FPCG First Physicians Capital Group Inc (CE)

(State or other jurisdiction

of incorporation)

(Commission

File Number)

(IRS Employer

Identification No.)

FIRST PHYSICIANS CAPITAL GROUP, INC.

Date: August 26, 2014

/s/ Sean Kirrane

1. Merger

TargetCo will be merged into AcquisitionCo, or with a wholly-owned subsidiary of AcquisitionCo, in a statutory merger. This can be accomplished through either a One or Two Step Merger.

AcquisitionCo shall be funded with cash and tender for 100% of outstanding shares of TargetCo subject to a minimum tender of 60%.

Once the tender is complete, AcqusitionCo shall permit TargetCo shareholders the option of rolling over a percentage of the cash consideration into shares of the new private company. For example, shareholders with a pre-transaction minimum ownership in excess of 250,000 common stock equivalent shares giving effect to conversion of any preferred stock prior to the transaction would be able to allocate up to 40% of their ownership to “roll-over” into the private company subject to the minimum tender amount of 60% of total ownership.

Post-Closing of the going private transaction, AcquisitionCo shall access appropriate growth capital to execute on the go-forward business opportunity. The growth capital would consist of debt and equity as required for future transactions.

2. Consideration.

3. Warrants/Options.

4. Tax and Accounting

    Consequences.

5. Due Diligence.

6. Representations

    and Warranties; Indemnity; Escrow.

7. Form S-4

    Registration Statement.

8. Shareholder Approval

The merger will be subject to approval by TargetCo’s and AcquisitionCo’s shareholders.

At the time of execution of the definitive merger agreement, TargetCo’s and AcquisitionCo’s affiliates will agree to vote in favor of the merger. It will be a condition of the merger that a majority approve the merger.

9. Employment/ Noncompetition

    Agreements

Certain C-level Executives will execute Employment/Noncompetition Agreements with AcquisitionCo or minimally offer the same protections that TargetCo now enjoys.

Key suppliers and sub-contractors to TargetCo and its clients shall re-affirm their contracts and relationships with the TargetCo and its clients on terms satisfactory to AcquisitionCo.

10. Employee Matters.

11. Conditions to Closing.

12. Continuation of Business.

13. Closing.

14. Exclusive Period of

    Negotiation.

Upon the signing of this letter of intent, the parties will enter into negotiations to execute definitive agreements consistent with the terms and conditions of this letter. AcquisitionCo through its Representatives shall deliver the first draft of the definitive agreements.

Accordingly, TargetCo agrees that, after signing this letter and until October 15, 2014 or 45 Days from the date Targetco signs this Letter of Intent (the “Exclusive Period-”), TargetCo will not, and will not permit its officers, directors, employees, agents or representatives to, solicit, encourage, initiate, enter into, continue or participate in any negotiations or discussions with or provide any information to any third party concerning the possible acquisition or sale of TargetCo or its stock, business or assets or any other transaction that would be inconsistent with the merger contemplated by this letter.

Except as required by law, between the date of this letter the Termination Date (defined below), TARGETCO will not directly or indirectly, through any shareholder, officer, director, employee, affiliate or agent or otherwise, take any action to solicit, initiate, seek, entertain, encourage or support any inquiry, proposal or offer from, furnish any information to, or participate in any negotiations with, any third party regarding any acquisition, merger, equity financing, sale or other going public transaction of TARGETCO, or any acquisition of or consolidation with other parties or any acquisition of any material portion of the stock or assets of the other parties. TARGETCO agrees that any such negotiations in progress as of the date of this letter will be suspended during such period and that TARGETCO will not accept nor enter into any agreement, arrangement or understanding regarding any such third party acquisition, merger or divestiture transaction during such period.

If TARGETCO or its shareholders, officers, directors, employees, affiliates or agents thereof receives any written proposal for any third party acquisition transaction involving either TARGETCO or any of its respective affiliates or subsidiaries or partnerships, TARGETCO will immediately (within 24 hours) notify ACQUISITIONCO. If either TARGETCO for any reason enters into a letter of intent or other agreement with respect to a purchase of a portion or all of the ownership interests in TARGETCO in a sale, a going public transaction, or a related financing prior to expiration of this Letter of Intent, then TARGETCO shall pay to the other, as liquidated damages and not as a penalty or forfeiture, an amount equal to the ACQUISITIONCO’s actual expenses incurred in connection with the Transaction up to a maximum reimbursed amount of $500,000.

As additional compensation to ACQUISITIONCO, if TARGETCO abandons the Transaction in favor of another transaction or financing involving a change of control, going public or similar transaction, TARGETCo shall pay ACQUISITIONCO a one-time break-up fee of $1,000,000. There shall be a six (6) month tail on break-up fees and expense reimbursements from the Expiration Date as set forth in this Letter of Intent.

15. Disclosure.

AcquisitionCo will issue a press release upon signing the definitive agreement.

AcquisitionCo and TargetCo agree to take all reasonable precautions to prevent any trading in AcquisitionCo securities by their respective officers, directors, employees and agents having knowledge of the proposed merger until the proposed merger has been sufficiently publicly disclosed. The parties understand and agree that until the press release is issued, neither party will disclose the fact that these negotiations are taking place, except to professional advisors and to employees of AcquisitionCo and TargetCo on a need-to-know basis.

