DEFM14A 1 d121614ddefm14a.htm DEFM14A DEFM14A
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

 

 

Filed by the Registrant  ☒                            Filed by a Party other than the Registrant  ☐

Check the appropriate box:

 

   Preliminary Proxy Statement
   Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
   Definitive Proxy Statement
   Definitive Additional Materials
   Soliciting Material under §240.14a-12

FORTRESS VALUE ACQUISITION CORP. II

(Name of Registrant as Specified in its Charter)

(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)

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  Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.
  (1)  

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EXPLANATORY NOTE

Pursuant to the Agreement and Plan of Merger, dated as of February 21, 2021 (as may be amended from time to time, the “Merger Agreement”), by and among Fortress Value Acquisition Corp. II, a Delaware corporation (“FAII”), FVAC Merger Corp. II, a Delaware corporation and a direct, wholly-owned subsidiary of FAII (“Merger Sub”), and Wilco Holdco, Inc., a Delaware corporation (the “Company”), among other things, Merger Sub will merge with and into the Company, with the Company being the surviving corporation (such merger, the “Merger,” and together with the other transactions and ancillary agreements contemplated by the Merger Agreement, the “Business Combination”). As a result of the Business Combination, the Company will become a direct, wholly-owned subsidiary of FAII.


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Dear Stockholder:

On February 21, 2021, Fortress Value Acquisition Corp. II, a Delaware corporation (“FAII”), entered into an Agreement and Plan of Merger (as may be amended from time to time, the “Merger Agreement”), by and among FAII, FVAC Merger Corp. II, a Delaware corporation and a direct, wholly-owned subsidiary of FAII (“Merger Sub”), and Wilco Holdco, Inc., a Delaware corporation (the “Company”). The transactions contemplated by the Merger Agreement will constitute a “business combination” as contemplated by FAII’s current charter. For purposes of this proxy statement, “ATI” means ATI Physical Therapy, Inc. (f/k/a Fortress Value Acquisition Corp. II) and its consolidated subsidiaries, after giving effect to the Business Combination.

In accordance with the Merger Agreement, among other things, Merger Sub will merge with and into the Company, with the Company being the surviving corporation (such merger, the “Merger,” and together with the other transactions and ancillary agreements contemplated by the Merger Agreement, the “Business Combination”). As a result of the Business Combination, the Company will become a direct, wholly-owned subsidiary of FAII.

Concurrently with the entry into the Merger Agreement, Fortress Acquisition Sponsor II LLC, a Delaware limited liability company (the “Sponsor”), and FAII’s officers and directors (together with the Sponsor, the “Insiders”) entered into an amended and restated letter agreement (the “Parent Sponsor Letter Agreement”), pursuant to which they agreed to (i) vote all of their shares of FAII’s Class F common stock, par value $0.0001 per share (the “FAII Class F common stock”) and FAII’s Class A common stock, par value $0.0001 per share (the “FAII Class A common stock” and, together with the FAII Class F common stock, the “FAII Common Stock”), in favor of the Business Combination and each of the other proposals set forth in this proxy statement, (ii) vote all of their FAII Common Stock against certain other actions, including any action expected to result in a breach of the Merger Agreement or any alternative business combination and (iii) certain restrictions on their FAII Common Stock, including (x) to not redeem or tender any of their FAII Common Stock in connection with any such vote or in connection with any vote to amend FAII’s current charter and (y) to not transfer any FAII Class F common stock (or shares of FAII Class A common stock issuable upon conversion thereof) or Private Placement Warrants (as defined below) for certain “lock-up” periods, in each case, upon the terms and subject to the conditions set forth therein.

Pursuant to the Parent Sponsor Letter Agreement, the Insiders further agreed that, as of the consummation of the Business Combination, all of the FAII Class F common stock and shares of FAII Class A common stock issued or issuable upon the conversion of the FAII Class F common stock (the “Vesting Shares”) shall be unvested and shall be subject to certain vesting and forfeiture provisions, as follows: (i) 33.33% of the Vesting Shares beneficially owned by Insiders shall vest at such time as a $12.00 Common Share Price (as defined below) is achieved on or before the date that is ten years after the consummation of the Business Combination, (ii) 33.33% of the Vesting Shares beneficially owned by Insiders shall vest at such time as a $14.00 Common Share Price is achieved on or before the date that is ten years after the consummation of the Business Combination and (iii) 33.34% of the Vesting Shares beneficially owned by Insiders shall vest at such time as a $16.00 Common Share Price is achieved on or before the date that is ten years after the consummation of the Business Combination. As used in this proxy statement, the applicable “Common Share Price” will be considered achieved only when the volume-weighted average price (“VWAP”) equals or exceeds the applicable threshold for at least five days out of a period of ten consecutive trading days ending on the trading day immediately prior to the date of determination.

The Sponsor also agreed, subject to, and conditioned upon the closing of the Business Combination, immediately prior to the effective time of the Merger (the “effective time”), to transfer and surrender 2,966,667 warrants to purchase FAII Class F common stock (the “Private Placement Warrants”), resulting in such warrants being cancelled and no longer outstanding.

In connection with the consummation of the Business Combination, the holders of Company common stock immediately prior to the consummation of the Business Combination will receive, in the aggregate, 130,300,000 shares of Class A common stock, par value $0.0001 per share, of ATI (“ATI Class A common stock”).


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Specifically, each share of Company common stock issued and outstanding immediately prior to the effective time will be converted into the right to receive (A) a number of shares of ATI Class A common stock equal in value to (1) $1,303,000,000 divided by (2) the number of shares of Company common stock outstanding as of immediately prior to the effective time and (B) the contingent right to receive shares of ATI Class A common stock (the “Earnout Shares”) if the VWAP of ATI Class A common stock exceeds certain thresholds at any time between the closing of the Business Combination and the date that is ten years after the closing. In the event the VWAP of ATI Class A common stock is greater than (i) $12.00 for at least five days out of a period of ten consecutive trading days ending on the trading day immediately prior to the date of determination, there shall be a one-time issuance of 5,000,000 shares of ATI Class A common stock, (ii) $14.00 for at least five days out of a period of ten consecutive trading days ending on the trading day immediately prior to the date of determination, there shall be a one-time issuance of 5,000,000 shares of ATI Class A common stock and (iii) $16.00 for at least five days out of a period of ten consecutive trading days ending on the trading day immediately prior to the date of determination, there shall be a one-time issuance of 5,000,000 shares of ATI Class A common stock. The price targets and the number of Earnout Shares issued shall be equitably adjusted for any stock dividend, subdivision, reclassification, recapitalization, split, combination or exchange of shares, or any similar event affecting ATI Class A common stock.

Separately, each share of Company preferred stock issued and outstanding immediately prior to the effective time will be converted into the right to receive (A) an amount in cash equal to (1) $59,000,000 divided by (2) the number of shares of Company preferred stock outstanding as of immediately prior to the effective time and (B) a number of shares of ATI Class A common stock equal in value to (i) the product of (a) (x) the aggregate Liquidation Amount (as defined in the Company’s current charter) as of the closing date with respect to the Company preferred stock (after reducing such Liquidation Amount by $59,000,000) (the “Preferred Stock Adjusted Base”) plus (y) an aggregate accrued amount, calculated based on the Preferred Stock Adjusted Base, at the Dividend Rate (as defined in the Company’s current charter) from the closing date through the date that is 180 days from the closing date, multiplied by (b) 1.05, divided by (ii) the number of shares of Company preferred stock outstanding as of immediately prior to the effective time.

Public stockholders may elect to redeem their public shares (as defined below) whether they vote for or against, or whether they abstain from voting on, the Business Combination. A FAII public stockholder (as defined below), together with any of his, her or its affiliates or any other person with whom he, she or it is acting in concert or as a “group” (as defined in Section 13 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), will be restricted from seeking redemption rights with respect to more than an aggregate of 15% of the public shares (as defined below). The Insiders have agreed to waive their redemption rights in connection with the consummation of the Business Combination with respect to any shares of FAII Common Stock they may hold. Currently, the Insiders own approximately 20% of FAII Common Stock, consisting of FAII Class F common stock (the “Founder Shares”). Founder Shares will be excluded from the pro rata calculation used to determine the per-share redemption price. The Insiders have agreed to vote any shares of FAII Common Stock owned by them in favor of each of the proposals set forth in this proxy statement.

Immediately prior to the effective time, the PIPE Investors, including the Sponsor, will purchase 30,000,000 shares of FAII Class A common stock pursuant to a private placement at a price of $10.00 per share (the “PIPE Investment”). It is anticipated that, upon consummation of the Business Combination (excluding Vesting Shares): (i) existing FAII public stockholders will own approximately 16.6% of the issued and outstanding ATI Class A common stock; (ii) the Sponsor will own approximately 3.61% of the issued and outstanding ATI Class A common stock (reflecting the 7,500,000 shares purchased by the Sponsor as part of the PIPE Investment); (iii) the current holders of Company common stock and Company preferred stock (the “Company stockholders”) will own approximately 69% of the issued and outstanding ATI Class A common stock and (iv) the PIPE Investors will own approximately 10.81% of the issued and outstanding ATI Class A common stock (excluding the 7,500,000 shares purchased by the Sponsor as part of the PIPE Investment). The ownership percentages of ATI following the Business Combination assume no redemptions by the existing FAII public stockholders and exclude the impact of 8,625,000 Founder Shares, public warrants and the shares underlying the equity awards to be granted pursuant to the terms of the New Employment Agreements summarized in the

 

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Company Executive CompensationNew Employment Agreements In Connection With The Business Combination” section, and assume that approximately 207.7 million shares of ATI Class A common stock will be outstanding after the consummation of the Business Combination (excluding Vesting Shares). FAII Class A common stock is listed on the New York Stock Exchange (“NYSE”) under the symbol “FAII.” FAII’s public warrants are listed on the NYSE under the symbol “FAII WS.” FAII’s units that have not separated are listed on the NYSE under the symbol “FAII.U.” Following the Business Combination, ATI Class A common stock (including common stock issuable in the Business Combination) will be listed on the NYSE under the symbol “ATIP.”

FAII will hold a virtual special meeting in lieu of the 2021 annual meeting of stockholders (the “FAII Special Meeting”) to consider matters relating to the proposed Business Combination. The Company and FAII cannot complete the Business Combination unless the FAII stockholders consent to the approval of the Business Combination, including the issuance of FAII Class A common stock as the merger consideration in the Business Combination, and the Company stockholders consent to adoption and approval of the Merger Agreement and the transactions contemplated thereby (which, with respect to the Company stockholders, was satisfied immediately following the execution of the Merger Agreement). FAII is sending you this proxy statement to ask you to vote in favor of the Business Combination and the other matters described in this proxy statement.

The FAII Special Meeting will be held exclusively via a live webcast at www.virtualshareholdermeeting.com/FAII2021, on June 15, 2021 at 8:00 a.m., Eastern Time. To participate in the virtual meeting, a FAII stockholder of record will need the 16-digit control number included on your proxy card or instructions that accompanied your proxy materials, if applicable, or to obtain a proxy form from your broker, bank or other nominee. The FAII Special Meeting webcast will begin promptly at 8:00 a.m., Eastern Time. FAII stockholders are encouraged to access the FAII Special Meeting prior to the start time. If you encounter any difficulties accessing the virtual meeting or during the meeting time, please call the technical support number that will be posted on the virtual meeting login page.

YOUR VOTE IS VERY IMPORTANT, REGARDLESS OF THE NUMBER OF SHARES OF FAII COMMON STOCK YOU OWN. To ensure your representation at the FAII Special Meeting, please complete and return the enclosed proxy card or submit your proxy by following the instructions contained in this proxy statement and on your proxy card. Please submit your proxy promptly whether or not you expect to attend the meeting. Submitting a proxy now will NOT prevent you from being able to vote virtually at the FAII Special Meeting. If you hold your shares in “street name,” you should instruct your broker, bank or other nominee how to vote in accordance with the voting instruction form you receive from your broker, bank or other nominee.

The FAII Board has unanimously approved the Merger Agreement and the transactions contemplated thereby and recommends that FAII stockholders vote “FOR” the approval of the Merger Agreement, “FOR” the issuance of ATI Class A common stock to be issued as the merger consideration and “FOR” the other matters to be considered at the FAII Special Meeting.

This proxy statement provides you with detailed information about the proposed Business Combination. It also contains or references information about FAII, the Company and certain related matters. You are encouraged to read this proxy statement carefully. In particular, you should read the “Risk Factors” section beginning on page 40 for a discussion of the risks you should consider in evaluating the proposed Business Combination and how it will affect you.

If you have any questions regarding the accompanying proxy statement, you may contact D.F. King & Co., Inc., FAII’s proxy solicitor, toll-free at (800) 791-3320 or collect at (212) 269-5550 or email at FAII@dfking.com.

 

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Sincerely,

 

LOGO

Andrew A. McKnight

Chief Executive Officer

NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES REGULATORY AGENCY HAS APPROVED OR DISAPPROVED THE TRANSACTIONS DESCRIBED IN THE ACCOMPANYING PROXY STATEMENT, PASSED UPON THE MERITS OR FAIRNESS OF THE BUSINESS COMBINATION OR RELATED TRANSACTIONS OR PASSED UPON THE ADEQUACY OR ACCURACY OF THE DISCLOSURE IN THE ACCOMPANYING PROXY STATEMENT. ANY REPRESENTATION TO THE CONTRARY CONSTITUTES A CRIMINAL OFFENSE.

This proxy statement is dated May 14, 2021, and is first being mailed to stockholders of FAII on or about May 14, 2021.

 

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Fortress Value Acquisition Corp. II

NOTICE OF THE SPECIAL MEETING IN LIEU OF 2021 ANNUAL MEETING OF STOCKHOLDERS

TO BE HELD ON JUNE 15, 2021

NOTICE IS HEREBY GIVEN that a special meeting in lieu of the 2021 annual meeting of stockholders (the “FAII Special Meeting”) of Fortress Value Acquisition Corp. II, a Delaware corporation (which is referred to as “FAII”), will be held exclusively via a live webcast at www.virtualshareholdermeeting.com/FAII2021, on June 15, 2021 at 8:00 a.m., Eastern Time. You are cordially invited to attend the FAII Special Meeting for the following purposes:

 

1.

The Business Combination Proposal—To consider and vote upon a proposal to approve the Agreement and Plan of Merger, dated as of February 21, 2021 (as amended from time to time, the “Merger Agreement”), by and among FAII, FVAC Merger Corp. II, a Delaware corporation and a direct, wholly-owned subsidiary of FAII (“Merger Sub”), and Wilco Holdco, Inc., a Delaware corporation (the “Company”), and the transactions and ancillary agreements contemplated thereby (the “Business Combination”), pursuant to which the Company shall become a direct, wholly-owned subsidiary of FAII upon consummation of the Business Combination. A copy of the Merger Agreement is attached to this proxy statement as Annex A (Proposal No. 1);

 

2.

The NYSE Issuance Proposal—To consider and vote upon a proposal to approve, for purposes of complying with applicable listing rules of the NYSE, the issuance of shares of common stock pursuant to the Merger Agreement and the Subscription Agreements (Proposal No. 2);

 

3.

The Charter Amendment Proposal—To consider and act upon a proposal to adopt the proposed Second Amended and Restated Certificate of Incorporation of FAII (the “proposed charter”) in the form attached hereto as Annex B (Proposal No. 3);

 

4.

The Governance Proposal—To consider and act upon, on a non-binding advisory basis, a separate proposal with respect to certain governance provisions in FAII’s proposed charter in accordance with United States Securities and Exchange Commission (“SEC”) requirements (Proposal No. 4);

 

5.

The Director Election Proposal— To consider and vote upon a proposal to elect eight directors to serve on the board of directors of FAII (the “FAII Board”) until the earlier of the closing and the 2023 annual meeting of stockholders, and until their respective successors are duly elected and qualified, subject to their earlier death, resignation or removal (Proposal No. 5);

 

6.

The Incentive Plan Proposal—To consider and vote upon a proposal to approve the Incentive Plan (as defined below) (Proposal No. 6); and

 

7.

The Adjournment Proposal—To consider and vote upon a proposal to approve the adjournment of the FAII Special Meeting to a later date or dates, if necessary, to permit further solicitation and vote of proxies in the event that there are insufficient votes for, or for any other reason permitted by the Merger Agreement in connection with, the approval of one or more of the other proposals at the FAII Special Meeting (Proposal No. 7).

Only holders of record of FAII Common Stock at the close of business on May 24, 2021 are entitled to notice of the FAII Special Meeting and to vote at the FAII Special Meeting and any adjournments or postponements of the FAII Special Meeting. A complete list of FAII stockholders of record entitled to vote at the FAII Special Meeting will be available for inspection by stockholders ten days before the FAII Special Meeting by contacting FAII at the following email address: FVACIIMeeting@fortress.com for any purpose germane to the FAII Special Meeting upon entry of the 16-digit control number included on their proxy card. The eligible FAII stockholder list will also be available on the FAII Special Meeting website for examination by any stockholder attending the FAII Special Meeting webcast.

In accordance with FAII’s current charter, FAII will provide holders (“public stockholders”) of its FAII Class A common stock (“public shares”) with the opportunity to redeem their public shares for cash equal to their pro rata


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share of the aggregate amount on deposit in FAII’s trust account (the “Trust Account”), which holds the proceeds of FAII’s initial public offering (“FAII’s IPO”), as of two business days prior to the consummation of the transactions contemplated by the Business Combination Proposal (including interest earned on the funds held in the Trust Account and not previously released to FAII to pay taxes) upon the closing of the Business Combination. For illustrative purposes, based on funds in the Trust Account of approximately $345,015,940 on May 10, 2021, the estimated per share redemption price would have been approximately $10.00, excluding additional interest earned on the funds held in the Trust Account and not previously released to FAII to pay taxes. Public stockholders may elect to redeem their public shares whether they vote for or against, or whether they abstain from voting on, the Business Combination. A public stockholder, together with any of his, her or its affiliates or any other person with whom he, she or it is acting in concert or as a “group” (as defined in Section 13 of the Exchange Act), will be restricted from seeking redemption rights with respect to more than an aggregate of 15% of the public shares. Fortress Acquisition Sponsor II LLC, a Delaware limited liability company (the “Sponsor”), and FAII’s officers and directors (together with the Sponsor, the “Insiders”) have agreed to waive their redemption rights in connection with the consummation of the Business Combination with respect to any shares of FAII Common Stock they may hold. Currently, the Insiders own approximately 20% of FAII Common Stock, consisting of FAII Class F common stock (“Founder Shares”). Founder Shares will be excluded from the pro rata calculation used to determine the per-share redemption price. The Insiders have agreed to vote any shares of FAII Common Stock owned by them in favor of each of the proposals set forth in this proxy statement.

Approval of each of the Business Combination Proposal, the NYSE Issuance Proposal, the Governance Proposal, the Incentive Plan Proposal and the Adjournment Proposal requires the affirmative vote of a majority of the votes cast by holders of outstanding shares of FAII Common Stock represented virtually or by proxy at the FAII Special Meeting and entitled to vote thereon, voting together as a single class. Approval of the Charter Amendment Proposal requires the affirmative vote of the holders of a majority of the outstanding shares of FAII Common Stock, voting together as a single class. Approval of the Director Election Proposal requires the affirmative vote (virtually or by proxy) of holders of a plurality of the votes cast by holders of outstanding shares of FAII Class F common stock entitled to vote thereon at the FAII Special Meeting, voting as a single class. The FAII Board has already unanimously approved each of the proposals.

As of May 10, 2021, there was approximately $345,015,940 in the Trust Account, which FAII intends to use for the purposes of consummating the Business Combination and to pay approximately $12.075 million in deferred underwriting commissions to the underwriters of FAII’s IPO. Each redemption of public shares by its public stockholders will decrease the amount in the Trust Account. FAII will not consummate the Business Combination if the redemption of public shares would result in FAII’s failure to have at least $5,000,001 of net tangible assets (as determined in accordance with Rule 3a51-1(g)(1) of the Exchange Act) (or any successor rule)). The Merger Agreement also contains a mutual condition to closing, which may be waived by the parties, requiring that FAII have at least $472,500,000 in available cash immediately prior to the consummation of the Business Combination (after taking into account (x) payments required to satisfy FAII’s stockholder redemptions and (y) the net proceeds from the PIPE Investment, the “Minimum Cash Condition”).

If FAII stockholders fail to approve the Business Combination Proposal, the Business Combination will not occur. The proxy statement accompanying this notice explains the Merger Agreement and the transactions contemplated thereby, as well as the proposals to be considered at the FAII Special Meeting. Please review the proxy statement carefully.

The FAII Board has set May 24, 2021 as the record date for the FAII Special Meeting. Only holders of record of shares of FAII Common Stock at the close of business on May 24, 2021 will be entitled to notice of and to vote at the FAII Special Meeting and any adjournments or postponements thereof. Any stockholder entitled to attend and vote at the FAII Special Meeting is entitled to appoint a proxy to attend and vote on such stockholder’s behalf. Such proxy need not be a holder of shares of FAII Common Stock.

 

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YOUR VOTE IS VERY IMPORTANT, REGARDLESS OF THE NUMBER OF SHARES OF FAII COMMON STOCK OWN. Whether or not you plan to attend the FAII Special Meeting virtually, please complete, sign, date and mail the enclosed proxy card in the postage-paid envelope provided at your earliest convenience. You may also submit a proxy by telephone or via the Internet by following the instructions printed on your proxy card. If you hold your shares through a broker, bank or other nominee, you should direct the vote of your shares in accordance with the voting instruction form received from your broker, bank or other nominee.

The FAII Board has unanimously approved the Merger Agreement and the transactions contemplated thereby and recommends that you vote “FOR” the Business Combination Proposal, “FOR” the NYSE Issuance Proposal, “FOR” the Charter Amendment Proposal, “FOR” the Governance Proposal, “FOR” the Director Election Proposal, “FOR” the Incentive Plan Proposal and “FOR” the Adjournment Proposal.

If you have any questions regarding the accompanying proxy statement, you may contact D.F. King & Co., Inc., FAII’s proxy solicitor, toll-free at (800) 791-3320 or collect at (212) 269-5550 or email at FAII@dfking.com.

If you plan to attend the FAII Special Meeting virtually, you will be required to take certain actions ahead of the meeting so that you can participate. Please carefully read the sections in the proxy statement regarding attending and voting at the annual meeting to ensure that you comply with these requirements.

BY ORDER OF THE BOARD OF DIRECTORS

 

LOGO

Andrew A. McKnight

Chief Executive Officer and Director

May 14, 2021

 

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TABLE OF CONTENTS

 

SUMMARY TERM SHEET

     1  

FREQUENTLY USED TERMS

     8  

QUESTIONS AND ANSWERS

     10  

SUMMARY

     20  

RISK FACTORS

     40  

THE FAII BOARD RECOMMENDS THAT YOU VOTE “FOR” EACH OF THESE PROPOSALS

     79  

THE BUSINESS COMBINATION

     88  

U.S. FEDERAL INCOME TAX CONSIDERATIONS FOR STOCKHOLDERS EXERCISING REDEMPTION RIGHTS

     107  

THE MERGER AGREEMENT

     112  

RELATED AGREEMENTS

     128  

REGULATORY APPROVALS RELATED TO THE BUSINESS COMBINATION

     131  

SELECTED HISTORICAL FINANCIAL INFORMATION OF FAII

     132  

SELECTED HISTORICAL FINANCIAL INFORMATION OF THE COMPANY

     133  

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

     135  

NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

     142  

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

     147  

INFORMATION ABOUT FAII

     150  

MANAGEMENT OF FAII

     155  

FAII’S MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

     162  

INFORMATION ABOUT THE COMPANY’S BUSINESS

     166  

MANAGEMENT OF THE COMPANY

     179  

COMPANY’S MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

     183  

FAII EXECUTIVE COMPENSATION

     205  

COMPANY EXECUTIVE COMPENSATION

     206  

MANAGEMENT AFTER THE BUSINESS COMBINATION

     215  

DESCRIPTION OF SECURITIES

     220  

DESCRIPTION OF CERTAIN INDEBTEDNESS

     237  

CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

     238  

BENEFICIAL OWNERSHIP OF SECURITIES

     242  

PRICE RANGE OF SECURITIES AND DIVIDENDS

     247  

FAII PROPOSALS

     248  

PROPOSAL NO. 1 — THE BUSINESS COMBINATION PROPOSAL

     248  

PROPOSAL NO. 2—THE NYSE ISSUANCE PROPOSAL

     249  

PROPOSAL NO. 3—THE CHARTER AMENDMENT PROPOSAL

     250  

PROPOSAL NO. 4—THE GOVERNANCE PROPOSAL

     252  

PROPOSAL NO. 5—THE DIRECTOR ELECTION PROPOSAL

     257  

PROPOSAL NO. 6—THE INCENTIVE PLAN PROPOSAL

     258  

PROPOSAL NO. 7—THE ADJOURNMENT PROPOSAL

     267  

THE COMPANY’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

     268  

APPRAISAL RIGHTS

     268  

TRANSFER AGENT AND REGISTRAR

     268  

SUBMISSION OF STOCKHOLDER PROPOSALS

     268  

FUTURE STOCKHOLDER PROPOSALS

     269  

DELIVERY OF DOCUMENTS TO STOCKHOLDERS

     270  

WHERE YOU CAN FIND ADDITIONAL INFORMATION

     271  

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

     F-1  

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

     F-1  


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SUMMARY TERM SHEET

This summary term sheet, together with the sections entitled “Questions and Answers” and “Summary” summarizes certain information contained in this proxy statement, but does not contain all of the information that is important to you. You should read carefully this entire proxy statement, including the attached Annexes, for a more complete understanding of the matters to be considered at the FAII Special Meeting. In addition, for definitions used commonly throughout this proxy statement, including this summary term sheet, please see “Frequently Used Terms.”

 

   

Fortress Value Acquisition Corp. II, a Delaware corporation, which we refer to as “FAII,” “we,” “us,” or “our,” is a special purpose acquisition company formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses.

 

   

There are currently 43,125,000 shares of FAII Common Stock, par value $0.0001 per share, issued and outstanding, consisting of (A) 34,500,000 shares of FAII Class A common stock originally sold as part of FAII’s IPO and (B) 8,625,000 shares of FAII Class F common stock that were initially issued to Sponsor, prior to FAII’s IPO. There are currently no shares of FAII preferred stock issued and outstanding. In addition, we issued 6,900,000 public warrants to purchase FAII Class A common stock (originally sold as part of the public units issued in FAII’s IPO) as part of FAII’s IPO along with 5,933,333 Private Placement Warrants issued to Sponsor in a private placement on August 14, 2020. Pursuant to the Parent Sponsor Letter Agreement, Sponsor has agreed to transfer and surrender for no consideration 2,966,667 of its Private Placement Warrants subject to and immediately prior to the consummation of the Business Combination. Each of the 6,900,000 public warrants (all of which remain outstanding) entitle its holder to purchase one share of FAII Class A common stock at an exercise price of $11.50 per share, to be exercised only for a whole number of shares of FAII Class A common stock. The public warrants will become exercisable upon the earlier to occur of (A) 30 days after the completion of our initial business combination or (B) 12 months from the closing of FAII’s IPO, and they expire five years after the completion of our initial business combination or earlier upon redemption or liquidation. Once the public warrants become exercisable, FAII may redeem the outstanding public warrants at a price of $0.01 per warrant, if the last sale price of FAII Common Stock equals or exceeds $18.00 per share for any 20 trading days within a 30 trading day period ending on the third trading day before FAII sends the notice of redemption to the warrant holders. The Private Placement Warrants, however, are non-redeemable so long as they are held by Sponsor or its permitted transferees. For more information regarding the public warrants, please see “Description of Securities.”

 

   

The Company is a nationally recognized outpatient physical therapy provider specializing in outpatient rehabilitation and adjacent healthcare services, with 875 clinics (as well as 22 clinics under management service agreements) located in 25 states as of December 31, 2020. The Company operates with a commitment to providing its patients, medical provider partners, payors and employers with evidence-based, patient-centric care. The Company offers a variety of services within its clinics, including physical therapy to treat spine, shoulder, knee and neck injuries or pain; work injury rehabilitation services, including work conditioning and work hardening; hand therapy; and other specialized treatment services. The Company’s team of professionals is dedicated to returning patients to optimal physical health. For more information about the Company, please see the sections entitled “Information About the Company’s Business,” “Company’s Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Management After the Business Combination.”

 

   

Subject to the terms of the Merger Agreement and customary adjustments set forth therein, the aggregate merger consideration to be received by the Company’s common stockholder and the Company’s preferred stockholders in connection with the Business Combination is expected to be approximately an aggregate of $1.492 billion (assuming the Business Combination closes on June 30, 2021), of which $59 million will constitute cash consideration payable to the Company’s preferred stockholders and the remaining amount of merger consideration will constitute shares of ATI Class A common stock, valued at $10.00 per share,


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issuable to the Company’s common stockholder and the Company’s preferred stockholders. Assuming the Business Combination closes on June 30, 2021, the stock consideration to be issued to the Company’s common stockholder and the Company’s preferred stockholders as part of the merger consideration will consist of approximately 143,000,000 newly-issued shares of publicly-traded ATI Class A common stock. No fractional shares will be issued in connection with the Business Combination. In lieu thereof, FAII shall pay or cause to be paid cash to each holder who otherwise would have been entitled to receive a fractional share (after aggregating all fractional shares of ATI Class A common stock issuable to such holder). In addition, Wilco Acquisition, LP (the sole holder of common stock of the Company as of the date of the Merger Agreement) will have the contingent right to receive Earnout Shares following the closing. For more information about the merger consideration, please see “The Merger Agreement.”

 

   

In connection with the execution of the Merger Agreement, FAII, the Company, Merger Sub, the Insiders entered into the Parent Sponsor Letter Agreement, which provides, among other things, that (A) the Insiders will vote in favor of the Business Combination and each of the proposals set forth in this proxy statement (and against any alternative business combination except as permitted by the Merger Agreement) at any meeting of FAII stockholders, (B) Sponsor will transfer and surrender 2,966,667 of its Private Placement Warrants to FAII for no consideration subject to and immediately prior to the effective time , (C) the Insiders have waived certain anti-dilution rights set forth in the current charter in connection with the conversion of the Founder Shares to unvested shares of ATI Class A common stock at the time of the Business Combination, (D) the Insiders have agreed to waive any redemption rights they have with respect to the Founder Shares in connection with the closing and (E) the Founder Shares (and shares of ATI Class A common stock issued or issuable upon the conversion of the Founder Shares) will be unvested and subject to a vesting schedule as set forth in the Parent Sponsor Letter Agreement. For more information about the Parent Sponsor Letter Agreement, please see “Related Agreements—Parent Sponsor Letter Agreement.”

 

   

In connection with the execution of the Merger Agreement, FAII and certain holders of Company stock affiliated with Advent International Corporation (“Advent”) entered into the Stockholders Agreement, pursuant to which, among other things, Advent is entitled to designate for nomination to the ATI Board (A) five directors if Advent holds equal to or greater than 50% of the outstanding shares of ATI Class A common stock, (B) four directors if Advent holds less than 50% but equal to or greater than 38% of the outstanding shares of ATI Class A common stock, (C) three directors if Advent holds less than 38% but equal to or greater than 26% of the outstanding shares of ATI Class A common stock, (D) two directors if Advent holds less than 26% but equal to or greater than 13% of the outstanding shares of ATI Class A common stock and (E) one director if Advent holds less than 13% but equal to or greater than 5% of the outstanding shares of ATI Class A common stock. For more information about the Stockholders Agreement, please see “Related Agreements—Stockholders Agreement.”

 

   

It is anticipated that, upon consummation of the Business Combination (excluding Vesting Shares): (A) existing FAII public stockholders will own approximately 16.6% of the issued and outstanding ATI Class A common stock; (B) the Sponsor will own approximately 3.61% of the issued and outstanding ATI Class A common stock (reflecting the 7,500,000 shares purchased by the Sponsor as part of the PIPE Investment); (C) the current Company stockholders will own approximately 69% of the issued and outstanding ATI Class A common stock; and (D) the PIPE Investors will own approximately 10.81% of the issued and outstanding ATI Class A common stock (excluding the 7,500,000 shares purchased by the Sponsor as part of the PIPE Investment). The ownership percentages of ATI following the Business Combination assume no redemptions by the existing FAII public stockholders and exclude the impact of 8,625,000 Founder Shares, public warrants and the shares underlying the equity awards to be granted pursuant to the terms of the New Employment Agreements summarized in the “Company Executive CompensationNew Employment Agreements In Connection With The Business Combination” section, and assume that approximately 207.7 million shares of ATI Class A common stock will be outstanding after the consummation of the Business Combination (excluding Vesting Shares). If the actual facts are different than these assumptions (which they are likely to be), the percentage ownership of FAII’s existing stockholders in ATI will be different. For more information, please see the sections entitled “Unaudited Pro Forma Condensed Combined Financial Information” and “Proposal No. 6—The Incentive Plan Proposal.”

 

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The PIPE Investors have agreed to purchase in the aggregate approximately 30,000,000 shares of FAII Class A common stock, for aggregate gross proceeds of $300 million, pursuant to the Subscription Agreements. In this proxy statement, we assume that the gross proceeds from the Subscription Agreements, in addition to funds from the Trust Account (plus any interest accrued thereon), will be used to fund the cash consideration payable pursuant to the Merger Agreement, the repayment of approximately $541 million (assuming the Business Combination closes on June 30, 2021) of the Company’s existing indebtedness totaling approximately $1,009 million as of March 31, 2021 and the payment of transaction expenses estimated to total approximately $59 million.

 

   

Our management and the FAII Board considered various factors in determining whether to approve the Merger Agreement and the transactions contemplated thereby, including the Business Combination, including the strength of the Company’s brand, the Company’s growth prospects, the Company’s established infrastructure and the Company’s experienced and proven management team. For more information about our decision-making process, see “The Business Combination—Recommendation of the FAII Board and Reasons for the Business Combination.”

 

   

Pursuant to our current charter, in connection with the Business Combination, holders of FAII public shares may elect to have their FAII Class A common stock redeemed for cash at the applicable redemption price per share calculated in accordance with our current charter. As of May 10, 2021, the redemption price would have been approximately $10.00 per share. If a holder exercises its redemption rights, then such holder will be exchanging its shares of FAII Class A common stock for cash and will no longer own shares of FAII and will not participate in the future growth of the ATI, if any. Such holders will be entitled to receive cash for its public shares only if it properly demands redemption and delivers their shares (either physically or electronically) to FAII’s transfer agent, Continental Stock Transfer & Trust Company (the “transfer agent”), at least two business days prior to the FAII Special Meeting.

 

   

In addition to voting on the proposal to approve the Merger Agreement and the transactions contemplated thereby, including the Business Combination, at the FAII Special Meeting, the stockholders of FAII will be asked to vote on:

 

   

a proposal for purposes of complying with applicable provisions of Rule 312.03 of the NYSE Listed Company Manual, to approve (i) the issuance of more than 20% of FAII’s currently issued and outstanding FAII Common Stock in connection with the Business Combination, (ii) the issuance of more than 1% of FAII’s currently issued and outstanding FAII Common Stock to a Related Party (as defined in Rule 312.03 of the NYSE Listed Company Manual) in connection with the Business Combination and (iii) the issuance of a number of shares of FAII Class A common stock that will result in a change of control of FAII (pursuant to Rule 312.03(d) of the NYSE Listed Company Manual) in connection with the Business Combination the “NYSE Issuance Proposal” or “Proposal No. 2”);

 

   

a proposal to adopt the proposed charter in the form attached hereto as Annex B (the “Charter Amendment Proposal” or “Proposal No. 3”);

 

   

a separate proposal with respect to certain governance provisions in the proposed charter, which is being separately presented in accordance with SEC requirements and which will be voted upon on a non-binding advisory basis (the Governance Proposal” or Proposal No. 4”);

 

   

a proposal to elect eight directors to serve on the FAII Board until the earlier of the closing and the 2023 annual meeting of stockholders, and until their respective successors are duly elected and qualified, subject to their earlier death, resignation or removal (the Director Election Proposal” or Proposal No. 5”);

 

   

a proposal to approve the Incentive Plan and the material terms thereunder, including the authorization of the initial share reserve under the Incentive Plan (the Incentive Plan Proposal” or Proposal No. 6”); and

 

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a proposal to adjourn the FAII Special Meeting to a later date or dates, if necessary, to permit further solicitation and vote of proxies in the event that there are insufficient votes for, or for any other reason permitted by the Merger Agreement in connection with, the approval of the foregoing proposals (the Adjournment Proposal” or Proposal No. 7”).

Please see the sections entitled “Proposal No. 1—The Business Combination Proposal,” “Proposal No. 2—The NYSE Issuance Proposal,” “Proposal No. 3—The Charter Amendment Proposal,” “Proposal No. 4—The Governance Proposal,” “Proposal No. 5—The Director Election Proposal,” “Proposal No. 6—The Incentive Plan Proposal,” and “Proposal No. 7—The Adjournment Proposal.” The Business Combination is conditioned on the approval of the Business Combination Proposal, the NYSE Issuance Proposal and the Charter Amendment Proposal at the FAII Special Meeting. Each of the proposals other than the Business Combination Proposal, the NYSE Issuance Proposal and the Charter Amendment Proposal is conditioned on the approval of the Business Combination Proposal, the NYSE Issuance Proposal and the Charter Amendment Proposal, other than the Governance Proposal and the Adjournment Proposal, which are not conditioned on the approval of any other proposal set forth in this proxy statement.

 

   

Upon the closing, and subject to the adoption of the proposed charter, our Board anticipates that its size will remain at eight directors, with each Class I director having a term that expires at ATI’s annual meeting of stockholders in 2022, each Class II director having a term that expires at ATI’s annual meeting of stockholders in 2023 and each Class III director having a term that expires at ATI’s annual meeting of stockholders in 2024, or in each case until their respective successors are duly elected and qualified, or until their earlier resignation, removal or death. Please see the sections entitled “Proposal No. 5—The Director Election Proposal” and “Management After the Business Combination” for additional information.

 

   

Unless waived by the parties to the Merger Agreement, and subject to applicable law, the closing is subject to a number of conditions set forth in the Merger Agreement including, among others, expiration of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “HSR Act”), receipt of FAII stockholder approval contemplated by this proxy statement and the availability of minimum cash amounts at closing. For more information about the closing conditions to the Business Combination, please see “The Merger Agreement—Conditions to the Business Combination.”

 

   

The Merger Agreement may be terminated at any time prior to the closing upon agreement of the parties thereto, or by FAII or the Company in specified circumstances. For more information about the termination rights under the Merger Agreement, please see “The Merger Agreement—Termination.”

 

   

The proposed Business Combination involves numerous risks. For more information about these risks, please see “Risk Factors.”

In considering the recommendation of the FAII Board to vote for the proposals presented at the FAII Special Meeting, including the Business Combination Proposal, you should be aware that aside from their interests as stockholders, certain of FAII’s executive officers and directors have interests in the Business Combination that may be different from, or in addition to, the interests of FAII’s stockholders. The members of the FAII Board were aware of and considered these interests, among other matters, when they approved the Merger Agreement and recommended that FAII stockholders approve the proposals required to effect the Business Combination. In considering the recommendation of the FAII Board to vote in favor of approval of the Business Combination Proposal, the NYSE Issuance Proposal, the Charter Amendment Proposal and the other proposals, FAII stockholders should keep in mind that certain members of the board of directors and executive officers of FAII and the Sponsor, including the Insiders, have interests in such proposals that may be different from, or in addition to, those of FAII stockholders generally. In particular:

 

   

Various investment funds managed by affiliates of the Sponsor (the “Fortress Credit Funds”) are currently lenders pursuant to the First Lien Credit Agreement, and as of December 31, 2020, those Fortress Credit Funds held approximately $5,996,614 (or 0.765%) of the outstanding indebtedness under the First Lien Credit Agreement. While certain officers and directors of FAII that are affiliated with Fortress Investment Group LLC (“Fortress”) have the right to receive distributions of profit made

 

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by the Fortress Credit Funds that are lenders under the First Lien Credit Agreement, the First Lien Credit Agreement loans held by the Fortress Credit Funds represent less than 0.1% of the assets under management of the Fortress Credit Funds participating in the First Lien Credit Agreement, and any profit distributions related to the First Lien Credit Agreement would be de minimis and immaterial to the FAII officers and directors receiving such profit distributions. Similarly, certain officers and directors of FAII that are affiliated with Fortress have the right to receive distributions of profit from the Fortress Credit Funds that are participating in the PIPE Investment and that, upon closing, will own the Founder Shares and Private Placement Warrants. The PIPE Investment is anticipated to represent approximately 1% of the available capital of the participating Fortress Credit Funds, and while difficult to predict, distributions of profit to FAII officers and directors that have the right to participate in the profits of such Fortress Credit Funds are anticipated to represent a similar amount (approximately 1%) of the total profits distributed by such Fortress Credit Funds.

 

   

In connection with the PIPE Investment, which is conditioned upon the consummation of the Business Combination, the Sponsor agreed to purchase 7,500,000 shares of FAII Class A common stock at $10.00 per share for an aggregate purchase price of $75 million. While the per share subscription price for the FAII Class A common stock to be purchased by the Sponsor in connection with the PIPE Investment is $10.00, the implied price per share of the Sponsor’s overall holdings in ATI will be lower based on the purchase price paid by the Sponsor for the Founder Shares and the Private Placement Warrants (as described in the two immediately succeeding paragraphs below). The Sponsor currently holds a controlling stake in FAII, and will participate in the PIPE Investment and receive ATI Class A common stock subject to certain vesting restrictions set forth in the Parent Sponsor Letter Agreement in connection with the Business Combination (the “Vesting Shares”).

 

   

The Vesting Shares will vest as follows: (i) 33.33% of the Vesting Shares shall vest at such time as a $12.00 Common Share Price is achieved on or before the date that is ten years after the consummation of the Business Combination; (ii) 33.33% of the Vesting Shares shall vest at such time as a $14.00 Common Share Price is achieved on or before the date that is ten years after the consummation of the Business Combination and (iii) 33.34% of the Vesting Shares shall vest at such time as a $16.00 Common Share Price is achieved on or before the date that is ten years after the consummation of the Business Combination. As used in this proxy statement, the applicable “Common Share Price” will be considered achieved only when the VWAP equals or exceeds the applicable threshold for at least five days out of a period of ten consecutive trading days ending on the trading day immediately prior to the date of determination. In the event that there is an agreement with respect to the sale or other change of control of ATI entered into after the closing and before the date that is ten years after the closing, then immediately prior to the consummating of the change of control, all Vesting Shares that were eligible to vest and remain unvested, if any, will vest on the day immediately preceding the closing of such change of control.

 

   

If the Business Combination or another business combination is not consummated by August 14, 2022, FAII will cease all operations except for the purpose of winding up, redeeming 100% of the outstanding public shares for cash and, subject to the approval of its remaining stockholders and the FAII Board, dissolving and liquidating. In such event, the 8,625,000 Founder Shares held by the Insiders, which were acquired for an aggregate purchase price of $25,000 by Sponsor prior to FAII’s IPO, would be worthless because the holders are not entitled to participate in any redemption or distribution with respect to such shares. Such Founder Shares, if valued based on the closing price of $9.99 per share of FAII Class A common stock on the NYSE on May 10, 2021, would be valued at approximately $86,163,750 (after giving effect to the conversion of such Founder Shares into shares of ATI Class A common stock). Pursuant to the Parent Sponsor Letter Agreement, the Insiders agreed that, as of the consummation of the Business Combination, all of the Vesting Shares shall be unvested and shall be subject to certain vesting and forfeiture provisions as further described in this proxy statement.

 

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In exchange for serving on the FAII Board, each of FAII’s independent directors, Mr. Hood, Mr. Policy, Ms. Russak-Aminoach and Mr. Gulati, received a nominal economic interest through the purchase from Sponsor of 25,000 Founder Shares at their original purchase price of $0.003 per share and subject to certain vesting and forfeiture provisions whereby 33.33%, 33.33% and 33.34% of such Founder Shares shall vest at such time that the Common Share Price equals or exceeds $12.00, $14.00 and $16.00 per share, respectively, on or before the date that is ten years after the consummation of the Business Combination. Such Founder Shares, if valued based on the closing price of $9.99 per share of FAII Class A common stock on the NYSE on May 10, 2021, would be valued at approximately $249,750 (after giving effect to the conversion of such Founder Shares into shares of ATI Class A common stock). If FAII fails to complete a business combination by August 14, 2022, these Founder Shares will become worthless. As a result, FAII’s independent directors may have a conflict of interest in determining whether a particular business is an appropriate business with which to effectuate FAII’s initial business combination. The FAII Board took into consideration the potential for such a conflict of interest to arise and believes any potential conflict to be adequately mitigated through the vesting provision’s requirement of price appreciation over a vesting period of ten years.

 

   

The Sponsor purchased an aggregate of 5,933,333 Private Placement Warrants from FAII for an aggregate purchase price of $8,900,000 (or $1.50 per warrant). These purchases took place on a private

  placement basis simultaneously with the consummation of FAII’s IPO. A portion of the proceeds FAII received from these purchases was placed in the Trust Account. Pursuant to the Parent Sponsor Letter Agreement, the Sponsor has agreed to transfer and surrender 2,966,667 Private Placement Warrants immediately prior to the effective time, which warrants will be cancelled and no longer outstanding. The 5,933,333 Private Placement Warrants, if valued based on the closing price of $1.87 per public warrant on the NYSE on May 10, 2021, would be valued at approximately $11,095,333, but may expire and become worthless if FAII fails to complete a business combination by August 14, 2022.

 

   

Mr. McKnight is expected to become a member of the ATI Board upon consummation of the Business Combination. As such, in the future, Mr. McKnight may receive cash fees, stock options or stock awards that the ATI Board determines to pay its non-executive directors.

 

   

If FAII is unable to complete a business combination within the required time period, the Sponsor may be liable to FAII under certain circumstances described herein to ensure that the proceeds in the Trust Account are not reduced by any claims by a third party (other than our independent auditors) for services rendered or products sold to us, or a prospective target business with which we have discussed entering into a transaction agreement.

 

   

Following the consummation of a business combination, directors or members of our management team who remain with us may be paid consulting, management or other fees from the combined company.

 

   

The continued indemnification of current directors and officers and the continuation of directors’ and officers’ liability insurance.

 

   

The FAII Board is not comprised of a majority of independent directors, and the Insiders, who hold a controlling interest in FAII until consummation of our initial business combination, control the composition of the FAII Board until consummation of our initial business combination.

 

   

The Insiders have agreed not to redeem any of the outstanding Founder Shares in connection with the Business Combination Proposal.

 

   

The Insiders have agreed to waive their rights to liquidating distributions from the Trust Account with respect to their Founder Shares.

 

   

The Insiders have also agreed to waive their right to a conversion price adjustment with respect to their Founder Shares in connection with the consummation of the Business Combination.

 

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As of the closing of the Business Combination, FAII will enter into the A&R RRA with the A&R RRA Parties, which provides for certain demand, piggy-back and shelf registration rights to the A&R RRA Parties and their permitted transferees. The A&R RRA Parties include the following directors and officers of FAII: Joshua Pack, Andrew McKnight, Daniel Bass, Micah Kaplan, Alexander Gillette, Marc Furstein, Leslee Cowen, Aaron Hood, Carmen Policy, Rakefet Russak-Aminoach, and Sunil Gulati.

 

   

If the Business Combination is not consummated, FAII will have to pay certain expenses related to the Business Combination, which may impede its ability to consummate a transaction with another acquisition target.

 

   

If FAII consummates the Business Combination, any amounts outstanding under any loan made by the Sponsor to FAII will be repayable in cash, and if FAII fails to complete a business combination there may be insufficient assets outside the Trust Account to satisfy such loan.

 

   

Starting August 2020 and through the completion of the initial business combination or liquidation, FAII has paid and will continue to pay a monthly fee of $20,000 for office space and related support services to an affiliate of the Sponsor.

 

   

As described in Proposal No. 3, the current charter will be amended to exclude Advent and any Exempt Transferee (as defined in the proposed charter) and their respective affiliates or successors or any “group,” or any member of any such group, to which such persons are a party from the definition of “interested stockholder,” and to make certain related changes.

 

   

If the Trust Account is liquidated, including in the event FAII is unable to complete an initial business combination within the required time period, Sponsor has agreed to indemnify FAII to ensure that proceeds in the Trust Account are not reduced below $10.00 per public share, or such lesser per public share amount as is in the Trust Account on the liquidation date, by the claims of prospective target businesses with which FAII has discussed entering into a transaction agreement or any third party (other than FAII’s independent auditors) for services rendered or products sold to FAII, but only if such third party or target business has not executed a waiver of any and all rights to seek access to the Trust Account.

 

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FREQUENTLY USED TERMS

As used in this proxy statement, unless otherwise noted or the context otherwise requires:

 

   

“A&R RRA” means that certain Amended and Restated Registration Rights Agreement, substantially in the form attached hereto as Annex D, to be entered into at the closing of the Business Combination, by and among FAII, the Insiders and the other parties that will be signatory thereto.

 

   

“A&R RRA Parties” means FAII, the Insiders and the other parties that will be signatory to the A&R RRA.

