[Letterhead of CRAssociates, Inc.]
December 8, 1997
PHP Healthcare Corporation
00000 Xxxxxxxx Xxxx Xxxxx
Xxxxxx, Xxxxxxxx 00000
Attention: Board of Directors
Re: Acquisition of Assets Relating to a Portion of the
Service Business
of PHP Healthcare Corporation
Gentlemen:
This letter is intended to set forth the basic understanding
between CRAssociates, Inc., a Delaware corporation ("CRA"), and
PHP Healthcare Corporation, a Delaware corporation (the
"Company"), concerning the purchase by CRA, either directly or
through a wholly owned subsidiary, of the assets relating to a
portion of the Company's Service Business, as described in
paragraph 3 and Annex I hereof (the "Service Business").
The proposed terms of CRA's acquisition of the Service
Business from the Company are as follows:
1. Transaction. Subject to the negotiation, execution
and delivery of a mutually satisfactory definitive asset purchase
agreement (the "Asset Purchase Agreement") setting forth all of
the terms and conditions of the purchase by CRA of the Service
Business and other related matters, the Company will sell to CRA
and CRA will purchase from the Company the Assets (as defined
below) and assume the Assumed Liabilities (as defined below) on
the date of the satisfaction or waiver of the conditions set
forth in the Asset Purchase Agreement (the "Closing Date"). The
Assets will be transferred to CRA free and clear of all liens,
pledges, judgments, security interests, restrictions and
encumbrances.
2. Purchase Price. CRA will acquire the Assets for an
aggregate purchase price equal to Ten Million Dollars
($10,000,000) (the "Purchase Price"). The Purchase Price will be
paid in cash, by means of a wire transfer of immediately
available funds. A portion of the Purchase Price will be
deposited into escrow on the Closing Date to satisfy any
potential indemnification obligations of the Company.
PHP Healthcare Corporation
December 8, 1997
Page 2
3. Assets. The Assets will consist of the assets
relating to or used in connection with the Service Business,
including, without limitation, inventories, marketable
securities, interests in real property, fixed assets, equipment,
all contracts to perform work or provide goods and
services (including Primecare, Annandale and the Government
Contracts, as defined in Annex I), all orders, work in process,
all existing service or maintenance contracts, prepaid accounts,
all supplies, durable goods and other miscellaneous inventory,
equipment, personalty or assets, and all client lists, patient
records, business goodwill, files, books and records, and
intellectual and industrial property rights and know-how.
4. Assumed Liabilities. The Assumed Liabilities will
consist of those liabilities of the Service Business which arise
after the Closing Date in connection with the performance by CRA
of the Government Contracts. Except for the Assumed Liabilities,
CRA will assume no liabilities of the Company in connection with
the consummation of the transaction described in this letter.
The Assumed Liabilities will exclude any outstanding indebtedness
or intercompany payables of the Company.
5. Asset Purchase Agreement. The Asset Purchase
Agreement will include the following: (a) customary
representations, warranties and indemnities by the Company
concerning the Assets and the Service Business, including,
without limitation, matters relating to authority, organization,
ownership, environmental, health and safety, employees and
employee benefits, labor, compliance with laws, taxes,
intellectual or industrial property rights, obligations,
contractual arrangements, liabilities, business conduct,
projections, business prospects and financial condition; (b)
customary closing conditions including, but not limited to, the
following: (i) the parties will have obtained all governmental,
corporate or contractual consents, assignments or approvals as
may be required or appropriate in order to consummate the
transaction described herein; (ii) CRA will have completed its
due diligence inquiries, the results of which will be
satisfactory to CRA; (iii) CRA will have verified or obtained all
required or appropriate permits, licenses, franchises,
authorizations, and approvals to conduct the Service Business;
(iv) no change in the business, prospects or commercial
relationships of the Company that could have a material adverse
impact on the Service Business will have occurred; and (v) CRA
will have obtained the necessary funds to finance the Purchase
Price and its transaction expenses; and (c) an escrow of a
portion of the Purchase Price on the Closing Date in order to
satisfy any potential indemnification obligations.
6. Conduct of Business. The Company will continue to
conduct the Service Business in the ordinary and normal course,
and the Company will not enter into or terminate any material
contracts or transactions nor incur any liabilities with respect
to the Service Business, including, without limitation, the
acquisition or disposition of assets or the granting of
compensation increases to employees above current levels (other
than regular and normal salary increases), without CRA's prior
written consent.
