Escrow Agreement
On December 3, 2021, the Issuer entered into the Escrow Agreement among the Issuer, P3 Health Group Holdings, P3 LLC, Hudson Vegas Investment SPV, LLC
(the Class D Member), Mary Tolan and Sherif Abdou (the Unitholder Representatives) and PNC Bank, N.A. (Escrow Agent). Pursuant to the Escrow Agreement, certain of the consideration for the Merger was set
aside in an escrow until resolution of the disputes described below.
At Closing, (i) cash, certain units of P3 LLC (P3 LLC Units) and
shares of Class V Common Stock and Class A Common Stock were placed in escrow, to be allocated upon resolution of the dispute regarding the Option described on Pages 233-234 of the definitive proxy
statement in connection with the solicitation of proxies from Foresights stockholders to approve the Merger and related transactions filed with the Securities and Exchange Commission on October 25, 2021, as supplemented on
November 29, 2021. (the Class D Dispute), and (ii) certain members of P3 LLC (the Contributing P3 Equityholders) contributed cash, and Hudson contributed P3 LLC Units and shares of Class V Common Stock,
into escrow, to be allocated upon resolution of a dispute regarding Hudson Vegas Investment SPV, LLCs right to a preference on the cash portion of the Merger consideration (the Cash Preference Dispute). If the Class D Dispute
is (i) resolved in favor of Hudson Vegas Investment SPV, LLC, Hudson Vegas Investment SPV, LLC will receive cash, the P3 LLC Units and shares of Class V Common Stock escrowed for the Class D Dispute and the shares of Class A
Common Stock escrowed for the Class D Dispute will be retired or (ii) resolved in favor of the former members of P3 Health Group Holdings (other than Hudson Vegas Investment SPV, LLC), the former members of P3 Health Group Holdings
(including Hudson Vegas Investment SPV, LLC) will receive cash, the P3 LLC Units and Class V Common Stock or shares of Class A Common Stock, as applicable, escrowed for the Class D Dispute. If the Cash Preference Dispute is
(i) resolved in favor of Hudson Vegas Investment SPV, LLC, the Contributing P3 Equityholders will receive the P3 LLC Units and shares of Class V Common Stock escrowed for the Cash Preference Dispute or shares of Class A Common Stock,
as applicable, and Hudson Vegas Investment SPV, LLC will receive cash, or (ii) resolved in favor of the former members of P3 Health Group Holdings (other than Hudson Vegas Investment SPV, LLC), Hudson Vegas Investment SPV, LLC will receive the
P3 LLC Units and shares of Class V Common Stock escrowed for the Cash Preference Dispute and the Contributing P3 Equityholders will receive cash.
In
the Escrow Agreement, the parties authorized the Unitholder Representatives to direct the voting power of any of the securities in escrow, as applicable, on any matter put to a vote of the applicable securityholders in accordance with the
proportional vote totals that such matter received by all voting securities other than those in escrow.
The foregoing description of the Escrow Agreement
is qualified in its entirety by the full text of the Escrow Agreement, a copy of which is attached hereto as Exhibit 7 and is incorporated herein by reference.
Registration Rights and Lock-Up Agreement
In
connection with the Merger, at Closing, the Issuer, Foresight Sponsor Group, LLC, Foresights sponsor (the Sponsor), and FA Co-Investment LLC, an affiliate of one of the underwriters in the IPO (together with the Sponsor, the
Sponsors), certain of the former equityholders of P3 Health Group Holdings (the P3 Sellers), Brian Gamache, John Svoboda and Robert Zimmerman (collectively, the Holders) entered into that certain
Registration Rights and Lock-Up Agreement (the Registration Rights and Lock-Up Agreement).
The Registration Rights and Lock-Up Agreement was
entered into to: (i) amend, restate and replace the registration rights agreement entered into by Foresight with the Sponsors, Brian Gamache, John Svoboda and Robert Zimmerman on February 9, 2021, and (ii) provide registration rights to
the Holders pursuant to which Foresight will be required to file a shelf registration statement to register the resale shares of Class A Common Stock or any other equity security held by the Holders upon the Closing, including the shares of
Class A Common Stock issuable upon the future exchange of P3 LLC Units and shares of Class V Common Stock by such Holders, in each case held by them upon the Closing (collectively, Registrable Securities).