 

   

“Amended and Restated Bylaws” means those certain Amended and Restated Bylaws of ATI Physical Therapy, Inc., substantially in the form attached hereto as Annex C, to be adopted at the closing of the business combination.

 

   

“ATI” means ATI Physical Therapy, Inc. (f/k/a Fortress Value Acquisition Corp. II) and its consolidated subsidiaries, after giving effect to the Business Combination.

 

   

“ATI Board” means the board of directors of ATI Physical Therapy, Inc.

 

   

“ATI Class A common stock” means the shares of Class A common stock, par value $0.0001 per share, of ATI Physical Therapy, Inc.

 

   

“Business Combination” refers to the transactions contemplated by the Merger Agreement.

 

   

“closing” means the closing of the transactions contemplated by the Merger Agreement.

 

   

“closing date” means the date on which the closing of the transactions contemplated by the Merger Agreement occurs.

 

   

“Company” means Wilco Holdco, Inc., a Delaware corporation.

 

   

“Company Board” means the board of directors of the Company.

 

   

“current charter” means the current amended and restated certificate of incorporation of FAII.

 

   

“effective time” means the effective time of the Merger.

 

   

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

 

   

“FAII” means Fortress Value Acquisition Corp. II, a Delaware corporation.

 

   

“FAII Board” means the board of directors of FAII.

 

   

“FAII Class A common stock” means the shares of Class A common stock, par value $0.0001 per share, of FAII.

 

   

“FAII Class F common stock” means the shares of Class F common stock, par value $0.0001 per share, of FAII.

 

   

“FAII Common Stock” means the shares of common stock, par value $0.0001 per share, of FAII, consisting of FAII Class A common stock and FAII Class F common stock.

 

   

“FAII Special Meeting” means the virtual special meeting in lieu of 2021 annual meeting of FAII’s stockholders that is the subject of this proxy statement.

 

   

“FAII’s IPO” means FAII’s initial public offering, consummated on August 14, 2020, through the sale of 34,500,000 units (including 4,500,000 units sold pursuant to the underwriters’ exercise of their over-allotment option) at $10.00 per unit.

 

   

“FAII units” means one share of FAII Class A common stock and one-fifth of one redeemable public warrant of FAII, whereby each public warrant entitles the holder thereof to purchase one share of FAII Class A common stock at an exercise price of $11.50 per share of FAII Class A common stock, sold in FAII’s IPO.

 

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“Founder Shares” means shares of FAII Class F common stock initially purchased by the Insiders whether or not converted into shares of FAII Class A common stock.

 

   

“Insiders” means holders of Founder Shares prior to FAII’s IPO, including the Sponsor.

 

   

“Merger” means the merger of Merger Sub with and into the Company, with the Company being the surviving corporation pursuant to the terms of the Merger Agreement.

 

   

“Merger Agreement” means that certain Agreement and Plan of Merger, dated February 21, 2021, by and among FAII, Merger Sub and the Company.

 

   

“Merger Sub” means FVAC Merger Corp. II, a Delaware corporation and a direct, wholly-owned subsidiary of FAII.

 

   

“NYSE” means the New York Stock Exchange.

 

   

“Parent Sponsor Letter Agreement” means that certain amended and restated letter agreement dated February 21, 2021, by and among FAII, the Company and the Insiders, a copy of which is attached hereto as Annex E, as it may be amended and/or restated from time to time.

 

   

“PIPE Investors” means the Sponsor and certain other investors who entered into Subscription Agreements with FAII (together with any permitted assigns under the Subscription Agreements) in connection with the Business Combination.

 

   

“proposed charter” means the proposed second amended and restated certificate of incorporation of FAII, which is attached hereto as Annex B, which will become ATI’s certificate of incorporation subject to the approval of the Charter Amendment Proposal, assuming the consummation of the Business Combination.

 

   

“public warrants” means the warrants included in the public units issued in FAII’s IPO, each of which is exercisable for one share of FAII Class A common stock, in accordance with its terms.

 

   

“SEC” means the United States Securities and Exchange Commission.

 

   

“Securities Act” means the Securities Act of 1933, as amended.

 

   

“Sponsor” means Fortress Acquisition Sponsor II LLC, a Delaware limited liability company.

 

   

“Stockholders Agreement” means that certain Stockholders Agreement, dated as of February 21, 2021, by and among FAII and certain stockholders of the Company.

 

   

“Subscription Agreements” means those certain Subscription Agreements, each dated as of February 21, 2021, by and between FAII and each of the PIPE Investors.

Unless specified otherwise, amounts in this proxy statement are presented in United States (“U.S.”) dollars.

Defined terms in the financial statements contained in this proxy statement have the meanings ascribed to them in the financial statements.

 

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QUESTIONS AND ANSWERS

The following are answers to certain questions that you may have regarding the Business Combination and the FAII Special Meeting. We urge you to carefully read the remainder of this proxy statement because the information in this section may not provide all the information that might be important to you in determining how to vote. Additional important information is also contained in the annexes to this proxy statement.

QUESTIONS AND ANSWERS ABOUT THE BUSINESS COMBINATION

 

Q:

WHAT IS THE BUSINESS COMBINATION?

 

A:

FAII, FVAC Merger Corp. II, a Delaware corporation and a direct, wholly-owned subsidiary of FAII (“Merger Sub”), and Wilco Holdco, Inc., a Delaware corporation (the “Company”), have entered into an Agreement and Plan of Merger, dated as of February 21, 2021 (as may be amended from time to time, the “Merger Agreement”), pursuant to which, among other things, Merger Sub will merge with and into the Company, with the Company being the surviving corporation (such merger, the “Merger,” and together with the other transactions and ancillary agreements contemplated by the Merger Agreement, the “Business Combination”). As a result of the Business Combination, the Company will become a direct, wholly-owned subsidiary of FAII.

FAII will hold the FAII Special Meeting to, among other things, obtain the approvals required for the Business Combination, and you are receiving this proxy statement in connection with such FAII Special Meeting. See “The Merger Agreement.” In addition, a copy of the Merger Agreement is attached to this proxy statement as Annex A. We urge you to carefully read this proxy statement and the Merger Agreement in their entirety.

 

Q:

WHY AM I RECEIVING THIS DOCUMENT?

 

A:

FAII is sending this proxy statement to the FAII stockholders to help them decide how to vote their shares of FAII Common Stock with respect to the matters to be considered at the FAII Special Meeting.

The Business Combination cannot be completed unless the FAII stockholders approve the Business Combination Proposal, the NYSE Issuance Proposal and the Charter Amendment Proposal as set forth in this proxy statement for their approval.

This document constitutes a proxy statement because the FAII Board is soliciting proxies using this proxy statement from the FAII stockholders.

 

Q:

WHEN WILL THE BUSINESS COMBINATION BE COMPLETED?

 

A:

The parties currently expect that the Business Combination will be completed during the second quarter of 2021. However, neither FAII nor the Company can assure you of when or if the Business Combination will be completed and it is possible that factors outside of the control of FAII and the Company could result in the Business Combination being completed at a different time or not at all. FAII must first obtain the approval of FAII stockholders for the Business Combination Proposal, the NYSE Issuance Proposal and the Charter Amendment Proposal, and FAII and the Company must also comply with the applicable requirements of the HSR Act and satisfy other closing conditions. See “The Merger Agreement—Conditions to the Business Combination.”

 

Q:

WHAT EFFECT WILL THE BUSINESS COMBINATION HAVE ON THE SPONSOR’S INVESTMENT IN FAII?

 

A:

The Insiders each have agreed to (i) vote all of their shares of FAII Common Stock in favor of the Business Combination and each of the other proposals set forth in this proxy statement, (ii) vote all of their FAII

 

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  Common Stock against certain other actions, including any action expected to result in a breach of the Merger Agreement or any alternative business combination and (iii) certain restrictions on their FAII Common Stock, including (x) to not redeem or tender any of their FAII Common Stock in connection with any such vote or in connection with any vote to amend FAII’s current charter and (y) to not transfer any FAII Class F common stock (or shares of FAII Class A common stock issuable upon conversion thereof) or Private Placement Warrants for certain “lock-up” periods, in each case, upon the terms and subject to the conditions set forth in the Parent Sponsor Letter Agreement.

The Insiders further agreed that, as of the consummation of the Business Combination, all of the Vesting Shares shall be unvested and shall be subject to certain vesting and forfeiture provisions, as follows: (i) 33.33% of the Vesting Shares beneficially owned by Insiders shall vest at such time as a $12.00 Common Share Price is achieved on or before the date that is ten years after the consummation of the Business Combination, (ii) 33.33% of the Vesting Shares beneficially owned by Insiders shall vest at such time as a $14.00 Common Share Price is achieved on or before the date that is ten years after the consummation of the Business Combination and (iii) 33.34% of the Vesting Shares beneficially owned by Insiders shall vest at such time as a $16.00 Common Share Price is achieved on or before the date that is ten years after the consummation of the Business Combination. As used in this proxy statement, the applicable “Common Share Price” will be considered achieved only when the VWAP equals or exceeds the applicable threshold for at least five days out of a period of ten consecutive trading days ending on the trading day immediately prior to the date of determination.

Pursuant to the Parent Sponsor Letter Agreement, the Sponsor also agreed, subject to, and conditioned upon the closing of the Business Combination, immediately prior to the effective time, to transfer and surrender 2,966,667 Private Placement Warrants, resulting in such warrants being cancelled and no longer outstanding.

 

Q:

WHAT WILL THE COMPANY STOCKHOLDERS RECEIVE IN THE BUSINESS COMBINATION?

 

A:

Each share of Company common stock issued and outstanding immediately prior to the effective time will be converted into the right to receive (A) a number of shares of ATI Class A common stock equal to (1) $1,303,000,000 divided by (2) the number of shares of Company common stock outstanding as of immediately prior to the effective time and (B) the contingent right to receive Earnout Shares that may be issued in accordance with the terms of the Merger Agreement.

Each share of Company preferred stock issued and outstanding immediately prior to the effective time will be converted into the right to receive (A) an amount in cash equal to (1) $59,000,000 divided by (2) the number of shares of Company preferred stock outstanding as of immediately prior to the effective time and (B) a number of shares of ATI Class A common stock equal in value to (i) the product of (a) (x) the aggregate Liquidation Amount (as defined in the Company’s current charter) as of the closing date with respect to the Company preferred stock (after reducing such Liquidation Amount by $59,000,000) (the “Preferred Stock Adjusted Base”) plus (y) an aggregate accrued amount, calculated based on the Preferred Stock Adjusted Base, at the Dividend Rate (as defined in the Company’s current charter) from the closing date through the date that is 180 days from the closing date, multiplied by (b) 1.05, divided by (ii) the number of shares of Company preferred stock outstanding as of immediately prior to the effective time.

No fractional shares will be issued in connection with the Business Combination. In lieu thereof, FAII shall pay or cause to be paid cash to each holder who otherwise would have been entitled to receive a fractional share.

Wilco Acquisition, LP (the sole holder of Company common stock as of the date of the Merger Agreement) or its designees will also have the contingent right to receive shares of ATI Class A common stock (the “Earnout Shares”), after the closing of the Business Combination and on or before the date that is ten years after the consummation of the Business Combination, if the VWAP of ATI Class A common stock exceeds

 

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certain thresholds. In the event the VWAP of ATI Class A common stock is greater than (i) $12.00 for at least five days out of a period of ten consecutive trading days ending on the trading day immediately prior to the date of determination, there shall be a one-time issuance of 5,000,000 shares of ATI Class A common stock, (ii) $14.00 for at least five days out of a period of ten consecutive trading days ending on the trading day immediately prior to the date of determination, there shall be a one-time issuance of 5,000,000 shares of ATI Class A common stock and (iii) $16.00 for at least five days out of a period of ten consecutive trading days ending on the trading day immediately prior to the date of determination, there shall be a one-time issuance of 5,000,000 shares of ATI Class A common stock. The number of Earnout Shares issued shall be equitably adjusted for any stock dividend, subdivision, reclassification, recapitalization, split, combination or exchange of shares, or any similar event affecting ATI Class A common stock.

See “The Merger Agreement—Merger Consideration.”

 

Q:

WILL THE MANAGEMENT OF THE COMPANY CHANGE UPON THE CONSUMMATION OF THE BUSINESS COMBINATION?

 

A:

The current executive officers of the Company set forth in “Management of the Company” are expected to remain the executive officers of ATI upon consummation of the Business Combination. For biographical information concerning such executive officers, see “Management of the Company.”

QUESTIONS AND ANSWERS ABOUT THE FAII SPECIAL MEETING

 

Q:

WHAT AM I BEING ASKED TO VOTE ON?

 

A:

FAII stockholders are being asked to vote on the following proposals:

 

  1.

the Business Combination Proposal;

 

  2.

the NYSE Issuance Proposal;

 

  3.

the Charter Amendment Proposal;

 

  4.

the Governance Proposal;

 

  5.

the Director Election Proposal;

 

  6.

the Incentive Plan Proposal; and

 

  7.

the Adjournment Proposal.

 

Q:

WHY IS FAII PROPOSING THE BUSINESS COMBINATION?

 

A:

FAII was organized to effect a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or other similar business combination with one or more businesses or entities (collectively, a “business combination”). On August 14, 2020, FAII completed its initial public offering, generating gross proceeds of $345,000,000. Since FAII’s IPO, FAII’s activity has been limited to the evaluation of business combination candidates.

The Company is a nationally recognized outpatient physical therapy provider specializing in outpatient rehabilitation and adjacent healthcare services, with 875 clinics (as well as 22 clinics under management service agreements) located in 25 states as of December 31, 2020.

Based on its due diligence investigation of the Company and the industry in which it operates, including the financial and other information provided by the Company in the course of their negotiations in connection with the Merger Agreement, FAII believes the Company is well-positioned in its industry for growth, has established infrastructure, and possesses a strong management team of which the senior management intends to remain with ATI in the capacity of officers and/or directors. As a result, FAII believes that the Business Combination will provide FAII stockholders with an opportunity to participate in the ownership of a company with significant growth potential. See “The Business Combination—Recommendation of the FAII Board and Reasons for the Business Combination.”

 

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Q:

DID THE FAII BOARD OBTAIN A THIRD-PARTY VALUATION OR FAIRNESS OPINION IN DETERMINING WHETHER OR NOT TO PROCEED WITH THE BUSINESS COMBINATION?

 

A:

The FAII Board did not obtain a third-party valuation or fairness opinion in connection with its determination to approve the Business Combination. FAII’s officers, directors and advisors have substantial experience in evaluating the operating and financial merits of companies from a wide range of industries and concluded that their experience and backgrounds, together with the experience and sector expertise of FAII’s financial advisors, enabled them to make the necessary analyses and determinations regarding the Business Combination. In addition, FAII’s officers, directors and advisors have substantial experience with mergers and acquisitions.

 

Q:

DO I HAVE REDEMPTION RIGHTS?

 

A:

If you are a holder of public shares, you have the right to demand that FAII redeem such shares for a pro rata portion of the cash held in the Trust Account, which holds the proceeds of FAII’s IPO, as of two business days prior to the consummation of the transactions contemplated by the Business Combination Proposal (including interest earned on the funds held in the Trust Account and not previously released to FAII to pay taxes) upon the closing of the Business Combination (such rights, “redemption rights”). Public stockholders may elect to redeem their public shares whether they vote for or against, or whether they abstain from voting on, the Business Combination.

Notwithstanding the foregoing, a holder of public shares, together with any affiliate of such holder or any other person with whom such holder is acting in concert or as a “group” (as defined in Section 13(d)(3) of the Exchange Act), will be restricted from seeking redemption with respect to more than 15% of the public shares. Accordingly, all public shares in excess of 15% held by a public stockholder, together with any affiliate of such holder or any other person with whom such holder is acting in concert or as a “group,” will not be redeemed.

Under FAII’s current charter, the Business Combination may be consummated only if FAII has at least $5,000,001 of net tangible assets after giving effect to all holders of public shares that properly demand redemption of their public shares for cash. Additionally, neither FAII nor the Company will be required to consummate the Business Combination if the Minimum Cash Condition is not satisfied or waived by the Company and FAII.

 

Q:

WILL HOW I VOTE AFFECT MY ABILITY TO EXERCISE REDEMPTION RIGHTS?

 

A:

No. You may exercise your redemption rights whether you vote your public shares for or against, or whether you abstain from voting on, the Business Combination Proposal or any other proposal described in this proxy statement. As a result, the Business Combination Proposal can be approved by stockholders who will redeem their public shares and no longer remain stockholders and the Business Combination may be consummated even though the funds available from the Trust Account and the number of public stockholders are substantially reduced as a result of redemptions by public stockholders. However, neither FAII nor the Company will be required to consummate the Business Combination if the Minimum Cash Condition is not satisfied or waived. Also, with fewer public shares and public stockholders, the trading market for ATI Class A common stock following the Business Combination may be less liquid than the market for FAII Class A common stock prior to the Business Combination and ATI may not be able to meet the listing standards of the NYSE.

 

Q:

HOW DO I EXERCISE MY REDEMPTION RIGHTS?

 

A:

If you are a holder of public shares and wish to exercise your redemption rights, you must demand that FAII redeem your public shares for cash no later than the second business day preceding the FAII Special Meeting by delivering your stock to FAII’s transfer agent physically or electronically using Depository

 

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  Trust Company’s (“DTC”) Deposit / Withdrawal At Custodian (“DWAC”). Any holder of public shares will be entitled to demand that such holder’s public shares be redeemed for a full pro rata portion of the amount then in the Trust Account (which, for illustrative purposes, was approximately $345,015,940 million, or $10.00 per share, as of May 10, 2021). Such amount, including interest earned on the funds held in the Trust Account and not previously released to pay its taxes, will be paid promptly upon consummation of the Business Combination. However, under Delaware law, the proceeds held in the Trust Account could be subject to claims which could take priority over those of FAII’s public stockholders exercising redemption rights, regardless of whether such holders vote for or against the Business Combination Proposal. Therefore, the per-share distribution from the Trust Account in such a situation may be less than originally anticipated due to such claims. Your vote on any proposal other than the Business Combination Proposal will have no impact on the amount you will receive upon exercise of your redemption rights.

Any request for redemption, once made by a holder of public shares, may be withdrawn at any time up to the time the vote is taken with respect to the Business Combination Proposal at the FAII Special Meeting. If you deliver your public shares for redemption to FAII’s transfer agent and later decide prior to the FAII Special Meeting not to elect redemption, you may request that FAII’s transfer agent return the shares (physically or electronically). You may elect to redeem your public shares whether you vote for or against, or whether you abstain from voting on, the Business Combination.

Any corrected or changed proxy card or written demand of redemption rights must be received by FAII’s transfer agent prior to the vote taken on the Business Combination Proposal at the FAII Special Meeting. No demand for redemption will be honored unless the holder’s stock has been delivered (either physically or electronically) to FAII’s transfer agent.

If a holder of public shares properly makes a request for redemption and the public shares are delivered as described to FAII’s transfer agent as described herein, then, if the Business Combination is consummated, FAII will redeem these public shares for a pro rata portion of funds deposited in the Trust Account. If you exercise your redemption rights, then you will be exchanging your public shares for cash.

For a discussion of the U.S. federal income tax considerations of an exercise of redemption rights, see “U.S. Federal Income Tax Considerations for Stockholders Exercising Redemption Rights.”

 

Q:

WHAT ARE THE U.S. FEDERAL INCOME TAX CONSEQUENCES OF EXERCISING MY REDEMPTION RIGHTS?

 

A:

The tax consequences of a redemption will depend on each stockholder’s particular facts and circumstances, and each stockholder is urged to consult its tax advisor with respect to such consequences. We expect that a stockholder that exercises its redemption rights to receive cash in exchange for its FAII Class A common stock will generally be treated as selling such shares, resulting in the recognition of capital gain or capital loss. However, depending on the amount of stock of FAII that a shareholder owns or is deemed to own (including through the ownership of FAII warrants), there may be certain circumstances in which the redemption is treated as a distribution for U.S. federal income tax purposes, which would result in different tax consequences. For a more complete discussion of the U.S. federal income tax considerations of an exercise of redemption rights, see “U.S. Federal Income Tax Considerations for Stockholders Exercising Redemption Rights.

 

Q:

WHAT HAPPENS TO THE FUNDS DEPOSITED IN THE TRUST ACCOUNT AFTER CONSUMMATION OF THE BUSINESS COMBINATION?

 

A:

The net proceeds of FAII’s IPO, together with funds raised from the private sale of an aggregate of 5,933,333 Private Placement Warrants simultaneously with the consummation of FAII’s IPO, was placed in the Trust Account immediately following FAII’s IPO. After consummation of the Business Combination, the funds in the Trust Account will be used to pay holders of the public shares who exercise redemption rights, to pay fees and expenses incurred in connection with the Business Combination (including aggregate

 

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  fees of approximately $12.075 million as deferred underwriting commissions related to FAII’s IPO) and for ATI’s working capital and general corporate purposes, including to pay down a portion of the Company’s debt.

 

Q:

WHAT HAPPENS IF THE BUSINESS COMBINATION IS NOT CONSUMMATED?

 

A:

If FAII does not complete the Business Combination for any reason, FAII would search for another target business with which to complete a business combination. If FAII does not complete the Business Combination or acquire another target business by August 14, 2022, FAII must: (i) cease all operations except for the purpose of winding up; (ii) as promptly as reasonably possible, but not more than ten business days thereafter, subject to lawfully available funds therefor, redeem 100% of its public shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account, including interest earned on the funds held in the trust account and not previously released to us to pay our taxes (less up to $100,000 of interest to pay dissolution expenses), divided by the number of then outstanding public shares, which redemption will completely extinguish public stockholders’ rights as stockholders (including the right to receive further liquidating distributions, if any); and (iii) as promptly as reasonably possible following such redemption, subject to the approval of FAII’s remaining stockholders and the FAII Board, dissolve and liquidate, subject in each case to FAII’s obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law. There will be no redemption rights or liquidating distributions with respect to the FAII warrants, which will expire worthless if it fails to complete its initial business combination within the 24-month time period.

 

Q:

HOW DO THE INSIDERS INTEND TO VOTE ON THE PROPOSALS?

 

A:

The Insiders own of record and are entitled to vote an aggregate of approximately 20% of the outstanding shares of FAII Common Stock. The Insiders have agreed to vote any Founder Shares, and any public shares held by them as of the record date, in favor of each of the proposals set forth in this proxy statement. See “Related Agreements—Parent Sponsor Letter Agreement.”

 

Q:

WHAT CONSTITUTES A QUORUM AT THE FAII SPECIAL MEETING?

 

A:

A quorum of FAII’s stockholders is necessary to hold a valid meeting. A quorum will be present at the FAII Special Meeting if holders of a majority in voting power of FAII Common Stock issued and outstanding and entitled to vote at the FAII Special Meeting is present virtually or represented by proxy. Abstentions and broker non-votes will count as present for the purposes of establishing a quorum at the FAII Special Meeting. The holders of the Founder Shares, who currently own approximately 20% of the issued and outstanding shares of FAII Common Stock, will count towards this quorum. Whether or not there is a quorum, the chairman of the FAII Special Meeting has the power to adjourn the FAII Special Meeting, subject to the terms of the Merger Agreement. As of the close of business on May 10, 2021, 21,562,501 shares of FAII Common Stock would be required to achieve a quorum.

 

Q:

WHAT VOTE IS REQUIRED TO APPROVE EACH PROPOSAL AT THE FAII SPECIAL MEETING?

 

A:

The Business Combination Proposal: The affirmative vote of the holders of a majority of the votes cast by holders of the outstanding shares of FAII Common Stock present virtually at the FAII Special Meeting webcast or represented by proxy, voting together as a single class, is required to approve the Business Combination Proposal. FAII stockholders must approve the Business Combination Proposal in order for the Business Combination to occur. If FAII stockholders fail to approve the Business Combination Proposal, the Business Combination will not occur.

The NYSE Issuance Proposal: The affirmative vote of holders of a majority of the votes cast by holders of the outstanding shares of FAII Common Stock present virtually at the FAII Special Meeting webcast or

 

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represented by proxy, voting together as a single class, is required to approve the NYSE Issuance Proposal. If FAII stockholders fail to approve the NYSE Issuance Proposal, the Business Combination will not occur. Notwithstanding the approval of the NYSE Issuance Proposal, if the Business Combination is not consummated for any reason, the actions contemplated by the NYSE Issuance Proposal will not be effected.

The Charter Amendment Proposal: The affirmative vote of the holders of a majority of the outstanding shares of FAII Common Stock, voting together as a single class, is required to approve the Charter Amendment Proposal. Notwithstanding the approval of the Charter Amendment Proposal, if the Business Combination is not consummated for any reason, the actions contemplated by the Charter Amendment Proposal will not be effected.

The Governance Proposal: The affirmative vote of holders of a majority of the votes cast by holders of the outstanding shares of FAII Common Stock present virtually at the FAII Special Meeting webcast or represented by proxy, voting together as a single class, is required to approve the Governance Proposal. Notwithstanding the approval of the Governance Proposal, if the Business Combination is not consummated for any reason, the actions contemplated by the Governance Proposal will not be effected.

The Director Election Proposal: The affirmative vote (virtually or by proxy) of holders of a plurality of the votes cast by holders of outstanding shares of FAII Class F common stock entitled to vote thereon at the FAII Special Meeting, voting as a single class, is required to approve the Director Election Proposal.

The Incentive Plan Proposal: The affirmative vote of holders of a majority of the votes cast by holders of the outstanding shares of FAII Common Stock present virtually at the FAII Special Meeting webcast or represented by proxy, voting together as a single class, is required to approve the Incentive Plan Proposal. Notwithstanding the approval of the Incentive Plan Proposal, if the Business Combination is not consummated for any reason, the actions contemplated by the Incentive Plan Proposal will not be effected.

The Adjournment Proposal: The affirmative vote of holders of a majority of the votes cast by holders of the outstanding shares of FAII Common Stock present virtually at the FAII Special Meeting webcast or represented by proxy, voting together as a single class, is required to approve the Adjournment Proposal.

As further discussed in “Related Agreements—Parent Sponsor Letter Agreement,” the Insiders have entered into the Parent Sponsor Letter Agreement, pursuant to which the Insiders have agreed to vote shares of FAII Common Stock held by them, representing approximately 20% of the aggregate voting power of the FAII Common Stock, in favor of each of the proposals set forth in this proxy statement.

 

Q:

DO ANY OF FAII’S DIRECTORS OR OFFICERS HAVE INTERESTS IN THE BUSINESS COMBINATION THAT MAY DIFFER FROM OR BE IN ADDITION TO THE INTERESTS OF FAII STOCKHOLDERS?

 

A:

FAII’s executive officers and certain non-employee directors have interests in the Business Combination that may be different from, or in addition to, the interests of FAII stockholders generally. The FAII Board was aware of and considered these interests to the extent such interests existed at the time, among other matters, in approving the Merger Agreement and in recommending that the Merger Agreement and the transactions contemplated thereby be approved by the stockholders of FAII. See “The Business Combination—Interests of Directors and Officers of FAII in the Business Combination.”

 

Q:

WHAT DO I NEED TO DO NOW?

 

A:

After carefully reading and considering the information contained in this proxy statement, please submit your proxies as soon as possible so that your shares will be represented at the FAII Special Meeting. Please follow the instructions set forth on the proxy card or on the voting instruction form provided by your broker, bank or other nominee if your shares are held in the name of your broker, bank or other nominee.

 

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Q:

HOW DO I VOTE?

 

A:

If you are a stockholder of record of FAII as of May 24, 2021 (the “FAII record date”) you may submit your proxy before the FAII Special Meeting in any of the following ways, if available:

 

   

Vote by Mail: by signing, dating and returning the enclosed proxy card in the accompanying prepaid reply envelope;

 

   

Vote by Internet: visit www.proxyvote.com, 24 hours a day, seven days a week, until 11:59 p.m., Eastern Time, on June 14, 2021 (have your proxy card in hand when you visit the website);

 

   

Vote by Phone: by calling toll-free (within the U.S. or Canada) 1-800-690-6903 (have your proxy card in hand when you call); or

 

   

Vote at the FAII Special Meeting: by casting your vote at the FAII Special Meeting via the special meeting website. There will not be a physical meeting location. Any stockholder of record as of the FAII record date can attend the FAII Special Meeting webcast by visiting www.virtualshareholdermeeting.com/FAII2021, where such stockholders may vote during the FAII Special Meeting. The FAII Special Meeting starts at 8:00 a.m., Eastern Time. We encourage you to allow ample time for online check-in, which will open at 8:00 a.m., Eastern Time. Please have your 16-digit control number to join the FAII Special Meeting webcast. Instructions on who can attend and participate via the Internet, including how to demonstrate proof of stock ownership, are posted at www.virtualshareholdermeeting.com/FAII2021.

If your shares are held in “street name” through a broker, bank or other nominee, your broker, bank or other nominee will send you separate instructions describing the procedure for voting your shares. Simply complete, sign and date your voting instruction card and return it in the postage-paid envelope provided to ensure that your vote is counted. Alternatively, you may vote by telephone or over the internet as instructed by your broker, bank or other nominee. “Street name” stockholders who wish to vote at the FAII Special Meeting will need the 16-digit control number included on the instructions that accompanied your proxy materials, if applicable, or to obtain a proxy form from your broker, bank or other nominee.

FAII stockholders are encouraged to vote in advance of the FAII Special Meeting.

 

Q:

WHEN AND WHERE IS THE FAII SPECIAL MEETING?

 

A:

The FAII Special Meeting will be held exclusively via a live webcast at www.virtualshareholdermeeting.com/FAII2021, on June 15, 2021 at 8:00 a.m., Eastern Time. To participate in the virtual meeting, an FAII stockholder of record will need the 16-digit control number included on their proxy card or instructions that accompanied their proxy materials, if applicable, or to obtain a proxy form from their broker, bank or other nominee. The FAII Special Meeting webcast will begin promptly at 8:00 a.m., Eastern Time. FAII stockholders are encouraged to access the FAII Special Meeting prior to the start time. If you encounter any difficulties accessing the virtual meeting or during the meeting time, please call the technical support number that will be posted on the virtual meeting login page.

 

Q:

IF MY SHARES ARE HELD IN “STREET NAME” BY A BROKER, BANK OR OTHER NOMINEE, WILL MY BROKER, BANK OR OTHER NOMINEE VOTE MY SHARES FOR ME?

 

A:

If your shares are held in “street name” in a stock brokerage account or by a broker, bank or other nominee, you must provide the record holder of your shares with instructions on how to vote your shares. Please follow the voting instructions provided by your broker, bank or other nominee. Please note that you may not vote shares held in “street name” by returning a proxy card directly to FAII.

Under the rules of the NYSE, brokers who hold shares in “street name” for a beneficial owner of those shares typically have the authority to vote in their discretion on “routine” proposals when they have not received instructions from beneficial owners. However, brokers are not permitted to exercise their voting discretion with respect to the approval of matters that the NYSE determines to be “non-routine” without

 

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specific instructions from the beneficial owner. It is expected that all proposals to be voted on at the FAII Special Meeting are “non-routine” matters. Broker non-votes occur when a broker or nominee is not instructed by the beneficial owner of shares to vote on a particular proposal for which the broker does not have discretionary voting power.

If you are a FAII stockholder holding your shares in “street name” and you do not instruct your broker, bank or other nominee on how to vote your shares, your broker, bank or other nominee will not vote your shares on the Business Combination Proposal, the NYSE Issuance Proposal, the Governance Proposal, the Director Election Proposal, the Incentive Plan Proposal or the Adjournment Proposal. Such broker non-votes will have no effect on the vote count for such proposals.

If you are a FAII stockholder holding your shares in “street name” and you do not instruct your broker, bank or other nominee on how to vote your shares, your broker, bank or other nominee will not vote your shares on the Charter Amendment Proposal. Such broker non-votes will have the same effect as a vote “AGAINST” the Charter Amendment Proposal.

 

Q:

WHAT IF I ATTEND THE FAII SPECIAL MEETING VIRTUALLY AND ABSTAIN OR DO NOT VOTE?

 

A:

For purposes of the FAII Special Meeting, an abstention occurs when a stockholder is present virtually at the FAII Special Meeting webcast and does not vote or returns a proxy with an “abstain” vote.

If you are a FAII stockholder that attends the FAII Special Meeting webcast virtually and fails to vote on the Business Combination Proposal, the NYSE Issuance Proposal, the Governance Proposal, the Director Election Proposal, the Incentive Plan Proposal or the Adjournment Proposal, or if respond to such proposals with an “abstain” vote, your failure to vote or “abstain” vote in each case will have no effect on the vote count for such proposals.

If you are a FAII stockholder that attends the FAII Special Meeting webcast virtually and fails to vote on the Charter Amendment Proposal, or if respond to such proposal with an “abstain” vote, your failure to vote or “abstain” vote in each case will have the same effect as a vote “AGAINST” such Charter Amendment Proposal.

 

Q:

WHAT WILL HAPPEN IF I RETURN MY PROXY CARD WITHOUT INDICATING HOW TO VOTE?

 

A:

If you sign and return your proxy card without indicating how to vote on any particular proposal, the FAII stock represented by your proxy will be voted as recommended by the FAII Board with respect to that proposal.

 

Q:

MAY I CHANGE MY VOTE AFTER I HAVE DELIVERED MY PROXY OR VOTING INSTRUCTION CARD?

 

A:

Yes. You may change your vote at any time before your proxy is voted at the FAII Special Meeting. You may do this in one of three ways:

 

   

filing a notice with the corporate secretary of FAII;

 

   

mailing a new, subsequently dated proxy card; or

 

   

by attending the FAII Special Meeting webcast and electing to vote your shares electronically.

If you are a stockholder of record of FAII and you choose to send a written notice or to mail a new proxy, you must submit your notice of revocation or your new proxy to Fortress Value Acquisition Corp. II, 1345 Avenue of the Americas, 46th Floor, New York, New York 10105, and it must be received at any time before the vote is taken at the FAII Special Meeting. Any proxy that you submitted may also be revoked by

 

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submitting a new proxy by mail, or online or by telephone, not later than 11:59 p.m., Eastern Time, on June 14, 2021, or by voting electronically at the FAII Special Meeting webcast. Simply attending the FAII Special Meeting webcast will not revoke your proxy. If you have instructed a broker, bank or other nominee to vote your shares of FAII Common Stock, you must follow the directions you receive from your broker, bank or other nominee in order to change or revoke your vote.

 

Q:

WHAT HAPPENS IF I FAIL TO TAKE ANY ACTION WITH RESPECT TO THE FAII SPECIAL MEETING?

 

A:

If you fail to take any action with respect to the FAII Special Meeting and the Business Combination is approved by stockholders and consummated, you will continue to be a stockholder of ATI. Failure to take any action with respect to the FAII Special Meeting will not affect your ability to exercise your redemption rights. If you fail to take any action with respect to the FAII Special Meeting and the Business Combination is not approved, you will continue to be a stockholder of FAII while FAII searches for another target business with which to complete a business combination.

 

Q:

WHAT SHOULD I DO IF I RECEIVE MORE THAN ONE SET OF VOTING MATERIALS?

 

A:

Stockholders may receive more than one set of voting materials, including multiple copies of this proxy statement and multiple proxy cards or voting instruction cards. For example, if you hold your shares in more than one brokerage account, you will receive a separate voting instruction card for each brokerage account in which you hold shares. If you are a holder of record and your shares are registered under more than one name, you will receive more than one proxy card. Please complete, sign, date and return each proxy card and voting instruction card that you receive in order to cast a vote with respect to all of your shares.

 

Q:

WHOM SHOULD I CONTACT IF I HAVE ANY QUESTIONS ABOUT THE PROXY MATERIALS OR VOTING?

 

A:

If you have any questions about the proxy materials, need assistance submitting your proxy or voting your shares or need additional copies of this proxy statement or the enclosed proxy card, you should contact D.F. King & Co., Inc., FAII’s proxy solicitor, toll-free at (800) 791-3320 (banks and brokers call (212) 269-5550) or email at FAII@dfking.com.

 

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SUMMARY

This summary highlights selected information included in this proxy statement and does not contain all of the information that may be important to you. You should read this entire document and its annexes and the other documents to which we refer before you decide how to vote. Each item in this summary includes a page reference directing you to a more complete description of that item.

Parties to the Business Combination

FAII

FAII is a blank check company incorporated in Delaware on June 10, 2020, formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses. FAII’s Class A common stock, units and warrants are currently listed on the NYSE under the symbols “FAII”, “FAII.U” and “FAII WS,” respectively. The mailing address of FAII’s principal executive office is 1345 Avenue of the Americas, 46th Floor, New York, New York 10105 and the telephone number of FAII’s principal executive office is (212) 798-6100.

Merger Sub

FVAC Merger Corp. II (“Merger Sub”) is a Delaware corporation, incorporated on February 3, 2021, and a direct, wholly-owned subsidiary of FAII. The Merger Sub was formed solely for the purpose of engaging in the Business Combination and does not own any material assets or operate any business.

Company

The Company is a nationally recognized outpatient physical therapy provider specializing in outpatient rehabilitation and adjacent healthcare services, with 875 clinics (as well as 22 clinics under management service agreements) located in 25 states as of December 31, 2020. The Company operates with a commitment to providing its patients, medical provider partners, payors and employers with evidence-based, patient-centric care.

The Company offers a variety of services within its clinics, including physical therapy to treat spine, shoulder, knee and neck injuries or pain; work injury rehabilitation services, including work conditioning and work hardening; hand therapy; and other specialized treatment services. The Company’s team of professionals is dedicated to returning patients to optimal physical health.

Physical therapy patients receive team-based care, robust techniques and individualized treatment plans in an encouraging environment. To achieve exceptional results, the Company uses an extensive array of techniques including therapeutic exercise, manual therapy and strength training, among others. The Company’s physical therapy model aims to deliver optimized outcomes and time to recovery for patients, insights and service satisfaction for referring providers and predictable costs and measurable value for payors.

In addition to providing services to physical therapy patients at outpatient rehabilitation clinics, the Company provides services through its ATI Worksite Solutions (“AWS”) program, Management Service Agreements (“MSA”), Home Health, and Sports Medicine arrangements. AWS provides an on-site team of healthcare professionals at employer worksites to promote work-related injury prevention, facilitate expedient and appropriate return-to-work follow-up and maintain the health and well-being of the workforce. MSA contracts with clinics or physician offices may provide dedicated service teams to oversee management and other physical therapy services. Home Health offers in-home rehabilitation. Sports Medicine arrangements provide certified healthcare professionals to various schools, universities and other institutions to perform on-site physical therapy and rehabilitation services.



 

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The Company is a corporation formed under the laws of the State of Delaware. The mailing address of the Company’s principal executive office is 790 Remington Boulevard, Bolingbrook, Illinois 60440. The telephone number of the Company is (630) 296-2223. For more information about the Company, please see the sections entitled “Information About the Company’s Business,” “Company’s Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Management After the Business Combination” of this proxy statement.

The Business Combination and the Merger Agreement

The terms and conditions of the Business Combination are contained in the Merger Agreement, which is attached as Annex A to this proxy statement. We encourage you to read the Merger Agreement carefully, as it is the legal document that governs the Business Combination.

If the Merger Agreement is approved and the Business Combination is approved and subsequently completed, the Company will be a direct wholly-owned subsidiary of FAII.

Consideration to the Company’s Stockholders in the Business Combination

Each share of Company preferred stock issued and outstanding immediately prior to the effective time will be converted into the right to receive (A) an amount in cash equal to (1) $59,000,000 divided by (2) the number of shares of Company preferred stock outstanding as of immediately prior to the effective time and (B) a number of shares of ATI Class A common stock equal in value to (i) the product of (a) (x) the Preferred Stock Adjusted Base plus (y) an aggregate accrued amount, calculated based on the Preferred Stock Adjusted Base, at the Dividend Rate (as defined in the Company’s current charter) from the closing date through the date that is 180 days from the closing date, multiplied by (b) 1.05, divided by (ii) the number of shares of Company preferred stock outstanding as of immediately prior to the effective time. For more information on the Dividend Rate of Company preferred stock, see Note 14 to the Company’s audited consolidated financial statements included elsewhere in this proxy statement.

Each share of Company common stock issued and outstanding immediately prior to the effective time will be converted into the right to receive (A) a number of shares of ATI Class A common stock equal to (1) $1,303,000,000 divided by (2) the number of shares of Company common stock outstanding as of immediately prior to the effective time and (B) the contingent right to receive Earnout Shares that may be issued in accordance with the terms of the Merger Agreement.

No fractional shares will be issued in connection with the Business Combination. In lieu thereof, FAII shall pay or cause to be paid cash to each holder who otherwise would have been entitled to receive a fractional share (after aggregating all fractional shares of ATI Class A common stock issuable to such holder).

Related Agreements (page 128)

Parent Sponsor Letter Agreement

Concurrently with the execution of the Merger Agreement, the Insiders entered into the Parent Sponsor Letter Agreement, a copy of which is attached to this proxy statement as Annex E, pursuant to which they agreed to (i) vote all of their shares of FAII Common Stock in favor of the Business Combination and each of the other proposals set forth in this proxy statement, (ii) vote all of their FAII Common Stock against certain other actions, including any action expected to result in a breach of the Merger Agreement or any alternative business combination and (iii) certain restrictions on their FAII Common Stock, including (x) to not redeem or tender any of their FAII Common Stock in connection with any such vote or in connection with any vote to amend FAII’s



 

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current charter and (y) to not transfer any FAII Class F common stock (or shares of FAII Class A common stock issuable upon conversion thereof) or Private Placement Warrants for certain “lock-up” periods, in each case, upon the terms and subject to the conditions set forth therein.

Pursuant to the Parent Sponsor Letter Agreement, the Sponsor also agreed, subject to, and conditioned upon the closing of the Business Combination, immediately prior to the effective time, to transfer and surrender 2,966,667 Private Placement Warrants, resulting in such warrants being cancelled and no longer outstanding.

The Insiders further agreed that, as of the consummation of the Business Combination, all of the Vesting Shares shall be unvested and shall be subject to certain vesting and forfeiture provisions as set forth in the Parent Sponsor Letter Agreement.

For a more detailed discussion, please see “Related Agreements—Parent Sponsor Letter Agreement” of this proxy statement.

Stockholders Agreement

Concurrently with the execution of the Merger Agreement, FAII entered into the Stockholders Agreement, a copy of which is attached to this proxy statement as Annex G, with each of the Company stockholders listed on Schedule A thereto (the “Advent Stockholders”). The Stockholders Agreement will become effective upon the effective time. Pursuant to the terms of the Stockholders Agreement, the Advent Stockholders will have the right to designate nominees for election to the ATI Board following the closing at any meeting of the ATI stockholders (each, an “Advent Director”). The number of nominees that the Advent Stockholders will be entitled to nominate pursuant to the Stockholders Agreement is dependent on the aggregate number of shares of ATI Class A common stock (including any securities or rights convertible into, or exercisable or exchangeable for (in each case, directly or indirectly), shares of ATI Class A common stock, including options and warrants) held by Advent Stockholders. For so long as the Advent Stockholders own (i) 50% or more of the ATI Class A common stock, the Advent Stockholders will be entitled to designate five Advent Directors, (ii) 38% or more (but less than 50%) of ATI Class A common stock, the Advent Stockholders will be entitled to designate four Advent Directors, (iii) 26% or more (but less than 38%) of ATI Class A common stock, the Advent Stockholders will be entitled to designate three Advent Directors, (iv) 13% or more (but less than 26%) of ATI Class A common stock, the Advent Stockholders will be entitled to designate two Advent Directors, (v) 5% or more (but less than 13%) of ATI Class A common stock, the Advent Stockholders will be entitled to designate one Advent Director and (vi) less than 5%, the Advent Stockholders will not be entitled to designate any Advent Directors. Under the Stockholders Agreement, ATI and the Advent Stockholders agreed to nominate Andrew McKnight, the Chief Executive Officer and a director of FAII, to the ATI Board following the closing as a Class I Director, with a term expiring at the first annual meeting of the ATI stockholders following the closing. Mr. McKnight also currently serves as a member of the board of managers and the Chairman of the Sponsor. For a more detailed discussion, please see “Related Agreements—Stockholders Agreement” of this proxy statement.

Subscription Agreements

Concurrently with the execution of the Merger Agreement, FAII entered into Subscription Agreements with the PIPE Investors, the form of which is attached to this proxy statement as Annex F, pursuant to which the PIPE Investors have committed to purchase an aggregate amount of $300,000,000 in shares of FAII Class A common stock at a purchase price of $10.00 per share, substantially concurrent with, and contingent upon, the consummation of the Business Combination. In connection with the PIPE Investment, certain Fortress Credit Funds have entered into Subscription Agreements, pursuant to which Fortress has subscribed for 7,500,000 newly-issued shares of FAII Class A common stock (which will not be subject to vesting or forfeiture restrictions under the Parent Sponsor Letter Agreement), at a purchase price of $10.00 per share.



 

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The Subscription Agreements for the PIPE Investors provide for certain registration rights. In particular, FAII is required to, within 15 business days following the closing of the Business Combination, file with the SEC (at FAII’s sole cost and expense) a shelf registration statement registering the resale of such shares, and will use its commercially reasonable efforts to have such registration statement declared effective as soon as practicable after the filing thereof, but no later than the earlier of the 60th calendar day (or 90th calendar day if the SEC notifies FAII that it will “review” the registration statement) following the closing date of the Business Combination. Such registration statement is required to be kept effective for at least three years after the closing or, if earlier, the date on which the shares may be sold without volume or manner of sale limitations under Rule 144 promulgated under the Securities Act (“Rule 144”), subject to certain issuer suspension periods.

The Subscription Agreements will terminate with no further force and effect upon the earliest to occur of: (a) such date and time as the Merger Agreement is validly terminated in accordance with its terms, (b) upon the mutual written agreement of the parties to such Subscription Agreement, (c) if any of the conditions to closing set forth in the Subscription Agreements are not satisfied or waived by the party entitled to grant such waiver on or prior to the closing date and, as a result thereof, the transactions contemplated by the Subscription Agreement are not consummated at the closing date or (d) at each PIPE Investor’s election, on or after August 23, 2021, if the closing has not occurred by such date. For a more detailed discussion, please see “Related Agreements—Subscription Agreements” of this proxy statement.

Amended and Restated Registration Rights Agreement

Concurrently with the execution of the Merger Agreement, but effective upon the consummation of the Business Combination, FAII entered into the A&R RRA, a copy of which is attached to this proxy statement as Annex D, with the Sponsor, existing holders of certain securities of FAII and new holders of certain securities of FAII (including all current Company stockholders) (collectively, with each other person who has executed and delivered a joinder thereto, the “A&R RRA Parties”).

Pursuant to the terms of the A&R RRA, the A&R RRA Parties will be entitled to registration rights in respect of certain shares of ATI Class A common stock and certain other equity securities of ATI that are held by the A&R RRA Parties from time to time. The A&R RRA provides that FAII will, as soon as practicable but no later than 15 business days following the closing of the Business Combination, file with the SEC (at FAII’s sole cost and expense) a shelf registration statement registering the resale of certain shares of ATI Class A common stock and certain other equity securities of ATI held by the A&R RRA Parties and will use its reasonable best efforts to have such shelf registration statement declared effective as soon as practicable after the filing thereof, but no later than the earlier of (a) the 60th calendar day following the actual filing date (or the 90th calendar day following the actual filing date if the SEC notifies FAII that it will “review” such registration statement) and (b) the 10th business day after the date FAII is notified orally or in writing by the SEC that such registration statement will not be “reviewed” or will not be subject to further review.

Each of the A&R RRA Parties and their respective permitted transferees will be entitled to certain demand registration rights in connection with an underwritten shelf takedown offering, in each case subject to certain offering thresholds, applicable lock-up restrictions, issuer suspension periods and certain other conditions. The majority-in-interest of the A&R RRA Parties and their permitted transferees will also be entitled to certain demand registration rights when FAII does not have an effective shelf registration statement, which will be limited to three demand registrations, subject to applicable lock-up restrictions, issuer suspension periods and certain other conditions. In addition, the A&R RRA Parties have certain “piggy-back” registration rights, subject to customary underwriter cutbacks, issuer suspension periods and certain other conditions. The A&R RRA includes customary indemnification provisions. FAII will bear the expenses incurred in connection with the filing of any registration statements filed pursuant to the terms of the A&R RRA, including the fees of one legal counsel to the majority-in-interest of A&R RRA Parties initiating a demand registration right.

For a more detailed discussion, please see “Related Agreements—Amended and Restated Registration Rights Agreement” of this proxy statement.



 

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Organizational Structure of the Company

The following diagram depicts, in a simplified form, the current ownership structure of the Company as of the date of this proxy statement:

 

LOGO

Organizational Structure of FAII

The following diagram depicts, in a simplified form, the current ownership structure of FAII as of the date of this proxy statement:

LOGO



 

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The following diagram illustrates, in a simplified form, the ownership structure of ATI immediately following consummation of the Business Combination assuming no redemptions (excluding the potential dilutive effect of the exercise of FAII public warrants and the Vesting Shares).

 

LOGO

 

*

Excludes 7,500,000 shares purchased by the Sponsor as part of the PIPE Investment.

