Item 1.01. Entry into a Material Definitive Agreement.
On
December 13, 2022 (the “Effective Date”), P3 Health Partners, LLC (“P3 LLC”), a subsidiary of P3 Health Partners
Inc. (the “Company”), entered into a financing transaction with VBC Growth SPV LLC (“VBC”), consisting of an unsecured
promissory note (the “Promissory Note”) and warrants (the “Warrants”) to purchase shares of Class A Common Stock,
par value $0.0001 per share, of the Company (the “Common Stock”). VBC is a Delaware limited liability company managed
by Chicago Pacific Founders GP, L.P., an affiliate of a principal stockholder of the Company. The members of VBC include Greg Wasson and
Mark Thierer, each of whom is a director of the Company, Sherif Abdou, M.D., the Company’s Chief Executive Officer and a director
of the Company, and Amir Bacchus, M.D., the Company’s Chief Medical Officer and a director of the Company. Mary Tolan, Lawrence
Leisure and Greg Kazarian, each of whom is a director of the Company, hold interests in Chicago Pacific Founders, GP, L.P. The entry into
the Promissory Note and the issuance of the Warrants was approved by a committee of independent, disinterested directors of the Company.
Promissory Note
The Promissory Note was issued by P3 LLC to VBC
on December 13, 2022, and provides for funding of up to $40.0 million (the “Promissory Note”), available for draw by
P3 LLC in three tranches, as follows: (i) a first tranche of $15.0 million available to P3 LLC upon the Effective Date, (ii) a
second tranche of up to $15.0 million available at the Company’s sole option in a single draw, on or prior to January 5,
2023, and (iii) a third tranche of up to $10.0 million available at P3 LLC’s sole option
in a single draw, after January 5, 2023 and on or prior to February 3, 2023. The maturity date of the Promissory Note is May 19,
2026. Interest is payable at 14.0 % per annum on a quarterly cycle (in arrears) beginning March 31, 2023. P3 LLC may elect to pay
interest 6.0% in kind and 8.0% in cash, but if the terms of the Subordination Agreement (as defined below) do not permit P3 LLC to pay
interest in cash, interest will be paid entirely in-kind. The Promissory Note may be prepaid, at the Company’s option, either in
whole or in part, without penalty or premium, at any time and from time to time, subject to the payment of the back-end fee described
below; provided that prepayments must be in increments of at least $2.0 million. The Promissory Note provides for mandatory prepayments
with the proceeds of certain asset sales, and the Lender has the right to demand payment in full upon (i) a change of control of
the Company and (ii) certain qualified financings (as defined in the Promissory Note).
The Promissory Note restricts P3 LLC’s ability
and the ability of its subsidiaries to, among other things, incur indebtedness and liens, and make investments and restricted payments.
The maturity date may be accelerated as a remedy under the certain default provisions in the agreement, or in the event a mandatory prepayment
event occurs.
Pursuant to the Promissory Note, P3 LLC will pay
VBC an up-front fee of 1.5% at the time of each draw under the Promissory Note, In addition, P3 LLC will pay VBC a back-end fee at the
time the Promissory Note as follows: (i) if paid prior to February 28, 2023, 2.25%; (ii) if paid from March 1, 2023
through June 30, 2023, 4.5%; (iii) if paid from July 1, 2023 through December 31, 2021, 6.75% and (iv) if paid
on January 1, 2024 or later, 9.0%.
P3 LLC intends to use the proceeds of the Promissory
Note to fund the Company’s ongoing working capital requirements.
Warrants
In connection with the Promissory Note, on December 13,
2022, P3 LLC and VBC entered into a Warrant (the “Warrant Agreement”). Pursuant to the Warrant Agreement, P3 LLC issued warrants
to purchase 429,180 shares of Class A Common Stock, par value $0.0001 per share, of the Company (the “Common Stock”),
at an exercise price of $4.26 per share (the “Warrants”) to VBC. The number of shares of Common Stock for which the Warrant
is exercisable and the exercise price may be adjusted upon any event involving subdivisions, combinations, distributions, recapitalizations
and like transactions. Pursuant to the Warrant Agreement, the Warrants and the right to purchase securities upon the exercise of the Warrants
will terminate upon the earliest to occur of the following: (a) December 13, 2027; and (b) the consummation of (i) a
sale, conveyance, disposal, or encumbrance of all or substantially all of the Company’s or P3 LLC’s
property or business or the Company’s or P3 LLC’s merger into or consolidation with any other corporation (other
than a wholly owned subsidiary corporation) or (ii) any other transaction or series of related transactions in which more than fifty
percent (50%) of the voting power of the Company or P3 LLC is disposed of.
Subordination Agreement
In connection with the transactions described above,
P3 LLC entered into a subordination agreement, dated as of December 13, 2022 (the “Subordination Agreement”), by and
among the Company, CRG Services LLC, as administrative agent under the Company’s existing term loan facility (the “Term Loan
Facility”) and VBC. Pursuant to the Subordination Agreement, VBC agreed to subordinate its right of payment under the Promissory
Note to the right of payment and security interests of the lenders under the Term Loan Facility. The terms of the Subordination Agreement
will effectively require P3 LLC to pay all interest under the Promissory Note in-kind.
Amendment to Term Loan Agreement
In connection with the transactions described above,
P3 LLC entered into an amendment to that certain Term Loan Agreement, dated as of December 3, 2021, by among P3 LLC, as borrower,
the subsidiary guarantors party thereto, the lenders from time to time party thereto and CRG Servicing LLC, as administrative agent and
collateral agent. The amendment permits the issuance of the Promissory Note and the entry into the Subordination Agreement.
The foregoing descriptions of the Promissory Note,
the Warrant Agreement, the Subordination Agreement and the Amendment to Term Loan Agreement do not purport to be complete and is qualified
in its entirely by the terms of the Promissory Note, the Warrant Agreement, the Subordination Agreement and the Amendment to the Term
Loan Agreement, copies of which are filed herewith as Exhibit 10.1, 10.2, 10.3 and 10.4, respectively, and are incorporated herein
by reference.