In addition, subject to certain requirements and customary conditions, the Holders may demand, at any time or from time to time, that Foresight file a shelf
registration statement on Form S-3, or if Form S-3 is not available, a Form S-1 to register the Registrable Securities held by such Holders. The Registration Rights and Lock-Up Agreement also provides the Holders with
piggy-back registration rights, subject to certain requirements and customary conditions.
Subject to certain exceptions, the Registration
Rights and Lock-Up Agreement further provides for the Class A Common Stock, the Class V Common Stock and the Class A Common Stock issuable upon the future exchange of P3 LLC Units and shares of Class V Common Stock held by the
P3 Equityholders after the Closing to be locked-up for a period of six months following the Closing, while the Class A Common Stock received by the Sponsors upon conversion of the Class B Common Stock on the Closing Date will be locked-up for a
period of one year following the Closing, subject to earlier release upon (i) the date on which the last reported sale price of the Class A Common Stock equals or exceeds $12.00 per share for any 20 trading days within any 30-day trading
period commencing at least 150 days after the Closing or (ii) the date on which the Issuer completes a liquidation, merger, capital stock exchange or other similar transaction after the Closing that results in all of the Issuers
stockholders having the right to exchange their shares of Class A Common Stock for cash, securities or other property. The Private Placement Units, including the Private Placement Warrants and Class A Common Stock issuable upon exercise of
the Private Placement Warrants will be locked-up for a period of thirty days following the Closing.
Except as set forth in the Registration Rights and
Lock-Up Agreement, Foresight will be required to bear all expenses incurred in connection with the filing of any such registration statements and any such offerings, other than underwriting discounts and commissions on the sale of Registrable
Securities, brokerage fees, underwriter marketing costs and, except as specified in the Registration Rights and Lock-Up Agreement, the fees and expenses of counsel to holders of Registrable Securities. The Registration Rights and Lock-Up Agreement
also will include customary provisions regarding indemnification and contribution.
The foregoing description of the Registration Rights and Lock-Up
Agreement is qualified in its entirety by the full text of the Registration Rights and Lock-Up Agreement, a copy of which is attached hereto as Exhibit 8 and is incorporated herein by reference.
Tax Receivable Agreement
In connection with the
Transaction, on the Closing Date, the Issuer, certain members of P3 LLC, P3 LLC and the other TRA Holders (as defined in the Tax Receivable Agreement) entered into a tax receivable agreement (the Tax Receivable Agreement).
The Issuer expects to obtain an increase in its proportionate share of the tax basis of the assets of P3 LLC (1) as a result of the purchase of
P3 Existing Units from the P3 Equityholders in connection with the Merger, (2) if and when the P3 Equityholders receive shares of Class A Common Stock or cash in connection with any future redemption or exchange of P3 LLC
Units pursuant to the P3 LLC A&R LLC Agreement and (3) transactions pursuant to the Merger Agreement that result in a basis adjustment and in connection with certain distributions (or deemed distributions) by P3 LLC (any such
basis increase, the Basis Adjustments). The parties intend to treat the purchase of P3 Existing Units described in clause (1) and any such redemption or exchange of P3 LLC Units described in clause (2) above as a
direct purchase by the Issuer of P3 Existing Units and P3 LLC Units, as applicable, from the P3 Equityholders for U.S. federal income and other applicable tax purposes, regardless of whether such P3 Existing Units or P3 LLC Units are
surrendered by the P3 Equityholders to P3 LLC or sold to the Issuer upon the exercise of its election to acquire P3 LLC Units directly. A Basis Adjustment may have the effect of increasing (for income tax purposes) depreciation and
amortization deductions allocable to the Issuer and thereby reducing the amounts otherwise payable in the future to various tax authorities. The Basis Adjustments may also decrease gains (or increase losses) on future dispositions of certain assets
to the extent tax basis is allocated to those assets.