Redemption Rights (page 85)

Pursuant to FAII’s current charter, a holder of FAII public shares may request that FAII redeem all or a portion of such stockholder’s public shares for cash if the Business Combination is consummated. Public stockholders may elect to redeem their public shares whether they vote for or against, or whether they abstain from voting on, the Business Combination. If a public stockholder properly exercises its right to redeem its public shares and timely delivers its shares to the transfer agent, FAII will redeem each redeeming stockholder’s public shares for a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account, calculated as of two business days prior to the consummation of the Business Combination, including interest not previously released to FAII to pay its taxes, divided by the number of then issued and outstanding public shares.

In order to exercise your redemption rights, you must:

 

   

if you hold public units, separate the underlying FAII public shares and FAII public warrants;



 

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prior to 5:00 p.m., Eastern Time, on June 11, 2021 (two business days before the FAII Special Meeting), tender your shares physically or electronically and submit a request in writing that we redeem your public shares for cash to the transfer agent, at the following address:

Continental Stock Transfer & Trust Company

1 State Street, 30th Floor

New York, NY 10004

Attn: Mark Zimkind

Email: mzimkind@continentalstock.com

and

 

   

deliver your FAII public shares either physically or electronically through DTC’s DWAC system to the transfer agent at least two business days before the FAII Special Meeting. Stockholders seeking to exercise their redemption rights and opting to deliver physical certificates should allot sufficient time to obtain physical certificates from the transfer agent and time to effect delivery. It is FAII’s understanding that stockholders should generally allot at least two weeks to obtain physical certificates from the transfer agent. However, FAII does not have any control over this process and it may take longer than two weeks. Public stockholders who hold their FAII public shares in street name will have to coordinate with their bank, broker or other nominee to have the FAII public shares certificated or delivered electronically. If you do not submit a written request and deliver your FAII public shares as described above, your FAII public shares will not be redeemed.

Stockholders seeking to exercise their redemption rights, whether they are record holders or hold their shares in “street name,” are required to either tender their certificates to the transfer agent prior to the date set forth in these proxy materials or deliver their shares to the transfer agent electronically using DTC’s DWAC system, at such stockholder’s option. Any demand for redemption, once made, may be withdrawn at any time until the deadline for exercising redemption requests and thereafter, with our consent, until the vote is taken on the Business Combination. If you delivered your public shares for redemption to the transfer agent and decide within the required timeframe not to exercise your redemption rights, you may request that the transfer agent return the shares (physically or electronically). The requirement for physical or electronic delivery prior to the FAII Special Meeting ensures that a redeeming public stockholder’s election to redeem is irrevocable once the Business Combination is approved.

Holders of outstanding public units must separate the underlying FAII public shares and public warrants prior to exercising redemption rights with respect to the FAII public shares.

If you hold public units registered in your own name, you must deliver the certificate for such public units to the transfer agent, with written instructions to separate such public units into FAII public shares and public warrants. This must be completed far enough in advance to permit the mailing of the public share certificates back to you so that you may then exercise your redemption rights upon the separation of the public shares from the public units.

If a broker, dealer, commercial bank, trust company or other nominee holds your public units, you must instruct such nominee to separate your public units. Your nominee must send written instructions by facsimile to the transfer agent. Such written instructions must include the number of public units to be split and the nominee holding such public units. Your nominee must also initiate electronically, using DTC’s DWAC system, a withdrawal of the relevant units and a deposit of an equal number of public shares and public warrants. This must be completed far enough in advance to permit your nominee to exercise your redemption rights upon the separation of the public shares from the public units. While this is typically done electronically on the same



 

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business day, you should allow at least one full business day to accomplish the separation. If you fail to cause your public shares to be separated in a timely manner, you will likely not be able to exercise your redemption rights.

Each redemption of shares of FAII Class A common stock by public stockholders will reduce the amount in the Trust Account, which held marketable securities with a fair value of approximately $345,015,940 as of May 10, 2021. The Merger Agreement provides that FAII’s and the Company’s respective obligations to consummate the Business Combination are conditioned on, among other things, satisfaction or waiver of, the Minimum Cash Condition. This condition to the respective obligations of the parties is for the sole benefit of the parties thereto and may be waived by such parties. If, as a result of redemptions of FAII public shares by public stockholders, this condition is not met (or waived), then FAII or the Company may elect not to consummate the Business Combination. In addition, in no event will FAII redeem public shares in an amount that would cause its net tangible assets to be less than $5,000,001. Holders of public warrants do not have redemption rights in connection with the Business Combination.

Prior to exercising redemption rights, stockholders should verify the market price of FAII Class A common stock as they may receive higher proceeds from the sale of their FAII Class A common stock in the public market than from exercising their redemption rights if the market price per share is higher than the redemption price. FAII cannot assure you that you will be able to sell your FAII Class A common stock in the open market, even if the market price per share is higher than the redemption price stated above, as there may not be sufficient liquidity in FAII Class A common stock when you wish to sell your shares.

If you exercise your redemption rights, the shares of FAII Class A common stock will cease to be outstanding immediately prior to the Business Combination and will only represent the right to receive a pro rata share of the aggregate amount on deposit in the Trust Account. You will no longer own those shares and will have no right to participate in, or have any interest in, the future growth of FAII, if any. You will be entitled to receive cash for these shares only if you properly and timely demand redemption.

If the Business Combination is not approved and FAII does not consummate an initial business combination by August 14, 2022, FAII will be required to dissolve and liquidate the Trust Account by returning the then remaining funds in such account to the public stockholders and FAII warrants will expire worthless.

ATI Board Following the Business Combination (page 106)

In connection with the Business Combination, FAII will amend and restate its current charter to, among other things, (A) change its name to “ATI Physical Therapy, Inc.” and (B) provide for a classified Board of Directors that will initially consist of eight directors. The ATI Board shall be divided into three classes, Class I, Class II and Class III, with only one class of directors being elected in each year and each class serving a three-year term. The term of office of the Class I directors will expire at the first annual meeting of stockholders of ATI following the effectiveness of the proposed charter. The term of office of the Class II directors will expire at the second annual meeting of stockholders of ATI following the effectiveness of the proposed charter. The term of office of the Class III directors will expire at the third annual meeting of stockholders of ATI following the effectiveness of proposed charter. See “Management After the Business Combination.

The Proposals (page 248)

At the FAII Special Meeting, FAII stockholders will vote on the following proposals:

 

   

Proposal No. 1—The Business Combination Proposal: To consider and vote upon a proposal to approve the Merger Agreement and approve the transactions contemplated thereby;

 

   

Proposal No. 2—The NYSE Issuance Proposal: To consider and vote upon a proposal for purposes of complying with applicable provisions of Rule 312.03 of the NYSE Listed Company Manual, to



 

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approve (i) the issuance of more than 20% of FAII’s currently issued and outstanding FAII Common Stock in connection with the Business Combination, (ii) the issuance of more than 1% of FAII’s currently issued and outstanding FAII Common Stock to a Related Party (as defined in Rule 312.03 of the NYSE Listed Company Manual) in connection with the Business Combination and (iii) the issuance of a number of shares of FAII Class A common stock that will result in a change of control of FAII (pursuant to Rule 312.03(d) of the NYSE Listed Company Manual) in connection with the Business Combination;

 

   

Proposal No. 3—The Charter Amendment Proposal—To consider and act upon a proposal to adopt the proposed charter;

 

   

Proposal No. 4—The Governance Proposal—A separate proposal with respect to certain governance provisions in the proposed charter, which is being separately presented in accordance with SEC requirements and which will be voted upon on a non-binding advisory basis;

 

   

Proposal No. 5—The Director Election Proposal: For the holders of outstanding shares of FAII Class F common stock to consider and vote upon a proposal to elect eight directors to serve on the FAII Board until the earlier of the closing and the 2023 annual meeting of stockholders, and until their respective successors are duly elected and qualified, subject to their earlier death, resignation or removal (Proposal No. 5);

 

   

Proposal No. 6—The Incentive Plan Proposal: To consider and vote upon a proposal to approve the Incentive Plan and the material terms thereunder, which we refer to as the “Incentive Plan Proposal.” A copy of the Incentive Plan is attached to the accompanying proxy statement as Annex J; and

 

   

Proposal No. 7—The Adjournment Proposal: To consider and vote upon a proposal to approve the adjournment of the FAII Special Meeting to a later date or dates, if necessary, to permit further solicitation and vote of proxies in the event that there are insufficient votes for, or for any other reason permitted by the Merger Agreement in connection with, the approval of one or more of the other proposals at the FAII Special Meeting.

See “FAII Proposals.”

Time and Place of FAII Special Meeting (page 77)

The FAII Special Meeting will be held exclusively via a live webcast at www.virtualshareholdermeeting.com/FAII2021, on June 15, 2021 at 8.00 a.m., Eastern Time. To participate in the virtual meeting, an FAII stockholder of record will need the 16-digit control number included on their proxy card or instructions that accompanied their proxy materials, if applicable, or to obtain a proxy form from their broker, bank or other nominee. The FAII Special Meeting webcast will begin promptly at 8.00 a.m., Eastern Time. FAII stockholders are encouraged to access the FAII Special Meeting prior to the start time. If you encounter any difficulties accessing the virtual meeting or during the meeting time, please call the technical support number that will be posted on the virtual meeting login page.

Voting Power; Record Date for FAII Special Meeting (page 77)

As a stockholder of FAII, you have a right to vote on the matters presented at the FAII Special Meeting, which are summarized above and fully set forth in this proxy statement. You will be entitled to vote or direct votes to be cast at the FAII Special Meeting if you owned FAII Common Stock at the close of business on May 24, 2021, which is the record date for the FAII Special Meeting. You are entitled to one vote for each share of FAII Common Stock that you owned as of the close of business on the record date. If your shares are held in “street name” or are in a margin or similar account, you should contact your broker, bank or other nominee to ensure that votes related to the shares you beneficially own are properly counted. As of the close of business on May 10, 2021, there were 43,125,000 shares of FAII Common Stock outstanding, of which 34,500,000 are shares of FAII Class A common stock and 8,625,000 are shares of FAII Class F common stock held by the Insiders.



 

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In connection with FAII’s IPO, the Insiders agreed to vote their Founder Shares and any public shares purchased during or after FAII’s IPO in favor of the Business Combination. Currently, the Insiders own approximately 20% of the issued and outstanding FAII Common Stock, including all of the outstanding Founder Shares. As a result, it is expected that the Insiders will vote all of such shares in favor of each of the proposals set forth in this proxy statement.

Accounting Treatment (page 106)

The Business Combination will be accounted for as a reverse recapitalization in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”). Under this method of accounting, FAII will be treated as the “acquired” company for financial reporting purposes. Accordingly, the Business Combination will be treated as the equivalent of the Company issuing stock for the net assets of FAII, accompanied by a recapitalization. The net assets of FAII will be stated at historical cost with no goodwill or intangible assets recorded. Operations prior to the Business Combination will be those of the Company.

The Company has been determined to be the accounting acquirer based on evaluation of the following facts and circumstances under both the no redemption and maximum redemption scenarios:

 

   

Company stockholders have the greatest voting interest in the combined entity, with approximately 66% majority interest in a no redemption scenario and approximately 72% majority interest in a maximum redemption scenario;

 

   

the Company’s former executive management will make up all of the management of ATI;

 

   

the Company’s existing directors and individuals designated by, or representing, Company stockholders will constitute a majority of the initial ATI Board following the consummation of the Business Combination;

 

   

ATI will assume the name “ATI Physical Therapy, Inc.;” and

 

   

the Company is the larger entity based on assets and revenue. Additionally, the Company has a larger employee base and substantive operations.

Appraisal Rights (page 106)

Appraisal rights are not available to holders of FAII Common Stock in connection with the Business Combination under Delaware law.

Proxy Solicitation (page 117)

Proxies may be solicited by mail. FAII has engaged D.F. King & Co., Inc. to assist in the solicitation of proxies.

If a stockholder grants a proxy, it may still vote its shares virtually if it revokes its proxy before the FAII Special Meeting. A stockholder may also change its vote by submitting a later-dated proxy, as described in “The FAII Board Recommends That You Vote “FOR” Each of These Proposals—Revoking Your Proxy.”

Conditions to the Business Combination (page 124)

The consummation of the Business Combination contemplated by the Merger Agreement is subject to certain conditions including, among others: (A) approval by FAII’s stockholders and the Company’s stockholders; (B) FAII having at least $5,000,001 of net tangible assets as of the effective time; (C) the expiration or termination of the waiting period under the HSR Act; (D) the listing of the shares of FAII Class A



 

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common stock to be issued in connection with the closing on the NYSE; (E) the satisfaction of the Minimum Cash Condition and (F) the filing of the proposed charter with the Secretary of State of the State of Delaware.

See “The Merger Agreement—Conditions to the Business Combination.”

Regulatory Matters (page 131)

Completion of the Business Combination is subject to governmental approval under the HSR Act. FAII and the Company have agreed to use their respective reasonable best efforts to obtain all required regulatory approvals. FAII and the Company filed HSR Act Notification and Report Forms with the Antitrust Division and the Federal Trade Commission (the “FTC”) on March 2, 2021. The HSR 30-day waiting period expired at 11:59 p.m., Eastern Time, on April 1, 2021.

The regulatory approvals to which completion of the Business Combination are subject are described in more detail in “Regulatory Approvals Related to the Business Combination.

No Solicitation (page 118)

From the date of the Merger Agreement to the closing or, if earlier, the termination of the Merger Agreement in accordance with its terms, each of FAII and Merger Sub has agreed not to, and has agreed not to authorize or permit any of their respective representatives acting on its behalf to, directly or indirectly:

 

   

initiate, solicit, knowingly facilitate, make or respond to any offer or proposal concerning, or related to, any alternative business combination;

 

   

enter into, engage in or continue any discussions or negotiations concerning, or related to, any alternative business combination;

 

   

provide any non-public information, data or access to employees to any person that has made, or that is considering making, a proposal with respect to an alternative business combination;

 

   

approve, endorse or recommend any alternative business combination; or

 

   

enter into any agreement, letter of intent, memorandum of understanding, term sheet or other contract relating to an alternative business combination.

FAII has agreed to promptly notify the Company of any submissions, proposals or offers made with respect to an alternative business combination as soon as practicable following FAII’s awareness thereof (but in any event within 24 hours).

FAII and Merger Sub have also agreed that FAII, Merger Sub and their respective officers and directors will, and will instruct and cause their respective affiliates and representatives, in each case, to the extent acting on behalf of FAII or Merger Sub, as applicable, to, immediately cease and terminate all discussions and negotiations with any person with respect to, or which is reasonably likely to give rise to or result in, a possible alternative business combination.

From the date of the Merger Agreement to the closing or, if earlier, the termination of the Merger Agreement in accordance with its terms, the Company has agreed not to, and agreed not to authorize or permit any of its representatives acting on its behalf to, directly or indirectly:

 

   

initiate, solicit, knowingly encourage, knowingly facilitate or make or respond to an acquisition proposal;

 

   

engage in or continue any discussions or negotiations with respect to an acquisition proposal;

 

   

provide any non-public information or data or access to employees to, any person that has made, or informs the Company that it is considering making, an acquisition proposal;

 

   

approve, endorse or recommend any acquisition proposal; or

 

   

enter into any agreement, letter of intent, memorandum of understanding, term sheet or other contract relating to an acquisition proposal.



 

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The Company has agreed to promptly notify FAII of any submissions, proposals or offers made with respect to an acquisition proposal as soon as practicable following the knowledge of the Company thereof (but in any event within two business days).

The Company has also agreed that it and its officers and directors will, and will instruct and cause their respective affiliates and representatives, to the extent acting on behalf of the Company, to immediately cease and terminate all discussions and negotiations with any person with respect to, or which is reasonably likely to give rise to or result in, a possible acquisition proposal.

See “The Merger Agreement—Covenants and Agreements.”

Termination (page 125)

The Merger Agreement may be terminated under certain customary and limited circumstances prior to the consummation of the Business Combination, including:

 

   

by mutual written consent of the Company and FAII;

 

   

by written notice from either the Company or FAII to the other party, if the closing has not occurred on or prior to August 23, 2021 (the “Outside Date”); provided, however, that the Merger Agreement may not be terminated under this condition by or on behalf of any party that is in breach of any representation, warranty or covenant contained in the Merger Agreement and such breach results in the failure of a closing condition set forth in the Merger Agreement to be satisfied on or prior to the Outside Date;

 

   

by written notice from either the Company or FAII to the other party, if a governmental entity in the United States has enacted, issued, promulgated, enforced or entered any law which has become final and nonappealable and has the effect of permanently making consummation of the Business Combination illegal or otherwise permanently preventing or prohibiting consummation of the Business Combination;

 

   

by written notice from either the Company or FAII to the other party if the FAII Special Meeting shall have been held and the FAII stockholder approval is not obtained at the FAII Special Meeting (subject to any postponement or adjournment of the FAII Special Meeting), provided, however, that the right to terminate the Merger Agreement under this condition will not be available from and after the time that FAII obtains the FAII stockholder approval;

 

   

by written notice from the Company to FAII, if there has been a breach of any representation, warranty or covenant made by FAII in the Merger Agreement, such that (A) the conditions described under the heading “—Conditions to the Business Combination” would not be satisfied at the closing (a “terminating FAII breach”) and (B) the terminating FAII breach is not cured within 30 days after written notice from the Company of such terminating FAII breach is delivered to FAII, or which breach, untruth or inaccuracy, by its nature, cannot be cured prior to the Outside Date; provided, however, that the Company will not be entitled to terminate the Merger Agreement under this condition if (1) the Company has waived such terminating FAII breach or (2) the Company is then in breach of any representation, warranty or covenant such that the conditions described under the heading “The Merger AgreementConditions to the Business Combination” would not reasonably be expected to be satisfied;

 

   

by written notice from FAII to the Company, if there has been a breach of any representation, warranty or covenant made by the Company in the Merger Agreement, such that (A) the conditions described under the heading “—Conditions to the Business Combination” would not be satisfied at the closing (a “terminating Company breach”) and (B) the terminating Company breach is not cured within 30 days after written notice from FAII of such terminating Company breach is delivered to the Company, or which breach, untruth or inaccuracy, by its nature, cannot be cured prior to the Outside Date; provided, however, that FAII will not be entitled to terminate the Merger Agreement under this condition if (1) FAII has waived such terminating Company breach or (2) FAII or Merger Sub is then in breach of any representation, warranty or covenant such that the conditions described under the heading “The Merger AgreementConditions to the Business Combination” would not reasonably be expected to be satisfied;



 

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by written notice from FAII to the Company, if the Company requisite approval has not been obtained within one business day of the execution and delivery of the Merger Agreement;

 

   

by written notice from the Company to FAII prior to obtaining the FAII stockholder approval, if the FAII Board (A) shall have made a FAII change in recommendation (as defined below) or (B) shall have failed to include the FAII Board recommendation (as defined below) in this proxy statement; or

 

   

by written notice from the Company to FAII, if, after giving effect to the FAII stock redemption, if any, the Available Cash (as defined below) would be less than $472,500,000 immediately prior to the effective time.

See “The Merger Agreement—Termination.”

NYSE Listing (page 119)

FAII Class A common stock is listed on the NYSE under the symbol “FAII.” FAII’s public warrants are listed on the NYSE under the symbol “FAII WS.” FAII’s units that have not separated are listed on the NYSE under the symbol “FAII.U.” Following the Business Combination, ATI Class A common stock (including common stock issuable in connection with the consummation of the Business Combination) will be listed on the NYSE under the symbol “ATIP.”

Quorum and Required Vote for Proposals for the FAII Special Meeting

A quorum of FAII’s stockholders is necessary to hold a valid meeting. A quorum will be present at the FAII Special Meeting if holders of a majority in voting power of FAII Common Stock issued and outstanding and entitled to vote at the FAII Special Meeting is present virtually or represented by proxy. Abstentions and broker non-votes will count as present for the purposes of establishing a quorum at the FAII Special Meeting.

The approval of each of the Business Combination Proposal, the NYSE Issuance Proposal, the Governance Proposal, the Incentive Plan Proposal and the Adjournment Proposal requires the affirmative vote of majority of the votes cast by holders of the outstanding shares of FAII Common Stock represented virtually or by proxy at the FAII Special Meeting and entitled to vote thereon. If a valid quorum is established, a stockholder’s failure to vote by proxy or virtually at the FAII Special Meeting will have no effect on the outcome of any vote on any of the foregoing proposals. Abstentions will be counted in connection with determination of whether a valid quorum is established, but will have no effect on the vote with respect to such proposals. Broker non-votes will also have no effect on the vote with respect to such proposals. The Insiders have agreed to vote their Founder Shares and any public shares they may hold in favor of each of the Business Combination Proposal, the NYSE Issuance Proposal, the Governance Proposal, the Incentive Plan Proposal and the Adjournment Proposal. Currently, the Insiders own approximately 20% of the issued and outstanding FAII Common Stock, including all of the outstanding Founder Shares.

The approval of the Charter Amendment Proposal requires the affirmative vote of the holders of a majority of the outstanding shares of FAII Common Stock entitled to vote thereon at the FAII Special Meeting. Accordingly, if a valid quorum is otherwise established, a stockholder’s failure to vote by proxy or virtually at the FAII Special Meeting, as well as an abstention from voting and a broker non-vote with regard to the Charter Amendment Proposal, will each have the same effect as a vote “AGAINST” such Charter Amendment Proposal. The Insiders have agreed to vote their Founder Shares and any public shares they may hold in favor of the Charter Amendment Proposal.

Approval of the Director Election Proposal requires the affirmative vote (virtually or by proxy) of holders of a plurality of the votes cast by holders of outstanding shares of FAII Class F common stock entitled to vote thereon at the FAII Special Meeting, voting as a single class. Failure to vote by proxy or to vote virtually at the FAII Special Meeting or an abstention from voting will have no effect on the outcome of the vote on the Director Election Proposal. Proxies will have full discretion to cast votes for other persons in the event that any nominee



 

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is unable to serve. Failure to vote by proxy or to vote virtually at the FAII Special Meeting, abstentions and broker non-votes will have no effect on the vote for the Director Election Proposal. The Insiders have agreed to vote their Founder Shares and any public shares they may hold in favor of the Director Election Proposal.

The transactions contemplated by the Merger Agreement will be consummated only if the Business Combination Proposal, the NYSE Issuance Proposal and the Charter Amendment Proposal are approved at the FAII Special Meeting. It is important for you to note that in the event that the Business Combination Proposal, the NYSE Issuance Proposal and the Charter Amendment Proposal do not receive the requisite vote for approval, we will not consummate the Business Combination.

Recommendation of the FAII Board and Reasons for the Business Combination (page 98)

The FAII Board has unanimously determined that the Business Combination, on the terms and conditions set forth in the Merger Agreement, is advisable and in the best interests of FAII and its stockholders and has directed that the proposals set forth in this proxy statement be submitted to its stockholders for approval at the FAII Special Meeting on the date and at the time and place set forth in this proxy statement.

After careful consideration, the FAII Board unanimously recommends voting “FOR” the Business Combination Proposal, “FOR” the NYSE Issuance Proposal, “FOR” the Charter Amendment Proposal, “FOR” the Governance Proposal, “FOR” the Director Election Proposal, “FOR” the Incentive Plan Proposal and “FOR” the Adjournment Proposal. See “The Business Combination—Recommendation of the FAII Board and Reasons for the Business Combination.”

Risk Factors (page 40)

You should consider all the information contained in this proxy statement in deciding how to vote for the proposals presented in the proxy statement. In particular, you should consider the factors described under “Risk Factors” of this proxy statement.

The occurrence of one or more of the events or circumstances described in “Risk Factors,” alone or in combination with other events or circumstances, may have a material adverse effect on (A) the ability of the Company and FAII to complete the Business Combination and (B) the business, cash flows, financial condition and results of operations of ATI following consummation of the Business Combination.

Interests of Directors and Officers of FAII in the Business Combination (page 103)

Certain of FAII’s executive officers and directors have interests in the Business Combination that may be different from, or in addition to, the interests of FAII’s stockholders. The members of the FAII Board were aware of and considered these interests, among other matters, when they approved the Merger Agreement and recommended that FAII stockholders approve the proposals required to effect the Business Combination. See “The Business Combination—Interests of Directors and Officers of FAII in the Business Combination.”

Summary of the Transactions

Conversion of Equity Interests

Each share of Company preferred stock issued and outstanding immediately prior to the effective time will be converted into the right to receive (A) an amount in cash equal to (1) $59,000,000 divided by (2) the number of shares of Company preferred stock outstanding as of immediately prior to the effective time and (B) a number of shares of ATI Class A common stock equal in value to (i) the product of (a) (x) the aggregate Liquidation



 

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Amount (as defined in the Company’s current charter) as of the closing date with respect to the Company preferred stock (after reducing such Liquidation Amount by $59,000,000) plus (y) an aggregate accrued amount, calculated based on the Preferred Stock Adjusted Base, at the Dividend Rate (as defined in the Company’s current charter) from the closing date through the date that is 180 days from the closing date, multiplied by (b) 1.05, divided by (ii) the number of shares of Company preferred stock outstanding as of immediately prior to the effective time. For more information on the Dividend Rate of Company preferred stock, see Note 14 to the Company’s audited consolidated financial statements.

Each share of Company common stock issued and outstanding immediately prior to the effective time will be converted into the right to receive (A) a number of shares of ATI Class A common stock equal to (1) $1,303,000,000 divided by (2) the number of shares of Company common stock outstanding as of immediately prior to the effective time and (B) the contingent right to receive Earnout Shares that may be issued in accordance with the terms of the Merger Agreement.

No fractional shares will be issued in connection with the Business Combination. In lieu thereof, FAII shall pay or cause to be paid cash to each holder who otherwise would have been entitled to receive a fractional share (after aggregating all fractional shares of ATI Class A common stock issuable to such holder).

Upon the closing of the Business Combination, all Founder Shares outstanding at the time of the Business Combination will automatically convert, in accordance with FAII’s existing charter, to ATI Class A common stock, and will be subject to the vesting and forfeiture provisions set forth in the Parent Sponsor Letter Agreement. For more information, see “Related Agreements—Parent Sponsor Letter Agreement.”

PIPE Investment

Immediately prior to the effective time, the PIPE Investors, including Sponsor, will purchase 30,000,000 shares of FAII Class A common stock pursuant to a private placement at a price of $10.00 per share. For more information, see “Related Agreements—Subscription Agreements.”

Beneficial Ownership of ATI Following the Business Combination (page 242)

As of the close of business on May 10, 2021, there were (A) 43,125,000 shares of FAII Common Stock outstanding, (B) no shares of preferred stock outstanding, (C) 5,933,333 Private Placement Warrants outstanding and (D) 6,900,000 FAII public warrants outstanding, that were originally sold as part of the 34,500,000 units issued in FAII’s IPO.

It is anticipated that, upon consummation of the Business Combination: (A) existing FAII public stockholders will own approximately 16.6% of the issued and outstanding ATI Class A common stock, (B) the Sponsor will own approximately 3.61% of the issued and outstanding ATI Class A common stock (reflecting the 7,500,000 shares purchased by the Sponsor as part of the PIPE Investment), (C) the current Company stockholders will own approximately 69% of the issued and outstanding ATI Class A common stock and (D) the PIPE Investors will own approximately 10.81% of the issued and outstanding ATI Class A common stock (excluding the 7,500,000 shares purchased by the Sponsor as part of the PIPE Investment). The ownership percentages of ATI following the Business Combination assume no redemptions by the existing FAII public stockholders and exclude the impact of 8,625,000 Founder Shares, public warrants and the shares underlying the equity awards to be granted pursuant to the terms of the New Employment Agreements summarized in the “Company Executive CompensationNew Employment Agreements In Connection With The Business Combination” section, and assume that approximately 207.7 million shares of ATI Class A common stock will be outstanding after the consummation of the Business Combination (excluding Vesting Shares).

See “Beneficial Ownership of Securities.”



 

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Summary Historical Financial Data for FAII (page 132)

The following tables summarize financial results achieved by FAII for the periods and at the dates indicated to assist you in your analysis of the financial aspects of the Business Combination. FAII’s statement of operations data for the period from June 10, 2020 (date of inception) through December 31, 2020 and balance sheet data as of December 31, 2020 is derived from FAII’s audited financial statements included elsewhere in this proxy statement. This information is only a summary and should be read in conjunction with “FAII’s Management’s Discussion and Analysis of Financial Condition and Results of Operations” and FAII’s financial statements and related notes contained elsewhere herein. You should not assume the results of operations for past periods indicate results for any future period.

 

($ in thousands, except per share data)    For the period
from
June 10, 2020
(inception)
through
December 31, 2020
(As Restated)
 

Statement of Operations Data:

  

General and administrative expenses

   $ 1,496  

Franchise tax expense

     112  
  

 

 

 

Loss from operations

     (1,608

Interest income

     19  

Increase in fair value of warrant liabilities

     (7,031

Loss on excess of fair value over cash received for Private Placement Warrants

     (4,217

Offering costs attributed to warrant liabilities

     (775
  

 

 

 

Net loss

   $ (13,612
  

 

 

 

Weighted average shares outstanding—Class A common stock

     34,500,000  
  

 

 

 

Basic and diluted net loss per share, Class A common stock

   $ (0.00
  

 

 

 

Weighted average shares outstanding—Class F common stock

     8,625,000  
  

 

 

 

Basic and diluted net loss per share, Class F common stock

   $ (1.58
  

 

 

 

 

($ in thousands, except per share data)    As of
December 31,
2020
(As Restated)
 

Balance Sheet Data:

  

Total assets

   $ 346,678  

Total liabilities

   $ 47,394  

Class A common stock, $0.0001 par value; 29,428,392 shares subject to possible redemption

   $ 294,284  

Total stockholders’ equity

   $ 5,000  

Total liabilities and stockholders’ equity

   $ 346,678  

Summary Historical Financial Data for the Company (page 133)

The following tables show summary historical consolidated financial information for the periods and as of the dates indicated. The summary historical consolidated financial information as of and for the years ended December 31, 2020, 2019, and 2018 were derived from the audited historical consolidated financial statements included elsewhere in this proxy statement.



 

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Historical results are not necessarily indicative of future operating results. The summary historical consolidated financial information should be read in conjunction with “Company’s Management’s Discussion and Analysis of Financial Condition and Results of Operations” as well as our historical consolidated financial statements and accompanying notes included elsewhere in this proxy statement.

 

in $ thousands    As of December 31,  

Consolidated Balance Sheet Data

   2020      2019  

Total assets

   $ 2,610,372      $ 2,285,587  

Total debt

   $ 999,585      $ 997,184  

Total redeemable preferred stock

   $ 163,329      $ 144,298  

 

In $ thousands, except per share data    Years Ending December 31,  

Consolidated Statement of Operations Data

   2020      2019      2018  

Net operating revenues

   $ 592,253      $ 785,458      $ 738,654  

Net (loss) income

   $ (298    $ 9,749      $ (44,927

Net (loss) income attributable to Wilco Holdco, Inc.

   $ (5,371    $ 5,349      $ (48,814

(Loss) earnings per share, basic and diluted

   $ (5.72    $ 5.13      $ (51.99

 

In $ thousands

     

Consolidated Statement of Cash Flows Data

             

Net cash provided by operating activities

   $ 138,604      $ 47,944      $ 16,710  

Net cash used in investing activities

   $ (21,809    $ (42,678    $ (41,468

Net cash (used in) provided by financing activities

   $ (12,970    $ (13,029    $ 30,023  

Summary Unaudited Pro Forma Condensed Combined Financial Information (page 135)

The following summary unaudited pro forma condensed combined financial information (the “Summary Pro Forma Information”) gives effect to the transactions contemplated by the Merger Agreement. The Business Combination will be accounted for as a reverse recapitalization in accordance with U.S. GAAP. Under this method of accounting, FAII will be treated as the “acquired” company for financial reporting purposes. Accordingly, the Business Combination will be reflected as the equivalent of the Company issuing stock for the net assets of FAII, accompanied by a recapitalization whereby no goodwill or other intangible assets are recorded. Operations prior to the Business Combination will be those of the Company. The summary unaudited pro forma condensed combined balance sheet data as of December 31, 2020 gives effect to the Business Combination as if it had occurred on December 31, 2020. The summary unaudited pro forma condensed combined statement of operations data for the year ended December 31, 2020 give effect to the Business Combination as if it had occurred on January 1, 2020.

The Summary Pro Forma Information has been derived from, and should be read in conjunction with, the more detailed unaudited pro forma condensed combined financial information of ATI appearing elsewhere in this proxy statement and the accompanying notes to the unaudited pro forma condensed combined financial information. The unaudited pro forma condensed combined financial information is based upon, and should be read in conjunction with, the historical financial statements and related notes of FAII and the Company for the applicable periods included elsewhere in this proxy statement. The Summary Pro Forma Information has been presented for informational purposes only and is not necessarily indicative of what ATI’s financial position or results of operations actually would have been had the Business Combination been completed as of the dates indicated. In addition, the Summary Pro Forma Information does not purport to project the future financial position or operating results of ATI.



 

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The unaudited pro forma condensed combined financial information has been prepared using the assumptions below with respect to the potential redemption by FAII’s public stockholders of shares of FAII Class A common stock for cash equal to their pro rata share of the aggregate amount in the Trust Account:

 

   

Assuming No Redemptions: This presentation assumes that no FAII public stockholders exercise redemption rights with respect to their FAII Class A common stock for a pro rata share of the funds in the Trust Account.

 

   

Assuming Maximum Redemptions: The Merger Agreement includes a Minimum Cash Condition. This presentation assumes that FAII public stockholders holding approximately 17.4 million of FAII Class A common stock will exercise their redemption rights for an aggregate payment of $173.8 million (based on the estimated per share redemption price of approximately $10.00 per share) from the Trust Account. Such amount represents the maximum number of FAII Class A common stock redemptions that could occur before the Minimum Cash Condition would not be met.

The actual results will likely be within the parameters described by the two scenarios, however, there can be no assurance regarding which scenario will be closest to the actual results. Under both scenarios, the Company is considered the accounting acquirer, as further discussed in Note 1 of the “Notes to the Unaudited Pro Forma Condensed Combined Financial Information.”

 

     Pro Forma Combined
(Assuming No
Redemptions)
     Pro Forma Combined
(Assuming Maximum
Redemptions)
 
     (in thousands, except share and per share data)  

Summary Unaudited Pro Forma Condensed Combined

     

Statement of Operations Data

     

Year Ended December 31, 2020

     

Revenue

   $ 592,253      $ 592,253  

Net loss per share – Class A - basic and diluted

   $ (0.08    $ (0.11

Weighted-average Class A shares outstanding - basic and diluted

     207,743,450        190,361,209  

Summary Unaudited Pro Forma Condensed Combined

     

Balance Sheet Data as of December 31, 2020

     

Total assets

   $ 2,605,060      $ 2,605,060  

Total liabilities

   $ 1,048,058      $ 1,220,256  

Total stockholders’ equity

   $ 1,557,002      $ 1,384,804  

Unaudited Historical Comparative and Pro Forma Combined Per Share Data of FAII and the Company (page 136)

The following table sets forth selected historical comparative share information for FAII and the Company, and unaudited pro forma condensed combined per share information of ATI after giving effect to the Business Combination, assuming two redemption scenarios as follows:

 

   

Assuming No Redemptions: This presentation assumes that no FAII public stockholders exercise redemption rights with respect to their FAII Class A common stock for a pro rata share of the funds in the Trust Account.

 

   

Assuming Maximum Redemptions: The Merger Agreement includes a Minimum Cash Condition. This presentation assumes that FAII public stockholders holding approximately 17.4 million of FAII Class A



 

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common stock will exercise their redemption rights for an aggregate payment of $173.8 million (based on the estimated per share redemption price of approximately $10.00 per share) from the Trust Account. Such amount represents the maximum number of FAII Class A common stock redemptions that could occur before the Minimum Cash Condition would not be met.

The pro forma book value information reflects the Business Combination as if it had occurred on December 31, 2020. The weighted average shares outstanding and net loss per share information give pro forma effect to the Business Combination as if it had occurred on January 1, 2020.

This information is only a summary and should be read together with the selected historical financial information included elsewhere in this proxy statement, and the historical financial statements of FAII and the Company and related notes that are included elsewhere in this proxy statement.

The unaudited pro forma combined earnings per share information below does not purport to represent the loss per share which would have occurred had the companies been combined during the periods presented, nor loss per share for any future date or period. The unaudited pro forma combined book value per share information below does not purport to represent what the value of FAII and the Company would have been had the companies been combined during the periods presented.

Uncertainties that could impact our financial condition include risks that effect the Company’s operations and outlook such as economic recessions, inflation, fluctuations in interest and currency exchange rates, and changes in the fiscal or monetary policies of the United States government.

 

      Pro Forma Combined     Company equivalent pro forma
per share data (2)
 
    FAII
(Historical)
(As Restated)
    Company
(Historical)
    (Assuming No
Redemptions)
    (Assuming
Maximum
Redemptions)
    (Assuming No
Redemptions)
    (Assuming
Maximum
Redemptions)
 
    (in actuals)     (in actuals)  

As of and for the year ended December 31, 2020

           

Book Value per share (1)

  $ 0.12     $ 960     $ 7.49     $ 7.27     $ 1,036     $ 1,005  

Weighted average shares outstanding of FAII Class A common stock - basic and diluted

    34,500,000         207,743,450       190,361,209       143,243,450       143,243,450  

Weighted average shares outstanding of FAII Class F common stock - basic and diluted

    8,625,000         —         —        

Weighted average shares outstanding of the Company common stock - basic and diluted

      938,557          

Net loss per share of FAII Class A common stock - basic and diluted

  $ —         $ (0.08   $ (0.11   $ (10.37   $ (15.16

Net loss per share of FAII Class F common stock - basic and diluted

  $ (1.58     $ —       $ —        

Net loss per share of the Company common stock - basic and diluted

    $ (5.72        

 

(1)

Book value per share is equal to total equity excluding redeemable shares / shares outstanding.

(2)

The equivalent pro forma basic and diluted per share data for the Company is calculated based on the expected exchange ratios assuming no redemptions and maximum redemptions pursuant to the terms set forth in the Merger Agreement.



 

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MARKET PRICE AND DIVIDEND INFORMATION

FAII

FAII’s units, FAII Class A common stock and public warrants are currently listed on the NYSE under the symbols “FAII.U,” “FAII” and “FAII WS,” respectively.

The closing price of the FAII units, FAII Class A common stock and public warrants on February 19, 2021, the last trading day before announcement of the execution of the Merger Agreement, was $12.80, $12.10 and $3.40, respectively. As of the close of business on May 10, 2021, the most recent closing price for FAII units, FAII Class A common stock and public warrants was $10.31, $9.99 and $1.87, respectively.

Holders of the FAII units, FAII Class A common stock and public warrants should obtain current market quotations for their securities. The market price of FAII’s securities could vary at any time before the consummation of the Business Combination.

The Company

Historical market price information for the Company’s stock is not provided because there is no public market for the Company’s stock. See “Company’s Management’s Discussion and Analysis of Financial Condition and Results of Operations.



 

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RISK FACTORS

You should carefully review and consider the following risk factors and the other information contained in this proxy statement, including the financial statements and notes to the financial statements included herein, in evaluating the Business Combination and the proposals to be voted on at the FAII Special Meeting. The following risk factors apply to the business and operations of the Company and will also apply to the business and operations of ATI following the completion of the Business Combination. The occurrence of one or more of the events or circumstances described in these risk factors, alone or in combination with other events or circumstances, may adversely affect the ability to complete or realize the anticipated benefits of the Business Combination, and may have a material adverse effect on the business, cash flows, financial condition and results of operations of ATI following the Business Combination. The risks discussed below may not be exhaustive and are based on certain assumptions made by FAII and the Company that may later prove to be incorrect or incomplete. You should carefully consider the following risk factors in addition to the other information included in this proxy statement, including matters addressed in “Cautionary Note Regarding Forward-Looking Statements.” ATI may face additional risks and uncertainties that are not presently known to the Company and FAII, or that are currently deemed immaterial, which may also impair ATI’s business or financial condition. The following discussion should be read in conjunction with the financial statements and notes to the financial statements included elsewhere herein.

Unless the context otherwise requires, for purposes of this section, the terms “we,” “us,” “the Company” or “our company” refer to the Company as it currently exists prior to consummation of the Business Combination, and to ATI from and after the consummation of the Business Combination.

Risk Factors Summary

The following is only a summary of principal risks that are applicable to our business and the shares of our common stock after the Business Combination. Such risks are discussed in more detail below and you should read this Risk Factors section carefully and in its entirety. Risks applicable to our business include:

 

   

the inability of the parties to successfully or timely consummate the Business Combination and the PIPE Investment, including the risk that any required regulatory approvals are not obtained, are delayed or are subject to unanticipated conditions that could adversely affect ATI or the expected benefits of the Business Combination or that the approval of FAII stockholders is not obtained;

 

   

the inability to maintain the listing of ATI’s securities on NYSE;

 

   

the risk that the proposed Business Combination disrupts current plans and operations of FAII or ATI as a result of the announcement and consummation of the transactions described herein;

 

   

the risk that any of the conditions to closing are not satisfied or waived in the anticipated manner or on the anticipated timeline;

 

   

the failure to realize the anticipated benefits of the Business Combination;

 

   

ATI’s dependence upon governmental and third party private payors for reimbursement and that decreases in reimbursement rates may adversely affect ATI’s financial results;

 

   

federal and state governments’ continued efforts to contain growth in Medicaid expenditures, which could adversely affect ATI’s revenue and profitability;

 

   

payments that ATI receives and will receive from Medicare and Medicaid being subject to potential retroactive reduction;

 

   

risks associated with public health crises, including the novel strain of coronavirus (“COVID-19”);

 

   

ATI’s inability to compete effectively in a competitive industry subject to rapid technological change;

 

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risks associated with future acquisitions, which may use significant resources, may be unsuccessful and could expose ATI to unforeseen liabilities;

 

   

ATI’s operations are subject to extensive regulation;

 

   

failure of third-party customer service and technical support providers to adequately address customers’ requests;

 

   

ATI’s dependence upon the cultivation and maintenance of relationships with physicians and other referral sources;

 

   

the severity of the weather and natural disasters that can occur in the regions of the U.S. in which ATI operates, which could cause disruption to ATI’s business;

 

   

risks associated with applicable state laws regarding fee-splitting and professional corporation laws;

 

   

inspections, reviews, audits and investigations under federal and state government programs and payor contracts that could have adverse findings that may negatively affect ATI’s business, including its results of operations, liquidity, financial condition and reputation;

 

   

ATI’s facilities face competition for experienced physical therapists and other clinical providers that may increase labor costs and reduce profitability;

 

   

risks associated with ATI’s reliance on information technology in critical areas of its operations;

 

   

risks relating to FAII’s restatement of its Form 10-K to reflect accounting for its warrants as liabilities and risks relating to FAII’s identification of a material weakness of its internal controls over financial reporting;

 

   

failure by ATI to maintain financial controls and processes over billing and collections or disputes with third-parties could have a significant negative impact on its financial condition and results of operations;

 

   

costs related to operating as a public company; and

 

   

other risks identified in this section, including those that follow.

Risks Relating to the Company’s Business and Industry

The Company depends upon governmental payors through Medicare and Medicaid reimbursement and decreases in Medicare reimbursement rates may adversely affect the Company’s financial results.

A significant portion of the Company’s net patient revenue is derived from governmental third-party payors. In 2020, approximately 22.2% of the Company’s net patient revenue was derived from Medicare and Medicaid and net patient revenues from Medicare and Medicaid were approximately $117.4 million. In recent years, through legislative and regulatory actions, the federal government has made substantial changes to various payment systems under the Medicare program. Additional reforms or other changes to these payment systems may be proposed or adopted, either by the U.S. Congress (“Congress”) or by the Centers for Medicare & Medicaid Services (“CMS”), including bundled payments, outcomes-based payment methodologies and a shift away from traditional fee-for-service reimbursement. If revised regulations are adopted, the availability, methods and rates of Medicare reimbursements for services of the type furnished at the Company’s facilities could change. Some of these changes and proposed changes could adversely affect the Company’s business strategy, operations and financial results. The Medicare program reimburses outpatient rehabilitation providers based on the Medicare Physician Fee Schedule (“MPFS”). In the 2020 MPFS final rule, CMS proposed an increase to the code values for office / outpatient evaluation and management codes and cuts to other codes to maintain budget neutrality of the MPFS. This change in code valuations became effective January 1, 2021. Under the new code values, physical / occupational therapy services expected to see code reductions resulting in an estimated 9% decrease in payment. In December 2020, Congress passed the Consolidated Appropriations Act, which reduced the original approximately 9% reduction in reimbursement for physical and occupational therapy services in 2021 to approximately 3%, and suspended a 2% sequestration deduction through the first quarter of 2021. On April 14, 2021, H.R. 1868 was signed into law. H.R. 1868 extends the suspension of the 2% Medicare sequestration reduction through 2021. The suspension initially went effective on April 1, 2021 and is subject to potential further suspension pending possible Congressional action. Additional reductions in Medicare reimbursement are projected in subsequent years.

 

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Medicare claims for outpatient therapy services furnished by therapy assistants on or after January 1, 2020 must include a modifier indicating the service was furnished by a therapy assistant. Outpatient therapy services furnished on or after January 1, 2022 in whole or part by a therapy assistant will be paid at an amount equal to 85% of the payment amount otherwise applicable for the service. On March 11, 2021, the President of the United States signed into law the American Rescue Plan Act of 2021, which will result in an additional 4% reduction in Medicare reimbursement for all Medicare providers beginning in 2022, unless the reductions are otherwise prevented by Congress.

Statutes, regulations and payment rules governing the delivery of therapy services to Medicare and Medicaid beneficiaries are complex and subject to interpretation. Compliance with such laws and regulations requires significant expense and management attention, and can be subject to future government review and interpretation, as well as significant regulatory actions, including fines, penalties and exclusion from the Medicare and Medicaid programs if the Company is found to be in non-compliance. Any required actions to return to compliance, or any challenges to such regulatory actions, could be costly and time consuming and may not result in a favorable reversal of any such fines, penalties or exclusions.

Given the history of frequent revisions to the Medicare and Medicaid programs and their complexity, reimbursement rates and rules, the Company may not continue to receive reimbursement rates from Medicare or Medicaid that sufficiently compensate the Company for services or, in some instances, cover operating costs. Limits on reimbursement rates or the scope of services being reimbursed could have a material adverse effect on the Company’s revenue, financial condition and results of operations. Additionally, any delay or default by the federal or state governments in making Medicare or Medicaid reimbursement payments could materially and adversely affect the Company’s business, financial condition and results of operations.

The Company anticipates the federal and state governments to continue their efforts to contain growth in Medicaid expenditures, which could adversely affect the Company’s revenue and profitability.

Medicaid spending has increased rapidly in recent years, becoming a significant component of state budgets. This, combined with slower state revenue growth, has led 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. The Company expects these state and federal efforts to continue for the foreseeable future. Furthermore, not all of the states in which the Company operates have elected to expand Medicaid as part of federal healthcare reform legislation. There can be no assurance that the program, on the current terms or otherwise, will continue for any particular period of time beyond the foreseeable future. Historically, state budget pressures have translated into reductions in state spending. In addition, an economic downturn, including the consequences of the COVID-19 pandemic, coupled with sustained unemployment, may also impact the number of enrollees in managed care programs as well as the profitability of managed care companies, which could result in reduced reimbursement rates. If Medicaid reimbursement rates are reduced or fail to increase as quickly as the Company’s costs, or if there are changes in the rules governing the Medicaid program that are disadvantageous to the Company’s business, the Company’s business and results of operations could be materially and adversely affected.

Payments the Company receives from Medicare and Medicaid are subject to potential retroactive reduction.

Payments the Company receives from Medicare and Medicaid can be retroactively adjusted during the claims settlement process or as a result of post-payment audits. Payors may disallow the Company’s requests for reimbursement, or recoup amounts previously reimbursed, based on determinations by the payors or their third-party audit contractors that certain costs are not reimbursable because the documentation provided was inadequate or because certain services were not covered or were deemed medically unnecessary. Significant adjustments, recoupments or repayments of the Company’s Medicare or Medicaid revenue, and the costs associated with complying with audits and investigations by regulatory and governmental authorities, could adversely affect the Company’s financial condition and results of operations.

 

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Additionally, from time to time the Company becomes aware, either based on information provided by third parties and/or the results of internal audits, of payments from payor sources that were either wholly or partially in excess of the amount that the Company should have been paid for the services provided. The Company is also subject to regular post-payment inquiries, investigations and audits of the claims it submits to Medicare and Medicaid for payment for its services. These post-payment reviews have increased as a result of government cost-containment initiatives. Overpayments may result from a variety of factors, including insufficient documentation to support the services rendered or the medical necessity of such services, or other failures to document the satisfaction of the necessary conditions of payment. The Company is required by law in most instances to refund the full amount of the overpayment after becoming aware of it, and failure to do so within requisite time limits imposed by applicable law could lead to significant fines and penalties being imposed on us. Furthermore, initial billing of and payments for services that are unsupported by the requisite documentation and satisfaction of any other conditions of payment, regardless of the Company’s awareness of the failure at the time of the billing or payment, could expose the Company to significant fines and penalties. The Company and/or certain of the Company’s operating companies could also be subject to exclusion from participation in the Medicare or Medicaid programs in some circumstances, in addition to any monetary or other fines, penalties or sanctions that the Company may incur under applicable federal and/or state law. The Company’s repayment of any overpayments, as well as any related fines, penalties or other sanctions that the Company may be subject to, and any costs incurred in responding to requests for records or pursuing the reversal of payment denials, could be significant and could have a material and adverse effect on the Company’s results of operations and financial condition.