16. Professional Fees.

ACQUISITIONCO shall each pay its own fees and expenses, and those with respect to its Representatives, with respect to the Transaction, including but not limited to fees and expenses related to due diligence, the negotiation of the definitive agreements and, if the definitive agreements are executed, the closing of the Transaction contemplated thereby, except as set forth in Section 14 above.

Each party will pay the fees of its own accountants, attorneys, investment advisors and other professionals. If the merger is consummated, at the Closing, TargetCo may pay the reasonable fees and expenses of TargetCo’s investment bankers, accountants and attorneys incurred in the merger, not to exceed a combined total of $250,000 and any amounts above the cap shall reduce the purchase price dollar for dollar.

Additionally, prior to the commencement of due diligence, TargetCo shall provide a due diligence deposit in favor of AcquisitionCo of $250,000. The deposit shall be applied to all direct and indirect costs of AcquisitionCo and its Representatives with respect to the Transaction. If AcqusitionCo at its sole option declines to move forward with the Transaction any un-used portions of the deposit shall be returned to TargetCo.

If TargetCo abandons the Transaction, AcquisitionCo shall retain any remaining deposit funds along with those fees outlined in Paragraph 14 above.

17. Confidentiality.

Neither Party, nor its officers, directors, trustees, employees, representatives, agents, shareholders, members or affiliates, shall disclose any confidential information regarding the other Party or the Transaction proposed or terms under negotiation, except to its own officers, directors, trustees, employees, representatives, agents, shareholders, members, or affiliates who have a need to know for the sole and limited purpose of assisting in the Transaction (collectively, “Representatives”); provided that each Party shall be responsible for ensuring that its Representatives comply with the confidentiality obligations set forth herein. This Section 17 shall not prohibit disclosures of confidential information as may be required by any lawful statute, regulation, order, summons or subpoena; provided that the Party that is under a legal obligation to disclose information will promptly notify the other Party and permit the other Party’s counsel to speak with the disclosing Party’s counsel prior to announcement.

For purposes of this Letter of Intent, the term “confidential information” includes the subject matter of the proposed Transaction and all information exchanged between, or provided by, the Parties related to the Transaction including, without limitation, the terms of this Letter of Intent and attached Term Sheet, business records, appraisals, consultants’ reports, financial information, operational information, offers and negotiations related to the Transaction. The term “confidential information” does not include information that has been made generally available to the public other than as a result of a breach by a Party or its Representatives of their obligations hereunder or information that has become available to a Party on a non-confidential basis from a source other than the other Party or its Representatives that is not under a duty of confidentiality with respect to such information. The Parties further agree that the Parties shall jointly issue all public statements regarding the Transaction.

Each Party acknowledges and agrees that neither the other Party nor any of the other Party’s Representatives (i) has made or makes any express or implied representation or warranty as to the accuracy or completeness of the confidential information or (ii) will have any liability whatsoever to the other Party or any of its Representatives resulting from or relating to any use of the confidential information or any errors therein or omissions therefrom. Each Party further agrees that it is not entitled to rely on the accuracy or completeness of the confidential information, and that it will only be entitled to rely on such representations or warranties as may be included in any definitive agreement with respect to the Transaction, subject to such limitations and restrictions as may be contained therein.

Upon the earliest to occur of (i) the termination of a Party’s evaluation of the confidential information furnished by the other Party, or (ii) a decision by either Party not to pursue the Transaction, following which such Party will promptly inform the other Party in writing of such decision, each Party and its Representatives will promptly delete all confidential information furnished by the other Party from any computer and backup storage system in which the confidential information has been stored and will turn over to the other Party (x) all documents and other materials (including without limitation all copies or reproductions of such documents or materials, tapes, floppy disks, backup copies, and other forms of electronic storage media) which constitute, contain or are derived from such confidential information, and (y) all other documents, notes, and other materials connected with or arising out of the other Party’s evaluation of the Transaction, and no copy thereof will be retained by the other Party or its Representatives. The other Party will deliver to the disclosing Party a certificate that it, along with its Representatives, have complied with the requirements of this Paragraph 5(c). Notwithstanding the return, deletion or destruction of the confidential information, each Party and its Representatives will continue to be bound by all obligations of confidentiality and other obligations under this Agreement.

Each Party acknowledges that the other Party could suffer serious adverse consequences from the unauthorized use or disclosure of any confidential information by it in the course of its business and operations. Each Party further acknowledges that, upon breach by it of any provision of this Section 17, the other Party hereto will have all lawful remedies including injunctive relief, in addition to all of the rights and remedies available to it at law and equity. This Section 17 supersedes any previous confidentiality agreement between the Parties. Each Party acknowledges and agrees that the confidential information is to be used to evaluate the Transaction and for no other purpose.

This Section 17 related to confidentiality shall expire 1 year from the date of this Letter of Intent.

18. Nature of Negotiations.

19. Effect of this Letter.

20. Remedies.

21. Termination.

22. Letter of Intent Acceptance

On behalf of AcquisitionCo

Clearlake Capital Group LP

On behalf of TargetCo

First Physicians Capital Group, Inc.

A Delaware Corporation

By:

Its:

By: William A. Houlihan

Its: Chairman of the Board of Directors

By:

Its:

CLG Health Care Analytics LLC

A Delaware Limited Liability Company

By: Sean Kirrane

Its: Chief Executive Officer

By:

Its:

By:

Its: Chief Financial Officer