The Tax Receivable Agreement will provide for the payment by the Issuer to the
P3 Equityholders of 85% of the amount of tax benefits, if any, that are actually realized, or in some circumstances are deemed to realize, as a result of the transactions described above, including tax benefits attributable to payments made
under the Tax Receivable Agreement (such as deductions attributable to imputed interest deemed paid pursuant to the Tax Receivable Agreement). P3 LLC will have in effect an election under Section 754 of the Code effective for each taxable
year in which a redemption or exchange of P3 LLC Units for shares of Class A Common Stock or cash occurs. These Tax Receivable Agreement payments are not conditioned upon any continued ownership interest in either P3 LLC or the Issuer by
the P3 Equityholders. The rights of the P3 Equityholders under the Tax Receivable Agreement are assignable to transferees, including transferees of the P3 LLC Units (other than the Issuer or P3 LLC as transferee pursuant to subsequent
redemptions or exchanges of the transferred P3 LLC Units).
Decisions made by the Issuer with respect to mergers, asset sales, other forms of business
combinations, or other changes in control, may influence the timing and amount of payments that are received by the P3 Equityholders under the Tax Receivable Agreement. For example, the earlier disposition of assets following a transaction that
results in a Basis Adjustment will generally accelerate payments under the Tax Receivable Agreement and increase the present value of such payments.
For
purposes of the Tax Receivable Agreement, cash savings in income tax will be computed by comparing actual income tax liability (subject to certain assumptions relating to state and local income taxes) to the amount of such taxes that the Issuer
would have been required to pay had there been no Basis Adjustments and had the Tax Receivable Agreement not been entered into. The Tax Receivable Agreement will generally apply to each of the Issuers taxable years, beginning with the first
taxable year ending after the Merger. There is no maximum term for the Tax Receivable Agreement; however, the Tax Receivable Agreement may be voluntarily terminated by the Issuer pursuant to an early termination procedure and shall be terminated
upon the occurrence of certain mergers, asset sales, other forms of business combinations, or other changes of control or material breach of the Issuers material obligations under the Tax Receivable Agreement under certain circumstances, and
in each case the Issuer will be obligated to pay the P3 Equityholders an agreed upon amount equal to the estimated present value of the remaining payments to be made under the agreement (calculated based on certain assumptions, including
regarding tax rates and utilization of the Basis Adjustments). However, the Issuers ability to make such payment may be subject to various limitations and restrictions, such as restrictions on distributions that would either violate any
contract or agreement to which The Issuer or P3 LLC are then a party, or any applicable law.
The payment obligations under the Tax Receivable
Agreement are the Issuers obligations and not of P3 LLC. Although the actual timing and amount of any payments that may be made under the Tax Receivable Agreement will vary, the Issuer expects that the payments that may be required to be
made to the P3 Equityholders will be substantial. Any payments made by the Issuer to the P3 Equityholders under the Tax Receivable Agreement will generally reduce the amount of cash that might have otherwise been available to the Issuer.
To the extent that the Issuer is unable to make payments under the Tax Receivable Agreement for any reason, the unpaid amounts will be deferred and will accrue interest until paid. Failure to make any payment required under the Tax Receivable
Agreement (including any accrued and unpaid interest) within 90 calendar days of the date on which the payment is required to be made will constitute a material breach of a material obligation under the Tax Receivable Agreement, which will
generally terminate the Tax Receivable Agreement and accelerate payments thereunder, unless the applicable payment is not made because (i) the Issuer is prohibited from making such payment under the terms of the Tax Receivable Agreement or the
terms governing certain of its indebtedness or (ii) the Issuer does not have, and despite using commercially reasonable efforts cannot obtain, sufficient funds to make such payment.