From time to time the Company is also involved in various external governmental investigations, subpoenas, audits and reviews, including in connection with the Company’s claims for reimbursement and associated payments. Reviews, audits and investigations of this sort can lead to governmental subpoenas or other actions, which can result in the assessment of damages, civil or criminal fines or penalties, or other sanctions, including restrictions or changes in the way the Company conducts business, loss of licensure or exclusion from participation in government programs. Failure to comply with applicable laws, regulations and rules could have a material and adverse effect on the Company’s results of operations and financial condition. Furthermore, becoming subject to these governmental subpoenas, investigations, audits and reviews can require the Company to incur significant legal and document production expenses as the Company cooperates with the governmental authorities, regardless of whether the particular investigation, audit or review leads to the identification of underlying issues.

The Company depends upon reimbursement by third-party payors.

A significant portion of the Company’s revenue is derived from third-party payors. In 2020, approximately 53.1% of the Company’s revenue was derived from commercial payors. These private third-party payors attempt to control healthcare costs by contracting with healthcare providers to obtain services on a discounted basis. The Company believes that this trend will continue and may limit reimbursement for healthcare services in the future. In addition, Company claims are closely scrutinized, and failure to submit accurate and complete clinical documentation, including specific documentation by the service provider, could result in adverse actions taken by the payor. Further, if insurers or managed care companies from whom the Company receives substantial payments were to reduce the amounts they pay for services, the Company’s profit margins may decline, or it may lose patients if it chooses not to renew its contracts with these insurers at lower rates. In addition, in certain geographical areas, the Company’s clinics must be approved as providers by key health maintenance organizations and preferred provider plans. Failure to obtain or maintain these approvals would adversely affect the Company’s financial results.

If payments from workers’ compensation payors are reduced or eliminated, the Company’s revenue and profitability could be adversely affected.

In 2020, approximately 17.6% of the Company’s revenue was derived from workers’ compensation payors. State workers’ compensation laws and regulations vary and changes to state laws could result in decreased

 

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reimbursement by third-party payors for physical therapy services, which could have an adverse impact on the Company’s revenue. Further, payments received under certain workers’ compensation arrangements may be based on pre-determined state fee schedules, which may be impacted by changes in state funding. Any modification to such schedules that reduces our ability to receive payments from workers’ compensation payors could be significant and could have a material adverse effect on the Company’s results of operations and financial condition.

The Company’s payor contracts are subject to renegotiation or termination, which could result in a decrease in the Company’s revenue or profits.

The majority of the Company’s payor contracts are subject to termination by either party. Such contracts are routinely amended (sometimes through unilateral action by payors with respect to payment policies), renegotiated, subjected to bidding processes with the Company’s competitors, or terminated altogether. Oftentimes in the renegotiation process, certain lines of business may not be renewed or a payor may enlarge its provider network or otherwise change the way it conducts its business in a way that adversely impacts the Company’s revenue. In other cases, a payor may reduce its provider network in exchange for lower payment rates. The Company’s revenue from a payor may also be adversely affected if the payor alters its utilization management expectations and/or administrative procedures for payments and audits, changes its order of preference among the providers to which it refers business or imposes a third-party administrator, network manager or other intermediary.

The Company is subject to risks associated with public health crises and epidemics / pandemics, such as COVID-19.

The Company’s operations expose it to risks associated with public health crises and epidemics / pandemics, such as the COVID-19 pandemic that has spread globally since February 2020.

The COVID-19 pandemic has had, and will continue to have, a material and adverse impact on the Company’s operations, including through restrictions on the operation of physical locations, potential cancellations of physical therapy patient appointments and a decline in the scheduling of new or additional patient appointments. Due to these impacts and measures, the Company has experienced, and may continue to experience, significant and unpredictable reductions and cancellations of patient visits.

The continued spread of COVID-19, and the related global, national and regional policy response has also led to disruption and volatility in the global capital markets, which increases economic uncertainty and the cost of, and adversely impacts access to, capital. The COVID-19 pandemic has caused an economic slowdown of potentially extended duration, and could possibly cause a global recession.

The Company’s financial results have been, and are expected to continue to be, negatively impacted by the COVID-19 pandemic, particularly since, as of December 31, 2020, approximately 40% of the Company’s customers are in the above-60 age group and may delay their return to physical therapy clinics. Visits per day decreased approximately 50.5%, 27.9% and 24.4% in the quarters ended June 30, 2020, September 30, 2020 and December 31, 2020, respectively, in relation to the comparative prior year periods. While the Company is experiencing a steady build toward pre-COVID-19 patient volumes across the country, it continues to experience lower aggregate patient volumes in many geographic areas in which it operates as compared to prior to the pandemic. The current economic crisis and increased unemployment rates resulting from COVID-19 have significantly reduced individual disposable income and depressed consumer confidence, which have reduced, and could continue to reduce, customer spend on certain medical procedures, including physical therapy, in both the short- and medium-term. Furthermore, the Company is unable to predict the impact that COVID-19 may have going forward on the business, results of operations or financial position of any of the Company’s major payors, which could impact each payor to a varying degree and at different times and could ultimately impact the Company’s own financial performance. Certain of the Company’s competitors may also be better equipped to weather the impact of COVID-19 and be better able to address changes in customer demand.

 

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In addition, in response to COVID-19-related public health directives and orders, the Company has implemented alternative working practices and work-from-home requirements for appropriate employees. At the start of the pandemic and in accordance with many state orders, corporate support staff were asked to work remotely / from home to the greatest extent possible. Over the course of the pandemic, corporate staff have largely continued to work remotely and were asked to consult with their functional leaders as to whether certain job responsibilities needed to be performed from the office from time to time.

At the start of the pandemic, the Company formed a COVID-19 task force (the “Task Force”), consisting of representatives from clinic operations, human resources, legal, compliance, marketing / communications, sales and strategy, to determine, coordinate and communicate the Company’s response to the evolving situation. The Task Force has relied on state and local directives, CDC and Occupational Safety and Health Administration (“OSHA”) guidance and has consulted with a University of Chicago epidemiologist to establish policies and procedures to ensure the health and safety of the Company’s employees and patients.

The Company has implemented enhanced cleaning, sanitization and social distancing protocols and adopted a mask policy for all clinicians, patients and support staff and implemented screening protocols for all employees and patients designed to identify possible COVID-19 symptoms and exclude individuals from clinics or the workplace for the appropriate quarantine period. The Company launched ATI Connect, a tele-physical therapy platform to offer patients an alternative to in-clinic treatment. Additionally, the Company developed a corporate support center playbook for communicating and implementing the new policies and issued frequent communications to the staff and the field to ensure compliance with evolving CDC, regulatory and state and local guidance and requirements. These initiatives, and initiatives we may take in the future, require expenditures of time and resources that the Company would otherwise be investing in growing the business and could result in slower growth and opportunity costs.

To the extent the Company’s operating cash flows, together with its cash on hand, become insufficient to cover its liquidity and capital requirements, including funds for any future acquisitions and other corporate transactions, the Company may be required to seek third-party financing. There can be no assurance that the Company would be able to obtain any required financing on a timely basis or at all. Further, lenders and other financial institutions could require the Company to agree to more restrictive covenants, grant liens on the Company’s assets as collateral and/or accept other terms that are not commercially beneficial to the Company in order to obtain financing. Such terms could further restrict the Company’s operations and exacerbate any impact on its results of operations and liquidity that may result from COVID-19. In addition, a recession or market correction resulting from the spread of COVID-19 could materially affect the Company’s business and the value of ATI’s securities following Business Combination.

The full extent to which the COVID-19 pandemic and the various governmental responses to it impacts the Company’s business, operations and financial results will depend on numerous other evolving factors that the Company may not be able to accurately predict, including:

 

   

the duration and scope of the pandemic;

 

   

governmental, business and individual actions that have been and continue to be taken in response to the pandemic;

 

   

the Company’s ability to comply with the requirements necessary to retain the Coronavirus Aid, Relief, and Economic Security Act provider relief funds the Company received;

 

   

the effect on the Company’s patient, physician and facility referral sources and demand and ability to pay for physical therapy services;

 

   

disruptions of or restrictions on the ability of the Company’s employees to travel and to work, including as a result of their health and wellbeing;

 

   

availability of third-party providers to whom the Company outsources portions of the Company’s internal business functions, including billing and administrative functions relating to revenue cycle management;

 

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increased cybersecurity risks as a result of remote working conditions;

 

   

the availability and cost of accessing the capital markets;

 

   

our ability to pursue, diligence, finance and integrate acquisitions;

 

   

our ability to comply with financial and operating covenants in the Company’s debt and operating lease agreements; and

 

   

potential for goodwill impairment charges.

Furthermore, COVID-19 could increase the magnitude of many of the other risks described herein and have other adverse effects on the Company’s operations that it is not currently able to predict. Additionally, the Company may also be required to delay or limit the Company’s internal strategies in the short- and medium-term by, for example, redirecting significant resources and management attention away from implementing the Company’s strategic priorities or executing opportunistic corporate development transactions.

The magnitude of the effect of COVID-19 on the Company’s current business and ATI’s business following the Business Combination will depend, in part, on the length and severity of the COVID-19- related restrictions (including the effects of any “re-opening” actions and plans) and other limitations on the Company’s ability to conduct its business in the ordinary course. The longer the pandemic continues, the more severe the impacts described above will be on the Company’s business (which may also be disproportionately larger in certain local areas compared to the national level). The extent, length and consequences of the COVID-19 pandemic are uncertain and impossible to predict. COVID-19 and other similar outbreaks, epidemics or pandemics could have a material adverse effect on the Company’s business, financial condition, results of operations and cash flows, and could cause significant volatility in the trading prices of ATI’s securities following the Business Combination.

The Company operates in a competitive industry, and if the Company is not able to compete effectively, the Company’s business, financial condition and results of operations will be harmed.

Even if the Company’s services are more effective than those of its competitors’, current or potential clients may accept competitive services in lieu of the Company’s services. If the Company is unable to compete successfully in the physical therapy industry, the Company’s business, financial condition and results of operations could be materially adversely affected.

The outpatient physical therapy market is rapidly evolving and highly competitive. The Company expects competition to intensify in the future as existing competitors and new entrants introduce new physical therapy services and platforms. The Company currently faces competition from a range of companies, including other incumbent providers of physical therapy consultation services, that are continuing to grow and enhance their service offerings and develop more sophisticated and effective service platforms. In addition, since there are limited capital expenditures required for providing physical therapy services, there are few financial barriers to enter the industry. Other companies could enter the healthcare industry in the future and divert some or all of the Company’s business. Competition from specialized physical therapy service providers, healthcare providers, hospital systems and other parties will result in continued pricing pressures, which is likely to lead to price declines in certain of the Company’s services, all of which could negatively impact the Company’s sales, profitability and market share.

Some competitors may have greater name recognition, longer operating histories and significantly greater resources than the Company. Further, the Company’s current or potential competitors may be acquired by third parties with greater available resources. As a result, the Company’s competitors may be able to respond more quickly and effectively than the Company to new or changing opportunities, technologies, standards or client requirements and may have the ability to initiate or withstand substantial price competition. In addition, current and potential competitors have established, and may in the future establish, cooperative relationships with vendors of complementary products, technologies or services to increase the availability of their services in the marketplace. Accordingly, new competitors or alliances may emerge that have greater market share, a larger

 

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client base, more widely adopted proprietary technologies, greater marketing expertise, greater financial resources or larger sales forces than those of the Company, which could put the Company at a competitive disadvantage. The Company’s competitors could also be better positioned to serve certain geographies or segments of the physical therapy market, which could create additional price pressure. As the Company expands into new geographical areas, it may encounter competitors with stronger relationships or recognition in the community in such new areas, which could give those competitors an advantage in obtaining new patients or retaining existing ones.

Moreover, the Company expects that competition will continue to increase as a result of consolidation in the healthcare industry. Many healthcare industry participants are consolidating to create integrated healthcare systems with greater market power, including, in some cases, integrating physical therapy services with their core medical practices. As provider networks and managed care organizations consolidate, thus decreasing the number of market participants, competition to provide services like ours will become more intense, and the importance of establishing and maintaining relationships with key industry participants will become greater.

Rapid technological change in the Company’s industry presents the Company with significant risks and challenges.

The healthcare market is characterized by rapid technological change, changing consumer requirements, short product lifecycles and evolving industry standards. The Company’s success will depend on its ability to enhance its brands with next-generation technologies and to develop, acquire and market new services to access new consumer populations. Moreover, the Company may not be successful in developing, using, selling or maintaining new technologies effectively or adapting solutions to evolving client requirements or emerging industry standards, and, as a result, the Company’s business, financial condition and results of operations could be materially adversely affected. In addition, the Company has limited insight into trends that might develop and later affect the Company’s business, and which could lead to errors in the Company’s analysis of available data or in predicting and reacting to relevant business, legal and regulatory trends and healthcare reform. Further, there can be no assurance that technological advances by one or more of the Company’s current or future competitors will not result in the Company’s present or future solutions and services becoming uncompetitive or obsolete. If any of these events occur, it could harm the Company’s business.

If the Company fails to manage its growth effectively, the Company may be unable to execute its business plan, maintain high levels of service and patient satisfaction or adequately address competitive challenges.

The Company has experienced, and may continue to experience, rapid growth and organizational change, which has placed, and may continue to place, significant demands on its management and its operational and financial resources. To manage growth effectively, the Company will be required, among other things, to continue to implement and improve its operating and financial systems and controls to expand, train and manage its employee base. This will require the Company to continue expending funds to enhance its operational, financial and management controls, reporting systems and procedures and to attract and retain sufficient numbers of talented personnel. If the Company is unable to implement and scale improvements to all of its control systems in an efficient and timely manner, or if it encounters deficiencies in existing systems and controls, then it will not be able to make available the services required to successfully execute its business plan. Failure to attract and retain sufficient numbers of qualified personnel could further strain its human resources department and impede its growth or result in ineffective growth.

In addition, as it expands its business, it is important that the Company continue to maintain a high level of patient service and satisfaction. As the Company’s patient base continues to grow, it will need to increase its patient services and other personnel, as well as its network of partners, to provide personalized patient service. If the Company is not able to continue to provide high quality physical therapy services with high levels of patient satisfaction, its reputation, as well as its business, results of operations and financial condition could be adversely affected.

 

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The Company’s current locations may become unattractive, and attractive new locations may not be available for a reasonable price, if at all, which could adversely affect the Company’s business.

The success of any of the Company’s clinics depends in substantial part on their locations. There can be no assurance that the current locations will continue to be attractive as demographic patterns and trade areas change. For example, neighborhood or economic conditions where the Company’s clinics are located could decline in the future, thus resulting in potentially reduced patient visits. In addition, rising real estate prices in some areas may restrict the Company’s ability to lease new desirable locations. If desirable locations cannot be obtained at reasonable prices, the Company’s ability to execute its growth strategies could be adversely affected, and the Company may be impacted by declines in patient visits as a result of the deterioration of certain locations, each of which could materially and adversely affect the Company’s business and results of operations.

The Company may incur closure costs and losses.

The competitive, economic or reimbursement conditions in the markets in which the Company operates may require the Company to reorganize or close certain clinics. In fiscal year 2020, the Company opened 23 clinics and closed 20 clinics, compared to fiscal year 2019, during which the Company opened 71 clinics and closed 9 clinics. In the event a clinic is reorganized or closed, the Company may incur losses and closure costs, including, but not limited to, lease obligations, severance and write-down or write-off of goodwill and other intangible assets.

The Company’s ability to generate revenue is highly sensitive to the strength of the economies in which it operates and the demographics and populations of the local communities that it serves.

The Company’s revenues depend upon a number of factors, including, among others, the size and demographic characteristics of local populations and the economic condition of the communities that the Company’s locations serve. In the case of an economic downturn in a market (such as the current downturn resulting from the COVID-19 pandemic), the utilization of physical therapy services by the local population of such market, and the Company’s resulting revenues and profitability in that market, could be adversely affected. The Company’s revenues could also be affected by negative trends in the general economy that affect consumer spending. Furthermore, significant demographic changes in, or significant outmigration from, the neighborhoods where the Company’s clinics are located could reduce the demand for the Company’s services, all of which could materially and adversely affect the Company’s business and results of operation.

The size and expected growth of the Company’s addressable market has not been established with precision, and may be smaller than estimated.

The Company’s estimates of the addressable market are based on a number of internal and third-party estimates and assumptions. While the Company believes its assumptions and the data underlying its estimates are reasonable, these assumptions and estimates may not be correct. Accordingly, the statements in this proxy statement relating to, among other things, the expected growth in the market for physical therapy services may prove to be inaccurate, and the actual size of the Company’s total addressable market and resulting growth rates may be materially lower than expected.

Risks Relating to the Company’s Operations

Future acquisitions may use significant resources, may be unsuccessful and could expose the Company to unforeseen liabilities.

The Company has historically acquired outpatient physical therapy clinics and, as an important part of its growth strategy, intends to pursue similar acquisition activity in the future. Failure to successfully identify and complete acquisitions would likely result in slower growth. Even if the Company is able to identify appropriate acquisition targets, it may not be able to execute transactions on favorable terms or integrate targets in a manner that allows

 

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the Company to fully realize the anticipated benefits of these acquisitions. Acquisitions may involve significant cash expenditures, potential debt incurrence and operational losses, dilutive issuances of equity securities and expenses that could have an adverse effect on the Company’s financial condition and results of operations. Acquisitions also involve numerous risks, including:

 

   

the difficulty and expense of integrating acquired personnel into the Company’s business;

 

   

the diversion of management’s time from existing operations;

 

   

the potential loss of key employees of acquired companies and existing customers of the acquired companies that may not be familiar with the Company’s brand or services;

 

   

the difficulty of assignment and/or procurement of managed care contractual arrangements; and

 

   

the assumption of the liabilities and exposure to unforeseen liabilities of acquired companies, including liabilities for failure to comply with healthcare regulations.

Failure of the Company’s third-party customer service and technical support providers to adequately address customers’ requests could harm its business and adversely affect the Company’s financial results.

The Company’s customers rely on its customer service support organization to resolve issues with its services. The Company outsources a portion of its customer service and technical support activities to third-party service providers. The Company depends on these third-party customer service and technical support representatives working on its behalf, and expects to continue to rely on third parties in the future. This strategy presents risks to the business due to the fact that the Company may not be able to influence the quality of support as directly as the Company would be able to do if the Company’s own employees performed these activities. The Company’s customers may react negatively to providing information to, and receiving support from, third-party organizations, especially if these third-party organizations are based overseas. If the Company encounters problems with its third-party customer service and technical support providers, its reputation may be harmed, its ability to sell its services could be adversely affected, and it could lose customers and associated revenue.

The Company depends upon the cultivation and maintenance of relationships with the physicians and other referral sources in the Company’s markets.

The Company’s success is partially dependent upon referrals from physicians in the communities its clinics serve and its ability to maintain good relationships with these physicians and other referral sources. Physicians referring patients to the Company’s clinics are free to refer their patients to other therapy providers or to their own physician owned therapy practices. If the Company is unable to successfully cultivate and maintain strong relationships with such physicians and other referral sources (including as a result of negative publicity about the Company (whether true or not)), its business may be negatively impacted and its net operating revenues may decline. In addition, the Company’s relationships with referral sources are subject to extensive laws and regulations, and if those relationships with referral sources are found to be in violation of those requirements, the Company may be subject to significant civil, criminal and/or administrative penalties, exclusion from participation in government programs, such as Medicare and Medicaid, and/or reputational harm.

The Company operates its business in regions subject to natural disasters and other catastrophic events, and any disruption to the Company’s business resulting from such natural disasters would adversely affect its revenue and results of operations.

The Company operates its business in regions subject to severe weather and natural disasters, including hurricanes, floods, fires, earthquakes and other catastrophic events. In February 2021, the state of Texas experienced unprecedented cold weather, resulting in power outages across the state. Nearly all of the Company’s 57 clinics in Texas were impacted by the weather, with all clinics closing for at least one day. Due to the extreme weather conditions and power outages, the Company estimates losses in revenue of $317,093 based

 

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on a five-week comparison period of average visit volumes from January 11, 2021 through February 15, 2021. An insurance claim submitted by the Company is currently under review and the Company cannot anticipate the outcome of such claim, which would have an impact on the Company’s business or results of operations. Any natural disaster could adversely affect the Company’s ability to conduct business and provide services to its customers, and the insurance it maintains may not be adequate to cover losses resulting from any business interruption resulting from a natural disaster or other catastrophic event.

The Company’s systems infrastructure may not adequately support its operations.

The Company believes its future success will depend in large part on establishing an efficient and productive information technology (“IT”) systems infrastructure that is able to provide operational intelligence to support and enhance the Company’s value proposition. The Company’s systems infrastructure is designed to address interoperability challenges across the healthcare continuum and any failure of the Company’s systems infrastructure to identify efficiencies or productivity may impact the execution of the Company’s strategies and have a significant impact on business and operating results. The Company’s inability to continue improving its clinical systems and data infrastructure could impact the Company’s ability to perform and continue improving outcomes for patients using its proprietary software.

Failure by the Company to maintain financial controls and processes over billing and collections or disputes with third-parties could have a significant negative impact on its financial condition and results of operations.

The collection of accounts receivable requires constant focus and involvement by management, as well as ongoing enhancements of information systems and billing center operating procedures. There can be no assurance that the Company will be able to improve upon or maintain its current levels of collectability and days sales outstanding in future periods. Further, some of the Company’s patients may experience financial difficulties, or may otherwise fail to pay accounts receivable when due, resulting in increased write-offs. If the Company is unable to properly bill and collect its accounts receivable, its financial condition and results of operations will be adversely affected. In addition, from time to time the Company is involved in disputes with various parties, including its payors and their intermediaries regarding their performance of various contractual or regulatory obligations. These disputes sometimes lead to legal and other proceedings and cause the Company to incur costs or experience delays in collections, increases in its accounts receivable or loss of revenue. In addition, in the event such disputes are not resolved in the Company’s favor or cause the Company to terminate its relationships with such parties, there may be an adverse impact on the Company’s financial condition and results of operations.

The Company intends to grant incentive compensation awards under its incentive plan, which may result in significant share-based compensation expenses and may incur immediate and substantial dilution.

ATI intends to adopt an employee incentive plan for the purpose of granting share-based compensation awards to employees and directors in an effort to incentivize their performance and align their interests with the Company’s. As of the date of this proxy statement, the Company has not incurred share-based compensation expenses relating to awards granted under the new incentive plan that ATI is adopting. The Company believes the granting of share-based compensation is of significant importance to its ability to attract and retain key personnel and employees, and it will continue to grant share-based compensation awards to employees in the future. As a result, its expenses associated with share-based compensation may increase, which may have an adverse effect on the Company’s results of operations. The Company may re-evaluate the vesting schedules, lock-up period, exercise price or other key terms applicable to the incentive plan from time to time. If it chooses to do so, the Company may experience substantial change in its share-based compensation charges in the applicable reporting periods.

 

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Legal and Regulatory Risks Relating to the Company’s Business

The Company’s operations are subject to extensive regulation.

The Company’s operations are subject to extensive federal, state and local government laws and regulations, such as:

 

   

Medicare and Medicaid reimbursement rules and regulations (as discussed above);

 

   

federal and state anti-kickback laws, which prohibit the knowing and willful offer, payment, solicitation or receipt of any bribe, kickback, rebate or other remuneration for referring an individual, in return for ordering, leasing, purchasing or recommending or arranging for or to induce the referral of an individual or the ordering, purchasing or leasing of items or services covered, in whole or in part, by any federal healthcare program, such as Medicare and Medicaid;

 

   

the Physician Self-Referral Law and analogous state self-referral prohibition statutes, which, subject to limited exceptions, prohibits physicians from referring Medicare or Medicaid patients to an entity for the provision of certain “designated health services,” including physical therapy, 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 prohibits the entity from billing Medicare or Medicaid for such “designated health services”;

 

   

the federal False Claims Acts (the “False Claims Acts”), which impose civil and/or criminal penalties against any person or entity that knowingly submits or causes to be submitted a claim that the person knew or should have known (i) to be false or fraudulent; (ii) for items or services not provided or provided as claimed; or (iii) was provided by an individual not otherwise qualified or who was excluded from participation in federal healthcare programs. The False Claims Acts also impose penalties for requests for payment that otherwise violate conditions of participation in federal healthcare programs or other healthcare compliance laws;

 

   

U.S.C. 42 U.S. Code § 1320a–7, the Exclusions Statute of the Social Security Act, which subjects healthcare providers to exclusion from participation in federal healthcare programs if they engage in Medicare fraud, patient neglect or abuse / felony convictions related to fraud, breach of fiduciary duties or other financial misconduct related to healthcare service delivery;

 

   

the civil monetary penalty statute and associated regulations, which authorizes the government agent to impose civil money penalties, an assessment, and program exclusion for various forms of fraud and abuse; and

 

   

the Health Insurance Portability and Accountability Act of 1996 (“HIPAA”), which created new federal criminal statutes that prohibit knowingly and willfully executing, or attempting to execute, a scheme to defraud any healthcare benefit program or obtain, by means of false or fraudulent pretenses, representations or promises, any of the money or property owned by, or under the custody or control of, any healthcare benefit program, regardless of the payor (e.g., public or private) and knowingly and willfully falsifying, concealing or covering up by any trick or device a material fact or making any materially false statements in connection with the delivery of, or payment for, healthcare benefits, items or services relating to healthcare matters. Similar to the federal Anti-Kickback Statute, a person or entity can be found guilty of violating HIPAA without actual knowledge of the statute or specific intent to violate it.

In recent years, there have been heightened coordinated civil and criminal enforcement efforts by both federal and state government agencies relating to the healthcare industry, and physical therapy providers, in particular, have been subject to increased enforcement. The Company believes it is in substantial compliance with all laws, but differing interpretations or enforcement of these laws and regulations could subject the Company’s current practices to allegations of impropriety or illegality or could require it to make changes in its methods of operations, facilities, equipment, personnel, services and capital expenditure programs and increase its operating

 

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expenses. If the Company fails to comply with these extensive laws and government regulations, it could become ineligible to receive government program reimbursement, suffer civil or criminal penalties or be required to make significant changes to its operations. In addition, the Company could be forced to expend considerable resources responding to an investigation or other enforcement action under these laws or regulations.

In conducting its business, the Company is required to comply with applicable state laws regarding fee-splitting and professional corporation laws.

The laws of some states restrict or prohibit the “corporate practice of medicine,” meaning business corporations cannot provide medical services through the direct employment of medical providers, or by exercising control over medical decisions by medical providers. In some states, such restrictions explicitly apply to physical therapy services; in others, those restrictions have been interpreted to apply to physical therapy services or are not fully developed.

Specific restrictions with respect to enforcement of the corporate practice of medicine or physical therapy vary from state to state and certain states in which the Company operates may present higher risk than others. Each state has its own professional entity laws and unique requirements for entities that provide professional services. Further, states impose varying requirements on the licenses that the shareholders, directors, officers, and professional employees of professional corporations must possess.

Many states also have laws that prohibit non-physical therapy entities, individuals or providers from sharing in or splitting professional fees for patient care (“fee-splitting”). Generally, these laws restrict business arrangements that involve a physical therapist sharing professional fees with a referral source, but in some states, these laws have been interpreted to extend to management agreements between physical therapists and business entities under some circumstances.

Such laws and regulations vary from state to state and are enforced by governmental, judicial, law enforcement or regulatory authorities with broad discretion. Accordingly, the Company cannot be certain that its interpretation of certain laws and regulations is correct with respect to how it has structured its operations, service agreements and other arrangements with physical therapists in the states in which it operates.

The enforcement environment in any state in which the Company operates could also change, leading to increased enforcement of existing laws and regulations. If a court or governing body determines that the Company, or the physical therapists whom the Company supports, have violated any of the fee-splitting laws or regulations, or if new fee-splitting laws or regulations are enacted, the Company or the physical therapists whom the Company supports could be subject to civil or criminal penalties, the Company’s contracts could be found legally invalid and unenforceable (in whole or in part), or the Company could be required to restructure its contractual arrangements with its licensed providers of physical therapy (which may not be completed on a timely basis, if at all, and may result in terms materially less favorable to the Company), all of which may have a material adverse effect on the Company’s business.

The Company faces inspections, reviews, audits and investigations under federal and state government programs and payor contracts. These audits could have adverse findings that may negatively affect the Company’s business, including its results of operations, liquidity, financial condition and reputation.

As a result of the Company’s participation in the Medicare and Medicaid programs, it is subject to various governmental inspections, reviews, audits, subpoenas and investigations to verify its compliance with these programs and applicable laws and regulations. Payors may also reserve the right to conduct audits. The Company also periodically conducts internal audits and reviews of its regulatory compliance. While the Company’s facilities intend to comply with the federal requirements for properly billing, coding and documenting claims for reimbursement, there can be no assurance that these audits will determine that all applicable requirements are fully met at the facilities that are reviewed. An adverse inspection, review, audit or investigation could result in:

 

   

refunding amounts the Company has been paid pursuant to the Medicare or Medicaid programs or from payors;

 

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state or federal agencies imposing fines, penalties and other sanctions on the Company;

 

   

temporary suspension of payment for new patients;

 

   

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 its reputation; and

 

   

loss of certain rights under, or termination of, its contracts with payors.

The Company is currently, has in the past been, and will likely in the future be, subject to various external governmental investigations, subpoenas, audits and reviews. Certain adverse governmental investigations, subpoenas, audits and reviews may require the Company to refund amounts it has been paid and/or pay fines and penalties as a result of these inspections, reviews, audits and investigations, which could have a material adverse effect on the Company’s business and operating results. Furthermore, the legal, document production and other costs associated with complying with these inspections, reviews, subpoenas, audits or investigations could be significant.

The Company’s facilities are subject to extensive federal and state laws and regulations relating to the privacy of individually identifiable information.

HIPAA required the Health and Human Services Department to adopt standards to protect the privacy and security of individually identifiable health-related information. The privacy regulations extensively regulate the use and disclosure of individually identifiable health-related information. The regulations also provide patients with significant rights related to understanding and controlling how their health information is used or disclosed. The security regulations require healthcare providers to implement administrative, physical and technical practices to protect the security of individually identifiable health information that is maintained or transmitted electronically. The Health Information Technology for Electronic and Clinical Health Act (“HITECH”), which was signed into law in 2009, enhanced the privacy, security and enforcement provisions of HIPAA by, among other things establishing security breach notification requirements, allowing enforcement of HIPAA by state attorneys general and increasing penalties for HIPAA violations. Violations of HIPAA or HITECH could result in civil or criminal penalties.

In addition to HIPAA, there are numerous federal and state laws and regulations addressing patient and consumer privacy concerns, including unauthorized access or theft of personal information. State statutes and regulations vary from state to state. Lawsuits, including class actions and actions by state attorneys general, directed at companies that have experienced a privacy or security breach also can occur.

The Company has established policies and procedures in an effort to ensure compliance with these privacy related requirements. However, if there is a breach of these privacy related requirements, the Company may be subject to various penalties and damages and may be required to incur costs to mitigate the impact of the breach on affected individuals.

The Company’s business may be adversely impacted by healthcare reform efforts, including repeal of or significant modifications to the ACA.

In recent years, Congress and certain state legislatures have considered and passed a number of laws that are intended to result in significant changes to the healthcare industry. However, there is significant uncertainty regarding the future of the Patient Protection and Affordable Care Act (“ACA”), the most prominent of these reform efforts. The law has been subject to legislative and regulatory changes and court challenges, and the prior presidential administration and certain members of Congress have stated their intent to repeal or make additional

 

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significant changes to the ACA, its implementation or its interpretation. In 2017, the Tax Cuts and Jobs Acts was enacted, which, effective January 1, 2019, among other things, removed penalties for not complying with ACA’s individual mandate to carry health insurance. Because the penalty associated with the individual mandate was eliminated, a federal judge in Texas ruled in December 2018 that the entire ACA was unconstitutional. On December 18, 2019, the Fifth Circuit U.S. Court of Appeals upheld the lower court’s finding that the individual mandate is unconstitutional and remanded the case back to the lower court to reconsider its earlier invalidation of the full ACA. On March 2, 2020, the United States Supreme Court (the “Supreme Court”) granted the petitions for writs of certiorari to review this case. The Supreme Court held oral arguments on November 10, 2020, although it remains unclear when and how the Supreme Court will rule. These and other efforts to challenge, repeal or replace the ACA may result in reduced funding for state Medicaid programs, lower numbers of insured individuals, and reduced coverage for insured individuals. There is uncertainty regarding whether, when and how the ACA will be further changed, what alternative provisions, if any, will be enacted, and the impact of alternative provisions on providers and other healthcare industry participants. Government efforts to repeal or change the ACA or to implement alternative reform measures could cause the Company’s revenues to decrease to the extent such legislation reduces Medicaid and/or Medicare reimbursement rates.

The Company’s failure to comply with labor and employment laws could result in monetary fines and penalties.

Worker health and safety (OSHA and similar state and local agencies); family medical leave (the Family Medical Leave Act), wage and hour laws and regulations, equal employment opportunity and non-discrimination requirements, among other laws and regulations relating to employment, apply to the Company. Failure to comply with such laws and regulations could result in the imposition of consent orders or civil and criminal penalties, including fines, which could damage the Company’s reputation and have an adverse effect on the Company’s results of operations or financial condition. The regulatory framework for privacy issues is rapidly evolving and future enactment of more restrictive laws, rules or regulations and/or future enforcement actions or investigations could have a materially adverse impact on the Company through increased costs or restrictions on the Company’s business, and noncompliance could result in regulatory penalties and significant legal liability.

There is an inherent risk of liability in the provision of healthcare services; damage to the Company’s reputation or its failure to adequately insure against losses, including from substantial claims and litigation, could have an adverse impact on the Company’s operations, financial condition or prospects.

There is an inherent risk of liability in the provision of healthcare services. As a participant in the healthcare industry, the Company is and expects to be, periodically subject to lawsuits, some of which may involve large claims and significant costs to defend. In such cases, coverage under the Company’s insurance programs may not be adequate to protect it. The Company’s insurance policies are subject to annual renewal and its insurance premiums could be subject to material increases in the future. The Company cannot ensure that it will be able to maintain this insurance on acceptable terms in the future, or at all. A successful claim in excess of, or not covered by, the Company’s insurance policies could have a material adverse effect on its business, financial condition, results of operations, cash flow, capital resources and liquidity. Even where the Company’s insurance is adequate to cover claims against it, damage to its reputation in the event of a judgment against it, or continued increases in the Company’s insurance costs, could have an adverse effect on the Company’s business, financial condition, results of operations, cash flow, capital resources, liquidity, or prospects.

The Company has outstanding indebtedness and may incur additional debt in the future.

The Company has outstanding indebtedness that may be refinanced contemporaneously with the consummation of the Business Combination, and its and ATI’s ability to incur additional indebtedness is subject to and potentially restricted by the terms of any such indebtedness or future indebtedness. The Company’s indebtedness could have detrimental consequences on the Company’s or ATI’s ability to obtain additional financing as needed for working capital, acquisition costs, other capital expenditures or general corporate purposes. The Company

 

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cannot be certain that cash flow from operations will be sufficient to allow it to pay principal and interest on the debt, support operations and meet other obligations. If the Company does not have the resources to meet its obligations, the Company may be required to refinance all or part of its outstanding debt, sell assets or borrow more money. The Company may not be able to do so on acceptable terms, in a timely manner, or at all. If the Company is unable to refinance its debt on acceptable terms, the Company may be forced to dispose of its assets on disadvantageous terms, potentially resulting in losses. Defaults under the Company’s debt agreements could have a material adverse effect on its business, prospects, liquidity, financial condition or results of operations.

Risks Relating to the Company’s Human Resources

The Company’s facilities face competition for experienced physical therapists and other clinical providers that may increase labor costs and reduce profitability.

The Company’s ability to attract and retain clinical talent is critical to its ability to provide high quality care to patients and successfully cultivate and maintain strong relationships in the communities it serves. If the Company cannot recruit and retain its base of experienced and clinically skilled therapists and other clinical providers, management and support personnel, its business may decrease and its revenues may decline. The Company competes with other healthcare providers in recruiting and retaining qualified management, physical therapists and other clinical staff and support personnel responsible for the daily operations of its business, financial condition and results of operations.

The Company may also experience increases in its labor costs, primarily due to higher wages and greater benefits required to attract and retain qualified healthcare personnel, and such increases may adversely affect the Company’s profitability. Furthermore, while the Company attempts to manage overall labor costs in the most efficient way, its efforts to manage them may have limited effectiveness and may lead to increased turnover and other challenges.

The Company faces licensing and credentialing barriers, and associated variability across states is a risk to timely delivery of productive talent.

The scope of licensing laws differs from state to state, and the application of such laws to the activities of physical therapists and other clinical providers is often unclear. Given the nature and scope of the solutions and services that the Company provides, the Company is required to maintain physical therapy licenses and registrations for itself and its providers in certain jurisdictions and to ensure that such licenses and registrations are in good standing. These licenses require the Company and its providers to comply with the rules and regulations of the governmental bodies that issued such licenses. The Company’s or its providers’ failure to comply with such rules and regulations could result in significant administrative penalties, the suspension of a license or the loss of a license, all of which could negatively impact the Company’s business.

Risks Relating to the Company’s Information Technology

The Company relies on information technology in critical areas of its operations, and a disruption relating to such technology could harm its financial condition.

The Company relies on IT systems in critical areas of its operations, including its electronic medical records system and systems supporting revenue cycle management, and financial and operational reporting, among others. The Company has legacy IT systems that IT is continuing to upgrade and modernize. If one of these systems were to fail or cause operational or reporting interruptions, or if the Company decides to change these systems or hire outside parties to provide these systems, it may suffer disruptions, which could have a material adverse effect on the Company’s operation, results of operations and financial condition. In addition, the Company may underestimate the costs, complexity and time required to develop and implement new systems.

 

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The Company uses software vendors and network and cloud providers in its business and if they cannot deliver or perform as expected or if the Company’s relationships with them are terminated or otherwise change, it could have a material adverse effect on the Company’s business, financial condition and results of operations.

The Company’s ability to provide its services and support its operations requires that it work with certain third-party providers, including software vendors and network and cloud providers, and depends on such third parties meeting its expectations in timeliness, quality, quantity and economics. The Company’s third-party suppliers may be unable to meet such expectations due to a number of factors, including due to factors attributable to the COVID-19 pandemic. The Company might incur significant additional liabilities if the services provided by these third parties do not meet the Company’s expectations, if they terminate or refuse to renew their relationships with the Company or if they were to offer their services on less advantageous terms. The Company relies on internally developed software applications and systems to conduct its critical operating and administrative functions. The Company also depends on its software vendors to provide long-term software maintenance support for its information systems. In addition, while there are backup systems in many of the Company’s operating facilities, it may experience an extended outage of network services supplied by these vendors or providers that could impair its ability to deliver its solutions, which could have a material adverse effect on the Company’s business, financial condition and results of operations.

The Company is a target of attempted cyber and other security threats and must continuously monitor and develop the Company’s IT networks and infrastructure to prevent, detect, address and mitigate the risk of unauthorized access, misuse, computer viruses and other events that could have a security impact or which may cause a violation of HIPAA or HITECH and subject it to potential legal and reputational harm.

In the normal course of business, the Company’s IT systems hold sensitive patient information including patient demographic data, eligibility for various medical plans including Medicare and Medicaid and protected health information subject to HIPAA and HITECH. The Company also contracts with third-party vendors to maintain and store its patients’ individually identifiable health information. Numerous state and federal laws and regulations address privacy and information security concerns resulting from the Company’s access to its patients’ and employees’ personal information. Additionally, the Company utilizes those same systems to perform its day-to-day activities, such as receiving referrals, assigning clinicians to patients, documenting medical information and maintaining an accurate record of all transactions.

While the Company has not experienced any known attacks on its IT systems that have compromised patient data, its IT systems and those of its vendors that process, maintain and transmit such data are subject to computer viruses, cyber-attacks, including ransomware attacks, or breaches. The Company maintains its IT systems with safeguard protection against cyber-attacks including active intrusion protection, firewalls and virus detection software, adheres to (and requires its third-party vendors to adhere to) policies and procedures designed to ensure compliance with HIPAA and HITECH regulations, and has developed and tested a response plan in the event of a successful attack and maintains commercial insurance related to a cyber-attack. However, these safeguards do not ensure that a significant cyber-attack could not occur. A successful attack on the Company’s or its third-party vendors’ IT systems could have significant consequences to the business, including liability for compromised patient information, business interruption, significant civil and criminal penalties, lawsuits, reputational harm and increased costs to the Company, any of which could have a material adverse effect on its financial condition and results of operations.

In addition, insider or employee cyber and security threats are increasingly a concern for all large companies, including the Company. The Company’s future results could be adversely affected due to the theft, destruction, loss, misappropriation or release of protected health information, other confidential data or proprietary business information, operational or business delays resulting from the disruption of IT systems and subsequent mitigation activities, or regulatory action taken as a result of such incidents. The Company provides its employees with training and regular reminders on important measures they can take to prevent breaches. The Company routinely identifies attempts to gain unauthorized access to its systems. However, given the rapidly evolving nature and

 

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proliferation of cyber threats, there can be no assurance the Company’s training and network security measures or other controls will detect, prevent or remediate security or data breaches in a timely manner or otherwise prevent unauthorized access to, damage to, or interruption of the Company’s systems and operations. Accordingly, the Company may be vulnerable to losses associated with the improper functioning, security breach, or unavailability of its information systems, as well as any systems used in acquired company operations.

Risks Relating to the Company’s Accounting and Financial Policies

The Company currently outsources, and from time to time in the future may outsource, a portion of its internal business functions to third-party providers. Outsourcing these functions has significant risks, and the Company’s failure to manage these risks successfully could materially adversely affect its business, results of operations and financial condition.

The Company currently, and from time to time in the future, may outsource portions of its internal business functions, including billing and administrative functions relating to revenue cycle management, to third-party providers. These third-party providers may not comply on a timely basis with all of the Company’s requirements, or may not provide the Company with an acceptable level of service. In addition, reliance on third-party providers could have significant negative consequences, including significant disruptions in the Company’s operations and significantly increased costs to undertake such operations, either of which could damage the Company’s relationships with its customers. The Company could experience a reduction in revenue due to inability to collect from patients, overpayments, claim denials, recoupments or governmental and third-party audits may impact its profitability and cash flow.

If the Company’s estimates or judgments relating to its critical accounting policies prove to be incorrect, its results of operations could be adversely affected.

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the Company’s financial statements and accompanying notes included elsewhere in this proxy statement. The results of these estimates form the basis for making judgments about the carrying values of assets, liabilities and equity, and the amount of revenue and expenses that are not readily apparent from other sources. Significant estimates and judgments used in preparing financial statements include those related to the determination of the revenue transaction price for current transactions and estimation of expected collections on the Company’s accounts receivable, among others. The Company’s results of operations may be adversely affected if its assumptions change or if actual circumstances differ from those in the Company’s assumptions, which could cause the Company’s results of operations to fall below the expectations of securities analysts and investors.

Risks Relating to FAII and the Business Combination

The Insiders have agreed to vote in favor of the proposals at the FAII Special Meeting, regardless of how public stockholders vote.

As of the date hereof, the Founder Shares owned by the Insiders represent approximately 20% of the voting power of the outstanding FAII Common Stock. Pursuant to the Parent Sponsor Letter Agreement, the Insiders have agreed to vote their Founder Shares and any public shares held by them in favor of each of the proposals set forth in this proxy statement, regardless of how public stockholders vote. Accordingly, the agreement by the Insiders to vote in favor of each of the proposals at the FAII Special Meeting will increase the likelihood that FAII will receive the requisite stockholder approval for the Business Combination.

FAII stockholders will have a reduced ownership and voting interest after the Business Combination and will exercise less influence over management.

Upon the issuance of the shares of ATI Class A common stock to Company stockholders, current FAII stockholders’ percentage ownership will be diluted. Assuming no public stockholders exercise their redemption

 

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rights and excluding the potential dilutive effect of the Earnout Shares, Vesting Shares, exercise of FAII public warrants and the shares underlying the equity awards to be granted pursuant to the terms of the New Employment Agreements summarized in the “Company Executive CompensationNew Employment Agreements In Connection With The Business Combination” section, current FAII public stockholders’ percentage ownership in ATI following the issuance of shares to Company stockholders would be approximately 16.6%. Assuming that 17,382,241 public shares (the maximum number of public shares that could be redeemed in connection with the Business Combination in order to satisfy the Minimum Cash Condition) are redeemed in connection with the Business Combination and excluding the potential dilutive effect of the Earnout Shares, Vesting Shares, exercise of FAII public warrants and the shares underlying the equity awards to be granted pursuant to the terms of the New Employment Agreements summarized in the “Company Executive CompensationNew Employment Agreements In Connection With The Business Combination” section, current FAII public stockholders’ percentage ownership in ATI following the issuance of shares of ATI Class A common stock to Company stockholders would be approximately 9.0%. Additionally, of the expected members of the ATI Board after the completion of the Business Combination, only one is a current director of FAII and the rest will be current directors of the Company or newly appointed directors. The percentage of ATI Class A common stock that will be owned by current FAII stockholders as a group will vary based on the number of shares of FAII Class A common stock for which the holders thereof request redemption in connection with the Business Combination. Because of this, current FAII stockholders, as a group, will have less influence on the ATI Board, management and policies of ATI than they now have on the FAII Board, management and policies of FAII.

FAII stockholders likely will experience significant dilution as a result of other issuances contemplated in connection with the Business Combination (including the PIPE Investment, Earnout Shares and exercise of FAII public warrants).

In addition to the 143,243,450 shares of ATI Class A common stock that will be issued to the Company stockholders in connection with the Business Combination (assuming a closing date of June 30, 2021), the Business Combination also contemplates a significant number of actual or potential additional issuances of shares of ATI Class A common stock, as applicable. These include the Earnout Shares, shares issued in connection with the PIPE Investment, the exercise of FAII public warrants and the shares underlying the equity awards to be granted pursuant to the terms of the New Employment Agreements summarized in the “Company Executive CompensationNew Employment Agreements In Connection With The Business Combination” section. These additional issuances could result in our remaining stockholders experiencing significant dilution; however, the ultimate significance of the dilution will depend on the number of redemptions from the Trust Account in connection with the FAII Special Meeting.

Even if FAII consummates the Business Combination, there is no guarantee that the FAII public warrants will ever be in the money, and they may expire worthless and the terms of FAII’s public warrants may be amended.

The exercise price for FAII public warrants is $11.50 per share of FAII Class A common stock. There is no guarantee that the FAII public warrants will ever be in the money prior to their expiration, and as such, the FAII public warrants may expire worthless and the terms may be amended.

The Private Placement Warrants and FAII public warrants (collectively, the “warrants”) are accounted for as liabilities and the changes in value of the warrants could have a material effect on our financial results.

On April 12, 2021, the Acting Director of the Division of Corporation Finance and Acting Chief Accountant of the SEC together issued a statement regarding the accounting and reporting considerations for warrants issued by special purpose acquisition companies entitled “Staff Statement on Accounting and Reporting Considerations for Warrants Issued by Special Purpose Acquisition Companies (“SPACs”)” (the “SEC Statement”). Specifically, the SEC Statement focused on warrants that have certain settlement terms and provisions related to certain tender offers or warrants which do not meet the criteria to be considered indexed to an entity’s own stock, which terms are similar to those contained in the warrant agreement governing the warrants. As a result of the SEC Statement, FAII reevaluated the accounting treatment of the 6,900,000 FAII public warrants and 5,933,333 Private

 

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Placement Warrants, and determined that the warrants should be reclassified as derivative liabilities measured at fair value, with changes in fair value each period reported in earnings.

As a result, included on FAII’s balance sheet as of December 31, 2020 contained in FAII’s Annual Report on Form 10-K/A for the period ended December 31, 2020 (the “Amended Annual Report”) are derivative liabilities related to embedded features contained within the warrants. Accounting Standards Codification 815-40, “Derivatives and Hedging — Contracts on an Entity’s Own Equity,” provides for the remeasurement of the fair value of such derivatives at each balance sheet date, with a resulting non-cash gain or loss related to the change in the fair value being recognized in earnings in the statement of operations. As a result of the recurring fair value measurement, FAII’s financial statements and results of operations may fluctuate quarterly, based on factors, which are outside of FAII’s control. Due to the recurring fair value measurement, FAII expects to recognize non-cash gains or losses on the warrants each reporting period and that the amount of such gains or losses could be material.