7. Public Announcements. All press releases and public
announcements relating to the transaction contemplated by this
letter will be agreed to and prepared jointly by the Company and
CRA; provided, however, that nothing contained herein shall
prohibit any party hereto from making any disclosure required by
applicable laws or regulations.
PHP Healthcare Corporation
December 8, 1997
Page 3
8. Due Diligence. The Company and its representatives,
officers, employees and advisors, including accountants and legal
advisors, will provide CRA and its advisors with all information,
books, records and property that CRA reasonably considers
necessary or appropriate in connection with its due diligence
inquiry of the Service Business. Such inquiry will include,
without limitation, legal, financial, fiscal, environmental,
health and safety, tax, technology, and business conduct
investigations. On the basis of the results of these inquiries,
CRA will form a definitive judgment concerning whether or not to
proceed with the transaction as herein described. The Company
agrees to make available to CRA such employees, managers,
consultants, advisors and others as reasonably requested by CRA
for meetings, visitation and discussions concerning the Company
and the transaction described herein.
9. Exclusivity. In consideration of the mutual covenants
and agreements contained herein, the Company will discontinue all
negotiations with all prospective purchasers of the Assets or the
Service Business, and will not permit any of their respective
affiliates, officers, employees, agents or representatives,
whether directly or indirectly, to solicit or encourage
(including by way of furnishing information) any inquiries or
proposals relating to, or engage in any negotiations with respect
to, the sale of the Assets or the Service Business or an
investment therein, or any part thereof, or any other business
combination involving the Service Business.
10. No Brokers. Each party represents and warrants to the
other that there are no brokers or finders entitled to any
compensation with respect to the above described transaction and
each agrees to indemnify and hold the other harmless from and
against any expenses or damages incurred as a result of a breach
of this representation and warranty.
11. Expenses. Each party will bear its own costs and
expenses in connection with the transaction described herein.
Other than matters addressed in Paragraphs 6 through 11
above, which the undersigned parties agree will be legally
binding, the terms herein contained are not intended, nor will
they be construed to be legally binding on the parties hereto,
and the transaction will be binding on the parties only in
accordance with the terms contained in the definitive Asset
Purchase Agreement and other agreements if and when such
agreements have been executed by the parties. This letter may be
terminated upon written notice by either party at any time after
January 31, 1998. The terms of this letter will be governed by
the laws of the State of Delaware, without regard to provisions
thereof relating to choice of law or conflicts of law.
The Company acknowledges that the proposal set forth in this
letter was solicited and requested by the Company pursuant to the
letter dated November 26, 1997 from the Company to CRA.
PHP Healthcare Corporation
December 8, 1997
Page 4
If the foregoing proposal is acceptable, please indicate
such acceptance by signing the enclosed execution counterparts of
the letter where indicated. The proposal set forth in this
letter will expire at 5:00 p.m. on December 12, 1997 unless this
letter is executed and returned to CRA prior to such date.
Very truly yours,
CRAssociates, Inc., a Delaware
corporation
/s/ Xxxxxxx X. Xxxxxxx
By: Xxxxxxx X. Xxxxxxx, President
Accepted and Agreed this day
of December, 1997
PHP HEALTHCARE CORPORATION,
a Delaware corporation
By:
Title:
Annex I
The Service Business consists of: (A) the following
operations of the Company's Government Division: (i) ambulatory
care - outpatient primary care for government-related
populations; (ii) medical staffing - the recruitment and
provision of qualified medical, nursing and mental health
specialists and technicians; and (iii) mental health - inpatient
and outpatient psychiatric services for government populations,
and (B) the Company's Primecare facility located in Annandale,
Virginia. The Service Business will include the following
government contracts (the "Government Contracts") and business
operations:
Selected Government Contracts and Business Operations:
Long Beach, Navcare (California) N62645-93-C-0041
Oceanside, Navcare (California) N62645-93-C-0039
Primus - Northern Virginia (Woodbridge, Fairfax) DADA10-96-C-0028
Victory Clinic, Ft. Xxxxxxx (Columbus, GA) DADA10-97-C-0003
Wm. Beaumont Psychiatric (Ft. Bliss, TX) DADA10-96-C-0022
Ft. Xxxx, Kentucky DABT23-96-C-0374
Family Practice (Multiple Regions) DADA10-97-C-0037
Social Workers (Various Locations) DADA10-94-C-0030
Primecare Annandale, Annandale, VA