The Tax Receivable Agreement provides that if (i) the Issuer materially breaches any of its material obligations under the Tax Receivable Agreement,
(ii) certain mergers, asset sales, other forms of business combinations, or other changes of control were to occur, or (iii) the Issuer elects an early termination of the Tax Receivable Agreement, then its obligations, or its
successors obligations, under the Tax Receivable Agreement would accelerate and become due and payable, based on certain assumptions, including an assumption that the Issuer would have sufficient taxable income to fully utilize all potential
future tax benefits that are subject to the Tax Receivable Agreement, and an assumption that, as of the effective date of the acceleration, any P3 Equityholder that has P3 LLC Units that have not been exchanged is deemed to have exchanged
such P3 LLC Units for the fair market value of the shares of Class A Common Stock or the amount of cash that would be received by such P3 Equityholder had such P3 LLC Units actually been exchanged on such date, whichever is lower. However,
as noted above, the Issuers ability to make such payments may be limited by restrictions on distributions that would either violate any contract or agreement to which the Issuer or P3 LLC are then a party, or any applicable law.
As a result of the foregoing, the Issuer would be required to make an immediate cash payment equal to the estimated present value (calculated based on a
discount rate equal to 10%) of the anticipated future tax benefits that are the subject of the Tax Receivable Agreement based on certain assumptions, which payment may be made significantly in advance of the actual realization, if any, of those
future tax benefits and, therefore, the Issuer could be required to make cash payments to the P3 Equityholders that are greater than the specified percentage of the actual benefits the Issuer ultimately realizes in respect of the tax benefits
that are subject to the Tax Receivable Agreement. Payments under the Tax Receivable Agreement will be based on the tax reporting positions that the Issuer determines, and the IRS or another tax authority may challenge all or part of the Basis
Adjustments, as well as other related tax positions the Issuer takes, and a court could sustain any such challenge. If the outcome of any such challenge to any Basis Adjustments or the deduction of imputed interest deemed paid pursuant to the Tax
Receivable Agreement would reasonably be expected to materially affect a recipients payments under the Tax Receivable Agreement, then the Issuer will not be permitted to settle or to fail to contest such challenge without the consent (not to
be unreasonably withheld or delayed) of each P3 Equityholder, and any such restrictions will apply for as long as the Tax Receivable Agreement remains in effect. The Issuer will not be reimbursed for any cash payments previously made to the
P3 Equityholders pursuant to the Tax Receivable Agreement if any tax benefits initially claimed by the Issuer are subsequently challenged by a taxing authority and ultimately disallowed. Instead, in such circumstances, any excess cash payments
made by the Issuer to the P3 Equityholders will be netted against any future cash payments that the Issuer might otherwise be required to make under the terms of the Tax Receivable Agreement. However, the Issuer might not determine that the Issuer
has effectively made an excess cash payment to the P3 Equityholders for a number of years following the initial time of such payment. As a result, it is possible that the Issuer could make cash payments under the Tax Receivable Agreement that
are substantially greater than its actual cash tax savings.
Payments are generally due under the Tax Receivable Agreement within a specified period of
time following the filing of the Issuers tax return for the taxable year with respect to which the payment obligation arises, although interest on such payments will begin to accrue at a rate of LIBOR plus 100 basis points from the due
date (without extensions) of such tax return. Any late payments that may be made under the Tax Receivable Agreement will continue to accrue interest at LIBOR (or alternate replacement rate) plus 500 basis points until such payments are made,
including any late payments that the Issuer may subsequently make because it may not have enough available cash to satisfy payment obligations at the time at which they originally arose or were prohibited from making such payments under the terms
governing certain of indebtedness (although such payments are not considered late payments and therefore would accrue interest at the lower interest if the Issuer makes such payments promptly after such limitations are removed). Subject to certain
exceptions as noted above, failure to make any payment required under the Tax Receivable Agreement (including any accrued and unpaid interest) within 90 calendar days of the date on which the payment is required to be made will constitute a
material breach of a material obligation under the Tax Receivable Agreement under certain circumstances, in which case, the Tax Receivable Agreement will terminate and future payments thereunder will be accelerated, as noted above.
The foregoing description of the Tax Receivable Agreement is qualified in its entirety by the full text of the Tax Receivable Agreement, a copy of which is
attached hereto as Exhibit 9 and is incorporated herein by reference.