FAII has identified a material weakness in FAII’s internal control over financial reporting as of December 31, 2020. If FAII is unable to develop and maintain an effective system of internal control over financial reporting, FAII may not be able to accurately report FAII’s financial results in a timely manner, which may adversely affect investor confidence in FAII and materially and adversely affect FAII’s business and operating results.

Following this issuance of the SEC Statement, on April 28, 2021, after consultation with our independent registered public accounting firm, FAII’s management and FAII’s audit committee concluded that, in light of the SEC Statement, it was appropriate to restate FAII’s previously issued audited financial statements as of December 31, 2020 and for the period from June 10, 2020 (inception) through December 31, 2020 (the “Restatement”). As part of such process, FAII identified a material weakness in FAII’s internal controls over financial reporting.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of FAII’s annual or interim financial statements will not be prevented, or detected and corrected on a timely basis.

Effective internal controls are necessary for FAII to provide reliable financial reports and prevent fraud. We continue to evaluate steps to remediate the material weakness. These remediation measures may be time consuming and costly, and there is no assurance that these initiatives will ultimately have the intended effects.

If FAII identifies any new material weaknesses in the future, any such newly identified material weakness could limit FAII’s ability to prevent or detect a misstatement of FAII’s accounts or disclosures that could result in a material misstatement of FAII’s annual or interim financial statements. In such case, FAII may be unable to maintain compliance with securities law requirements regarding timely filing of periodic reports in addition to applicable stock exchange listing requirements, investors may lose confidence in FAII’s financial reporting and FAII’s stock price may decline as a result. FAII cannot assure you that the measures FAII has taken to date, or any measures we may take in the future, will be sufficient to avoid potential future material weaknesses in FAII’s internal controls over financial reporting.

FAII may face litigation and other risks as a result of the material weakness in FAII’s internal control over financial reporting.

Following the issuance of the SEC Statement, after consultation with FAII’s independent registered public accounting firm, FAII’s management and audit committee concluded that it was appropriate to restate FAII’s previously issued audited financial statements as of December 31, 2020 and for the period from June 10, 2020 (inception) through December 31, 2020. As part of the Restatement, FAII identified a material weakness in FAII’s internal controls over financial reporting.

As a result of such material weakness, the Restatement, the change in accounting for the warrants, and other matters raised or that may in the future be raised by the SEC, FAII faces potential for litigation or other disputes which may include, among others, claims invoking the federal and state securities laws, contractual claims or

 

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other claims arising from the Restatement and material weaknesses in FAII’s internal control over financial reporting and the preparation of FAII’s financial statements. As of the date of this proxy statement, FAII has no knowledge of any such litigation or dispute. However, FAII has can provide no assurance that such litigation or dispute will not arise in the future. Any such litigation or dispute, whether successful or not, could have a material adverse effect on FAII’s business, results of operations and financial condition or FAII’s ability to complete the Business Combination.

The market price of shares of ATI Class A common stock after the Business Combination will be affected by factors different from those currently affecting the price of shares of FAII Class A common stock.

Upon completion of the Business Combination, Company stockholders will become holders of shares of ATI Class A common stock. Prior to the Business Combination, FAII has had limited operations. Upon completion of the Business Combination, ATI’s results of operations will depend upon the performance of the Company’s business, which are affected by factors that are different from those currently affecting the results of operations of FAII.

FAII has not obtained an opinion from an independent investment banking firm, and consequently, there is no assurance from an independent source that the Business Combination consideration is fair to FAII stockholders from a financial point of view.

FAII is not required to, and has not, obtained an opinion from an independent investment banking firm that the consideration it is paying for the Company in the Business Combination is fair to FAII stockholders from a financial point of view. The equity value of the Company has been determined by the FAII Board based upon standards generally accepted by the financial community, such as potential revenue and the price for which comparable businesses or assets have been valued. FAII stockholders will be relying on their own judgment and the judgment of the FAII Board with respect to such matters.

If the Business Combination’s benefits do not meet the expectations of financial analysts, the market price of ATI Class A common stock may decline.

The trading market for ATI Class A common stock will be influenced by the research and reports that industry or securities analysts may publish about ATI, our business, our market or our competitors. The market price of the ATI Class A common stock may decline as a result of the Business Combination if ATI does not achieve the perceived benefits of the Business Combination as rapidly, or to the extent anticipated by, financial analysts, or if the effect of the Business Combination on ATI’s financial results is not consistent with the expectations of financial analysts. Accordingly, holders of ATI Class A common stock may experience a loss as a result of a decline in the market price of ATI Class A common stock. In addition, a decline in the market price of ATI Class A common stock could adversely affect ATI’s ability to issue additional securities and to obtain additional financing in the future.

Regulatory approvals may not be received, may take longer than expected or may impose conditions that are not presently anticipated or cannot be met.

Before the transactions contemplated by the Merger Agreement can be completed, approval must be obtained under the HSR Act. In deciding whether to grant antitrust clearance, the relevant governmental authorities will consider a variety of factors, including the effect of the Business Combination on competition within their relevant jurisdiction. The terms and conditions of the approvals that are granted may impose requirements, limitations or costs, or place restrictions on the conduct of ATI’s business. The requirements, limitations or costs imposed by the relevant governmental authorities could also delay the closing of the Business Combination or diminish the anticipated benefits of the Business Combination. Additionally, the completion of the Business Combination is conditioned on the absence of any law enacted or promulgated in the United States which is then in effect and has the effect of making consummation of the Merger Agreement and the transactions contemplated thereunder illegal or otherwise enjoining or prohibiting the consummation of the Business Combination. FAII and the Company believe that the Business Combination should not raise significant regulatory concerns and that

 

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FAII and the Company will be able to obtain all requisite regulatory approvals in a timely manner. However, FAII and the Company cannot be certain when or if regulatory approvals will be obtained or, if obtained, the conditions that may imposed. In addition, neither FAII nor the Company can provide assurance that any such conditions, terms, obligations or restrictions will not result in delay. See “Regulatory Approvals Related to the Business Combination.”

The consummation of the Business Combination is subject to a number of conditions and if those conditions are not satisfied or waived, the Merger Agreement may be terminated in accordance with its terms and the Business Combination may not be completed.

The Merger Agreement is subject to a number of conditions which must be fulfilled in order to complete the Business Combination. Those conditions include, among others: (i) approval by FAII stockholders and Company stockholders (which, with respect to the Company stockholders, was satisfied immediately following the execution of the Merger Agreement), (ii) FAII having at least $5,000,001 of net tangible assets after giving effect to FAII stockholder redemptions, if any, (iii) the expiration or termination of the waiting period under the HSR Act, (iv) the listing of the shares of FAII Class A common stock to be issued in connection with the closing on the NYSE, (v) the filing of the proposed charter with the Secretary of State of the State of Delaware and the adoption of the Amended and Restated Bylaws, and (vi) FAII having at least $472,500,000 in available cash immediately prior to the effective time (after taking into account (x) payments required to satisfy FAII stockholder redemptions and (y) the net proceeds from the Subscription Agreements). In addition, the parties can mutually decide to terminate the Merger Agreement at any time, before or after stockholder approval, or FAII or the Company may elect to terminate the Merger Agreement in certain other circumstances. See “The Merger Agreement—Termination.

FAII may waive one or more of the conditions to the Business Combination.

FAII may agree to waive, in whole or in part, one or more of the conditions to FAII’s obligations to complete the Business Combination, to the extent permitted by FAII’s current certificate of incorporation and bylaws and applicable laws. For example, it is a condition to FAII’s obligations to close the Business Combination that the Company has performed and complied in all material respects with the obligations required to be performed or complied with by the Company under the Merger Agreement. However, if the FAII Board determines that a breach of this obligation is not material, then the FAII Board may elect to waive that condition and close the Business Combination. FAII may not waive the condition that FAII stockholders approve the Business Combination. FAII may, however, waive the Minimum Cash Condition, in which case and provided the Company also waives the Minimum Cash Condition in accordance with the Merger Agreement, the resulting reduced liquidity of FAII may have an adverse impact on ATI’s financial condition and results of operations. See “The Merger Agreement—Conditions to the Business Combination.”

The exercise of discretion by FAII’s directors and officers in agreeing to changes to the terms of or waivers of closing conditions in the Merger Agreement may result in a conflict of interest when determining whether such changes to the terms of the Merger Agreement or waivers of conditions are appropriate and in the best interests of FAII stockholders.

In the period leading up to the consummation of the Business Combination, other events may occur that, pursuant to the Merger Agreement, would require FAII to agree to amend the Merger Agreement, to consent to certain actions or to waive rights that it is entitled to under the Merger Agreement. Such events could arise because of changes in the course of the business of the Company, a request by the Company and the Company’s management to undertake actions that would otherwise be prohibited by the terms of the Merger Agreement or the occurrence of other events that would have a material adverse effect on the business of the Company and could entitle FAII to terminate the Merger Agreement. In any of such circumstances, it would be in the discretion of FAII, acting through the FAII Board, to grant its consent or waive its rights. The existence of the financial and personal interests of the FAII directors described elsewhere in this proxy statement may result in a conflict of interest on the part of one or more of the FAII directors between what he or she may believe is best for FAII and FAII stockholders and what he or she may believe is best for

 

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himself or herself or his or her affiliates in determining whether or not to take the requested action. As of the date of this proxy statement, FAII does not believe there will be any changes or waivers that FAII’s directors and officers would be likely to make after FAII stockholder approval of the Business Combination has been obtained. While certain changes could be made without further stockholder approval, if, prior to obtaining such stockholder approval, there is a change to the terms of the Business Combination that would have a material impact on FAII stockholders, FAII will be required to file a new or amended proxy statement or supplement thereto with the SEC.

Termination of the Merger Agreement could negatively impact FAII.

If the Business Combination is not completed for any reason, including as a result of FAII stockholders declining to approve the proposals required to effect the Business Combination, the ongoing businesses of FAII may be adversely impacted and, without realizing any of the anticipated benefits of completing the Business Combination, FAII would be subject to a number of risks, including the following:

 

   

FAII may experience negative reactions from the financial markets, including negative impacts on its stock price (including to the extent that the current market price reflects a market assumption that the Business Combination will be completed);

 

   

FAII will have incurred substantial expenses and will be required to pay certain costs relating to the Business Combination, whether or not the Business Combination is completed; and

 

   

since the Merger Agreement restricts the conduct of FAII’s business prior to completion of the Business Combination, FAII may not have been able to take certain actions during the pendency of the Business Combination that would have benefitted it as an independent company, and the opportunity to take such actions may no longer be available. See “The Merger Agreement—Covenants and Agreements” for a description of the restrictive covenants applicable to FAII.

If the Merger Agreement is terminated and the FAII Board seeks another merger or business combination, FAII stockholders cannot be certain that FAII will be able to find another acquisition target that would constitute a business combination or that such other merger or business combination will be completed. See “The Merger Agreement—Termination.

The Company will be subject to business uncertainties and contractual restrictions while the Business Combination is pending.

Uncertainty about the effect of the Business Combination on employees and other business participants may have an adverse effect on the Company and consequently on FAII. These uncertainties may impair the Company’s ability to attract, retain and motivate key personnel until the Business Combination is completed, and could cause others that deal with the Company to seek to change existing business relationships with the Company. Retention of certain employees may be challenging during the pendency of the Business Combination, as certain employees may experience uncertainty about their future roles. If key employees depart because of issues relating to the uncertainty or a desire not to remain with the Company, ATI’s business following the Business Combination could be negatively impacted. In addition, the Merger Agreement restricts the Company from taking specified actions without the consent of FAII until the Business Combination occurs. These restrictions may prevent the Company from pursuing attractive business opportunities that may arise prior to the completion of the Business Combination. See “The Merger Agreement—Covenants and Agreements.”

FAII directors and officers have interests in the Business Combination that may be different from the interests of FAII Stockholders.

Executive officers of FAII negotiated the terms of the Merger Agreement with their counterparts at the Company, and the FAII Board determined that entering into the Merger Agreement was in the best interests of FAII and FAII stockholders, declared the Merger Agreement advisable and recommended that FAII stockholders approve the Merger Agreement and the transactions contemplated thereby. In considering these facts and the

 

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other information contained in this proxy statement, you should be aware that FAII’s executive officers and directors may have financial interests in the Business Combination that may be different from, or in addition to, the interests of FAII stockholders, including through ownership of Founder Shares, Private Placement Warrants and/or interests in the Sponsor, which will be without value if FAII does not consummate a business combination prior to August 14, 2022. The FAII Board was aware of and considered these interests, among other matters, in reaching the determination to approve the terms of the Business Combination and in recommending to FAII stockholders that they vote to approve the Business Combination. For a detailed discussion of the special interests that FAII’s directors and executive officers may have in the Business Combination, please see “The Business Combination—Interests of Directors and Officers of FAII in the Business Combination.

BofA Securities and Deutsche Bank may have a potential conflict of interest regarding the Business Combination.

Each of BofA Securities, Inc. (“BofA Securities”) and Deutsche Bank Securities Inc. (“Deutsche Bank”) served as underwriters in FAII’s IPO and, upon consummation of the Business Combination, will be entitled to receive approximately $8.151 million in deferred underwriting commissions for services rendered in connection with FAII’s IPO, of which BofA Securities will be entitled to approximately $3.019 million and Deutsche Bank will be entitled to approximately $5.132 million. The underwriters have agreed to waive their rights to their deferred underwriting commission held in the Trust Account in the event FAII does not complete a business combination by August 14, 2022. Accordingly, if the Business Combination, or any other business combination, is not consummated by that time and FAII is required to be liquidated as a result, BofA Securities and Deutsche Bank will not receive any of their deferred underwriting commissions and such funds will be available to fund the redemption of the FAII public shares.

Furthermore, Deutsche Bank was engaged by FAII as its financial advisor in connection with the Business Combination. FAII decided to retain Deutsche Bank as its financial advisor based primarily on its strong market position, ongoing relationship with the FAII team, positive reputation as a leading advisor in SPAC business combinations and their experienced and capable investment banking teams.

FAII agreed to reimburse Deutsche Bank for reasonable out-of-pocket expenses, including the fees and disbursements of Deutsche Bank’s outside attorneys, and to indemnify Deutsche Bank and certain related parties against liabilities, including liabilities under federal securities laws, in each case, in connection with, as a result of, or relating to its engagement.

BofA Securities and Deutsche Bank have an interest in FAII completing a business combination prior to August 14, 2022, and they each may have a potential conflict of interest given that they are entitled to the deferred portion of their underwriting compensation only if a business combination is completed within the specified timeframe. In considering approval of the Business Combination, FAII’s stockholders should consider the roles of BofA Securities and Deutsche Bank in light of this potential conflict.

The Insiders will control the election of the FAII Board until consummation of FAII’s initial business combination and will hold a substantial interest in FAII. As a result, the Insiders may exert a substantial influence on actions requiring a stockholder vote.

As of the date of this proxy statement, the Insiders own approximately 20% of the outstanding shares of FAII Common Stock. In addition, the Founder Shares, all of which are held by the Insiders, entitle such holders to elect all of FAII’s directors prior to its initial business combination. Public stockholders of FAII Common Stock will have no right to vote on the election of directors during such time. In addition, as a result of their substantial ownership in FAII, the Insiders may exert substantial influence on other actions requiring a stockholder vote, potentially in a manner that the Sponsor and the FAII public stockholders do not support, including amendments to FAII’s current charter or current bylaws and approval of the Business Combination.

 

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Currently, the FAII Board is not composed of a majority of directors that are independent from the Sponsor.

The FAII Board is not currently composed of a majority of directors that are independent from the Sponsor as permitted by the transition period provided under NYSE listing rules. Accordingly, should the interests of the Sponsor differ from those of other FAII stockholders, the other FAII stockholders may not have the same protections afforded to stockholders of companies with a majority independent board that are subject to all of the corporate governance rules for publicly-listed companies.

The Business Combination will result in changes to the FAII Board.

If the parties complete the Business Combination, the composition of the ATI Board will change from the current FAII Board. The ATI Board will consist of Andrew McKnight, John Maldonado, Carmine Petrone, Chris Krubert, John Larsen, Labeed Diab, Joanne Burns and Jamie Parisi, divided into three classes, with only one class of directors being elected in each year. This new composition of the ATI Board may affect the business strategy and operating decisions of ATI upon the completion of the Business Combination.

The Merger Agreement contains provisions that may prohibit FAII from seeking an alternative business combination.

The Merger Agreement contains provisions that prohibit FAII from seeking alternative business combinations during the pendency of the Business Combination. Further, if FAII is unable to obtain the requisite approval of FAII stockholders, either party may terminate the Merger Agreement.

The unaudited pro forma condensed combined financial information included in this proxy statement is preliminary and the actual financial condition and results of operations after the Business Combination may differ materially.

The unaudited pro forma condensed combined financial information for ATI following the Business Combination in this proxy statement is presented for illustrative purposes only and is not necessarily indicative of what ATI’s actual financial position or results of operations would have been had the Business Combination been completed on the dates indicated. Accordingly, ATI’s business, assets, cash flows, results of operations and financial condition may differ significantly from those indicated by the unaudited pro forma condensed combined financial statements included in this document. See “Unaudited Pro Forma Condensed Combined Financial Information.”

FAII and the Company will incur transaction costs in connection with the Business Combination.

Each of FAII and the Company has incurred and expects that it will incur significant, non-recurring costs in connection with consummating the Business Combination. The Company may also incur additional costs to retain key employees. FAII and the Company will also incur significant legal, financial advisor, accounting, banking and consulting fees, fees relating to regulatory filings and notices, SEC filing fees, printing and mailing fees and other costs associated with the Business Combination. FAII estimates that it will incur approximately $12.075 million in deferred underwriting fees and $14.156 million in transaction costs. The Company estimates that it will incur approximately $29.9 million in transaction costs associated with the Business Combination. Some of these costs are payable regardless of whether the Business Combination is completed. See “The Business Combination—Terms of the Business Combination.”

The Company stockholders will have their rights as stockholders governed by ATI’s organizational documents.

As a result of the completion of the Business Combination, Company stockholders will become holders of shares of ATI Class A common stock, which will be governed by ATI’s organizational documents. As a result, there

 

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will be differences between the rights currently enjoyed by Company stockholders and the rights they will have as stockholders of ATI. See “Proposal No. 3—The Charter Amendment Proposal,” “Proposal No. 4—The Governance Proposal” and “Description of Securities.”

The Insiders have agreed to vote in favor of the proposals at the FAII Special Meeting, regardless of how public stockholders vote.

As of the date hereof, the Founder Shares owned by the Insiders represent approximately 20% of the voting power of the outstanding FAII Common Stock. Pursuant to the Parent Sponsor Letter Agreement, the Insiders have agreed to vote their Founder Shares and any public shares held by them in favor of each of the proposals set forth in this proxy statement, regardless of how public stockholders vote. Accordingly, the agreement by the Insiders to vote in favor of each of the proposals at the FAII Special Meeting will increase the likelihood that FAII will receive the requisite stockholder approval for the Business Combination and the transactions contemplated thereby.

If FAII’s due diligence investigation of the business of the Company was inadequate, then stockholders of ATI following the Business Combination could lose some or all of their investment.

Even though FAII conducted a due diligence investigation of the business of the Company, FAII cannot be sure that this diligence uncovered all material issues that may be present inside the business of the Company, or that it would be possible to uncover all material issues through a customary amount of due diligence, or that factors outside of the business of the Company and outside of its control will not later arise.

Subsequent to the completion of the Business Combination, ATI may be required to take write-downs or write-offs, restructuring and impairment or other charges that could have a significant negative effect on ATI’s financial condition, results of operations and ATI’s stock price, which could cause stockholders of ATI following the Business Combination to lose some or all of their investment.

As a result of these factors, ATI may be forced to later write down or write off assets, restructure operations, or incur impairment or other charges that could result in losses. Even if FAII’s due diligence successfully identifies certain risks, factors outside of the business of the Company, factors outside of the Company’s control and other unexpected risks may arise and previously known risks may materialize in a manner not consistent with FAII’s preliminary risk analysis. Even though these charges may be non-cash items and not have an immediate impact on FAII’s liquidity, the fact that ATI reports charges of this nature could contribute to negative market perceptions about ATI or its securities. Accordingly, any of the FAII stockholders who choose to remain stockholders in ATI following the Business Combination could suffer a reduction in the value of their shares. Such stockholders are unlikely to have a remedy for such reduction in value.

Unanticipated changes in effective tax rates or adverse outcomes resulting from examination of ATI’s income or other tax returns could adversely affect ATI’s financial condition and results of operations.

ATI will be subject to income taxes in the United States, and ATI’s domestic tax liabilities will be subject to the allocation of expenses in different jurisdictions. ATI’s future effective tax rates could be subject to volatility or adversely affected by a number of factors, including:

 

   

changes in the valuation of ATI’s 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

 

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lower than anticipated future earnings in jurisdictions where ATI has lower statutory tax rates and higher than anticipated future earnings in jurisdictions where ATI has higher statutory tax rates.

In addition, ATI may be subject to audits of ATI’s income, sales and other taxes by U.S. federal, state and local taxing authorities. Outcomes from these audits could have an adverse effect on ATI’s financial condition and results of operations.

ATI’s ability to use the Company’s net operating loss carryforwards to offset future taxable income for U.S. federal income tax purposes may be limited as a result of future changes in the ownership of ATI common stock.

As of December 31, 2020, the Company had U.S. federal net operating loss carryforwards (“NOLs”) of approximately $153.3 million available to offset future taxable income. Under Section 382 of the Internal Revenue Code (the “Code”), a corporation that undergoes an “ownership change” is subject to limitations on its ability to utilize its pre-change federal NOLs to offset future taxable income. An “ownership change” generally occurs if one or more stockholders or groups of stockholders (including certain “public groups”) who own (or are deemed to own) at least 5% of a company’s stock increase their ownership by more than 50 percentage points over their lowest ownership percentage within a rolling three-year period. An ownership change thus could be triggered by substantial changes in the direct or indirect ownership of the outstanding Company common stock. Although the Business Combination itself is not expected to trigger an “ownership change,” subsequent changes in the ownership of ATI common stock, whether or not aggregated in a three-year period with the shift in ownership that will occur as a result of the Business Combination, could trigger an ownership change with respect to the Company’s NOLs. In particular, immediately following the Business Combination, approximately 83.4% of ATI Class A common stock will be held by a small number of stockholders (e.g., the current Company stockholders and the PIPE Investors), and significant sales of such stock by those stockholders in the future (which ATI will have no ability to control), among other transactions, could trigger an ownership change. If an ownership change were to occur in the future, the Company’s NOLs would become subject to limitations under Section 382 of the Code, which could cause us to incur materially greater tax liability than if such an ownership change had not occurred.

Additional Risks Relating to Ownership of ATI Class A Common Stock Following the Business Combination

ATI’s stock price may change significantly following the Business Combination and you could lose all or part of your investment as a result.

The trading price of the ATI Class A common stock is likely to be volatile. The stock market recently has experienced extreme volatility. This volatility often has been unrelated or disproportionate to the operating performance of particular companies. You may not be able to resell your shares following the Business Combination at an attractive price due to a number of factors such as those listed in “—Risks Relating to the Company’s Business and Industry” and the following:

 

   

results of operations that vary from the expectations of securities analysts and investors;

 

   

changes in expectations as to ATI’s future financial performance, including financial estimates and investment recommendations by securities analysts and investors;

 

   

declines in the market prices of stocks generally;

 

   

strategic actions by ATI or its competitors;

 

   

announcements by ATI or its competitors of significant contracts, acquisitions, joint ventures, other strategic relationships or capital commitments;

 

   

any significant change in ATI’s management;

 

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changes in general economic or market conditions or trends in ATI’s industry or markets;

 

   

changes in business or regulatory conditions, including new laws or regulations or new interpretations of existing laws or regulations applicable to ATI’s business;

 

   

future sales of ATI Class A common stock or other securities;

 

   

investor perceptions or the investment opportunity associated with ATI Class A common stock relative to other investment alternatives;

 

   

the public’s response to press releases or other public announcements by ATI or third-parties, including ATI’s filings with the SEC;

 

   

litigation involving ATI, ATI’s industry, or both, or investigations by regulators into ATI’s operations or those of ATI’s competitors;

 

   

guidance, if any, that ATI provides to the public, any changes in this guidance or ATI’s failure to meet this guidance;

 

   

the development and sustainability of an active trading market for ATI’s stock;

 

   

actions by institutional or activist stockholders;

 

   

changes in accounting standards, policies, guidelines, interpretations or principles; and

 

   

other events or factors, including those resulting from natural disasters, war, acts of terrorism, health pandemics or responses to these events.

These broad market and industry fluctuations may adversely affect the market price of ATI Class A common stock, regardless of ATI’s actual operating performance. In addition, price volatility may be greater if the public float and trading volume of ATI Class A common stock is low.

In the past, following periods of market volatility, stockholders have instituted securities class action litigation. If ATI becomes involved in securities litigation, it could have a substantial cost and divert resources and the attention of executive management from ATI’s business regardless of the outcome of such litigation.

Because there are no current plans to pay cash dividends on ATI Class A common stock for the foreseeable future, you may not receive any return on investment unless you sell your common stock for a price greater than that which you paid for it.

ATI intends to retain future earnings, if any, for future operations, expansion and debt repayment and there are no current plans to pay any cash dividends for the foreseeable future. The declaration, amount and payment of any future dividends on shares of ATI Class A common stock will be at the sole discretion of the ATI Board. The ATI Board may take into account general and economic conditions, ATI’s financial condition and results of operations, ATI’s available cash and current and anticipated cash needs, capital requirements, contractual, legal, tax and regulatory restrictions, implications on the payment of dividends by ATI to its stockholders or by its subsidiaries to it and such other factors as the ATI Board may deem relevant. In addition, following the Business Combination, ATI will have no direct operations and no significant assets other than its ownership of its subsidiaries from whom it will depend on for distributions, and whose ability to pay dividends may be limited by covenants of any future indebtedness ATI or its subsidiaries incurs. As a result, you may not receive any return on an investment in ATI Class A common stock unless you sell such ATI Class A common stock for a price greater than that which you paid for it.

If securities analysts do not publish research or reports about ATI’s business or if they downgrade ATI’s stock or ATI’s sector, ATI’s stock price and trading volume could decline.

The trading market for ATI Class A common stock will rely in part on the research and reports that industry or financial analysts publish about ATI or its business. ATI will not control these analysts. In addition, some

 

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financial analysts may have limited expertise with the Company’s model and operations. Furthermore, if one or more of the analysts who do cover ATI downgrade its stock or industry, or the stock of any of its competitors, or publish inaccurate or unfavorable research about its business, the price of ATI’s stock could decline. If one or more of these analysts ceases coverage of ATI or fails to publish reports on it regularly, ATI could lose visibility in the market, which in turn could cause its stock price or trading volume to decline.

Future sales, or the perception of future sales, by ATI or its stockholders in the public market following the Business Combination could cause the market price for ATI Class A common stock to decline.

The sale of shares of ATI Class A common stock in the public market, or the perception that such sales could occur, could harm the prevailing market price of shares of ATI Class A common stock. These sales, or the possibility that these sales may occur, also might make it more difficult for ATI to sell equity securities in the future at a time and at a price that it deems appropriate.

Upon consummation of the Business Combination, ATI will have a total of approximately 207.7 million shares of ATI Class A common stock outstanding (excluding Vesting Shares and assuming that (i) the Business Combination closes on June 30, 2021 and (ii) no Earnout Shares have been issued). All shares issued in the Business Combination will be restricted securities.

In connection with the Business Combination, the Insiders and holders of the Company common stock and Company preferred stock have each agreed with FAII, subject to certain exceptions, not to dispose of or distribute any of their Company common stock or securities convertible into or exchangeable for shares of ATI Class A common stock during the period from the date of the A&R RRA continuing through the date (i) in the case of ATI Class A common stock of the New Holders (as such term is defined in the A&R RRA) that is 180 days after the date of the A&R RRA or (ii) in the case of the Founder Shares, 180 days after the date of the A&R RRA. See “Related Agreements—Amended and Restated Registration Rights Agreement” for a description of these lock-up arrangements.

Upon the expiration or waiver of the lock-ups described above, shares held by the Insiders and holders of the Company common stock and Company preferred stock will be eligible for resale, subject to volume, manner of sale and other limitations under Rule 144. In addition, pursuant to the A&R RRA, the Insiders and holders of the Company common stock and Company preferred stock will have the right, subject to certain conditions, to require ATI to register the sale of their shares of ATI Class A common stock under the Securities Act. In addition, the Subscription Agreements for the PIPE Investors provide for certain registration rights. For more information, see “Related Agreements—Subscription Agreements.” By exercising their registration rights and selling a large number of shares, these stockholders could cause the prevailing market price of ATI Class A common stock to decline. Following completion of the Business Combination, the shares covered by registration rights could represent over 83.4% of outstanding shares of ATI Class A common stock (excluding Vesting Shares and assuming that (i) the Business Combination closes on June 30, 2021 and (ii) no Earnout Shares have been issued).

As restrictions on resale end or if these stockholders exercise their registration rights, the market price of shares of ATI Class A common stock could drop significantly if the holders of these shares sell them or are perceived by the market as intending to sell them. These factors could also make it more difficult for ATI to raise additional funds through future offerings of ATI’s shares of ATI Class A common stock or other securities.

In addition, the shares of ATI Class A common stock reserved for future issuance under ATI’s equity incentive plans will become eligible for sale in the public market once those shares are issued, subject to provisions relating to various vesting agreements, lock-up agreements and, in some cases, limitations on volume and manner of sale applicable to affiliates under Rule 144, as applicable. The aggregate number of shares of ATI Class A common stock expected to be reserved for future issuance under its equity incentive plans will be approximately 20.8 million, which represents 10% of the issued and outstanding shares of ATI Class A common stock

 

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immediately following consummation of the Business Combination (excluding Vesting Shares and assuming that (i) the Business Combination closes on June 30, 2021 and (ii) no Earnout Shares have been issued). The compensation committee of the ATI Board may determine the exact number of shares to be reserved for future issuance under its equity incentive plans at its discretion. ATI is expected to file one or more registration statements on Form S-8 under the Securities Act to register shares of ATI Class A common stock or securities convertible into or exchangeable for shares of ATI Class A common stock issued pursuant to ATI’s equity incentive plans. Any such Form S-8 registration statements will automatically become effective upon filing. Accordingly, shares registered under such registration statements will be available for sale in the open market.

In the future, ATI may also issue its securities in connection with investments or acquisitions. The amount of shares of ATI Class A common stock issued in connection with an investment or acquisition could constitute a material portion of ATI’s then-outstanding shares of ATI Class A common stock. Any issuance of additional securities in connection with investments or acquisitions may result in additional dilution to ATI’s stockholders.

Anti-takeover provisions in ATI’s organizational documents could delay or prevent a change of control.

Certain provisions of the proposed charter and Amended and Restated Bylaws to become effective upon the consummation of the Business Combination may have an anti-takeover effect and may delay, defer or prevent a merger, acquisition, tender offer, takeover attempt or other change of control transaction that a stockholder might consider in its best interest, including those attempts that might result in a premium over the market price for the shares held by ATI’s stockholders.

These provisions provide for, among other things:

 

   

there is no cumulative voting with respect to the election of the ATI Board;

 

   

the division of the ATI Board into three classes, with only one class of directors being elected in each year;

 

   

the ability of the ATI Board to issue one or more series of preferred stock;

 

   

advance notice for nominations of directors by stockholders and for stockholders to include matters to be considered at ATI’s annual meetings;

 

   

certain limitations on convening special stockholder meetings;

 

   

limiting the ability of stockholders to act by written consent;

 

   

the ability of the ATI Board to fill a vacancy created by the expansion of the ATI Board or the resignation, death or removal of a director in certain circumstances;

 

   

providing that the ATI Board is expressly authorized to adopt, amend, alter or repeal ATI’s bylaws;

 

   

the removal of directors only for cause; and

 

   

that certain provisions may be amended only by the affirmative vote of at least 65% (for amendments to the indemnification provisions) or 66.7% (for amendments to the provisions relating to stockholder meetings and stockholder action by written consent) of the shares of ATI Class A common stock entitled to vote generally in the election of ATI directors.

These anti-takeover provisions could make it more difficult for a third party to acquire ATI, even if the third party’s offer may be considered beneficial by many of ATI’s stockholders. As a result, ATI’s stockholders may be limited in their ability to obtain a premium for their shares. These provisions could also discourage proxy contests and make it more difficult for you and other stockholders to elect directors of your choosing and to cause ATI to take other corporate actions you desire. See “Description of Securities—Certain Anti-Takeover Provisions of Delaware Law, the Proposed Charter and Amended and Restated Bylaws.”

 

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The Amended and Restated Bylaws will designate the Court of Chancery of the State of Delaware as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by ATI’s stockholders, which could limit ATI’s stockholders’ ability to obtain a favorable judicial forum for disputes with ATI or its directors, officers, employees or stockholders.

The Amended and Restated Bylaws will provide that, subject to limited exceptions, any (i) derivative action or proceeding brought on behalf of ATI, (ii) action asserting a claim of breach of a fiduciary duty owed by any director, officer, stockholder or employee to ATI or its stockholders, (iii) action asserting a claim arising pursuant to any provision of the Delaware General Corporation Law (the “DGCL”), the proposed charter or the Amended and Restated Bylaws or (iv) action asserting a claim governed by the internal affairs doctrine shall, to the fullest extent permitted by law, be exclusively brought in the Court of Chancery of the State of Delaware or, if such court does not have subject matter jurisdiction thereof, another state or federal court located within the State of Delaware. The Amended and Restated Bylaws will also provide that, to the fullest extent permitted by law, the federal district courts of the United States will be the exclusive forum for resolving any complaint asserting a cause of action arising under the United States federal securities laws, including the Securities Act. Any person or entity purchasing or otherwise acquiring any interest in shares of ATI’s capital stock shall be deemed to have notice of and to have consented to the provisions of the Amended and Restated Bylaws described above. This choice of forum provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with ATI or its directors, officers or other employees, which may discourage such lawsuits against ATI and its directors, officers and employees. This exclusive forum provision will not apply to claims under the Exchange Act, but will apply to other state and federal law claims including actions arising under the Securities Act. Section 22 of the Securities Act, however, creates concurrent jurisdiction for federal and state courts over all suits brought to enforce any duty or liability created by the Securities Act or 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, and investors cannot waive compliance with the federal securities laws and the rules and regulations thereunder. If a court were to find these provisions of the Amended and Restated Bylaws inapplicable to, or unenforceable in respect of, one or more of the specified types of actions or proceedings, ATI may incur additional costs associated with resolving such matters in other jurisdictions, which could adversely affect ATI’s business and financial condition.

As a “controlled company” within the meaning of NYSE listing standards, ATI will qualify for exemptions from certain corporate governance requirements. ATI has the opportunity to elect any of the exemptions afforded a controlled company.

Because Advent will control more than a majority of the total voting power of ATI, ATI will be a “controlled company” within the meaning of NYSE Listing Standards. Under NYSE rules, a company of which more than 50% of the voting power is held by another person or group of persons acting together is a “controlled company” and may elect not to comply with the following NYSE rules regarding corporate governance:

 

   

the requirement that a majority of its board of directors consist of independent directors;

 

   

the requirement that compensation of its executive officers be determined by a majority of the independent directors of the board or a compensation committee comprised solely of independent directors with a written charter addressing the committee’s purpose and responsibilities; and

 

   

the requirement that director nominees be selected, or recommended for the board’s selection, either by a majority of the independent directors of the board or a nominating committee comprised solely of independent directors with a written charter addressing the committee’s purpose and responsibilities.

Advent will have significant influence over ATI after completion of the Business Combination.

Upon completion of the Business Combination, Advent will beneficially own approximately 63% of ATI Class A common stock (assuming no redemptions by the existing FAII public stockholders, excluding the impact of 8,625,000 Founder Shares and public warrants, and assuming that approximately 207.7 million shares of ATI

 

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Class A common stock will be outstanding after the consummation of the Business Combination (excluding Vesting Shares and the shares underlying the equity awards to be granted pursuant to the terms of the New Employment Agreements summarized in the “Company Executive CompensationNew Employment Agreements In Connection With The Business Combination” section)). As long as Advent owns or controls a significant percentage of ATI’s outstanding voting power, it will have the ability to significantly influence all corporate actions requiring stockholder approval, including the election and removal of directors and the size of the ATI Board, any amendment to ATI’s certificate of incorporation or bylaws, or the approval of any merger or other significant corporate transaction, including a sale of substantially all of ATI’s assets. Advent’s influence over ATI’s management could have the effect of delaying or preventing a change in control or otherwise discouraging a potential acquirer from attempting to obtain control of ATI, which could cause the market price of ATI Class A common stock to decline or prevent stockholders from realizing a premium over the market price for ATI Class A common stock.

Pursuant to the terms of the Stockholders Agreement, Advent will have the right to designate nominees for election to the ATI Board as Advent Directors following the closing at any meeting of the ATI stockholders. The number of nominees that the Advent Stockholders will be entitled to nominate pursuant to the Stockholders Agreement is dependent on the aggregate number of shares of ATI Class A common stock held by Advent Stockholders. For so long as the Advent Stockholders own (i) 50% or more of the ATI Class A common stock, the Advent Stockholders will be entitled to designate five Advent Directors, (ii) 38% or more (but less than 50%) of ATI Class A common stock, the Advent Stockholders will be entitled to designate four Advent Directors, (iii) 26% or more (but less than 38%) of ATI Class A common stock, the Advent Stockholders will be entitled to designate three Advent Directors, (iv) 13% or more (but less than 26%) of ATI Class A common stock, the Advent Stockholders will be entitled to designate two Advent Directors, (v) 5% or more (but less than 13%) of ATI Class A common stock, the Advent Stockholders will be entitled to designate one Advent Director and (vi) less than 5%, the Advent Stockholders will not be entitled to designate any Advent Directors. See “Related Agreements—Stockholders Agreement.”

Advent’s interests may not align with ATI’s interests as a company or the interests of ATI’s other stockholders. Accordingly, Advent could cause ATI to enter into transactions or agreements of which other stockholders would not approve or make decisions with which other stockholders would disagree. Further, Advent is in the business of making investments in companies and may acquire and hold interests in businesses that compete directly or indirectly with ATI. Advent may also pursue acquisition opportunities that may be complementary to ATI’s business, and, as a result, those acquisition opportunities may not be available to ATI. In recognition that partners, members, directors, employees, stockholders, agents and successors of Advent and its successors and affiliates and any of their respective managed investment funds and portfolio companies may serve as ATI directors or officers, the proposed charter provides, among other things, that none of Advent or any partners, members, directors, employees, stockholders, agents or successors of Advent and its successors and affiliates and any of their respective managed investment funds and portfolio companies has any duty to refrain from engaging directly or indirectly in the same or similar business activities or lines of business that ATI does (except as otherwise expressly provided in any agreement entered into between ATI and such exempted person). In the event that any of these persons or entities acquires knowledge of a potential transaction or matter which may be a corporate opportunity for itself and ATI, ATI will not have any expectancy in such corporate opportunity, and these persons and entities will not have any duty to communicate or offer such corporate opportunity to ATI and may pursue or acquire such corporate opportunity for themselves or direct such opportunity to another person. These potential conflicts of interest could have a material adverse effect on ATI’s business, financial condition and results of operations if, among other things, attractive corporate opportunities are allocated by Advent to themselves or their other affiliates.

The JOBS Act permits “emerging growth companies” like us to take advantage of certain exemptions from various reporting requirements applicable to other public companies that are not emerging growth companies.

FAII qualifies as an “emerging growth company” as defined in Section 2(a)(19) of the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). As such, following the

 

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consummation of the Business Combination, ATI will take advantage of certain exemptions from various reporting requirements applicable to other public companies that are not emerging growth companies for as long as it continues to be an emerging growth company, including (i) the exemption from the auditor attestation requirements with respect to internal control over financial reporting under Section 404 of the Sarbanes-Oxley Act, (ii) the exemptions from say-on-pay, say-on-frequency and say-on-golden parachute voting requirements and (iii) reduced disclosure obligations regarding executive compensation in its periodic reports and statements. As a result, ATI’s stockholders may not have access to certain information they deem important. ATI will remain an emerging growth company until the earliest of (i) the last day of the fiscal year (a) following August 14, 2025, the fifth anniversary of the closing of FAII’s IPO, (b) in which ATI has total annual gross revenue of at least $1.07 billion or (c) in which ATI is deemed to be a large accelerated filer, which means the market value of ATI Class A common stock that is held by non-affiliates exceeds $700 million as of the last business day of ATI’s prior second fiscal quarter, or (ii) the date on which ATI has issued more than $1.0 billion in non-convertible debt during the prior three-year period.

In addition, Section 107 of the JOBS Act also provides that an emerging growth company can take advantage of the exemption from complying with new or revised accounting standards provided in Section 7(a)(2)(B) of the Securities Act as long as ATI is an emerging growth company. An emerging growth company can therefore delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. 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. ATI 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, ATI, 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 ATI’s financial statements with another public company which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.

FAII cannot predict if investors will find ATI Class A common stock less attractive because ATI will rely on these exemptions. If some investors find ATI Class A common stock less attractive as a result, there may be a less active trading market for ATI Class A common stock and ATI’s stock price may be more volatile.

Transformation of the Company into a listed public company will increase its costs and may disrupt the regular operations of its business.

The Company has operated as a privately owned company and expects to incur additional legal, regulatory, finance, accounting, investor relations and other administrative expenses as a result of having publicly traded common stock. In addition, the Company will be required under the Sarbanes-Oxley Act, as well as rules adopted by the SEC and the NYSE, to implement specified corporate governance practices that currently do not apply to the Company as a private company.

ATI will be required to ensure that it has the ability to prepare financial statements on a timely basis that fully comply with all SEC reporting requirements and maintain effective internal controls over financial reporting.

The additional demands associated with being a public company may disrupt regular operations of ATI’s business by diverting the attention of some of its senior management team away from revenue producing activities to management and administrative oversight, adversely affecting ATI’s ability to attract and complete business opportunities and increasing the difficulty in both retaining professionals and managing and growing ATI’s businesses. In addition, failure to comply with any laws or regulations applicable to ATI as a public company may result in legal proceedings and/or regulatory investigations, and may cause reputational damage. Any of these effects could harm ATI’s business, financial condition and results of operations.

 

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As a private company, the Company’s internal control over financial reporting currently may not meet all of the standards contemplated by Section 404 of the Sarbanes-Oxley Act, and failure to achieve and maintain effective internal control over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act could have a material adverse effect on the Company’s business and the market price of ATI Class A common stock.

As a private company, the Company was not required to document and test its internal control over financial reporting nor was the Company’s management required to certify the effectiveness of the Company’s internal control and its auditors were not required to opine on the effectiveness of its internal control over financial reporting. The Company’s status as an emerging growth company notwithstanding, as a public company, the Company will have significant requirements for enhanced financial reporting and internal control. The process of designing and implementing effective internal control is a continuous effort that will require the Company to anticipate and react to changes in the Company’s business and the economic and regulatory environments and to expend significant resources to maintain a system of internal control that is adequate to satisfy its reporting obligations as a public company. If the Company is unable to establish or maintain appropriate internal financial reporting control and procedures, it could cause the Company to fail to meet its reporting obligations on a timely basis, result in material misstatements in its consolidated financial statements and harm its operating results.

Section 404(a) of the Sarbanes-Oxley Act requires that, beginning with a company’s second annual report on Form 10-K, management assess and report annually on the effectiveness of its internal control over financial reporting, and identify any material weaknesses in its internal control over financial reporting. Although Section 404(b) requires the Company’s independent registered public accounting firm to issue an annual report that addresses the effectiveness of the Company’s internal control over financial reporting, in connection with the Company’s upcoming reporting, including its 10-K filing for the fiscal year ending December 31, 2021, the Company has opted to rely on the exemptions provided in the JOBS Act and, consequently, will not be required to comply with SEC rules that implement Section 404(b) until such time as it is no longer treated as an “emerging growth company.” The Company’s internal control over financial reporting currently may not meet all of the standards contemplated by Section 404 of the Sarbanes-Oxley Act that it will eventually be required to meet. Because the Company currently does not have comprehensive documentation of its internal control and has not yet tested its internal control in accordance with Section 404, it cannot conclude in accordance with Section 404 that it does not have a material weakness in its internal control or a combination of significant deficiencies that could result in the conclusion that it has a material weakness in its internal control. If the Company is not able to complete its initial assessment of its internal control and otherwise implement the requirements of Section 404 in a timely manner or with adequate compliance, its independent registered public accounting firm may not be able to certify as to the adequacy of the Company’s internal control over financial reporting.

Matters impacting the Company’s internal control may cause it to be unable to report its financial information on a timely basis and thereby subject it to adverse regulatory consequences, including sanctions by the SEC or violations of applicable stock exchange listing rules, which may result in a breach of the covenants under existing or future financing arrangements. There also could be a negative reaction in the financial markets due to a loss of investor confidence in the Company and the reliability of its financial statements. Confidence in the reliability of its financial statements also could suffer if it or the Company’s independent registered public accounting firm were to report a material weakness in its internal control over financial reporting. This could materially adversely affect the Company and lead to a decline in the market price of ATI Class A common stock.

Risks Relating to Redemption

There is no guarantee that a FAII public stockholder’s decision whether to redeem their public shares for a pro rata portion of the Trust Account will put such stockholder in a better future economic position.

No assurance can be given as to the price at which a public stockholder may be able to sell the shares of ATI Class A common stock in the future following the completion of the Business Combination. Certain events

 

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following the consummation of any business combination, including the Business Combination, may cause an increase in ATI’s stock price, and may result in a lower value realized now than a FAII public stockholder might realize in the future had the FAII public stockholder not elected to redeem such stockholder’s public shares. Similarly, if a FAII public stockholder does not redeem his, her or its shares, such FAII public stockholder will bear the risk of ownership of ATI Class A common stock after the consummation of the Business Combination, and there can be no assurance that a FAII public stockholder can sell his, her or its shares of ATI Class A common stock in the future for a greater amount than the redemption price set forth in this proxy statement. A FAII public stockholder should consult his, her or its own tax and/or financial advisor for assistance on how this may affect its individual situation.

If FAII public stockholders fail to comply with the redemption requirements specified in this proxy statement, they will not be entitled to redeem their public shares for a pro rata portion of the funds held in the Trust Account.

To exercise their redemption rights, holders are required to deliver their stock, either physically or electronically using DTC’s DWAC system, to FAII’s transfer agent. If a holder properly seeks redemption as described in this proxy statement and the Business Combination is consummated, FAII will redeem these shares for a pro rata portion of funds deposited in the Trust Account and the holder will no longer own such shares following the Business Combination.

FAII does not have a specified maximum redemption threshold. The absence of such a redemption threshold may make it possible for FAII to complete the Business Combination with which a substantial majority of FAII stockholders do not agree.

FAII’s current charter does not provide a specified maximum redemption threshold, except that FAII will not redeem public shares in an amount that would cause its net tangible assets to be less than $5,000,001. The Minimum Cash Condition to the respective obligations of the parties is for the sole benefit of the parties thereto, as such the closing of the Business Combination could occur if FAII maintains at least $5,000,001 of net tangible assets. As a result, subject in all cases to the terms and conditions of the Merger Agreement and FAII’s current charter, FAII may be able to complete the Business Combination even though a substantial portion of FAII’s public stockholders do not agree with the Business Combination and have redeemed their public shares.

If third- parties bring claims against FAII, the proceeds held in the Trust Account could be reduced and the per-share redemption amount received by stockholders may be less than $10.00 per share.

FAII’s placing of funds in the Trust Account may not protect those funds from third-party claims against it. Although FAII seeks to have all vendors, service providers (other than FAII’s independent auditors), prospective target businesses or other entities with which FAII does business execute agreements with it waiving any right, title, interest or claim of any kind in or to any funds held in the Trust Account for the benefit of public stockholders, such parties may not execute such agreements, or even if they execute such agreements they may not be prevented from bringing claims against the Trust Account, including, but not limited to, fraudulent inducement, breach of fiduciary responsibility or other similar claims, as well as claims challenging the enforceability of the waiver, in each case in order to gain advantage with respect to a claim against FAII’s assets, including the funds held in the Trust Account. If any third party refuses to execute an agreement waiving such claims to the funds held in the Trust Account, FAII’s management will perform an analysis of the alternatives available to it and will only enter into an agreement with a third party that has not executed a waiver if management believes that such third party’s engagement would be significantly more beneficial to it than any alternative.

Examples of possible instances where FAII may engage a third party that refuses to execute a waiver include the engagement of a third-party consultant whose particular expertise or skills are believed by management to be significantly superior to those of other consultants that would agree to execute a waiver or in cases where management is unable to find a service provider willing to execute a waiver. In addition, there is no guarantee that such entities will agree to waive any claims they may have in the future as a result of, or arising out of, any

 

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negotiations, contracts or agreements with FAII and will not seek recourse against the Trust Account for any reason. Upon redemption of public shares, if FAII is unable to complete the Business Combination within the prescribed timeframe, or upon the exercise of a redemption right in connection with the Business Combination, FAII will be required to provide for payment of claims of creditors that were not waived that may be brought against it within the ten years following redemption. Accordingly, the per-share redemption amount received by public stockholders could be less than the $10.00 per share initially held in the Trust Account, due to claims of such creditors. The Sponsor has agreed that it will be liable to FAII if and to the extent any claims by a third party (other than FAII’s independent auditor) for services rendered or products sold to FAII, or a prospective target business with which FAII has discussed entering into a business combination agreement, reduce the amount of funds in the Trust Account to below (i) $10.00 per public share or (ii) such lesser amount per public share held in the Trust Account as of the date of the liquidation of the Trust Account due to reductions in the value of the trust assets, in each case net of the interest which may be withdrawn to pay taxes, except as to any claims by a third party who executed a waiver of any and all rights to seek access to the Trust Account and except as to any claims under indemnity of the underwriters of FAII’s IPO against certain liabilities, including liabilities under the Securities Act. Moreover, in the event that an executed waiver is deemed to be unenforceable against a third party, the Sponsor will not be responsible to the extent of any liability for such third-party claims. FAII has not independently verified whether the Sponsor has sufficient funds to satisfy its indemnity obligations and FAII has not asked the Sponsor to reserve for such indemnification obligations.

FAII directors may decide not to enforce the indemnification obligation of the Sponsor, resulting in a reduction in the amount of funds in the Trust Account available for distribution to public stockholders.

In the event that the proceeds in the Trust Account are reduced below (i) $10.00 per share or (ii) such lesser amount per share held in the Trust Account as of the date of the liquidation of the Trust Account due to reductions in the value of the trust assets, in each case net of the interest which may be withdrawn to pay taxes, and the Sponsor asserts that it is unable to satisfy its indemnification obligations or that it has no indemnification obligations related to a particular claim, FAII’s independent directors would determine whether to take legal action against the Sponsor to enforce its indemnification obligations. While FAII currently expects that its independent directors would take legal action on FAII’s behalf against the Sponsor to enforce its indemnification obligations to us, it is possible that FAII’s independent directors in exercising their business judgment and subject to FAII’s fiduciary duties may choose not to do so in any particular instance. If FAII’s independent directors choose not to enforce these indemnification obligations, the amount of funds in the Trust Account available for distribution to public stockholders may be reduced below $10.00 per share.

If you or a “group” of stockholders of which you are a part are deemed to hold an aggregate of more than 15% of the public shares, you (or, if a member of such a group, all of the members of such group in the aggregate) will lose the ability to redeem all such shares in excess of 15% of the public shares.

A public stockholder, together with any of his, her or its affiliates or any other person with whom it is acting in concert or as a “group” (as defined in Section 13(d)(3) of the Exchange Act), will be restricted from redeeming in the aggregate his, her or its public shares or, if part of such a group, the group’s public shares, in excess of 15% of the public shares. Your inability to redeem any such excess public shares could resulting in you suffering a material loss on your investment in FAII if you sell such excess public shares in open market transactions. FAII cannot assure you that the value of such excess public shares will appreciate over time following the Business Combination or that the market price of the public shares will exceed the per-share redemption price.

However, FAII stockholders’ ability to vote all of their public shares (including such excess shares) for or against the Business Combination Proposal is not restricted by this limitation on redemption.

 

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If a stockholder fails to receive notice of FAII’s offer to redeem public shares of FAII Class A common stock in connection with the Business Combination, or fails to comply with the procedures for tendering its shares, such shares of FAII Class A common stock may not be redeemed.

If, despite FAII’s compliance with the proxy rules, a public stockholder fails to receive FAII proxy materials, such stockholder may not become aware of the opportunity to redeem its shares of FAII Class A common stock. In addition, the proxy materials that FAII is furnishing to holders of public shares of FAII Class A common stock in connection with the Business Combination describe the various procedures that must be complied with in order to validly redeem public shares of FAII Class A common stock. In the event that a stockholder fails to comply with these procedures, its shares of FAII Class A common stock may not be redeemed.

 

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SPECIAL MEETING OF FAII STOCKHOLDERS

This proxy statement is being provided to FAII stockholders as part of a solicitation of proxies by the FAII Board for use at the FAII Special Meeting to be held on June 15, 2021, and at any adjournment or postponement thereof. This proxy statement contains important information regarding the FAII Special Meeting, the proposals on which you are being asked to vote and information you may find useful in determining how to vote and voting procedures.

This proxy statement is being first mailed on or about May 14, 2021 to all stockholders of record of FAII as of May 24, 2021, the record date for the FAII Special Meeting. Stockholders of record who owned shares of FAII Common Stock at the close of business on the FAII record date are entitled to receive notice of, attend and vote at the FAII Special Meeting.

Date, Time and Place of FAII Special Meeting

The FAII Special Meeting will be held exclusively via a live webcast at www.virtualshareholdermeeting.com/FAII2021, on June 15, 2021 at 8.00 a.m., Eastern Time. To participate in the virtual meeting, a FAII stockholder of record will need the 16-digit control number included on their proxy card or instructions that accompanied their proxy materials, if applicable, or to obtain a proxy form from their broker, bank or other nominee. The FAII Special Meeting webcast will begin promptly at 8.00 a.m., Eastern Time. FAII stockholders are encouraged to access the FAII Special Meeting prior to the start time. If you encounter any difficulties accessing the virtual meeting or during the meeting time, please call the technical support number that will be posted on the virtual meeting login page.

Voting Power; Record Date

As a FAII stockholder, you have a right to vote on the matters presented at the FAII Special Meeting, which are summarized above and fully set forth in this proxy statement. You will be entitled to vote or direct votes to be cast at the FAII Special Meeting if you owned FAII Common Stock at the close of business on May 24, 2021, which is the record date for the FAII Special Meeting. You are entitled to one vote for each share of FAII Common Stock that you owned as of the close of business on the FAII record date. If your shares are held in “street name” or are in a margin or similar account, you should contact your broker, bank or other nominee to ensure that votes related to the shares you beneficially own are properly counted. As of the close of business on May 10, 2021, there were 43,125,000 shares of FAII Common Stock outstanding, of which 34,500,000 are shares of FAII Class A common stock and 8,625,000 are shares of FAII Class F common stock held by the Insiders.

Proposals at the FAII Special Meeting

At the FAII Special Meeting, FAII stockholders will vote on the following proposals:

 

   

Proposal No. 1—The Business Combination Proposal: To consider and vote upon a proposal to approve the Merger Agreement and approve the transactions contemplated thereby;

 

   

Proposal No. 2—The NYSE Issuance Proposal: To consider and vote upon a proposal for purposes of complying with applicable provisions of Rule 312.03 of the NYSE Listed Company Manual, to approve (i) the issuance of more than 20% of FAII’s currently issued and outstanding FAII Common Stock in connection with the Business Combination, (ii) the issuance of more than 1% of FAII’s currently issued and outstanding FAII Common Stock to a Related Party (as defined in Rule 312.03 of the NYSE Listed Company Manual) in connection with the Business Combination and (iii) the issuance of a number of shares of FAII Class A common stock that will result in a change of control of FAII (pursuant to Rule 312.03(d) of the NYSE Listed Company Manual) in connection with the Business Combination;

 

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Proposal No. 3—The Charter Amendment Proposal—To consider and act upon a proposal to adopt the proposed charter;

 

   

Proposal No. 4—The Governance Proposal—A separate proposal with respect to certain governance provisions in the proposed charter, which is being separately presented in accordance with SEC requirements and which will be voted upon on a non-binding advisory basis;

 

   

Proposal No. 5—The Director Election Proposal: For the holders of outstanding shares of FAII Class F common stock to consider and vote upon a proposal to elect eight directors to serve on the FAII Board until the earlier of the closing and the 2023 annual meeting of stockholders, and until their respective successors are duly elected and qualified, subject to their earlier death, resignation or removal (Proposal No. 5);

 

   

Proposal No. 6—The Incentive Plan Proposal: To consider and vote upon a proposal to approve the Incentive Plan and the material terms thereunder, which we refer to as the “Incentive Plan Proposal.” A copy of the Incentive Plan is attached to the accompanying proxy statement as Annex J; and

 

   

Proposal No. 7—The Adjournment Proposal: To consider and vote upon a proposal to approve the adjournment of the FAII Special Meeting to a later date or dates, if necessary, to permit further solicitation and vote of proxies in the event that there are insufficient votes for, or for any other reason permitted by the Merger Agreement in connection with, the approval of one or more of the other proposals at the FAII Special Meeting.

 

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THE FAII BOARD RECOMMENDS THAT YOU VOTE “FOR” EACH OF THESE PROPOSALS

Vote of FAII’s Sponsor, Directors and Officers

The Insiders, including the Sponsor, have agreed to vote their Founder Shares and any public shares held by them in favor of the Business Combination Proposal and all other proposals presented to FAII stockholders in this proxy statement. Currently, the Insiders own approximately 20% of the issued and outstanding FAII Common Stock, including all of the outstanding Founder Shares.

The Insiders have waived any redemption rights, including with respect to any shares of FAII Class A common stock purchased in FAII’s IPO or in the aftermarket, in connection with the Business Combination.

Quorum and Required Vote for Proposals for the FAII Special Meeting

A quorum of FAII stockholders is necessary to hold a valid meeting. A quorum will be present at the FAII Special Meeting if holders of a majority in voting power of FAII Common Stock issued and outstanding and entitled to vote at the FAII Special Meeting is present virtually or represented by proxy. Abstentions and broker non-votes will count as present for the purposes of establishing a quorum at the FAII Special Meeting.

The approval of each of the Business Combination Proposal, the NYSE Issuance Proposal, the Governance Proposal, the Incentive Plan Proposal and the Adjournment Proposal requires the affirmative vote of majority of the votes cast by holders of the outstanding shares of FAII Common Stock represented virtually or by proxy at the FAII Special Meeting and entitled to vote thereon. If a valid quorum is established, a stockholder’s failure to vote by proxy or virtually at the FAII Special Meeting will have no effect on the outcome of any vote on any of the foregoing proposals. Abstentions will be counted in connection with determination of whether a valid quorum is established, but will have no effect on the vote with respect to such proposals. Broker non-votes will also have no effect on the vote with respect to such proposals. The Insiders have agreed to vote their Founder Shares and any public shares they may hold in favor of the Business Combination. Currently, the Insiders own approximately 20% of the issued and outstanding FAII Common Stock, including all of the outstanding Founder Shares.

The approval of the Charter Amendment Proposal requires the affirmative vote of the holders of a majority of the outstanding shares of FAII Common Stock entitled to vote thereon at the FAII Special Meeting. Accordingly, if a valid quorum is otherwise established, a stockholder’s failure to vote by proxy or virtually at the FAII Special Meeting, as well as an abstention from voting and a broker non-vote with regard to the Charter Amendment Proposal will each have the same effect as a vote “AGAINST” such Charter Amendment Proposal.

Approval of the Director Election Proposal requires the affirmative vote (virtually or by proxy) of holders of a plurality of the votes cast by holders of outstanding shares of FAII Class F common stock entitled to vote thereon at the FAII Special Meeting, voting as a single class. Failure to vote by proxy or to vote virtually at the FAII Special Meeting or an abstention from voting will have no effect on the outcome of the vote on the Director Election Proposal. Proxies will have full discretion to cast votes for other persons in the event that any nominee is unable to serve. Failure to vote by proxy or to vote virtually at the FAII Special Meeting, abstentions and broker non-votes will have no effect on the vote for the Director Election Proposal.

The transactions contemplated by the Merger Agreement are conditioned upon the approval of the Business Combination Proposal, the NYSE Issuance Proposal and the Charter Amendment Proposal at the FAII Special Meeting. It is important for you to note that in the event that the Business Combination Proposal, the Charter Amendment Proposal and the NYSE Issuance Proposal do not receive the requisite vote for approval, we will not consummate the Business Combination.

 

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Recommendation to FAII’s Stockholders

The FAII Board believes that each of the Business Combination Proposal, the NYSE Issuance Proposal, the Charter Amendment Proposal, the Governance Proposal, the Director Election Proposal, the Incentive Plan Proposal and the Adjournment Proposal to be presented at the FAII Special Meeting is in the best interests of FAII and FAII stockholders and recommends that its stockholders vote “FOR” each of the proposals.

When you consider the recommendation of the FAII Board in favor of approval of the Business Combination Proposal, you should keep in mind that the Sponsor and certain members of the FAII Board and officers have interests in the Business Combination that may be different from or in addition to (or which may conflict with) your interests as a stockholder. Stockholders should take these interests into account in deciding whether to approve the proposals presented at the FAII Special Meeting, including the Business Combination Proposal. These interests include, among other things:

 

   

the fact that various Fortress Credit Funds are currently lenders pursuant to the First Lien Credit Agreement, and as of December 31, 2020, those Fortress Credit Funds held approximately $5,996,614 (or 0.765%) of the outstanding indebtedness under the First Lien Credit Agreement. While certain officers and directors of FAII that are affiliated with Fortress have the right to receive distributions of profit made by the Fortress Credit Funds that are lenders under the First Lien Credit Agreement, the First Lien Credit Agreement loans held by the Fortress Credit Funds represent less than 0.1% of the assets under management of the Fortress Credit Funds participating in the First Lien Credit Agreement, and any profit distributions related to the First Lien Credit Agreement would be de minimis and immaterial to the FAII officers and directors receiving such profit distributions. Similarly, certain officers and directors of FAII that are affiliated with Fortress have the right to receive distributions of profit from the Fortress Credit Funds that are participating in the PIPE Investment and that, upon closing, will own the Founder Shares and Private Placement Warrants. The PIPE Investment is anticipated to represent approximately 1% of the available capital of the participating Fortress Credit Funds, and while difficult to predict, distributions of profit to FAII officers and directors that have the right to participate in the profits of such Fortress Credit Funds are anticipated to represent a similar amount (approximately 1%) of the total profits distributed by such Fortress Credit Funds;

 

   

the fact that, in connection with the PIPE Investment, which is conditioned upon the consummation of the Business Combination, the Sponsor agreed to purchase 7,500,000 shares of FAII Class A common stock at $10.00 per share for an aggregate purchase price of $75 million. While the per share subscription price for the FAII Class A common stock to be purchased by the Sponsor in connection with the PIPE Investment is $10.00, the implied price per share of the Sponsor’s overall holdings in ATI will be lower based on the purchase price paid by the Sponsor for the Founder Shares and the Private Placement Warrants (as described in the two immediately succeeding paragraphs below). The Sponsor currently holds a controlling stake in FAII, and will receive ATI Class A common stock in the PIPE Investment;

 

   

the fact that the Vesting Shares will vest as follows: (i) 33.33% of the Vesting Shares shall vest at such time as a $12.00 Common Share Price is achieved on or before the date that is ten years after the consummation of the Business Combination; (ii) 33.33% of the Vesting Shares shall vest at such time as a $14.00 Common Share Price is achieved on or before the date that is ten years after the consummation of the Business Combination; and (iii) 33.34% of the Vesting Shares shall vest at such time as a $16.00 Common Share Price is achieved on or before the date that is ten years after the consummation of the Business Combination. As used in this proxy statement, the applicable “Common Share Price” will be considered achieved only when the VWAP equals or exceeds the applicable threshold for at least five days out of a period of ten consecutive trading days ending on the trading day immediately prior to the date of determination. In the event that there is an agreement with respect to the sale or other change of control of ATI entered into after the closing and before the date that is ten years after the closing, then immediately prior to the consummating of the change of control, all Vesting Shares that were eligible to vest and remain unvested, if any, will vest on the day immediately preceding the closing of such change of control;

 

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the fact that, if the Business Combination or another business combination is not consummated by August 14, 2022, FAII will cease all operations except for the purpose of winding up, redeeming 100% of the outstanding public shares for cash and, subject to the approval of its remaining stockholders and the FAII Board, dissolving and liquidating. In such event, the 8,625,000 Founder Shares held by the Insiders, which were acquired for an aggregate purchase price of $25,000 by Sponsor prior to FAII’s IPO, would be worthless because the holders are not entitled to participate in any redemption or distribution with respect to such shares. Such Founder Shares, if valued based on the closing price of $9.99 per share of FAII Class A common stock on the NYSE on May 10, 2021, would be valued at approximately $86,163,750 (after giving effect to the conversion of such Founder Shares into shares of ATI Class A common stock). Pursuant to the Parent Sponsor Letter Agreement, the Insiders agreed that, as of the consummation of the Business Combination, all of the Vesting Shares shall be unvested and shall be subject to certain vesting and forfeiture provisions as further described in this proxy statement;

 

   

the fact that, in exchange for serving on the FAII Board, each of FAII’s independent directors, Mr. Hood, Mr. Policy, Ms. Russak-Aminoach and Mr. Gulati, received a nominal economic interest through the purchase from Sponsor of 25,000 Founder Shares at their original purchase price of $0.003 per share and subject to certain vesting and forfeiture provisions whereby 33.33%, 33.33% and 33.34% of such Founder Shares shall vest at such time that the Common Share Price equals or exceeds $12.00, $14.00 and $16.00 per share, respectively, on or before the date that is ten years after the consummation of the Business Combination. Such Founder Shares, if valued based on the closing price of $9.99 per share of FAII Class A common stock on the NYSE on May 10, 2021, would be valued at approximately $249,750 (after giving effect to the conversion of such Founder Shares into shares of ATI Class A common stock). If FAII fails to complete a business combination by August 14, 2022, these Founder Shares will become worthless. As a result, FAII’s independent directors may have a conflict of interest in determining whether a particular business is an appropriate business with which to effectuate FAII’s initial business combination. The FAII Board took into consideration the potential for such a conflict of interest to arise and believes any potential conflict to be adequately mitigated through the vesting provision’s requirement of price appreciation over a vesting period of ten years;

 

   

the fact that the Sponsor purchased an aggregate of 5,933,333 Private Placement Warrants from FAII for an aggregate purchase price of $8,900,000 (or $1.50 per warrant). These purchases took place on a private placement basis simultaneously with the consummation of FAII’s IPO. A portion of the proceeds FAII received from these purchases was placed in the Trust Account. Pursuant to the Parent Sponsor Letter Agreement, the Sponsor has agreed to transfer and surrender 2,966,667 Private Placement Warrants immediately prior to the effective time of the Business Combination, which warrants will be cancelled and no longer outstanding. The 5,933,333 Private Placement Warrants, if valued based on the closing price of $1.87 per public warrant on the NYSE on May 10, 2021, would be valued at approximately $11,095,333, but may expire and become worthless if FAII fails to complete a business combination by August 14, 2022;

 

   

the fact that Mr. McKnight is expected to become a member of the ATI Board upon consummation of the Business Combination. As such, in the future, Mr. McKnight may receive cash fees, stock options or stock awards that the ATI Board determines to pay its non-executive directors;

 

   

the fact that, if FAII is unable to complete a business combination within the required time period, the Sponsor may be liable to FAII under certain circumstances described herein to ensure that the proceeds in the Trust Account are not reduced by any claims by a third party (other than our independent auditors) for services rendered or products sold to us, or a prospective target business with which we have discussed entering into a transaction agreement;

 

   

the fact that, following the consummation of a business combination, directors or members of our management team who remain with us may be paid consulting, management or other fees from the combined company;

 

   

the continued indemnification of FAII’s current directors and officers and the continuation of FAII’s directors’ and officers’ liability insurance;

 

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the fact that the FAII Board is not comprised of a majority of independent directors, and that the Insiders, who hold a controlling interest in FAII until consummation of our initial business combination, control the composition of the FAII Board until consummation of our initial business combination;

 

   

the fact that the Insiders have agreed to waive their rights to liquidating distributions from the Trust Account with respect to their Founder Shares;

 

   

the fact that the Insiders have also agreed to waive their right to a conversion price adjustment with respect to their Founder Shares in connection with the consummation of the Business Combination;

 

   

the fact that, as of the closing of the Business Combination, FAII will enter into the A&R RRA with the A&R RRA Parties, which provides for certain demand, piggy-back and shelf registration rights to the A&R RRA Parties and their permitted transferees. The A&R RRA Parties include the following directors and officers of FAII: Joshua Pack, Andrew McKnight, Daniel Bass, Micah Kaplan, Alexander Gillette, Marc Furstein, Leslee Cowen, Aaron Hood, Carmen Policy, Rakefet Russak-Aminoach, and Sunil Gulati;

 

   

the fact that the Insiders have agreed not to redeem any of the outstanding Founder Shares in connection with the Business Combination Proposal;

 

   

the fact that if FAII consummates the Business Combination, any amounts outstanding under any loan made by the Sponsor to FAII will be repayable in cash, and if FAII fails to complete a business combination there may be insufficient assets outside the Trust Account to satisfy such loan;

 

   

the fact that, starting August 2020 and through the completion of the initial business combination or liquidation, FAII has paid and will continue to pay a monthly fee of $20,000 for office space and related support services to an affiliate of the Sponsor;

 

   

the fact that, as described in Proposal No. 3, the current charter will be amended to exclude Advent and any Exempt Transferee (as defined in the proposed charter) and their respective affiliates or successors or any “group,” or any member of any such group, to which such persons are a party from the definition of “interested stockholder,” and to make certain related changes;

 

   

if the Trust Account is liquidated, including in the event FAII is unable to complete an initial business combination within the required time period, Sponsor has agreed to indemnify FAII to ensure that proceeds in the Trust Account are not reduced below $10.00 per public share, or such lesser per public share amount as is in the Trust Account on the liquidation date, by the claims of prospective target businesses with which FAII has discussed entering into a transaction agreement or any third party (other than FAII’s independent auditors) for services rendered or products sold to FAII, but only if such third party or target business has not executed a waiver of any and all rights to seek access to the Trust Account;

 

   

the fact that if the Business Combination is not consummated, FAII will have to pay certain expenses related to the Business Combination, which may impede its ability to consummate a transaction with another acquisition target.

Abstentions and Broker Non-Votes

Abstentions are considered present for purposes of establishing a quorum. Abstentions will have the same effect as a vote “AGAINST” the Charter Amendment Proposal, but will have no effect on the Business Combination Proposal, the NYSE Issuance Proposal, the Governance Proposal, the Director Election Proposal, the Incentive Plan Proposal or the Adjournment Proposal.

In general, if your shares are held in “street” name and you do not instruct your broker, bank or other nominee on a timely basis on how to vote your shares, your broker, bank or other nominee, in its sole discretion, may either leave your shares unvoted or vote your shares on routine matters, but not on any non-routine matters.

 

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The Business Combination Proposal, the NYSE Issuance Proposal, the Charter Amendment Proposal, the Governance Proposal, the Director Election Proposal, the Incentive Plan Proposal and the Adjournment Proposal are considered non-routine matters. As such, without your voting instructions, your brokerage firm cannot vote your shares on any of the foregoing proposals to be voted on at the FAII Special Meeting without your instruction.

Attending the FAII Special Meeting; Voting Virtually at the Meeting

In light of on-going developments related to COVID-19 and after careful consideration, the FAII Board has determined to hold the FAII Special Meeting virtually in order to facilitate stockholder attendance and participation by enabling stockholders to participate from any location and at no cost.

To participate in the virtual special meeting, which we refer to as the “FAII Special Meeting,” the FAII stockholder will need the 16-digit control number included on their proxy card or instructions that accompanied their proxy materials, if applicable, or to obtain a proxy form from their broker, bank or other nominee. The FAII Special Meeting webcast will begin promptly at 8:00 a.m., Eastern Time. FAII stockholders are encouraged to access the FAII Special Meeting prior to the start time. Online check-in will begin at 8:00 a.m., Eastern Time, and FAII stockholders should allow ample time for the check-in procedures. If you encounter any difficulties accessing the virtual meeting or during the meeting time, please call the technical support number that will be posted on the virtual meeting login page.

FAII stockholders will be able to attend the FAII Special Meeting online, vote their shares electronically and submit questions during the FAII Special Meeting by visiting www.virtualshareholdermeeting.com/FAII2021. To submit questions, you will need the 16-digit control number included on their proxy card or instructions that accompanied their proxy materials, if applicable, or to obtain a proxy form from their broker, bank or other nominee. The FAII Board will try to answer as many stockholder-submitted questions as time permits that comply with the meeting rules of conduct. However, the FAII Board reserves the right to edit profanity or other inappropriate language, or to exclude questions that are not pertinent to FAII Special Meeting matters or that are otherwise inappropriate. If substantially similar questions are received, they will be grouped together, and a single response will be provided to avoid repetition.

Voting Your Shares—Stockholders of Record

If you are a FAII stockholder of record, you may vote by mail, internet, phone or virtually at the FAII Special Meeting. Each share of FAII Common Stock that you own in your name entitles you to one vote on each of the proposals for the FAII Special Meeting. Your one or more proxy cards show the number of shares of FAII Common Stock that you own.

Voting By Mail, Internet or Phone. If you are a stockholder of record of FAII as of the FAII record date you may also submit your proxy before the FAII Special Meeting in any of the following ways, if available:

 

   

Vote by Mail: by signing, dating and returning the enclosed proxy card in the accompanying prepaid reply envelope;

 

   

Vote by Internet: visit www.proxyvote.com, 24 hours a day, seven days a week, until 11:59 p.m., Eastern Time, on June 14, 2021 (have your proxy card in hand when you visit the website); or

 

   

Vote by Phone: by calling toll-free (within the U.S. or Canada) 1-800-690-6903 (have your proxy card in hand when you call).

If your shares are held in “street name” through a broker, bank or other nominee, your broker, bank or other nominee will send you separate instructions describing the procedure for voting your shares. Simply complete, sign and date your voting instruction card and return it in the postage-paid envelope provided to ensure that your

 

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vote is counted. If you receive more than one proxy card, it is an indication that your shares are held in multiple accounts. Please sign and return all proxy cards to ensure that all of your shares are voted. Alternatively, you may vote by telephone or over the internet as instructed by your broker, bank or other nominee. “Street name” stockholders who wish to vote at the FAII Special Meeting will need the 16-digit control number included on the instructions that accompanied your proxy materials, if applicable, or to obtain a proxy form from your broker, bank or other nominee. If you sign and return the proxy card but do not give instructions on how to vote your shares, your common shares will be voted as recommended by the FAII Board. The FAII Board recommends voting “FOR” the Business Combination Proposal, “FOR” the NYSE Issuance Proposal, “FOR” the Charter Amendment Proposal, “FOR” the Governance Proposal, “FOR” the Director Election Proposal, “FOR” the Incentive Plan Proposal, and “FOR” the Adjournment Proposal. Votes submitted by mail must be received by 11:59 p.m., Eastern Time, on June 14, 2021.

Voting Your Shares—Beneficial Owners

If your shares of FAII Common Stock are held in an account at a brokerage firm, bank or other nominee, then you are the beneficial owner of shares of FAII Common Stock held in “street name” and this proxy statement is being sent to you by that broker, bank or other nominee. The broker, bank or other nominee holding your account is considered to be the stockholder of record for purposes of voting at the FAII Special Meeting. As a beneficial owner, you have the right to direct your broker, bank or other nominee regarding how to vote the shares of FAII Common Stock in your account by following the instructions that the broker, bank or other nominee provides you along with this proxy statement. As a beneficial owner, if you wish to vote at the FAII Special Meeting, you will need the 16-digit control number included on your proxy card or instructions that accompanied your proxy materials, if applicable, or to obtain a proxy form from their broker, bank or other nominee. Please see “—Attending the FAII Special Meeting; Voting Virtually at the Meeting” above for more details.

Revoking Your Proxy

If you give a proxy, you may revoke it at any time before the FAII Special Meeting or at the FAII Special Meeting webcast by doing any one of the following:

 

   

filing a notice with the corporate secretary of FAII;

 

   

mailing a new, subsequently dated proxy card; or

 

   

by attending the FAII Special Meeting webcast and electing to vote your shares electronically, as indicated above.

If you are a stockholder of record of FAII and you choose to send a you must submit your notice of revocation or your new proxy to Fortress Value Acquisition Corp. II, 1345 Avenue of the Americas, 46th Floor, New York, New York 10105, and it must be received at any time before the vote is taken at the FAII Special Meeting. Any proxy that you submitted may also be revoked by submitting a new proxy by mail, or online or by telephone, not later than 11:59 p.m., Eastern Time, on June 14, 2021, or by voting electronically at the FAII Special Meeting webcast. Simply attending the FAII Special Meeting webcast will not revoke your proxy. If you have instructed a broker, bank or other nominee to vote your shares of FAII Common Stock, you must follow the directions you receive from your broker, bank or other nominee in order to change or revoke your vote.

No Additional Matters

The FAII Special Meeting has been called only to consider the approval of the Business Combination Proposal, the NYSE Issuance Proposal, the Charter Amendment Proposal, the Governance Proposal, the Director Election Proposal, the Incentive Plan Proposal and the Adjournment Proposal. Other than procedural matters incident to the conduct of the FAII Special Meeting, no other matters may be considered at the FAII Special Meeting if they are not included in this proxy statement, which serves as the notice of the FAII Special Meeting.

 

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Who Can Answer Your Questions About Voting

If you have any questions about how to vote or direct a vote in respect of your FAII Common Stock, you may call FAII’s proxy solicitor, contact D.F. King & Co., Inc., FAII’s proxy solicitor, toll-free at (800) 791-3320 (banks and brokers call (212) 269-5550) or email at FAII@dfking.com.

Redemption Rights

In accordance with FAII’s current charter, a holder of FAII public shares may request that FAII redeem all or a portion of such stockholder’s public shares for cash if the Business Combination is consummated. Public stockholders may elect to redeem their public shares whether they vote for or against the Business Combination. If a public stockholder properly exercises its right to redeem its public shares and timely delivers its shares to the transfer agent, FAII will redeem each redeeming stockholder’s public shares for a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account, calculated as of two business days prior to the consummation of the Business Combination, including interest not previously released to FAII to pay its taxes, divided by the number of then issued and outstanding public shares.

In order to exercise your redemption rights, you must:

 

   

if you hold public units, separate the underlying FAII public shares and FAII public warrants;

 

   

prior to 5:00 p.m., Eastern Time, on June 11, 2021 (two business days before the FAII Special Meeting), tender your shares physically or electronically and submit a request in writing that we redeem your public shares for cash to the transfer agent, at the following address:

Continental Stock Transfer & Trust Company 1 State Street, 30th Floor New York, NY 10004 Attn: Mark Zimkind Email: mzimkind@continentalstock.com

and

 

   

deliver your FAII public shares either physically or electronically through DTC’s DWAC system to the transfer agent at least two business days before the FAII Special Meeting. Stockholders seeking to exercise their redemption rights and opting to deliver physical certificates should allot sufficient time to obtain physical certificates from the transfer agent and time to effect delivery. It is FAII’s understanding that stockholders should generally allot at least two weeks to obtain physical certificates from the transfer agent. However, FAII does not have any control over this process and it may take longer than two weeks. Stockholders who hold their FAII shares in street name will have to coordinate with their bank, broker or other nominee to have the FAII shares certificated or delivered electronically. If you do not submit a written request and deliver your FAII public shares as described above, your FAII shares will not be redeemed.

Stockholders seeking to exercise their redemption rights, whether they are record holders or hold their shares in “street name,” are required to either tender their certificates to the transfer agent prior to the date set forth in these proxy materials or deliver their shares to the transfer agent electronically using DTC’s DWAC system, at such stockholder’s option. Any demand for redemption, once made, may be withdrawn at any time until the deadline for exercising redemption requests and thereafter, with our consent, until the vote is taken on the Business Combination. If you delivered your public shares for redemption to the transfer agent and decide within the required timeframe not to exercise your redemption rights, you may request that the transfer agent return the shares (physically or electronically).

 

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The requirement for physical or electronic delivery prior to the FAII Special Meeting ensures that a redeeming public stockholder’s election to redeem is irrevocable once the Business Combination is approved.

Holders of outstanding public units must separate the underlying FAII public shares and public warrants prior to exercising redemption rights with respect to the FAII public shares.

If you hold public units registered in your own name, you must deliver the certificate for such public units to the transfer agent, with written instructions to separate such public units into FAII public shares and public warrants. This must be completed far enough in advance to permit the mailing of the public share certificates back to you so that you may then exercise your redemption rights upon the separation of the public shares from the public units.

If a broker, dealer, commercial bank, trust company or other nominee holds your public units, you must instruct such nominee to separate your public units. Your nominee must send written instructions by facsimile to the transfer agent. Such written instructions must include the number of public units to be split and the nominee holding such public units. Your nominee must also initiate electronically, using DTC’s DWAC system, a withdrawal of the relevant units and a deposit of an equal number of public shares and public warrants. This must be completed far enough in advance to permit your nominee to exercise your redemption rights upon the separation of the public shares from the public units. While this is typically done electronically on the same business day, you should allow at least one full business day to accomplish the separation. If you fail to cause your public shares to be separated in a timely manner, you will likely not be able to exercise your redemption rights.

Each redemption of shares of FAII Class A common stock by public stockholders will reduce the amount in the Trust Account, which held marketable securities with a fair value of approximately $345,015,940 as of May 10, 2021. The Merger Agreement provides that FAII’s and the Company’s respective obligations to consummate the Business Combination are conditioned on, among other things, satisfaction or waiver of the Minimum Cash Condition. This condition to the respective obligations of the parties is for the sole benefit of the parties thereto and may be waived by such parties. If, as a result of redemptions of FAII public shares by public stockholders, this condition is not met (or waived), then FAII or the Company may elect not to consummate the Business Combination. In addition, in no event will FAII redeem public shares in an amount that would cause its net tangible assets to be less than $5,000,001. Holders of public warrants do not have redemption rights in connection with the Business Combination.

Prior to exercising redemption rights, stockholders should verify the market price of FAII Class A common stock as they may receive higher proceeds from the sale of their FAII Class A common stock in the public market than from exercising their redemption rights if the market price per share is higher than the redemption price. FAII cannot assure you that you will be able to sell your FAII Class A common stock in the open market, even if the market price per share is higher than the redemption price stated above, as there may not be sufficient liquidity in FAII Class A common stock when you wish to sell your shares.

If you exercise your redemption rights, the shares of FAII Class A common stock will cease to be outstanding immediately prior to the Business Combination and will only represent the right to receive a pro rata share of the aggregate amount on deposit in the Trust Account. You will no longer own those shares and will have no right to participate in, or have any interest in, the future growth of FAII, if any. You will be entitled to receive cash for these shares only if you properly and timely demand redemption.

If the Business Combination is not approved and FAII does not consummate an initial business combination by August 14, 2022, FAII will be required to dissolve and liquidate the Trust Account by returning the then remaining funds in such account to the public stockholders and FAII warrants will expire worthless.

Appraisal Rights

Appraisal rights are not available to holders of FAII Common Stock in connection with the Business Combination under Delaware law.

 

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Proxy Solicitation Costs

FAII is soliciting proxies on behalf of the FAII Board. This proxy solicitation is being made by mail, but also may be made by telephone or in person. FAII has engaged D.F. King & Co., Inc. to assist in the solicitation of proxies for the FAII Special Meeting. FAII and its directors, officers and employees may also solicit proxies in person. FAII will ask banks, brokers and other institutions, nominees and fiduciaries to forward the proxy materials to their principals and to obtain their authority to execute proxies and voting instructions.

FAII will bear the entire cost of the proxy solicitation, including the preparation, assembly, printing, mailing and distribution of the proxy materials. FAII will pay D.F. King & Co., Inc. a fee of $12,500, plus costs and expenses. FAII will reimburse D.F. King & Co., Inc. for reasonable out-of-pocket expenses and will indemnify D.F. King & Co., Inc. and its affiliates against certain claims, liabilities, losses, damages and expenses. FAII will also reimburse banks, brokers and other custodians, nominees and fiduciaries representing beneficial owners of shares of FAII Common Stock for their expenses in forwarding soliciting materials to beneficial owners of the FAII Common Stock and in obtaining voting instructions from those beneficial owners. FAII’s directors and officers may also solicit proxies by telephone, by facsimile, by mail, on the Internet or in person. They will not be paid any additional amounts for soliciting proxies.

 

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THE BUSINESS COMBINATION

The following is a discussion of the Business Combination and the material terms of the Merger Agreement by and among FAII, Merger Sub and the Company. You are urged to carefully read the Merger Agreement in its entirety, a copy of which is attached as Annex A to this proxy statement. This summary does not purport to be complete and may not contain all of the information about the Merger Agreement that is important to you. We encourage you to read the Merger Agreement carefully and in its entirety. This section is not intended to provide you with any factual information about FAII or the Company. Such information can be found elsewhere in this proxy statement.

Terms of the Business Combination

Transaction Structure

The Merger Agreement provides, among other matters, for the merger of Merger Sub with and into the Company on the terms and subject to the conditions in the Merger Agreement and in accordance with the DGCL. The Company will survive the Merger as the surviving company and a direct, wholly-owned subsidiary of ATI. From and after the effective time, all of the property, rights, privileges, powers and franchises, debts, liabilities, duties and obligations of the Company and Merger Sub shall become the property, rights, privileges, agreements, powers and franchises, debts, liabilities, duties and obligations of the Company, the surviving company.

At the effective time, the certificate of incorporation and the bylaws of the surviving company shall remain the same as the certificate of incorporation and the bylaws of the Company as in effective immediately prior to the effective time until thereafter amended in accordance with their terms and the DGCL. At the effective time, the directors of the Company immediately prior to the effective time will continue to be the directors of the surviving company and the officers of the Company immediately prior to the effective time will continue to be the officers and of the surviving company.

Merger Consideration

Each share of Company preferred stock issued and outstanding immediately prior to the effective time will be converted into the right to receive (A) an amount in cash equal to (1) $59,000,000 divided by (2) the number of shares of Company preferred stock outstanding as of immediately prior to the effective time and (B) a number of shares of ATI Class A common stock equal in value to (i) the product of (a) (x) the Preferred Stock Adjusted Base plus (y) an aggregate accrued amount, calculated based on the Preferred Stock Adjusted Base, at the Dividend Rate (as defined in the Company’s current charter) from the closing date through the date that is 180 days from the closing date, multiplied by (b) 1.05, divided by (ii) the number of shares of Company preferred stock outstanding as of immediately prior to the effective time (such number of shares, together with the cash amount set forth in clause “(A),” the “Preferred Stock Consideration”). For more information on the Dividend Rate of Company preferred stock, see Note 14 to the Company’s audited consolidated financial statements included elsewhere in this proxy statement.

Each share of Company common stock issued and outstanding immediately prior to the effective time will be converted into the right to receive (A) a number of shares of ATI Class A common stock equal to (1) $1,303,000,000 divided by (2) the number of shares of Company common stock outstanding as of immediately prior to the effective time and (B) the contingent right to receive Earnout Shares that may be issued in accordance with the terms of the Merger Agreement (such contingent right, together with the shares referenced in clause “(A),” the “Common Stock Consideration,” and, together with the Preferred Stock Consideration, the “Merger Consideration”).

No fractional shares will be issued in connection with the Business Combination. In lieu thereof, FAII shall pay or cause to be paid cash to each holder who otherwise would have been entitled to receive a fractional share (after aggregating all fractional shares of ATI Class A common stock issuable to such holder).

 

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See “The Merger Agreement—Merger Consideration.”

Conversion of Shares; Exchange Procedures

The conversion of Company preferred stock and Company common stock into the right to receive the applicable Merger Consideration will occur automatically at the effective time.

Letters of Transmittal

Concurrently with the mailing of this proxy statement, FAII will cause the transfer agent to mail a letter of transmittal to each holder of record of (A) Company preferred stock and (B) Company common stock. This mailing will also include instructions on how to surrender shares of (A) Company preferred stock and (B) Company common stock in exchange for the applicable Merger Consideration the holder is entitled to receive under the Merger Agreement. From and after the effective time, Company stockholders who properly surrender their shares to the Company, together with a properly completed and duly executed letter of transmittal, and such other documents as may be required pursuant to such instructions, will receive for each share of (A) Company preferred stock and (B) Company common stock, the applicable Merger Consideration.

Certain Projected Financial Information of the Company

The Company prepared certain unaudited projected financial information that was made available to FAII in connection with its evaluation of the Business Combination. The unaudited projected financial information of the Company was prepared by the management of the Company based on assumptions that management believed were reasonable and that reflected management’s best available estimates of the future financial performance of the Company.

The inclusion of this unaudited projected financial information should not be regarded as an indication that any of FAII, the FAII Board, the Company, the Company Board, their respective affiliates, financial advisors or any other recipient of this information considered, or now considers, such unaudited projected financial information to be necessarily predictive of actual future results, and this unaudited projected financial information should not be relied upon as such.

The unaudited projected financial information is not being included in this proxy statement to influence your decision whether to vote for or against the Business Combination but is being included because this unaudited projected financial information was provided to FAII in connection with its evaluation of the Business Combination.

The unaudited projected financial information was based on numerous variables, qualitative estimates and assumptions, including assumptions with respect to general business, economic, market, regulatory and financial conditions and various other factors. Such estimates and assumptions are inherently uncertain and may be beyond the control of the Company. The unaudited projected financial information are forward-looking statements, and important factors that may affect actual results and cause these financial forecasts to not be achieved include, but are not limited to: (i) decreases in Medicare reimbursement rates; (ii) industry and government initiatives undertaken to contain healthcare costs; (iii) changes in healthcare or other governmental regulations; (iv) renegotiation of payor contracts resulting in a decrease in revenue or profits; (v) adverse effects of COVID-19 and the ongoing governmental responses thereto; (vi) risks and uncertainties relating to the Company’s industry and business (including unanticipated delays associated with the Company’s ongoing plan for clinic openings and acquisitions); (vii) changing patient visitation volumes; (viii) the highly competitive nature of the outpatient services industry; (ix) rapid technological change; (x) any failure by the Company to manage growth effectively; (xi) the Company’s current locations becoming unattractive and attractive new locations not becoming available for a reasonable price; (xii) closure costs and losses; (xiii) the Company’s sensitivity to the strength of the economies in which it operates and demographics of the local communities that it serves; (xiv) the size and

 

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expected growth of the Company’s addressable market could be smaller than it estimates; (xv) the Company’s dependence upon the cultivation and maintenance of relationships with referral sources; (xvi) any failure by the Company to maintain controls and processes over billing and collections; (xvii) state laws regarding fee-splitting and professional corporation laws; (xviii) regulatory reviews, audits and investigations; and (xix) other factors described under the captions “Risk Factors—Risks Relating to the Company’s Business and Industry” and “Cautionary Note Regarding Forward-Looking Statements.” You are encouraged to review the risks and uncertainties described under these captions in this proxy statement. The projected results may not be realized and the actual results may be significantly higher or lower than estimated. Since the unaudited projected financial information covers multiple years, that information by its nature becomes less predictive with each successive year. In addition, the unaudited projected financial information is subjective in many respects and thus is susceptible to multiple interpretations and periodic revisions based on actual experience and business developments. The Company does not, as a matter of general practice, publicly disclose long-term forecasts or internal projections of its future performance, revenue, financial condition or other results. FAII will not refer back to the unaudited projected financial information in its future periodic reports filed under the Exchange Act. The unaudited projected financial information was prepared solely for internal use and not with a view toward public disclosure, compliance with GAAP, the published guidelines of the SEC or the guidelines established by the Public Company Accounting Oversight Board for preparation and presentation of projected financial information. Neither the Company’s nor FAII’s independent registered public accounting firm has audited, reviewed, compiled, examined or performed any procedures with respect to the unaudited prospective financial information contained herein, nor have they expressed any opinion or any other form of assurance on the information or its achievability. The projected financial information included in this proxy statement has been prepared by the Company’s management. The report of the Company’s independent registered public accounting firm included in this document relates to the Company’s previously issued financial statements. It does not extend to the projected financial information and should not be read to do so.

On January 18, 2021, the Company provided FAII with unaudited projected financial information relating to the Company’s revenue, clinic-level expenses, selling, general and administrative expenses (“SG&A”) and non-controlling interest, Adjusted EBITDA, maintenance and growth capital expenditures and free cash flow conversion for the years ending December 31, 2021 through December 31, 2025. The unaudited projected financial information is summarized in the table below and does not take into account any circumstances or events occurring after the date they were provided. See “Cautionary Note Regarding Forward-Looking Statements.”

 

     Forecast Year Ended December 31, (1)  
(USD in millions)    2021E     2022E     2023E     2024E     2025E  

Revenue

   $ 731     $ 903     $ 1,007     $ 1,122     $ 1,242  

Clinic-level expenses

   $ 525     $ 636     $ 708     $ 788     $ 871  

% of revenue

     71.8     70.5     70.3     70.2     70.1

SG&A & non-controlling interest

   $ 87     $ 92     $ 96     $ 99     $ 103  

% of revenue

     11.9     10.2     9.5     8.9     8.3

Adjusted EBITDA(2)

   $ 119     $ 175     $ 203     $ 235     $ 268  

% margin

     16.3     19.3     20.2     20.9     21.6

Cash flow items

          

Maintenance capital expenditures

   $ 27     $ 27     $ 30     $ 34     $ 37  

% of revenue

     3.6     3.0     3.0     3.0     3.0

Growth capital expenditures(3)

   $ 25     $ 31     $ 34     $ 34     $ 34  

Free cash flow conversion(4)

     77.3     84.5     85.1     85.6     86.1

 

(1)

This prospective financial information was not prepared with a view toward compliance with published guidelines of the SEC or the guidelines established by the American Institute of Certified Public Accountants for preparation or presentation of prospective financial information.

 

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(2)

Adjusted EBITDA is a non-GAAP financial measure defined as net income from continuing operations before provision for income taxes, interest expense, net, depreciation and amortization, business optimization costs, reorganization and severance related costs, charges related to lease terminations, transaction and integration costs, share-based compensation, pre-opening de-novo costs and other adjustments. See “Company’s Management’s Discussion and Analysis of Financial Condition and Results of Operations—Non-GAAP Financial Measures” for information about this non-GAAP financial measure.

(3)

Growth capital expenditures represents de novo / acqui-novo spend.

(4)

Free cash flow conversion is a non-GAAP financial measure and is calculated as Adjusted EBITDA less maintenance capital expenditures divided by Adjusted EBITDA. See “Company’s Management’s Discussion and Analysis of Financial Condition and Results of Operations—Non-GAAP Financial Measures” for information about this non-GAAP financial measure.

The assumptions that management of the Company made in preparing the foregoing unaudited projected financial information may not reflect actual future conditions. The estimates and assumptions underlying the unaudited projected financial information involve judgments with respect to, among other things, timing of the Company’s ongoing plan for clinic openings and acquisitions, future patient volumes at existing clinics and clinics opened or acquired in the future, growth rates in revenue per patient visit and corporate expenses, competition in the outpatient services industry, expenses within the clinics, future revenues and expenses for services performed outside of clinics, cash flows used in capital investments, potential effects of COVID-19 and the ongoing governmental responses thereto, future healthcare or other governmental regulations and the other risks and uncertainties described under “Risk Factors—Risks Relating to the Company’s Business and Industry” and “Cautionary Note Regarding Forward-Looking Statements,” all of which are difficult to predict and many of which are beyond the control of the Company. The underlying assumptions and projected results may not be realized and actual results may differ.

Additionally, although presented with numerical specificity, the unaudited projected financial information with respect to the Company reflects numerous assumptions and estimates as to future events made by the management of the Company. You are cautioned not to place undue reliance on the unaudited projected financial information set forth above. No representation is made by the Company, FAII or any other person to any stockholder regarding the ultimate performance of ATI compared to the information included in the above unaudited projected financial information.

Except as may be required in order to comply with applicable securities laws, none of the Company or any of its representatives intend to update, or otherwise revise, the unaudited projected financial information, or the specific portions presented, to reflect circumstances existing after the date when they were made or to reflect the occurrence of future events, even in the event that any or all of the assumptions are shown to be in error or change. In addition, the unaudited projected financial information does not reflect the impact of the Business Combination, nor does it take into account the effect of any failure of the Business Combination to occur.

Certain of the measures included in this unaudited projected financial information are non-GAAP financial measures. Non-GAAP financial measures should not be considered superior to, as a substitute for or as an alternative to, and should be considered in conjunction with the financial information presented in compliance with GAAP, and non-GAAP financial measures as used by the Company are susceptible to varying calculations and may not be comparable to other similarly titled measures of other companies. The Company does not provide reconciliations of these projected forward-looking non-GAAP financial measures to GAAP due to the inherent difficulty in forecasting and quantifying certain amounts that are necessary for such reconciliation, including adjustments that could be made for the charges reflected in the Company’s reconciliation of historic non-GAAP financial measures, the amount of which, based on historical experience, could be significant. See “Company’s Management’s Discussion and Analysis of Financial Condition and Results of Operations—Non-GAAP Financial Measures” for additional information about the Company’s non-GAAP financial measures.

Background of the Business Combination

FAII is a blank check company originally incorporated on June 10, 2020 as a Delaware corporation for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization or similar

 

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business combination with one or more businesses. The transactions contemplated by the Merger Agreement and Related Agreements, including the Business Combination and PIPE Investment, are the result of an extensive search for a potential transaction utilizing the global network and investing, operating and transaction experience of FAII’s management team and board of directors. The terms of the Merger Agreement are the result of an arm’s length negotiation between representatives and management teams of FAII and the Company.

The following chronology summarizes the meetings and events that led to the signing of the Merger Agreement. The following chronology does not purport to catalogue every conversation among representatives of FAII, the Company and other parties:

Since March 2010, well prior to the formation of FAII, various Fortress Credit Funds have served as lenders to the Company, including by backing a debt financing of the Company by GTCR LLC and subsequent financings for the acquisition of the Company by funds managed by affiliates of KRG Capital Partners in 2012, and then by funds managed by affiliates of Advent in 2016. As a result, affiliates of the Sponsor have been in regular contact with the Company’s management for over ten years in the context of managing those affiliates’ investments and staying up-to-date on the Company’s industry, volume and pricing trends. Affiliates of the Sponsor have also attended earnings calls with the Company’s management to discuss the Company’s financial performance multiple times per year. In addition, affiliates of the Sponsor, in their role as lenders, have periodically reached out to the Company’s management to obtain interim insight into certain unusual circumstances (e.g., changes in reimbursement and regulatory outlook, etc.). As of December 31, 2020, certain Fortress Credit Funds held approximately $6,000,000 of first lien indebtedness of the Company as lenders under the First Lien Credit Agreement (the “Fortress Debt Investment”). See also “Certain Relationships and Related Person Transactions—FAII.”

On June 15, 2020, FAII issued an aggregate of 8,625,000 shares of FAII Class F common stock to the Sponsor for an aggregate purchase price of $25,000, or approximately $0.003 per share. Prior to such time, FAII had no assets, tangible or intangible. The proceeds were used for formation and offering costs and to fund working capital needs of FAII. Of the 8,625,000 shares of FAII Class F common stock, an aggregate of up to 1,125,000 shares were subject to forfeiture to FAII by the Sponsor for no consideration to the extent that the underwriters’ over-allotment option was not exercised. On August 14, 2020, the underwriters exercised their over-allotment option in full. As a result, these shares were no longer subject to forfeiture.

The registration statement for FAII’s IPO was declared effective on August 11, 2020.

On August 14, 2020, FAII consummated FAII’s IPO of 34,500,000 FAII units, which included the issuance of 4,500,000 FAII units as a result of the underwriters’ exercise of their over-allotment option in full, at $10.00 per FAII unit, generating gross proceeds of $345.0 million and incurring offering costs of approximately $19.4 million, inclusive of approximately $12.075 million in deferred underwriting commissions to which the underwriters will be entitled upon consummation of FAII’s initial business combination for services rendered in connection with FAII’s IPO. The underwriters have agreed to waive their rights to their deferred underwriting commission held in the Trust Account in the event FAII does not complete a business combination by August 14, 2022 and, in such event, such amounts will be included with the funds held in the Trust Account that will be available to fund the redemption of the FAII public shares.

Substantially concurrently with FAII’s IPO, FAII consummated a Private Placement of 5,933,333 Private Placement Warrants, at a price of $1.50 per Private Placement Warrant (the “Private Placement”), with the Sponsor generating gross proceeds of approximately $8.9 million. The proceeds were to be used for formation and offering costs and to fund the working capital needs of FAII.

Upon the closing of FAII’s IPO and Private Placement, $345.0 million ($10.00 per FAII unit) of the aggregate net proceeds of the sale of the FAII units in FAII’s IPO and the Private Placement was placed in the Trust Account.

 

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Following FAII’s IPO, FAII commenced an active search for prospective businesses and assets to acquire. From the date of FAII’s IPO on August 14, 2020, through the execution of the Merger Agreement with the Company on February 21, 2021, Joshua A. Pack, Chairman of the FAII Board, Andrew A. McKnight, Chief Executive Officer and director of FAII, Daniel N. Bass, Chief Financial Officer of FAII, Micah Kaplan, Chief Operating Officer of FAII, and other representatives of the Sponsor, along with representatives of each of FAII’s financial advisors, BofA Securities and Deutsche Bank, contacted, and were contacted by, a number of individuals and entities with respect to potential business combination opportunities. As part of this process, representatives of FAII considered and evaluated over 197 potential acquisition targets in a wide variety of industry sectors, 29 of which involved active, albeit one-sided, evaluations of potential target companies, and 11 of which involved active evaluations and two-sided discussions with the management teams of potential targets. FAII only signed two non-binding letters of intent in respect of two potential targets, one of which was the Company.

On August 17, 2020, FAII executed a non-disclosure agreement with a potential acquisition target (“Target A”) and began its financial due diligence review of the Target A. On August 31, 2020, FAII and Target A executed a non-binding letter of intent outlining the terms of a potential transaction and an exclusivity agreement. Following the execution of the non-binding letter of intent and exclusivity agreement, FAII and its representatives conducted further financial, legal, tax, accounting and insurance diligence, and had meetings with the heads of various departments within Target A. In addition to such diligence, FAII also worked with Target A on capital markets presentation of Target A’s business and sought indications of interest from potential PIPE Investors for Target A. On October 5, 2020, after extensive discussions with Target A, the parties decided not to pursue a potential transaction, primarily due to the failure to agree on a valuation for the business in the transaction and then-prevailing capital market conditions.

Andrew Frank, Managing Director at Fortress and a representative of the Sponsor, initially reached out to Barclays Capital Inc. (“Barclays”) and a representative of Advent to discuss Fortress’ SPAC business generally in September 2020. As a result, Barclays, in its capacity as the Company’s financial advisor in connection with the Business Combination (the “Barclays Advisory Role”), contacted Fortress and FAII in November 2020 to discuss the potential transaction.

On December 1, 2020, Fortress, Barclays and Citigroup Global Markets Inc. (“Citigroup”), a financial advisor to the Company in connection with the Business Combination, held a call to discuss the potential transaction.

FAII decided to pursue an acquisition of the Company because it determined that the Company represented a compelling opportunity given its strong leadership team, strong balance sheet, impressive de novo growth effort and position to continue its de novo growth, as well as to be a primary and preferred acquirer in a fragmented industry. Compared to the Company, FAII and its advisors did not consider the other alternative acquisition targets to be as compelling when taking into consideration their business prospects, strategy, management teams, structure, likelihood of execution and valuation considerations. See also “—Recommendation of the FAII Board of Directors and Reasons for the Business Combination.”

FAII did not pursue further a potential transaction with the other potential acquisition targets with which it engaged in meaningful discussions for a variety of factors, including, among other things, the inability to reach agreement on a mutually acceptable valuation with such targets and the decision by FAII’s management to pursue an alternative transaction with the Company.

On December 7, 2020, representatives of Barclays, on behalf of the Company, sent an initial draft of a confidentiality agreement (the “Confidentiality Agreement”) to representatives of FAII, and on December 13, 2020, ATI Holdings Acquisition, Inc., an indirect wholly owned subsidiary of the Company, and FAII entered into the Confidentiality Agreement.

 

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On December 14, 2020, representatives of the Company, Barclays, Citigroup and FAII held a videoconference during which representatives of the Company provided an overview of the Company and its industry.

On January 4, 2021, representatives of FAII, Fortress and Advent held a call to discuss the possibility of a transaction between FAII and the Company.

On January 6, 2021, Mr. McKnight, on behalf of FAII, sent representatives of Barclays a non-binding proposal, which provided for the following terms, among other things: (i) an enterprise value for the Company, in each case, at a 15.0x 2022E Adjusted EBITDA entry multiple and on a pro forma (post-money) basis, of (x) $2.685 billion on a standalone basis and (y) $3.420 billion on a pro forma basis were the Company to complete a potential acquisition under consideration at such time (the “Company Bolt-on Acquisition”), (ii) an equity value for the Company common stock of (x) $1.585 billion on a standalone basis and (y) $2.020 billion on a pro forma basis for the Company Bolt-on Acquisition, in each case, with the holders of the Company’s preferred stock receiving cash payments in respect of their applicable liquidation preferences, (iii) a $210 million earnout consisting of additional shares vesting evenly across share price hurdles of $12, $14 and $16, (iv) a $300 million equity financing achieved through a PIPE, with the option for a potential $150 million upsize for secondary share sales and (v) the deferral of 100% of the Sponsor’s promote, with 50% of the Founder Shares vesting at $12 and 25% of the Founder Shares vesting at share price hurdles of $14 and $16.

On January 8, 2021, Mr. McKnight, a representative of Barclays and a representative of Citigroup held a call to further discuss the possibility of a transaction between FAII and the Company, and it was agreed that Barclays, at the Company’s direction, would begin preparing an initial draft of a term sheet (the “Term Sheet”) to be entered into between FAII and the Company with respect to a potential transaction and to outline, among other things, non-binding terms for the transaction along with binding exclusivity on the Company.

On January 9, 2021, representatives of Barclays, on behalf of the Company, sent an initial draft of the Term Sheet to FAII, which provided for the following terms, among other things: (i) an enterprise value for the Company of $3.65 billion (solely on a pro forma basis for the Company Bolt-on Acquisition), at a 16.0x 2022E Adjusted EBITDA entry multiple and on a pro forma (post-money) basis, (ii) an equity value for the Company common stock of $2.24 billion (solely on a pro forma basis for the Company Bolt-on Acquisition) with the holders of the Company’s preferred stock receiving cash payments in respect of their applicable liquidation preferences, (iii) a $540 million equity financing achieved through a PIPE, (iv) an earnout of up to 15 million shares of ATI Class A common stock to be issued to the Company’s equityholders after the closing of the Business Combination if certain ATI Class A common stock share price thresholds were met and (v) the deferral of all Founder Shares held by the Sponsor if, after the closing of the Business Combination, certain ATI Class A common stock share price thresholds that mirror the thresholds relating to the 15 million share earnout were met.

On January 11, 2021, representatives of Barclays, on behalf of the Company, sent FAII a revised Term Sheet, which proposed, among other things: (i) an enterprise value for the Company of (x) $2.865 billion on a standalone basis and (y) $3.65 billion on a pro forma basis for the Company Bolt-on Acquisition, in each case, on a pro forma (post-money) basis, (ii) an equity value for the Company common stock of (x) $1.755 billion on a standalone basis and (y) $2.24 billion on a pro forma basis for the Company Bolt-on Acquisition, in each case, with the holders of the Company’s preferred stock receiving cash payments in respect of their applicable liquidation preferences, and (iii) equity financing achieved through a PIPE of (x) $340 million (valuing the Company on a standalone basis) and (y) $540 million (valuing the Company pro forma for the Company Bolt-on Acquisition).

Later on January 11, 2021, following discussions among representatives of FAII, Skadden, Arps, Slate, Meagher & Flom LLP (“Skadden”), FAII’s outside counsel, and Weil, Gotshal & Manges LLP (“Weil”), the Company’s outside counsel, FAII and the Company finalized the Term Sheet and, on January 12, 2021, the Term Sheet was executed by FAII and the Company.

Throughout the negotiation of the Term Sheet and subsequent process to negotiate and finalize definitive documentation in respect of the Business Combination, Mr. McKnight and other members of the FAII management

 

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and legal teams, with input from representatives of each of Skadden, BofA Securities and Deutsche Bank, kept the FAII Board informed of the ongoing negotiations and regularly corresponded via email and over the telephone with the Company and its representatives, including Barclays, Citigroup and Weil in respect of the Term Sheet and the Business Combination.

On January 13, 2021, Barclays, on behalf of the Company, provided representatives of the FAII management team and its advisors, including Skadden, access to a virtual data room for purposes of continuing their respective due diligence on the Company.

From January 13, 2021 through February 18, 2021, Skadden, together with Ernst & Young LLP (“E&Y”), engaged on January 18, 2021 to provide financial and tax due diligence services, Marsh & McLennan Companies (“Marsh”), engaged on January 19, 2021 for its insurance and underwriting expertise, and the Marwood Group (“Marwood”), engaged on January 19, 2021 for its healthcare billing expertise, conducted a thorough due diligence investigation of the Company, which diligence was conducted through document review, numerous telephonic conferences with representatives of the Company, including the Company’s management team, covering, among other things, commercial operations, real property and environmental matters, healthcare regulatory and billing compliance matters, litigation and legal compliance matters, intellectual property and privacy matters, employment and benefits-related and labor matters, financial and insurance matters, IT and general corporate matters.

On January 14, 2021, Barclays sent FAII and Skadden a draft engagement letter (the “Placement Agent Engagement Letter”), pursuant to which Barclays proposed to act as FAII’s co-placement agent in the proposed private placement of FAII Class A common stock in connection with the Business Combination (referred to herein as the “PIPE Investment”). The Placement Agent Engagement Letter contains a conflicts waiver, pursuant to which FAII consented to Barclays’ performance of the Barclays Advisory Role in connection with the Business Combination. From January 14, 2021 through January 16, 2021, Skadden and Sidley Austin LLP (“Sidley”), outside counsel to Citigroup, Barclays, Deutsche Bank and BofA Securities, as the co-placement agents for the PIPE Investment, negotiated the Placement Agent Engagement Letter.

On January 17, 2021, Skadden delivered an initial draft of the PIPE Investment Subscription Agreement to Weil and Sidley, to be negotiated with, and ultimately executed by, each of the PIPE Investors concurrently with the signing of the Merger Agreement. Between January 17, 2021 and January 28, 2021, Skadden, Weil and Sidley continued to negotiate the Subscription Agreement. In addition, over the following month, FAII and the Company continued to negotiate the transaction documents that would be expected to be executed or in final form concurrently with the execution of the Merger Agreement.

On January 18, 2021, Sidley delivered an initial draft of a joinder to the Placement Agent Engagement Letter (the “Placement Agent Joinder”), pursuant to which Citigroup, Deutsche Bank and BofA Securities would be appointed as co-placement agents with Barclays in the PIPE Investment. The Placement Agent Joinder was negotiated between Skadden and Sidley through January 19, 2021.

On January 19, 2021, FAII entered into the Placement Agent Engagement Letter with Barclays.

On January 20, 2021, FAII entered into the Placement Agent Joinder with Citigroup, Deutsche Bank and BofA Securities.

Throughout the months of January and February, 2021, Barclays and Citigroup worked with the Company and FAII to prepare an investor presentation to present to potential PIPE Investors. The investor presentation outlined the proposed Business Combination and included information regarding the Company, which was refined through many rounds of review and comment among the FAII management team, the Company’s management team and each of their respective professional advisors, including Skadden and Weil.

 

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On January 21, 2021, the Company advised FAII that, following the completion of its diligence, the Company would no longer be actively pursuing the Company Bolt-on Acquisition and that the Company would be valued on a standalone basis. The determination by the Company to no longer pursue the Company Bolt-on Acquisition did not have an impact on the decision of FAII’s management or the FAII Board to proceed with the proposed transaction.

Later on January 21, 2021, Weil delivered an initial draft of the Merger Agreement to Skadden. From January 21, 2021 through February 21, 2021, Skadden and Weil negotiated the terms of, and exchanged several drafts of, the definitive agreements for the potential business combination, including the Merger Agreement, the Parent Sponsor Letter Agreement, the Stockholders Agreement and the A&R RRA. In addition during this same period, representatives of FAII, representatives of the Company, representatives of Advent, Skadden and Weil conducted various telephonic conferences to discuss and resolve the open issues related to the potential business combination.

On January 21, 2021, the FAII Board held a telephonic meeting to discuss, among other things: (i) FAII management’s view of the potential transaction, (ii) the status of discussions regarding the potential transaction, (iii) the diligence conducted on the Company to date, (iv) the engagement letters executed with the various advisors assisting FAII in its evaluation of the potential transaction and (v) the contemplated timeline for the transaction. During this meeting, FAII’s management gave a presentation to the FAII Board outlining the rationale for the proposed transaction. During this meeting, the FAII Board unanimously ratified the January 6, 2021 non-binding proposal and aforementioned engagement letters, and separately discussed and unanimously determined not to obtain a fairness opinion in respect of the proposed transaction at such time, in light of, among other factors, the Fortress Debt Investment representing less than 1% of the Company’s debt facility and less than 0.1% of the assets of the applicable Fortress Credit Funds.

Between January 22, 2021 and February 8, 2021, representatives of the Company, together with its advisors, held several due diligence calls with representatives of FAII and its advisors, including, among other things, with respect to financial and audit matters, public company readiness, regulatory and billing matters and other legal and business diligence topics.

On January 28, 2021, Skadden delivered to Weil initial drafts of certain Related Agreements, including the Parent Sponsor Letter Agreement. On the same day, Skadden delivered to Barclays and Citigroup an updated draft of the Subscription Agreement, in agreed form between Skadden and Weil, for transmission to potential PIPE Investors. Between January 28, 2021 until February 18, 2021, Skadden and Weil continued to negotiate the Subscription Agreement in response to comments received from prospective PIPE Investors and their legal counsel.

On February 4, 2021, the FAII Board held a telephonic meeting, which was attended by representatives of FAII management and Skadden, to discuss, among other things, the status of discussions regarding the potential transaction. Representatives of Skadden then reviewed with the FAII Board the directors’ fiduciary duties in connection with evaluating the potential transaction. FAII’s management and representatives of Skadden then reviewed the provisions of the proposed Merger Agreement. The FAII Board expressed to FAII management its continued support in respect of negotiation of the terms of the Business Combination.

On February 11, 2021, the FAII Board held a telephonic meeting, which was attended by representatives of FAII management and Skadden, to discuss, among other things: (i) the transaction documents and status of the proposed transaction, including the PIPE Investment, (ii) diligence conducted on the Company to date and (iii) certain matters related to this proxy statement. FAII’s management discussed with the FAII Board the diligence that had been conducted on the Company by each of Skadden, Marwood, E&Y and Marsh. FAII’s management and representatives of Skadden then reviewed certain provisions of the proposed Merger Agreement and the Related Agreements to be approved by the FAII Board. During the course of the meeting, the FAII Board discussed and considered the terms of the Business Combination. Following discussions amongst the FAII Board

 

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members, the FAII Board determined to hold a subsequent meeting during the week of February 15, 2021 to receive an update as to the status of the Business Combination.

On February 11, 2021, following discussions with Barclays and Citigroup and based upon reactions from certain of the PIPE Investors, the parties agreed that the equity value of the Company would be reduced, and that the Company would be valued at a 14.0x 2022E Adjusted EBITDA entry multiple.

On the same day, at a meeting of the Sponsor, in light of the attractive 14.0x 2022E Adjusted EBITDA entry multiple, the Sponsor determined that an investment in the PIPE by the Fortress Credit Funds would be attractive, and specifically considered a $75 million investment in the PIPE. In connection with the contemplated PIPE Investment by the Fortress Credit Funds, Fortress determined to transfer the equity interests in the Sponsor (including the Sponsor’s Founder Shares and Private Placement Warrants and the Sponsor’s portion of the PIPE Investment) to the Fortress Credit Funds making such PIPE Investment, as contemplated by and previously described in FAII’s public filings, which transfer would be effective upon the closing of the Business Combination. Shortly thereafter, representatives of FAII informed representatives of Advent of this decision.

On February 16, 2021, representatives of FAII, the Company, Skadden, Weil and Advent met to discuss certain business terms of the proposed transaction, including with respect to the treatment of the Company’s preferred stockholders, the minimum cash condition and an update on the PIPE Investment.

On February 18, 2021, representatives of FAII, the Company, Skadden, Weil and Advent met again to finalize certain business terms of the proposed transaction, including with respect to the treatment of the Company’s preferred stockholders, the surrender and cancellation of 50% of the Sponsor’s Private Placement Warrants, the revision of the Minimum Cash Condition to a mutual closing condition and to discuss process and timing with respect to finalizing definitive transaction documentation.

Also on February 18, 2021, the FAII Board held a telephonic meeting, which was attended by representatives from each of FAII’s management and Skadden. FAII’s management discussed with the FAII Board the current status of the transaction negotiations and documents, changes to the Merger Agreement since their meeting on February 11, 2021 and the Fortress Credit Funds’ potential $75 million investment in the PIPE, as well as the related transfer of the Sponsor to the Fortress Credit Funds. The FAII Board expressed to FAII management its continued support in respect of negotiation of the terms of the Business Combination. Following discussions amongst the FAII Board members, the FAII Board determined to hold a subsequent meeting on February 21, 2021 to receive an update as to the status of the Business Combination and to potentially consider the approval of the transactions contemplated by the Merger Agreement and Related Agreements.

On February 21, 2021, the FAII Board held a telephonic meeting, which was attended by representatives from each of FAII’s management, Deutsche Bank and Skadden. Representatives of Deutsche Bank reviewed certain financial terms of the proposed transaction with the FAII Board and discussed, among other things, the physical therapy market generally and the ability of the Company to grow and benefit from long term value based care upside. Representatives of FAII’s management reviewed with the FAII Board the current status of the transaction negotiations and documents, changes to the Merger Agreement since their meeting on February 18, 2021 and the resolutions to be approved by the FAII Board in connection with entering into the Business Combination. At the meeting, FAII’s Board unanimously declared that the Merger Agreement, the Related Agreements, the Business Combination and the other related transaction documentation and other transactions contemplated thereby were advisable and in the best interests of FAII and its stockholders, approved the form, terms and provisions of, and the transactions contemplated by the Merger Agreement and Related Agreements, including the Business Combination and the PIPE Investment, and other matters required to be submitted to the FAII stockholders, and authorized FAII to enter into the Merger Agreement and Related Agreements and perform each of its obligations thereunder.

Later on February 21, 2021, following the approval of the Business Combination by the FAII Board and the approval of the Company’s board of directors, FAII and the Company executed the Merger Agreement.

 

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Concurrently with the execution of the Merger Agreement, (i) the Sponsor, FAII and the Company entered into the Parent Sponsor Letter Agreement, (ii) FAII, the Sponsor, certain of FAII’s stockholders and certain of the Company’s equityholders entered into the A&R RRA, (iii) certain of the Company’s equityholders entered into the Stockholders Agreement, (iv) Messrs. Diab and Jordan entered into employment agreements with the Company and FAII, which agreements were negotiated by Messrs. Diab and Jordan and the Company, without any involvement by FAII, and (v) FAII and the PIPE Investors entered into the Subscription Agreements. Also on February 21, 2021, all of the Company stockholders delivered an irrevocable written consent in support of the Business Combination.

On the morning of February 22, 2021, prior to the commencement of trading of the shares of FAII Class A common stock on the NYSE, FAII and the Company issued a joint press release regarding the Business Combination. Also that morning, FAII filed a Current Report on Form 8-K, which included the joint press release, the Merger Agreement (and related exhibits) and the other material agreements entered into by FAII in connection with the Business Combination.

Recommendation of the FAII Board and Reasons for the Business Combination

The FAII Board, in evaluating the Business Combination, consulted with FAII’s management and financial and legal advisors. In reaching its unanimous resolution (i) that the Merger Agreement and the transactions contemplated thereby are advisable and in the best interests of FAII and its stockholders and (ii) to recommend that the stockholders of FAII approve the Merger Agreement and the transactions contemplated thereby, the FAII Board considered a range of factors, including, but not limited to, the factors discussed below. In light of the number and wide variety of factors considered in connection with its evaluation of the Business Combination, the FAII Board did not consider it practicable to, and did not attempt to, quantify or otherwise assign relative weights to the specific factors that it considered in reaching its determination and supporting its decision. The FAII Board viewed its decision as being based on all of the information available and the factors presented to and considered by it. In addition, individual directors may have given different weight to different factors. This explanation of the FAII Board’s reasons for the Business Combination and all other information presented in this section is forward-looking in nature and, therefore, should be read in light of the factors discussed under “Cautionary Note Regarding Forward-Looking Statements.”

In approving the Business Combination, the FAII Board considered the potential benefits of, but ultimately decided not to obtain, a fairness opinion. The officers and directors of FAII have substantial experience in evaluating the operating and financial merits of companies from a wide range of industries and concluded that their experience and background, together with the experience and sector expertise of FAII’s financial advisors, enabled them to make the necessary analyses and determinations regarding the Business Combination. In addition, FAII’s officers and directors and FAII’s advisors have substantial experience with mergers and acquisitions.

The FAII Board considered a number of factors pertaining to the Business Combination as generally supporting its decision to enter into the Merger Agreement and the transactions contemplated thereby, including, but not limited to, the following material factors (not weighted or in any order of significance):

 

   

Brand Strength. The Company’s strong, unified brand and expertise in building direct and deep relationships with its customers has positioned the Company as currently the largest independent outpatient physical therapy provider in the United States by clinic count with 875 owned clinics across 25 states as of December 31, 2020, and a database of more than two and a half million unique patient cases;

 

   

Industry and Growth Prospects. The belief that the Company has significant growth opportunities over and above recovery from the impacts of the COVID-19 pandemic with multiple levers for growth (including organic growth, acquisitions, acqui-novos, de novos and direct partnerships with employers) as (i) the highly fragmented $40 billion physical therapy and related services industry in the United States continues to shift toward outpatient care and as physical therapy continues to serve as an

 

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increasingly important front-line, cost-effective care method, (ii) the market continues to grow at a projected 2%-3% CAGR between 2020 and 2025 despite certain decreases in reimbursement rates from Medicare and Medicaid and (iii) volume growth continues to be driven by demographic trends (population growth and aging of population) and rising prevalence of disease and injuries;

 

   

Superior Clinical Outcomes. The Company’s ability to manage, deliver and track superior clinical outcomes positions it as an attractive partner for payors seeking to reduce downstream healthcare costs and move from a fee-for-service world to value-based care;

 

   

National Footprint. The Company has a large national footprint and market density in many of the regions in which it operates, which favorably positions the Company in its negotiations with commercial and regional payors;

 

   

Established Infrastructure. The Company benefits from established infrastructure, which drives scale and optimized clinical outcomes, as a result of Advent’s continued and significant investment in the Company and the creation of a sophisticated and unified operating platform from which the Company can grow and expand its footprint;

 

   

Experienced and Proven Management Team. The Company has a strong management team with significant public company experience that intends to remain with ATI in the capacity of officers and/or directors, which will provide helpful continuity in advancing the Company’s strategic and growth goals;

 

   

Attractive Recruiting and Retention Capabilities. The belief that the Company is considered an attractive place to work compared to others in its industry, which allows the Company to recruit and retain talent;

 

   

Due Diligence. FAII’s management and advisors conducted significant due diligence examinations of the Company, including by: performing commercial and legal due diligence, engaging a healthcare regulatory consultant to perform billing due diligence, and hiring other third-party advisors to perform due diligence on insurance and financial matters;

 

   

Valuation. The belief that the Business Combination presents an attractive investment opportunity at the agreed valuation based on extensive due diligence and FAII’s careful investigation of the Company. In particular, the FAII Board noted that the stock of the Company’s largest public competitor focused on outpatient physical therapy, U.S. Physical Therapy, Inc., traded at a 21.6x 2022E Adjusted EBITDA entry multiple as of February 19, 2021, as compared to the Company’s 14.0x 2022E Adjusted EBITDA entry multiple, which was agreed upon by the parties following discussions with Barclays and Citigroup and based upon reactions from certain of the PIPE Investors to the 16.0x 2022E Adjusted EBITDA entry multiple initially negotiated by the parties from the 15.0x 2022E Adjusted EBITDA entry multiple included in FAII’s January 6, 2021 non-binding proposal. FAII believes that this attractive valuation is partially enabled by the economic effects resulting from the COVID-19 pandemic, which FAII does not believe will have a long-term impact on the Company;

 

   

PIPE Investment. Third-party investor and Sponsor interest in the PIPE Investment served as validation of the valuation and the opportunity represented by the Business Combination;

 

   

Strategy. The belief that the Company has successfully implemented its long-term growth strategy, including through the continued improvement of the Company’s clinical labor management model, which it believes will allow providers to practice at the top of their respective licenses, as well as the Company’s robust de novo program, through which the Company has opened approximately 300 new clinics since Advent ownership and demonstrated what FAII believes is an impressive performance record;

 

   

Stockholder Liquidity. The FAII Board believes the Business Combination offers stockholders greater liquidity because of the obligation in the Merger Agreement to list the FAII Class A common stock issued as merger consideration on the NYSE, a major U.S. stock exchange. Even prior to the Business

 

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Combination, the FAII Board recognized the liquidity opportunity for FAII public stockholders in connection with redemption rights;

 

   

Alignment. The FAII Board and the Company have structured the Business Combination with significant performance-based vesting incentives that better align Company management and current and prospective ATI stockholders in a way to create long-term value;

 

   

Current Stockholders’ Investment in the Company’s Future. The fact that Advent and the holders of the Company preferred stock each plan to roll over more than 70% of their equity in the Company and primarily use the proceeds of the Business Combination to delever the Company, all of which will result in a more conservative balance sheet and stronger cash flow to support the Company’s growth strategy;

 

   

Pre-Existing Relationship. The fact that certain funds affiliated with FAII have served as lenders to the Company since March 2010 and, as a result, have been in regular contact with the Company’s management for over ten years in the context of managing those affiliates’ investments and staying up-to-date on the Company’s financial and operating performance, as well as overall industry outlook;

 

   

Lock-Up. Certain stockholders affiliated with the Company have agreed to a six-month lockup in respect of their ATI common stock, subject to certain customary exceptions, which will provide important stability to the leadership and governance of ATI;

 

   

Financial Condition. The FAII Board also considered factors such as the Company’s historical financial results, outlook, financial plan and debt structure. In considering these factors, the FAII Board reviewed the current prospects for the Company’s growth if the Company achieves its business plans and various historical and current balance sheet items for the Company. In reviewing these factors, the FAII Board noted that the Company is well-positioned for strong future growth;

 

   

Other Alternatives. The FAII Board believes, after a thorough review of other business combination opportunities reasonably available to FAII, that the proposed Business Combination represents the best potential business combination for FAII and the most attractive opportunity for FAII’s management to accelerate its business plan based upon the process utilized to evaluate and assess other potential acquisition targets, and the FAII Board’s belief that such process has not presented a better alternative; and

 

   

Negotiated Transaction. The financial and other terms of the Merger Agreement and the fact that such terms and conditions are reasonable and were the product of arm’s length negotiations between FAII and the Company.

The FAII Board also considered a variety of uncertainties, risks and other potentially negative factors concerning the Business Combination including, but not limited to, the following (not weighted or in any order of significance):

 

   

Macroeconomic Risks. Macroeconomic uncertainty, including uncertainty with respect to the physical therapy industry in light of the COVID-19 pandemic, may negatively impact the profitability and cash flow of the Company;

 

   

Continued COVID-19-related Volume Pressure. The risk that the Company will continue to experience downward volume pressure as a result of COVID-19, particularly since approximately 40% of the Company’s customers are in the above-60 age group and may delay their return to physical therapy clinics;

 

   

Benefits May Not Be Achieved. The risks associated with the successful implementation of the combined company’s long-term business plan and strategy, and the combined company realizing the anticipated benefits of the Business Combination may not be fully achieved or may not be achieved within the expected timeframe;

 

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Execution Risk. The potential for diversion of management and employee attention during the period prior to completion of the Business Combination and the potential negative effects on the Company’s business and the risks associated with the Company’s long-term growth strategy, including changes in customer preferences, market saturation, slower-than-expected anticipated clinic ramp, heightened competition and the Company’s ability to drive same clinic growth, continue its de novo program and expand through future acquisitions;

 

   

Forward Estimates. The FAII Board considered transaction economics and valuation justified by projected results and cash flows, instead of historical results, and the possibility that the Company’s actual results will be materially and adversely different from such projections;

 

   

Pending Management Arrangements. Certain members of the Company’s management team who are expected to remain as management to ATI are still negotiating employment arrangements;

 

   

Medicare and Medicaid Risks. The risk that significant adjustments, recoupments or repayments of the Company’s Medicare or Medicaid revenue (including decreases in Medicare reimbursement rates and payment reductions applied to physical therapy services as part of a wider budget neutrality cut), and the costs associated with complying with audits and investigations by regulatory and governmental authorities, may adversely affect the Company’s financial condition and results of operations;

 

   

Cyclicality. The fact that the Company derives approximately 17% of its revenue from workers’ compensation payors, an inherently cyclical customer cohort;

 

   

Competitive Risks. The risk that increasingly consolidated, vertically integrated hospital systems and scaled physician practices may attempt to recapture their patient flow by expanding their own competing physical therapy offerings, thereby limiting the Company’s growth potential or harming its existing patient volumes. Further, given the low barriers to entry to the physical therapy industry, new players may enter the markets in which the Company operates and increase the competition in those areas;

 

   

Regulation. The risk that changes in the regulatory and legislative landscape or new industry developments may result in increased litigation and regulatory risk and may adversely affect the benefits anticipated to result from the Business Combination;

 

   

Healthcare Regulatory. The fact that the Company is regularly and currently subject to investigations, reviews, audits, investigations, claims and subpoenas from governmental authorities and third parties, the results of which are unpredictable and could distract management, harm the Company’s reputation and/or subject the Company to significant legal and/or operational exposure or have a material adverse effect on the Company’s business or operations;

 

   

Fraud and Abuse. The risk that non-compliance with the extensive federal, state and local government laws applicable to the Company (including federal and state anti-kickback laws, the federal Physician Self-Referral Law and analogous state self-referral statutes, and federal and state false claims acts) could subject the Company to significant legal and operational exposure, render the Company ineligible to receive government reimbursement, or require the Company to expend significant resources to respond to government inquiries;

 

   

Data Privacy. The Company’s obligation to comply with extensive federal and state data privacy laws and regulations, including HIPAA, entails substantial operational costs, and non-compliance or breach could subject the Company to various penalties and further costs to mitigate the impact;

 

   

Redemption Risk. The potential that a significant number of FAII stockholders elect to redeem their public shares prior to the consummation of the Business Combination and pursuant to FAII’s current charter, which would potentially make the Business Combination more difficult or impossible to complete;

 

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Stockholder Vote. The risk that FAII’s stockholders may fail to provide the votes necessary to effect the Business Combination or will object to and challenge the Business Combination and take actions that may prevent or delay the consummation of the Business Combination;

 

   

Closing Conditions. The fact that the completion of the Business Combination is conditioned on the satisfaction of certain closing conditions that are not within FAII’s control;

 

   

No Survival of Remedies for Breach of Representations, Warranties or Covenants of the Company. The risk that FAII will not have any surviving remedies against the Company’s existing stockholders after the closing of the Business Combination to recover for losses as a result of any inaccuracies or breaches of the Company’s representations, warranties or covenants set forth in the Merger Agreement;

 

   

Litigation. The possibility of litigation challenging the Business Combination or that an adverse judgment granting permanent injunctive relief could indefinitely enjoin consummation of the Business Combination;

 

   

Listing Risks. The challenges associated with preparing the Company, a private entity, for the applicable disclosure and listing requirements to which ATI will be subject as a publicly traded company on the NYSE;

 

   

Liquidation of FAII. The risks and costs to FAII if the Business Combination is not completed, including the risk of diverting management focus and resources from other business combination opportunities, which could result in FAII being unable to effect a business combination by August 14, 2022;

 

   

No Third-Party Valuation. The fact that FAII did not obtain a third-party valuation or fairness opinion in connection with the Business Combination;

 

   

FAII Stockholders Receiving a Minority Position in ATI. The fact that FAII stockholders will hold a minority position in ATI; and

 

   

Fees and Expenses. The fees and expenses associated with completing the Business Combination.

In addition to considering the factors described above, the FAII Board also considered other factors including, without limitation:

 

   

Interests of Certain Persons. Some officers and directors of FAII have interests in the Business Combination. See “The Business Combination—Interests of Directors and Officers of FAII in the Business Combination”; and

 

   

Other Risk Factors. Various other risk factors associated with the Business Combination and the business of the Company, as described in the section entitled “Risk Factors” appearing elsewhere in this proxy statement.

The FAII Board concluded that the potential benefits that it expected FAII and its stockholders to achieve as a result of the Business Combination outweighed the potential drawbacks of the Business Combination. The FAII Board also noted that the FAII stockholders would have a substantial economic interest in the combined company (depending on the level of FAII stockholders that sought redemption of their public shares into cash). Accordingly, the FAII Board unanimously determined (i) that the Merger Agreement and the transactions contemplated thereby are advisable and in the best interests of FAII and its stockholders and (ii) to recommend that the stockholders of FAII adopt the Merger Agreement and approve the Business Combination and the transactions contemplated thereby.

Satisfaction of 80% Test

The NYSE rules require that FAII’s initial business combination must occur with one or more operating businesses or assets with a fair market value equal to at least 80% of the net assets held in the Trust Account (net

 

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of amounts disbursed to management for working capital purposes and excluding the amount of any deferred underwriting discount held in the Trust Account) at the time of FAII’s signing a definitive agreement in connection with its initial business combination. As of February 21, 2021, the date of the execution of the Merger Agreement, the value of the net assets held in the Trust Account was approximately $345,021,206 and 80% thereof represents approximately $276,016,965. In reaching its conclusion that the Business Combination meets the 80% asset test, the FAII Board used as a fair market value the enterprise value of approximately $2.5 billion, which was implied based on the terms of the transactions agreed to by the parties in negotiating the Merger Agreement. In determining whether the enterprise value described above represents the fair market value of the Company, the FAII Board considered all of the factors described in this section and the section of this proxy statement entitled “The Merger Agreement” and the fact that the purchase price for the Company was the result of an arm’s length negotiation. As a result, the FAII Board concluded that the fair market value of the business acquired was significantly in excess of 80% of the net assets held in the Trust Account (net of amounts disbursed to management for working capital purposes and excluding the amount of any deferred underwriting discount held in the Trust Account).

Interests of Directors and Officers of FAII in the Business Combination

In considering the recommendation of the FAII Board to vote in favor of approval of the Business Combination Proposal, the NYSE Issuance Proposal, the Charter Amendment Proposal and the other proposals, FAII stockholders should keep in mind that certain members of the board of directors and executive officers of FAII and the Sponsor, including the Insiders, have interests in such proposals that may be different from, or in addition to, those of FAII stockholders generally. In particular:

 

   

Various Fortress Credit Funds are currently lenders pursuant to the First Lien Credit Agreement, and as of December 31, 2020, those Fortress Credit Funds held approximately $5,996,614 (or 0.765%) of the outstanding indebtedness under the First Lien Credit Agreement. While certain officers and directors of FAII that are affiliated with Fortress have the right to receive distributions of profit made by the Fortress Credit Funds that are lenders under the First Lien Credit Agreement, the First Lien Credit Agreement loans held by the Fortress Credit Funds represent less than 0.1% of the assets under management of the Fortress Credit Funds participating in the First Lien Credit Agreement, and any profit distributions related to the First Lien Credit Agreement would be de minimis and immaterial to the FAII officers and directors receiving such profit distributions. Similarly, certain officers and directors of FAII that are affiliated with Fortress have the right to receive distributions of profit from the Fortress Credit Funds that are participating in the PIPE Investment and that, upon closing, will own the Founder Shares and Private Placement Warrants. The PIPE Investment is anticipated to represent approximately 1% of the available capital of the participating Fortress Credit Funds, and while difficult to predict, distributions of profit to FAII officers and directors that have the right to participate in the profits of such Fortress Credit Funds are anticipated to represent a similar amount (approximately 1%) of the total profits distributed by such Fortress Credit Funds.

 

   

In connection with the PIPE Investment, which is conditioned upon the consummation of the Business Combination, the Sponsor agreed to purchase 7,500,000 shares of FAII Class A common stock at $10.00 per share for an aggregate purchase price of $75 million. While the per share subscription price for the FAII Class A common stock to be purchased by the Sponsor in connection with the PIPE Investment is $10.00, the implied price per share of the Sponsor’s overall holdings in ATI will be lower based on the purchase price paid by the Sponsor for the Founder Shares and the Private Placement Warrants (as described in the two immediately succeeding paragraphs below). The Sponsor currently holds a controlling stake in FAII, and will receive ATI Class A common stock in the PIPE Investment.

 

   

The Vesting Shares will vest as follows: (i) 33.33% of the Vesting Shares shall vest at such time as a $12.00 Common Share Price is achieved on or before the date that is ten years after the consummation of the Business Combination; (ii) 33.33% of the Vesting Shares shall vest at such time as a $14.00 Common Share Price is achieved on or before the date that is ten years after the consummation of the

 

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Business Combination; and (iii) 33.34% of the Vesting Shares shall vest at such time as a $16.00 Common Share Price is achieved on or before the date that is ten years after the consummation of the Business Combination. As used in this proxy statement, the applicable “Common Share Price” will be considered achieved only when the VWAP equals or exceeds the applicable threshold for at least five days out of a period of ten consecutive trading days ending on the trading day immediately prior to the date of determination. In the event that there is an agreement with respect to the sale or other change of control of ATI entered into after the closing and before the date that is ten years after the closing, then immediately prior to the consummating of the change of control, all Vesting Shares that were eligible to vest and remain unvested, if any, will vest on the day immediately preceding the closing of such change of control.

 

   

If the Business Combination or another business combination is not consummated by August 14, 2022, FAII will cease all operations except for the purpose of winding up, redeeming 100% of the outstanding public shares for cash and, subject to the approval of its remaining stockholders and the FAII Board, dissolving and liquidating. In such event, the 8,625,000 Founder Shares held by the Insiders, which were acquired for an aggregate purchase price of $25,000 by Sponsor prior to FAII’s IPO, would be worthless because the holders are not entitled to participate in any redemption or distribution with respect to such shares. Such Founder Shares, if valued based on the closing price of $9.99 per share of FAII Class A common stock on the NYSE on May 10, 2021, would be valued at approximately $86,163,750 (after giving effect to the conversion of such Founder Shares into shares of ATI Class A common stock). Pursuant to the Parent Sponsor Letter Agreement, the Insiders agreed that, as of the consummation of the Business Combination, all of the Vesting Shares shall be unvested and shall be subject to certain vesting and forfeiture provisions as further described in this proxy statement.

 

   

In exchange for serving on the FAII Board, each of FAII’s independent directors, Mr. Hood, Mr. Policy, Ms. Russak-Aminoach and Mr. Gulati, received a nominal economic interest through the purchase from Sponsor of 25,000 Founder Shares at their original purchase price of $0.003 per share and subject to certain vesting and forfeiture provisions whereby 33.33%, 33.33% and 33.34% of such Founder Shares shall vest at such time that the Common Share Price equals or exceeds $12.00, $14.00 and $16.00 per share, respectively, on or before the date that is ten years after the consummation of the Business Combination. Such Founder Shares, if valued based on the closing price of $9.99 per share of FAII Class A common stock on the NYSE on May 10, 2021, would be valued at approximately $249,750 (after giving effect to the conversion of such Founder Shares into shares of ATI Class A common stock). If FAII fails to complete a business combination by August 14, 2022, these Founder Shares will become worthless. As a result, FAII’s independent directors may have a conflict of interest in determining whether a particular business is an appropriate business with which to effectuate FAII’s initial business combination. The FAII Board took into consideration the potential for such a conflict of interest to arise and believes any potential conflict to be adequately mitigated through the vesting provision’s requirement of price appreciation over a vesting period of ten years.

 

   

The Sponsor purchased an aggregate of 5,933,333 Private Placement Warrants from FAII for an aggregate purchase price of $8,900,000 (or $1.50 per warrant). These purchases took place on a private placement basis simultaneously with the consummation of FAII’s IPO. A portion of the proceeds FAII received from these purchases was placed in the Trust Account. Pursuant to the Parent Sponsor Letter Agreement, the Sponsor has agreed to transfer and surrender 2,966,667 Private Placement Warrants immediately prior to the effective time of the Business Combination, which warrants will be cancelled and no longer outstanding. The 5,933,333 Private Placement Warrants, if valued based on the closing price of $1.87 per public warrant on the NYSE on May 10, 2021, would be valued at approximately $11,095,333, but may expire and become worthless if FAII fails to complete a business combination by August 14, 2022.

 

   

Mr. McKnight is expected to become a member of the ATI Board upon consummation of the Business Combination. As such, in the future, Mr. McKnight may receive cash fees, stock options or stock awards that the ATI Board determines to pay its non-executive directors.

 

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If FAII is unable to complete a business combination within the required time period, the Sponsor may be liable to FAII under certain circumstances described herein to ensure that the proceeds in the Trust Account are not reduced by any claims by a third party (other than our independent auditors) for services rendered or products sold to us, or a prospective target business with which we have discussed entering into a transaction agreement.

 

   

Following the consummation of a business combination, directors or members of our management team who remain with us may be paid consulting, management or other fees from the combined company.

 

   

The continued indemnification of current directors and officers and the continuation of directors’ and officers’ liability insurance.

 

   

The FAII Board is not comprised of a majority of independent directors, and the Insiders, who hold a controlling interest in FAII until consummation of our initial business combination, control the composition of the FAII Board until consummation of our initial business combination.

 

   

The Insiders have agreed not to redeem any of the outstanding Founder Shares in connection with the Business Combination Proposal.

 

   

The Insiders have agreed to waive their rights to liquidating distributions from the Trust Account with respect to their Founder Shares.

 

   

The Insiders have also agreed to waive their right to a conversion price adjustment with respect to their Founder Shares in connection with the consummation of the Business Combination.

 

   

As of the closing of the Business Combination, FAII will enter into the A&R RRA with the A&R RRA Parties, which provides for certain demand, piggy-back and shelf registration rights to the A&R RRA Parties and their permitted transferees. The A&R RRA Parties include the following directors and officers of FAII: Joshua Pack, Andrew McKnight, Daniel Bass, Micah Kaplan, Alexander Gillette, Marc Furstein, Leslee Cowen, Aaron Hood, Carmen Policy, Rakefet Russak-Aminoach, and Sunil Gulati.

 

   

If the Business Combination is not consummated, FAII will have to pay certain expenses related to the Business Combination, which may impede its ability to consummate a transaction with another acquisition target.

 

   

If FAII consummates the Business Combination, any amounts outstanding under any loan made by the Sponsor to FAII will be repayable in cash, and if FAII fails to complete a business combination there may be insufficient assets outside the Trust Account to satisfy such loan;

 

   

Starting August 2020 and through the completion of the initial business combination or liquidation, FAII has paid and will continue to pay a monthly fee of $20,000 for office space and related support services to an affiliate of the Sponsor;

 

   

As described in Proposal No. 3, the current charter will be amended to exclude Advent and any Exempt Transferee (as defined in the proposed charter) and their respective affiliates or successors or any “group,” or any member of any such group, to which such persons are a party from the definition of “interested stockholder,” and to make certain related changes; and

 

   

If the Trust Account is liquidated, including in the event FAII is unable to complete an initial business combination within the required time period, Sponsor has agreed to indemnify FAII to ensure that proceeds in the Trust Account are not reduced below $10.00 per public share, or such lesser per public share amount as is in the Trust Account on the liquidation date, by the claims of prospective target businesses with which FAII has discussed entering into a transaction agreement or any third party (other than FAII’s independent auditors) for services rendered or products sold to FAII, but only if such third party or target business has not executed a waiver of any and all rights to seek access to the Trust Account.

 

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Total FAII Shares to be Issued in the Business Combination

It is anticipated that there will be approximately 164.6 million shares issued in connection with the Business Combination as of closing, resulting in approximately 207.7 million shares of ATI Class A common stock outstanding immediately following the Business Combination, assuming no redemptions and excluding the potential dilutive effect of the Earnout Shares, Vesting Shares, exercise of FAII public warrants and the shares underlying the equity awards to be granted pursuant to the terms of the New Employment Agreements summarized in the “Company Executive CompensationNew Employment Agreements In Connection With The Business Combination” section.

ATI Board following the Business Combination

Following the closing of the Business Combination, the ATI Board will consist of eight directors. Please see “Management after the Business Combination” for additional information.

ATI Certificate of Incorporation

If the Business Combination is to be consummated, FAII will replace the current charter with the proposed charter. The proposed charter differs materially from the current charter in a number of ways. For a summary of the proposed principal changes between the existing charter and the proposed charter, please see “Proposal No. 3—The Charter Amendment Proposal.”

Name; Headquarters

The name of FAII after the Business Combination will be “ATI Physical Therapy, Inc.” and its headquarters will be located at 790 Remington Blvd., Bolingbrook, Illinois 60440.

Appraisal Rights

Appraisal rights are not available to holders of FAII Common Stock in connection with the Business Combination under Delaware law.

Accounting Treatment of the Business Combination

The Business Combination will be accounted for as a reverse recapitalization, in accordance with U.S. GAAP. Under this method of accounting, FAII will be treated as the “acquired” company for financial reporting purposes. Accordingly, the Business Combination will be treated as the equivalent of the Company issuing stock for the net assets of FAII, accompanied by a recapitalization. The net assets of FAII will be stated at historical cost, with no goodwill or other intangible assets recorded. Operations prior to the Business Combination will be those of the Company.

The Company has been determined to be the accounting acquirer based on evaluation of the following facts and circumstances under both the no redemption and maximum redemption scenarios:

 

   

Company stockholders have the greatest voting interest in the combined entity with approximately 66% majority interest in a no redemption scenario and approximately 72% majority interest in a maximum redemption scenario;

 

   

the Company’s former executive management will make up all of the management of ATI;

 

   

the Company’s existing directors and individuals designated by, or representing, Company stockholders will constitute a majority of the initial ATI Board following the consummation of the Business Combination;

 

   

ATI will assume the name “ATI Physical Therapy, Inc.;” and

 

   

the Company is the larger entity based on assets and revenue. Additionally, the Company has a larger employee base and substantive operations.

 

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U.S. FEDERAL INCOME TAX CONSIDERATIONS FOR STOCKHOLDERS EXERCISING

REDEMPTION RIGHTS

The following is a discussion of U.S. federal income tax considerations for holders of FAII Class A common stock that elect to have their FAII Class A common stock redeemed for cash if the Business Combination is completed. This discussion applies only to FAII Class A common stock that is held as a capital asset for U.S. federal income tax purposes (generally, property held for investment). This discussion does not describe all of the U.S. federal income tax consequences that may be relevant to you in light of your particular circumstances, including the alternative minimum tax, the Medicare tax on certain investment income and the different consequences that may apply if you are subject to special rules that apply to certain types of investors, such as:

 

   

banks and financial institutions;

 

   

insurance companies;

 

   

brokers and dealers in securities, currencies or commodities;

 

   

dealers or traders in securities subject to a mark-to-market method of accounting with respect to shares of FAII Class A common stock;

 

   

regulated investment companies and real estate investment trusts;

 

   

governmental organizations and qualified foreign pension funds;

 

   

persons holding FAII Class A common stock as part of a “straddle,” hedge, integrated transaction or similar transaction;

 

   

U.S. holders (as defined below) whose functional currency is not the U.S. dollar;

 

   

holders who own (actually or constructively) 5% or more of our stock;

 

   

partnerships or other pass-through entities for U.S. federal income tax purposes (and investors in such entities);

 

   

the Sponsor;

 

   

certain former citizens or long-term residents of the United States;

 

   

controlled foreign corporations and passive foreign investment companies; and

 

   

tax-exempt entities.

If a partnership or entity treated as a partnership for U.S. federal income tax purposes holds shares of FAII Class A common stock, the U.S. federal income tax treatment of the partners in the partnership will generally depend on the status of the partners and the activities of the partnership. Partners in partnerships holding shares of FAII Class A common stock should consult their tax advisors.

This discussion is based on the Code and administrative pronouncements, judicial decisions and final, temporary and proposed Treasury regulations as of the date hereof, changes to any of which subsequent to the date of this proxy statement may affect the tax consequences described herein, possibly on a retroactive basis. No assurance can be given that the U.S. Internal Revenue Service (the “IRS”) would not assert, or that a court would not sustain, a position contrary to any of the tax considerations described below. No advance ruling has been or will be sought from the IRS regarding any matter discussed in this summary. This discussion does not address any aspect of state, local or non-U.S. taxation, or any U.S. federal taxes other than regular federal income taxes (such as gift and estate taxes).

You are urged to consult your tax advisor with respect to the application of U.S. federal tax laws to your particular situation, as well as any tax consequences arising under the laws of any state, local or foreign jurisdiction.

 

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Redemption of FAII Class A Common Stock

In the event that a holder’s shares of FAII Class A common stock are redeemed, the treatment of the redemption for U.S. federal income tax purposes will depend on whether the redemption qualifies as a sale or other exchange of shares of FAII Class A common stock under Section 302 of the Code. If the redemption qualifies as a sale of shares of FAII Class A common stock, a U.S. holder (as defined below) will be treated as described below under “U.S. Holders—Gain or Loss on Sale, Taxable Exchange or Other Taxable Disposition of FAII Class A common stock,” and a non-U.S. holder (as defined below) will be treated as described under “Non-U.S. Holders—Gain on Sale, Taxable Exchange or Other Taxable Disposition of FAII Class A common stock” below. If the redemption does not qualify as a sale of shares of FAII Class A common stock, a holder will be treated as receiving a corporate distribution with the tax consequences to a U.S. holder described below under “U.S. Holders—Taxation of Distributions” and the tax consequences to a non-U.S. holder described below under “Non-U.S. Holders—Taxation of Distributions.”

Whether a redemption of shares of FAII Class A common stock qualifies for sale treatment will depend largely on the total number of shares of our stock treated as held by the redeemed holder before and after the redemption (including any stock constructively owned by the holder, as described below, and any of our stock that a holder would directly or indirectly acquire pursuant to the Business Combination) relative to all of our shares outstanding both before and after the redemption. The redemption of FAII Class A common stock will generally be treated as a sale of FAII Class A common stock (rather than as a corporate distribution) if the redemption (i) is “substantially disproportionate” with respect to the holder, (ii) results in a “complete termination” of the holder’s interest in us, or (iii) is “not essentially equivalent to a dividend” with respect to the holder. These tests are explained more fully below.

In determining whether any of the foregoing tests result in a redemption qualifying for sale treatment, a holder takes into account not only shares of our stock actually owned by the holder, but also shares of our stock that are constructively owned by it under certain attribution rules set forth in the Code. A holder may constructively own, in addition to stock owned directly, stock owned by certain related individuals and entities in which the holder has an interest or that have an interest in such holder, as well as any stock that the holder has a right to acquire by exercise of an option, which would generally include FAII Class A common stock which could be acquired pursuant to the exercise of the warrants. Moreover, any of our stock that a holder directly or constructively acquires pursuant to the Business Combination should be included in determining the U.S. federal income tax treatment of the redemption.

In order to meet the substantially disproportionate test, the percentage of our outstanding voting stock actually and constructively owned by the holder immediately following the redemption of shares of FAII Class A common stock must, among other requirements, be less than 80% of the percentage of our outstanding voting stock actually and constructively owned by the holder immediately before the redemption (taking into account both redemptions by other holders of FAII Class A common stock and the FAII Class A common stock to be issued pursuant to the Business Combination). There will be a complete termination of a holder’s interest if either (i) all of the shares of our stock actually and constructively owned by the holder are redeemed or (ii) all of the shares of our stock actually owned by the holder are redeemed and the holder is eligible to waive, and effectively waives in accordance with specific rules, the attribution of stock owned by certain family members and the holder does not constructively own any other stock. The redemption of FAII Class A common stock will not be essentially equivalent to a dividend if the redemption results in a “meaningful reduction” of the holder’s proportionate interest in us. Whether the redemption will result in a meaningful reduction in a holder’s proportionate interest in us will depend on the particular facts and circumstances. The IRS has indicated in a published ruling that even a small reduction in the proportionate interest of a small minority stockholder in a publicly held corporation who exercises no control over corporate affairs may constitute such a “meaningful reduction.”

If none of the foregoing tests is satisfied, then the redemption of shares of FAII Class A common stock will be treated as a corporate distribution to the redeemed holder and the tax effects to such U.S. holder will be as

 

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described below under “U.S. Holders—Taxation of Distributions,” and the tax effects to such non-U.S. holder will be as described below under “Non-U.S. Holders—Taxation of Distributions.” After the application of those rules, any remaining tax basis of the holder in the redeemed FAII Class A common stock will generally be added to the holder’s adjusted tax basis in its remaining stock, or, if it has none, to the holder’s adjusted tax basis in its warrants or possibly to other stock constructively owned by it or, in certain circumstances, it may be lost entirely.

A holder should consult its tax advisors as to the tax consequences of a redemption.

U.S. Holders

This section applies to you if you are a “U.S. holder.” A U.S. holder is a beneficial owner of shares of FAII Class A common stock that is, for U.S. federal income tax purposes:

 

   

an individual who is a citizen or resident of the United States;

 

   

a corporation (or other entity taxable as a corporation for U.S. federal income tax purposes) organized in or under the laws of the United States, any state thereof or the District of Columbia;

 

   

an estate the income of which is subject to U.S. federal income tax regardless of its source; or

 

   

a trust, if (A) a court within the United States is able to exercise primary supervision over the administration of such trust and one or more “United States persons” (within the meaning of the Code) have the authority to control all substantial decisions of the trust or (B) the trust validly elected to be treated as a United States person for U.S. federal income tax purposes.

Taxation of Distributions. If our redemption of a U.S. holder’s shares of FAII Class A common stock is treated as a distribution, as discussed above under “Redemption of FAII Class A common stock,” such distributions will generally constitute a dividend 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 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 its FAII Class A common stock. Any remaining excess will be treated as gain realized on the sale or other disposition of the FAII Class A common stock and will be treated as described below under “U.S. Holders—Gain or Loss on Sale, Taxable Exchange or Other Taxable Disposition of FAII Class A common stock.”

Dividends received by 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, but not limited to, dividends treated as investment income for purposes of investment interest deduction limitations), and provided certain holding period requirements are met, dividends received by a non-corporate U.S. holder will generally constitute “qualified dividends” that will be subject to tax at the maximum tax rate applicable to long-term capital gains. It is unclear whether the redemption rights with respect to the FAII Class A common stock described in this proxy statement may prevent a U.S. holder from satisfying the applicable holding period requirements with respect to the dividends received deduction or the preferential tax rate on qualified dividend income, as the case may be.

Gain or Loss on Sale, Taxable Exchange or Other Taxable Disposition of FAII Class A common stock. If our redemption of a U.S. holder’s shares of FAII Class A common stock is treated as a sale or other taxable disposition, as discussed above under “Redemption of FAII Class A common stock,” a U.S. holder will generally recognize capital gain or loss in an amount equal to the difference between the amount realized (i.e., the amount of cash received in the redemption) and the U.S. holder’s adjusted tax basis in the shares of FAII Class A common stock redeemed. Any such capital gain or loss will generally be long-term capital gain or loss if the U.S. holder’s holding period for the FAII Class A common stock so disposed of exceeds one year. It is unclear, however, whether the redemption rights with respect to the FAII Class A common stock described in this proxy statement may suspend the running of the applicable holding period for this purpose. Long-term capital gains

 

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recognized by non-corporate U.S. holders will be eligible to be taxed at reduced rates. The deductibility of capital losses is subject to limitations. U.S. holders who hold different blocks of FAII Class A common stock (shares of FAII Class A common stock purchased or acquired on different dates or at different prices) should consult their tax advisor to determine how the above rules apply to them.

Non-U.S. Holders

This section applies to you if you are a “non-U.S. holder.” A non-U.S. holder is a beneficial owner of FAII Class A common stock who or that is, for U.S. federal income tax purposes:

 

   

a non-resident alien individual, other than certain former citizens and residents of the United States subject to U.S. tax as expatriates;

 

   

a foreign corporation; or

 

   

an estate or trust that is not a U.S. holder;

but does not include an individual who is present in the United States for 183 days or more in the taxable year of disposition. If you are such an individual, you should consult your tax advisor regarding the U.S. federal income tax consequences of a redemption.

Taxation of Distributions. If our redemption of a non-U.S. holder’s shares of FAII Class A common stock is treated as distribution, as discussed above under “Redemption of FAII 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), such distribution will constitute a dividend for U.S. federal income tax purposes and, provided such dividend is 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 timely provides proper certification of its eligibility for such reduced rate (usually on an IRS Form W-8BEN or W-8BEN-E). 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 FAII 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 FAII Class A common stock, which will be treated as described below under “Non-U.S. Holders—Gain on Sale, Taxable Exchange or Other Taxable Disposition of FAII Class A common stock.”

The withholding tax described above does not apply to a dividend paid to a non-U.S. holder who provides an IRS Form W-8ECI, certifying that such dividend is effectively connected with the non-U.S. holder’s conduct of a trade or business within the United States. Instead, the effectively connected dividend will be subject to regular U.S. federal income tax as if the non-U.S. holder were a U.S. holder, subject to an applicable income tax treaty providing otherwise. A non-U.S. holder that is a corporation for U.S. federal income tax purposes and is receiving an effectively connected dividend may also be subject to an additional “branch profits tax” imposed at a rate of 30% (or a lower applicable treaty rate).

Gain on Sale, Taxable Exchange or Other Taxable Disposition of FAII Class A common stock. If our redemption of a non-U.S. holder’s shares of FAII Class A common stock is treated as a sale or other taxable disposition as discussed above under “Redemption of FAII Class A common stock,” a non-U.S. holder will generally 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 FAII Class A common stock, 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, under certain income tax treaties, is attributable to a United States permanent establishment or fixed base maintained by the non-U.S. holder); or

 

   

we are or have been a “United States real property holding corporation” for U.S. federal income tax purposes at any time during the shorter of the five-year period ending on the date of disposition or the

 

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period that the non-U.S. holder held FAII Class A common stock, and, in the case where shares of FAII Class A common stock are treated as regularly traded on an established securities market, the non-U.S. holder has owned, directly or constructively, more than 5% of FAII Class A common stock at any time within such period.

Unless an applicable treaty provides otherwise, 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. holder. In the event the non-U.S. holder is a corporation for U.S. federal income tax purposes, such gain may also be subject to an additional “branch profits tax” at a 30% rate (or lower treaty rate).

If the second bullet point above applies to a non-U.S. holder, gain recognized by such holder on the sale, exchange or other taxable disposition of shares of FAII Class A common stock will be subject to tax at generally applicable U.S. federal income tax rates. In addition, if FAII Class A common stock were not treated as regularly traded on an established securities market, a buyer of FAII Class A common stock (we would be treated as a buyer with respect to a redemption of FAII Class A common stock) may be required to withhold U.S. federal income tax at a rate of 15% of the amount realized upon such disposition. There can be no assurance that FAII Class A common stock will be treated as regularly traded on an established securities market. We believe that we are not and have not been at any time since our formation a United States real property holding corporation and we do not expect to be a United States real property holding corporation immediately after the Business Combination is completed.

It is possible that because the applicable withholding agent may not be able to determine the proper characterization of a redemption of a non-U.S. holder’s FAII Class A common stock, the withholding agent might treat the redemption as a distribution subject to withholding tax.

FATCA Withholding Taxes. Provisions commonly referred to as “FATCA” impose withholding of 30% on payments of dividends (including constructive dividends received pursuant to a redemption of stock) on FAII Class A common stock to “foreign financial institutions” (which is broadly defined for this purpose and in general includes investment vehicles) and certain other non-U.S. entities unless various U.S. information reporting and due diligence requirements (generally relating to ownership by U.S. persons of interests in or accounts with those entities) have been satisfied, or an exemption applies (typically certified as to by the delivery of a properly completed IRS Form W-8BEN or W-8BEN-E). Foreign financial institutions located in jurisdictions that have an intergovernmental agreement with the United States governing FATCA may be subject to different rules. Non-U.S. holders should consult their tax advisers regarding the effects of FATCA on a redemption of FAII Class A common stock.

 

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THE MERGER AGREEMENT

This section describes the material terms of the Merger Agreement. The description in this section and elsewhere in this proxy statement is qualified in its entirety by reference to the complete text of the Merger Agreement, a copy of which is attached as Annex A to this proxy statement. This summary does not purport to be complete and may not contain all of the information about the Merger Agreement that is important to you. You are encouraged to read the Merger Agreement carefully and in its entirety. This section is not intended to provide you with any factual information about FAII or the Company. Such information can be found elsewhere in this proxy statement.

Effects of the Business Combination

As a result of the merger, the Company will become a direct wholly-owned subsidiary of FAII. The proposed charter set forth as Annex B to this proxy statement and the Amended and Restated Bylaws as set forth as Annex C to this proxy statement will be the certificate of incorporation and bylaws (respectively) of FAII following the Business Combination.

Merger Consideration

Conversion of Shares

Each share of Company preferred stock outstanding immediately prior to the effective time will be converted into the right to receive (A) an amount in cash equal to (1) $59,000,000 divided by (2) the number of shares of Company preferred stock outstanding as of immediately prior to the effective time and (B) a number of shares of ATI Class A common stock equal in value to (i) the product of (a) (x) the aggregate Liquidation Amount as of the closing date with respect to the Company preferred stock (after reducing such Liquidation Amount by $59,000,000) plus (y) an aggregate accrued amount, calculated based on the Preferred Stock Adjusted Base, at the Dividend Rate from the closing date through the date that is 180 days from the closing date, multiplied by (b) 1.05, divided by (ii) the number of shares of Company preferred stock outstanding as of immediately prior to the effective time . For more information on the Dividend Rate of Company preferred stock, see Note 14 to the Company’s audited consolidated financial statements included elsewhere in this proxy statement.

Each share of Company common stock issued and outstanding immediately prior to the effective time will be converted into the right to receive (A) a number of shares of ATI Class A common stock equal to (1) $1,303,000,000 divided by (2) the number of shares of Company common stock outstanding as of immediately prior to the effective time and (B) the contingent right to receive Earnout Shares that may be issued in accordance with the terms of the Merger Agreement.

No fractional shares will be issued in connection with the Business Combination. In lieu thereof, FAII shall pay or cause to be paid cash to each holder who otherwise would have been entitled to receive a fractional share (after aggregating all fractional shares of ATI Class A common stock issuable to such holder).

Earnout Consideration

After the consummation of the Business Combination, Wilco Acquisition, LP (the sole holder of the Company common stock as of the date of the Merger Agreement) or its designees will have the contingent right to receive Earnout Shares upon the terms and subject to the conditions set forth in the Merger Agreement and the agreements contemplated thereunder in the amounts set forth below if the price targets set forth below are achieved any time between the closing and the date that is ten years after the consummation of the Business Combination:

 

   

in the event the VWAP of one share of ATI Class A common stock as reported on the NYSE is greater than $12.00 for at least five days out of a period of ten consecutive trading days ending on the trading day immediately prior to the date of determination, there will be a one-time issuance of 5,000,000 shares of ATI Class A common stock;

 

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in the event the VWAP of one share of ATI Class A common stock as reported on the NYSE is greater than $14.00 for at least five days out of a period of ten consecutive trading days ending on the trading day immediately prior to the date of determination, there will be a one-time issuance of 5,000,000 shares of ATI Class A common stock; and

 

   

in the event the VWAP of one share of ATI Class A common stock as reported on the NYSE is greater than $16.00 for at least five days out of a period of ten consecutive trading days ending on the trading day immediately prior to the date of determination, there will be a one-time issuance of 5,000,000 shares of ATI Class A common stock.

In the event that there is an agreement with respect to the sale or other change of control of ATI entered into after the closing and prior to the date that is ten years after the consummation of the Business Combination, that will result in the holders of ATI Class A common stock receiving a per share price in excess of the applicable VWAP set forth above, then the applicable Earnout Shares that have not been issued prior to the closing of such sale or change of control will be issued by ATI on the day prior to such sale or change of control. Following such sale or change of control, ATI and the surviving company will take proper provision to ensure that any Earnout Shares that have not previously been issued will remain eligible to be paid through the date that is ten years after the consummation of the Business Combination.

If, after the closing and on or before the date that is ten years after the consummation of the Business Combination, the outstanding shares of ATI Class A common stock are changed into a different number or class of shares by reason of any merger, stock split, division or subdivision of shares, stock dividend, reverse stock split, consolidation of shares, reorganization, reclassification, recapitalization or other similar transaction, then the number of Earnout Shares to be issued pursuant to the Merger Agreement will be adjusted to the extent appropriate to provide the same economic effect as contemplated by the Merger Agreement prior to such action.

Closing and Effective Time of the Business Combination

Unless the parties otherwise mutually agree, the closing will take place on the closing date, which is to be three business days after the date on which all of the closing conditions have been satisfied or waived (other than those conditions that by their terms are to be satisfied at the closing, but subject to the satisfaction or waiver thereof). See “—Conditions to the Business Combination” for a more complete description of the conditions that must be satisfied prior to closing.

On the closing date, Merger Sub and the Company will effect the merger by filing a certificate of merger with the Secretary of State of the State of Delaware, and the merger will become effective at the time set forth in the certificate of merger.

As of the date of this proxy statement, the parties expect the Business Combination will be completed during the second quarter of 2021. However, there can be no assurance as to when or if the Business Combination will occur.

If the Business Combination is not completed by the Outside Date, the Merger Agreement may be terminated by either FAII or the Company. A party may not terminate the Merger Agreement pursuant to the provision described in this paragraph if such party’s action or failure to act has been a principal cause of or resulted in the failure of the Business Combination to occur on or before the Outside Date and such action or failure to act constitutes a breach of the Merger Agreement. See “—Termination.”

Covenants and Agreements

Conduct of Businesses Prior to the Completion of the Business Combination

The Company has agreed that, prior to the closing, subject to specified exceptions, it and its subsidiaries will conduct their businesses in the ordinary course of business consistent with past practice except to the extent as expressly contemplated by the Merger Agreement or in response to COVID-19.

 

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In addition to the general covenant above, the Company has agreed that prior to the closing, subject to specified exceptions, it and its subsidiaries will not, directly or indirectly, without the written consent of FAII (which may not be unreasonably withheld, conditioned or delayed):

 

   

make any change in or amendment to any of the Company organizational documents that would be adverse to FAII, or, other than in the ordinary course of business consistent with past practice, form or establish any subsidiary;

 

   

(A) make, declare or pay any dividend or distribution (whether in cash, stock, equity securities or property), other than dividends or distributions between or among the Company and any of its wholly-owned subsidiaries, (B) effect any recapitalization, reclassification, split or other change in the Company’s or its subsidiaries’ capitalization or (C) authorize for issuance, issue, sell, transfer, pledge, encumber, dispose of or deliver any shares of its capital stock or securities (including debt securities) convertible into or exchangeable for shares of its capital stock or voting interests, or issue, sell, transfer, pledge, encumber or grant any right, option or other commitment for the issuance of shares of its capital stock, or split, combine or reclassify any shares of its capital stock;

 

   

(A) except in the ordinary course of business consistent with past practice, amend, modify or terminate, prior to the expiration of its term or the completion of performance of any obligations of the Company, any material contract or any lease, (B) waive, delay the exercise of, release or assign any material rights or claims under any material contract or any lease or (C) enter into certain enumerated categories of material contracts;

 

   

issue or sell any debt securities or warrants or other rights to acquire any debt securities of the Company or any of its subsidiaries or guaranty any debt securities or incur, guarantee or otherwise become liable for (whether directly, contingently or otherwise) any indebtedness for borrowed money in excess of $10,000,000, other than (A) in connection with borrowings, extensions of credit and other financial accommodations under the Company’s and its subsidiaries’ existing credit facilities, notes and other existing indebtedness, (B) in connection with refinancings of existing indebtedness for borrowed money upon market terms and conditions (as determined by the Company in good faith), (C) for drawdowns of credit facilities available as of the date of the Merger Agreement and/or (D) in connection with the debt financing contemplated by the Merger Agreement, if consummated prior to the closing;

 

   

(A) enter into any collective bargaining agreement or other contract with a trade union or other labor organization, or (B) recognize or certify any trade union, other labor organization or group of employees of the Company or its subsidiaries as the bargaining representative for any employees of the Company or its subsidiaries;

 

   

terminate the service or employment (other than for cause) of any executive officer of the Company;

 

   

except as otherwise required pursuant to any company benefit plan in effect on the date of the Merger Agreement, grant any material increase in compensation, benefits or severance to any director or officer of the Company other than (A) annual increases in compensation, benefits or severance made in the ordinary course of business consistent with past practice and (B) severance payable in accordance with a company benefit plan in effect on the date of the Merger Agreement;

 

   

engage in any material new line of business;

 

   

except as permitted in the Merger Agreement, (A) acquire or agree to acquire by merger or consolidation with, or merge, consolidate or combine with, or purchase substantially all of the assets of, any business or any corporation, partnership, association, joint venture or other business organization or division thereof or person (B) purchase or otherwise acquire (by merger, consolidation, acquisition of stock or assets or otherwise), directly or indirectly, any securities, properties or businesses or (C) adopt or enter into a plan of complete or partial liquidation, dissolution or winding up, restructuring, recapitalization or other reorganization (other than in connection with the Business Combination);

 

   

other than in the ordinary course of business consistent with past practice and between or among the Company and any of its wholly-owned subsidiaries, make any loans, advances or capital contributions to, or

 

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investments in, any other person (including to any of the Company’s or its subsidiaries’ officers, directors, agents or consultants), make any change in its existing borrowing or lending arrangements for or on behalf of such persons, or enter into any “keep well” or similar agreement to maintain the financial condition of any other person;

 

   

(A) make any change in financial accounting methods, principles or practices, except insofar as may have been required by a change in GAAP, including pursuant to standards, guidelines and interpretations of the Financial Accounting Standards Board or any similar organization, or applicable law or (B) make any change in the auditors of the Company;

 

   

waive, release, compromise, settle, pay or satisfy any claim, or any claim threatened (which will include any pending litigation or threatened litigation), in each case, for amounts in excess of $5,000,000 in the aggregate, other than in the ordinary course of business consistent with past practice and as would not prohibit or materially restrict the Company or its subsidiaries from operating their respective businesses substantially as currently conducted; or

 

   

enter into any binding agreement or otherwise making a binding commitment to take any of the foregoing actions.

Each of FAII and Merger Sub has agreed that, prior to the closing, subject to specified exceptions, each of FAII and Merger Sub will conduct their businesses in the ordinary course of business consistent with past practice except to the extent as expressly contemplated by the Merger Agreement or in response to COVID-19.

In addition to the general covenant above, each of FAII and Merger Sub has agreed that prior to the closing, subject to specified exceptions, it will not, directly or indirectly, without the written consent the Company (which may not be unreasonably withheld, conditioned or delayed):

 

   

take any action that would reasonably be expected to prevent or materially delay the consummation of the Business Combination;

 

   

make any change in or amendment to any of FAII’s organizational documents or form or establish any subsidiary;

 

   

(A) make, declare or pay any dividend or distribution to any equityholder, (B) effect any recapitalization, reclassification, split or other change in its capitalization, (C) authorize for issuance, issue, sell, transfer, pledge, encumber, dispose of or deliver any additional shares of its capital stock or securities (including debt securities) convertible into or exchangeable for shares of its capital stock or voting interests, or issue, sell, transfer, pledge, encumber or grant any right, option or other commitment for the issuance of shares of its capital stock, or split, combine or reclassify any shares of its capital stock, other than in connection with the exercise of any public warrants or private placement warrants outstanding on the date of the Merger Agreement or (D) amend, modify or waive any of the material terms or rights set forth in any public warrant or private placement warrant or any related agreement governing such warrants, including any amendment, modification or reduction of the warrant price set forth therein;

 

   

issue or sell any debt securities or warrants or other rights to acquire any debt securities of FAII or Merger Sub or guaranty any debt securities or incur, guarantee or otherwise become liable for (whether directly, contingently or otherwise) any indebtedness;

 

   

amend, modify or consent to the termination of any FAII material contract;

 

   

enter into, renew or amend in any material respect, any transaction or contract with an affiliate of FAII or Merger Sub;

 

   

(A) effect any alternative business combination with respect to FAII other than the Business Combination or (B) adopt or enter into a plan of complete or partial liquidation, dissolution, restructuring, recapitalization or other reorganization (other than in connection with the Business Combination);

 

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except as contemplated by the Merger Agreement, (A) adopt or amend any FAII benefit plan, (B) enter into any employment contract or collective bargaining agreement or (C) hire any employee;

 

   

make any loans, advances or capital contributions to, or investments in, any other person (including to any of FAII’s or Merger Sub’s officers, directors, agents or consultants), make any change in its existing borrowing or lending arrangements for or on behalf of such persons, or enter into any “keep well” or similar agreement to maintain the financial condition of any other person, except as otherwise permitted by the Merger Agreement;

 

   

make any change in financial accounting methods, principles or practices, except insofar as may have been required by a change in GAAP, including pursuant to standards, guidelines and interpretations of the Financial Accounting Standards Board or any similar organization, or applicable law; or

 

   

enter into any binding agreement or otherwise making a binding commitment to take any of the foregoing actions.

HSR Act and Regulatory Approvals

The Company and FAII have agreed to act promptly, but in any event within ten business days after the date of the Merger Agreement, to comply with the notification and reporting requirements of the HSR Act. The Company and FAII have agreed to promptly furnish to each other such necessary information and reasonable assistance as the other may request in connection with its preparation of any filing or submission that is necessary under the HSR Act and take all other reasonable actions necessary or desirable to cause the expiration or termination of the applicable waiting periods as soon as practicable. FAII and the Company filed HSR Act Notification and Report Forms with the Antitrust Division and the FTC on March 2, 2021. The HSR 30-day waiting period expired at 11:59 p.m., Eastern Time, on April 1, 2021.

The Company and FAII have agreed to promptly provide the other with copies of all written communications between each of them, any of their affiliates and their respective representatives on the one hand, and any governmental authority, on the other hand, with respect to the Merger Agreement or the Business Combination. The Company and FAII have also agreed to:

 

   

cooperate in all respects with each other party or its affiliates in connection with any filing or submission with any governmental authority, with respect to the Merger Agreement or the Business Combination;

 

   

keep the other parties reasonably informed of any communication received by such party or its representatives from, or given by such party or its representatives to, any governmental authority regarding the Business Combination;

 

   

permit a representative of the other parties to review any communication given by it to, and consult with each other in advance of any meeting or conference with, any governmental authority, and to the extent permitted by such governmental authority, give a representative or representatives of the other parties the opportunity to attend and participate in such meetings and conferences;

 

   

in the event a party’s representative is prohibited from participating in or attending any meetings or conferences, keep such party promptly and reasonably apprised with respect thereto; and

 

   

cooperate in the filing of any memoranda, white papers, filings, correspondence or other written communications explaining or defending the Business Combination, articulating any regulatory or competitive argument, and/or responding to requests or objections made by any governmental authority.

Reasonable Best Efforts

The Company and FAII have agreed to cooperate and use their respective reasonable best efforts to take, or cause to be taken, all actions, and to do, or cause to be done, all things necessary, proper or advisable under applicable laws to consummate the Business Combination as soon as reasonably practicable after the date of the Merger Agreement, and to fulfill the conditions to consummation of the Business Combination as set forth in the Merger Agreement. See “—Conditions to the Business Combination.”

 

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Notwithstanding the above covenant or any other provision of the Merger Agreement, nothing in the Merger Agreement will require the Company to pay any material fee, penalty or other consideration to obtain any license, permit, consent, approval, authorization, qualification or waiver required under any contract for the consummation of the Business Combination.

Proxy Solicitation

FAII has agreed to, promptly following the SEC’s completion of its review of this proxy statement, (A) establish the record date for the FAII Special Meeting, (B) establish the earliest practicable date for the FAII Special Meeting in accordance with the FAII organizational documents for purposes of obtaining the FAII stockholder approval and (C) solicit proxies from the holders of FAII Common Stock to obtain the FAII stockholder approval. FAII has agreed, through the FAII Board, to recommend to its stockholders that they approve the proposals contained in this proxy statement (the “FAII Board recommendation”) and to include the FAII Board recommendation in this proxy statement, subject to the obligations described in this paragraph. The FAII Board has agreed not to (and agreed that no committee or subgroup thereof will) withdraw or modify, or propose publicly or by formal action of the FAII Board to withdraw or modify, in a manner adverse to the Company, the FAII Board recommendation (a “FAII change in recommendation”); provided, that the FAII Board may make a FAII change in recommendation if it determines in good faith, in response to an intervening event (as defined in the Merger Agreement and summarized below), after consultation with its outside legal counsel, that the failure to make a FAII change in recommendation would reasonably be expected to constitute a breach by the FAII Board of its fiduciary obligations to its stockholders under applicable law. Notwithstanding the foregoing, the FAII Board will not be entitled to make, or agree or resolve to make, a FAII change in recommendation unless (A) FAII delivers to the Company a written notice advising the Company that the FAII Board proposes to take such action and containing the material facts underlying the FAII Board’s determination that an intervening event has occurred (an “Intervening Event Notice”) and (B) following the period from the time when the Intervening Event Notice is provided until 5:00 pm New York City time on the fifth business day immediately following the day on which FAII delivered the Intervening Event Notice (the “Intervening Event Notice Period”), the FAII Board reaffirms in good faith (after consultation with its outside legal counsel) that the failure to make a FAII change in recommendation would be inconsistent with its fiduciary duties under applicable law. If requested by the Company, FAII will, and will cause its subsidiaries to, and will use its reasonable best efforts to cause its or their representatives to, during such Intervening Event Notice Period, engage in good faith negotiations with the Company and its representatives to make such adjustments in the terms and conditions of the Merger Agreement so as to obviate the need for a FAII change in recommendation.

An “intervening event” means an event, fact, development, circumstance or occurrence that materially and adversely affects the business, assets or operations of the Company and its subsidiaries, taken as a whole, that is consequential to the Company’s earning power over a long-term duration, and, in each case, that was not known and was not reasonably foreseeable to FAII or the FAII Board as of the date of the Merger Agreement (or the consequences of which were not reasonably foreseeable to the FAII Board as of the date of the Merger Agreement), and that becomes known to the FAII Board after the date of the Merger Agreement, except for: (A) any event, fact, development, circumstance or occurrence that relates to or is reasonably likely to give rise to or result in any offer, inquiry, proposal or indication of interest, written or oral relating to any alternative business combination, (B) general economic conditions, changes in capital markets or any declines or improvements in financial markets and (C) any event, fact, development, circumstance or occurrence arising from, or related to epidemics, disease outbreaks or pandemics (including, for the avoidance of doubt, any event, fact, development, circumstance or occurrence arising from or related to COVID-19 or measures taken in connection with or in response to COVID-19.

FAII may postpone, and if requested by the Company in writing, will postpone, the FAII Special Meeting in compliance with applicable requirements under Delaware law if (A) there are holders of an insufficient number of shares of FAII Class A common stock or FAII Class F common stock present or represented by proxy at the FAII Special Meeting to constitute a quorum at such meeting, but only until there are a sufficient number of

 

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shares of FAII Class A common stock and FAII Class F common stock present or represented by proxy at the FAII Special Meeting to obtain such a quorum or (B) on a date for which the FAII Special Meeting is scheduled, FAII has not received proxies representing a sufficient number of shares of FAII Class A common stock and FAII Class F common stock to obtain the FAII stockholder approval, in order to solicit additional proxies from stockholders for the purposes of obtaining the FAII stockholder approval, but only until there are a sufficient number of shares of FAII Class A common stock and FAII Class F common stock present or represented by proxy at the FAII Special Meeting to obtain the FAII stockholder approval; provided, that (A) FAII will not change the record date for the FAII Special Meeting without the Company’s prior written consent and (B) FAII may postpone or adjourn the FAII Special Meeting with the Company’s prior written consent. In the event FAII postpones or adjourns the FAII Special Meeting pursuant to the foregoing, FAII will use its reasonable best efforts to reconvene and hold a special meeting as promptly as reasonably practicable.

The Company agreed to seek the adoption of the Merger Agreement, as promptly as practicable following the execution and delivery of the Merger Agreement, by the holders of a majority of the voting power represented by all outstanding shares of Company stock voting together as a single class (the “Company requisite approval”) by irrevocable written consent, in form and substance acceptable to FAII. The Company agreed to deliver or cause to be delivered to FAII copies of such written consents within one business day of the Company’s receipt of the executed written consents. Promptly following the delivery of the written consents sufficient to constitute the Company requisite approval, the Company agreed to prepare and deliver to its stockholders who have not delivered written consents, the notice required by Section 228(e) of the DGCL. On the date of the Merger Agreement, each of the Company’s stockholders, who collectively beneficially own an aggregate of 100% of the outstanding voting power of the Company, executed and delivered irrevocable written consents adopting the Merger Agreement and approving the Business Combination. The Company delivered such written consents to FAII on the same day, and no further approval by the Company stockholders is required.

No Solicitation

From the date of the Merger Agreement until the closing or, if earlier, the termination of the Merger Agreement in accordance with its terms, each of FAII and Merger Sub has agreed that it will not, and will not authorize or permit any of its representatives acting on its behalf to, directly or indirectly:

 

   

initiate, solicit, knowingly facilitate, make or respond to any offer or proposal concerning, or related to, any alternative business combination;

 

   

enter into, engage in or continue any discussions or negotiations concerning, or related to, any alternative business combination;

 

   

provide any non-public information, data or access to employees to any person that has made, or that is considering making, a proposal with respect to an alternative business combination;

 

   

approve, endorse or recommend any alternative business combination; or

 

   

enter into any agreement, letter of intent, memorandum of understanding, term sheet or other contract relating to an alternative business combination.

FAII has agreed to promptly notify the Company of any submissions, proposals or offers made with respect to an alternative business combination as soon as practicable following FAII’s awareness thereof (but in any event within 24 hours).

FAII and Merger Sub have also agreed that FAII, Merger Sub and their respective officers and directors will, and will instruct and cause their respective affiliates and representatives, in each case, to the extent acting on behalf of FAII or Merger Sub, as applicable, to, immediately cease and terminate all discussions and negotiations with any person with respect to, or which is reasonably likely to give rise to or result in, a possible alternative business combination.

 

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From the date of the Merger Agreement to the closing or, if earlier, the termination of the Merger Agreement in accordance with its terms, the Company has agreed that it will not, and will not authorize or permit any of its representatives acting on its behalf to, directly or indirectly:

 

   

initiate, solicit, knowingly encourage, knowingly facilitate or make or respond to an acquisition proposal;

 

   

engage in or continue any discussions or negotiations with respect to an acquisition proposal;

 

   

provide any non-public information or data or access to employees to, any person that has made, or informs the Company that it is considering making, an acquisition proposal;

 

   

approve, endorse or recommend any acquisition proposal; or

 

   

enter into any agreement, letter of intent, memorandum of understanding, term sheet or other contract relating to an acquisition proposal.

The Company has agreed to promptly notify FAII of any submissions, proposals or offers made with respect to an acquisition proposal as soon as practicable following the knowledge of the Company thereof (but in any event within two business days).

The Company has also agreed that it and its officers and directors will, and will instruct and cause its respective affiliates and representatives, to the extent acting on behalf of the Company to, immediately cease and terminate all discussions and negotiations with any person with respect to, or which is reasonably likely to give rise to or result in, a possible acquisition proposal.

An “acquisition proposal” means, as to any person, other than the Business Combination and other than the acquisition or disposition of equipment or other tangible personal property in the ordinary course of business, any offer or proposal relating to: (A) any acquisition or purchase, direct or indirect, of (1) 20% or more of the consolidated assets of such person and its subsidiaries or (2) 20% or more of any class of equity or voting securities of (i) such person or (ii) one or more subsidiaries of such person holding assets constituting, individually or in the aggregate, 20% or more of the consolidated assets of such person and its subsidiaries; (B) any tender offer (including a self-tender offer) or exchange offer that, if consummated, would result in any person beneficially owning 20% or more of any class of equity or voting securities of (1) such person or (2) one or more subsidiaries of such person holding assets constituting, individually or in the aggregate, 20% or more of the consolidated assets of such person and its subsidiaries or (C) a merger, consolidation, share exchange, business combination, sale of substantially all the assets, reorganization, recapitalization, liquidation, dissolution or other similar transaction involving (1) such person or (2) one or more subsidiaries of such person holding assets constituting, individually or in the aggregate, 20% or more of the consolidated assets of such person and its subsidiaries.

An “alternative business combination” means any business combination with respect to FAII, other than the Business Combination.

The NYSE Listing

FAII has agreed to apply for a mutually agreed upon new ticker symbol with the NYSE that reflects the name “ATI Physical Therapy” and to use its reasonable best efforts to maintain its listing on the NYSE. FAII has also agreed to give prompt written notice, including a copy of any written notice from the NYSE or a summary of any oral notice from the NYSE, to the Company of any notice from the NYSE that FAII has failed, or would reasonably be expected to fail, to meet the NYSE’s listing requirements. FAII has further agreed to use reasonable best efforts to take, or cause to be taken, all actions and do, or cause to be done, all things necessary, proper or advisable to (A) remedy any and all issues set forth in any such NYSE notice and (B) in the event FAII is unable to remedy such issues set forth in such NYSE notice after using reasonable best efforts, to cause the FAII Common Stock to be issued in connection with the Business Combination to be approved for listing on an alternate exchange.

 

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FAII has also agreed to use reasonable best efforts to cause the FAII Common Stock to be issued in connection with the Business Combination (including the Earnout Shares, in the event such Earnout Shares become issuable pursuant to the Merger Agreement) to be approved for listing on the NYSE as promptly as practicable following the issuance thereof, subject to official notice of issuance.

Indemnification and Directors’ and Officers’ Insurance

From and after the closing, FAII and the surviving company have agreed to indemnify and hold harmless each present and former director and officer of the Company and each of its subsidiaries against any costs or expenses (including reasonable attorneys’ fees), judgments, fines, losses, claims, damages or liabilities incurred in connection with any action, whether civil, criminal, administrative or investigative, arising out of or pertaining to matters existing or occurring at or prior to the effective time, whether asserted or claimed prior to, at or after the effective time, to the fullest extent that the Company or its subsidiaries, as the case may be, would have been permitted under applicable law and its certificate of incorporation, bylaws or other organizational documents to indemnify such person (including the advancing of expenses as incurred to the fullest extent permitted under applicable law). FAII has also agreed to, and to cause the surviving company and its subsidiaries to, (A) maintain for a period of not less than six years from the effective time provisions in its certificate of incorporation, bylaws and other organizational documents concerning the indemnification and exoneration (including provisions relating to expense advancement) of officers and directors that are no less favorable to those persons than the provisions of such organizational documents as of the date of the Merger Agreement and (B) not amend, repeal or otherwise modify such provisions in any respect that would adversely affect the rights of those persons thereunder, in each case, except as required by law. FAII has additionally agreed to assume, and be liable for, and to cause the surviving company and their respective subsidiaries to honor, each of the related covenants in the Merger Agreement.

Prior to the closing, FAII has agreed to procure “tail” directors’ and officers’ liability insurance policies covering those persons who are currently covered by FAII’s directors’ and officers’ liability insurance policies with a claims reporting or discovery period of at least six years from the effective time placed with insurance companies having the same or better AM Best Financial rating as FAII’s current directors’ and officers’ liability insurance companies with terms and conditions providing retentions, limits and other material terms no less favorable than the current directors’ and officers’ liability insurance policies maintained by FAII with respect to matters, acts or omissions existing or occurring at or prior to the effective time; provided, however, that FAII may not spend more than 200% of the last annual premium paid by FAII prior to the date of the Merger Agreement for the six years of coverage under such “tail” policies.

Prior to the closing, the Company has agreed to obtain directors’ and officers’ liability insurance that will be effective as of closing and will cover those persons who will be the directors and officers of FAII and its subsidiaries (including the directors and officers of the surviving company and its subsidiaries) at and after the closing. The directors’ and officers’ liability insurance will have a scope of coverage, terms and limits that are reasonably appropriate for a company of similar characteristics (including the line of business, market capitalization and revenues) as FAII and its subsidiaries (including the surviving company and its subsidiaries).

Other Covenants and Agreements

The Merger Agreement contains other covenants and agreements, including covenants relating to:

 

   

the Company and FAII cooperating on the preparation and efforts to make effective this proxy statement and other required public filings, including providing the other party with all such information as may be reasonably necessary;

 

   

the Company and FAII (A) providing reasonable access, subject to certain specified restrictions and conditions, to the other party and its respective representatives, to their officers, employees, agents, properties, offices and other facilities and to their books and records, and (B) furnishing promptly upon

 

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reasonable request information concerning the business, properties, contracts, assets, liabilities, personnel and other properties of such party that the other party may reasonably request;

 

   

confidentiality and publicity relating to the Merger Agreement and the Business Combination;

 

   

changing the method or structure of effecting the Business Combination if mutually agreed upon in writing by the parties;

 

   

the Company waiving claims to the Trust Account in the event that the Business Combination is not consummated;

 

   

FAII agreeing to certain restrictions related to the Trust Account, including with respect to distributions;

 

   

the parties causing the merger to qualify for the intended tax treatment of the Business Combination;

 

   

the Company delivering to FAII a certification that shares of Company common stock are not “United States real property interests” in accordance with Treasury Regulation Section 1.1445-2(c)(3), together with a notice to the Internal Revenue Service in accordance with the provisions of Treasury Regulation Section 1.897-2(h)(2);

 

   

the Company and FAII cooperating to establish an equity incentive plan with an aggregate share reserve equal to 10% of the shares of FAII Class A common stock issued and outstanding immediately following the closing, in such form as mutually agreeable to the Company and FAII;

 

   

FAII taking steps to exempt the acquisition of FAII Class A common stock from Section 16(b) of the Exchange Act pursuant to Rule 16b-3 thereunder;

 

   

the Company and FAII providing notice of and cooperating with respect to any stockholder litigation related to the Merger Agreement;

 

   

FAII agreeing to certain restrictions relating to amendments or modifications to the Subscription Agreements;

 

   

FAII enforcing the terms of the Parent Sponsor Letter Agreement; and

 

   

FAII using commercially reasonable efforts to cooperate with the Company in connection with its debt financing.

Representations and Warranties

The Merger Agreement contains representations and warranties made by the Company to FAII relating to a number of matters, including the following:

 

   

corporate organization and qualification to do business;

 

   

requisite corporate authority to enter into the Merger Agreement and to complete the Business Combination;

 

   

absence of conflicts with organizational documents, applicable laws or certain agreements and instruments as a result of entering into the Merger Agreement or consummating the Business Combination;

 

   

subsidiaries;

 

   

required governmental and regulatory consents necessary in connection with the Business Combination;

 

   

capitalization;

 

   

financial statements of the Company;

 

   

absence of undisclosed liabilities;

 

   

litigation and legal proceedings;

 

   

compliance with applicable law;

 

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material contracts;

 

   

real property;

 

   

employee compensation and benefits matters;

 

   

labor matters and status of employment contracts;

 

   

tax matters;

 

   

intellectual property and information technology systems;

 

   

compliance with heath care, information privacy and security laws;

 

   

material payor and material supplier relations;

 

   

environmental matters;

 

   

insurance matters;

 

   

absence of certain changes or events to the businesses;

 

   

interested party transactions;

 

   

accuracy of the Company’s information provided in this proxy statement; and

 

   

broker’s and third party fees related to the Business Combination.

Certain of these representations and warranties are qualified as to “materiality” or “material adverse effect.” For purposes of the Merger Agreement, a “Company material adverse effect” means any change, effect, event, fact, occurrence, condition, circumstance or development that, individually or in the aggregate with all other changes, effects, events, facts, occurrences, conditions, circumstances or developments, has had, or would reasonably be expected to have, a material adverse effect on the business, condition (financial or otherwise) or results of operation, of the Company and its subsidiaries, taken as a whole; provided, however, that, in no event will any of the following be deemed, either alone or in combination, to constitute, or be taken into account in determining whether there has been or will be, a Company material adverse effect: (A) operating, business, regulatory or other conditions (financial or otherwise) generally effecting the industries in which the Company or its subsidiaries operate (including, for the avoidance of doubt, any loss of customers, suppliers, orders, contracts or other business relationships resulting from, or in connection with COVID-19); (B) general economic conditions, including changes or developments in the credit, securities, currency, banking, exchange, debt, financial or capital markets (including changes in interest or exchange rates) including any suspension of trading in securities (whether equity, debt, derivative or hybrid securities) generally on any securities exchange or over-the-counter market; (C) the announcement or consummation of the transactions contemplated under the Merger Agreement, including the impact thereof on relationships with customers, suppliers, distributors, partners or employees or others having relationships with the Company or any of its subsidiaries or the taking of any action required, expressly permitted or otherwise expressly contemplated by the Merger Agreement and the Ancillary Agreements (as defined in the Merger Agreement), including the completion of the Business Combination, including any action taken at the prior written request, or with the prior written consent, of FAII; (D) changes in GAAP or other accounting requirements or principles, as applied to the Company and its subsidiaries or otherwise, or any changes in applicable laws, in each case, after the date of the Merger Agreement; (E) the failure of the Company or any of its subsidiaries to meet or achieve the results set forth in any internal or published budget, plan, projection, prediction or forecast (it being understood that the underlying facts giving rise to such failure may be taken into account); (F) global, national or regional political, financial, economic or business conditions, including government required shutdowns, a presidential election, hostilities, acts of war, sabotage or terrorism or military actions or any escalation, worsening or diminution of any such hostilities, acts of war, sabotage or terrorism or military actions existing or underway; (G) effects arising from or relating to epidemics, pandemics, widespread occurrences of infectious diseases or disease outbreaks, including COVID-19 or measures taken in connection with or in response to COVID-19; (H) hurricanes, earthquakes, floods, tsunamis,

 

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tornadoes, changes in (or effects in) weather, meteorological conditions or climate, mudslides, explosions, wild fires, or other natural disasters and other force majeure events in the United States or any other country or region in the world and (I) any matter described in the disclosure schedules to the Merger Agreement, except, in each case of any of the foregoing clauses “(A),” “(B),” “(D),” “(F),” “(G)” and “(H)” to the extent that such condition has a materially disproportionate impact on the Company, taken as a whole, relative to other companies in the industries in which the Company and its subsidiaries operate (it being understood and agreed that only such incremental disproportionate impact will be taken into account in determining whether there has been or will be a Company material adverse effect).

The Merger Agreement also contains representations and warranties made by FAII to the Company relating to a number of matters, including the following:

 

   

corporate organization and qualification to do business;

 

   

requisite corporate authority to enter into the Merger Agreement and to complete the Business Combination;

 

   

absence of conflicts with governing documents, applicable laws or certain agreements and instruments as a result of entering into the Merger Agreement or consummate the Business Combination;

 

   

required governmental and regulatory consents necessary in connection with the Business Combination;

 

   

capitalization;

 

   

proper filing of documents with the SEC, the accuracy of information contained in the documents filed with the SEC and Sarbanes-Oxley Act certifications;

 

   

litigation and legal proceedings;

 

   

compliance with applicable law;

 

   

financial information of FAII and the Trust Account;

 

   

broker’s and finder’s fees related to the Business Combination;

 

   

business activities;

 

   

material contracts;

 

   

employees and benefit plans;

 

   

absence of a material adverse effect;

 

   

absence of undisclosed liabilities and transaction expenses;

 

   

compliance with SEC obligations;

 

   

the listing on the NYSE stock market;

 

   

compliance w