Exhibit 10.1

EXECUTION COPY

 

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CIT Capital Securities LLC

CIT Healthcare LLC

505 Fifth Avenue

New York, New York 10017

November 6, 2007

Senior Facilities

Commitment Letter

CONFIDENTIAL

The Providence Service Corporation

5524 E. Fourth Street

Tucson, AZ 85711

Attention:   Mr. Fletcher J. McCusker,   Chairman and Chief Executive Officer

Ladies and Gentlemen:

The Providence Service Corporation (“Borrower”; sometimes referred to herein as
“you”) has advised CIT Healthcare LLC (“CITHC” or “Agent”) and CIT Capital
Securities LLC (“CIT” or “Arranger” and, together with CITHC, the “Commitment
Parties”; sometimes referred to herein as “we” or “us”) that it intends to
acquire all of the outstanding capital stock of Charter LCI Corporation
(“Target”) from the shareholders of Target (“Sellers”) pursuant to an Agreement
and Plan of Merger (the “Merger Agreement”) among the Target, you, a
wholly-owned subsidiary of you, the Sellers and a representative of the Sellers
(the “Transaction”).

In connection with the Transaction, the Borrower has requested that CITHC commit
to provide either (1) senior secured first lien credit facilities (the “Senior
Secured Facilities”) in the aggregate amount of up to $253,000,000 (to be
comprised of (i) a term loan facility in an aggregate principal amount of
$173,000,000, (ii) a delayed draw term loan facility in an aggregate principal
amount of $40,000,000 and (iii) a revolving credit facility in an aggregate
principal amount of up to $40,000,000, and that CIT agrees to arrange and
syndicate the Senior Secured Facilities.

Based upon and subject to the terms and conditions set forth in this commitment
letter (the “Commitment Letter”), the Summary Terms and Conditions attached
hereto as Appendix A (the “Term Sheet”) and the fee letter of even date herewith
(the “Fee Letter”, and together with the Commitment Letter and the Term Sheet,
the “Commitment”), CITHC is pleased to advise you of its commitment to provide
the full amount of the Senior Secured Facilities, and to act as the
administrative agent and collateral agent in respect thereof, and CIT is pleased
to advise you of its agreement to act as the arranger for the Senior Secured
Facilities. CITHC will act as the sole administrative agent and sole collateral
agent for the Senior Secured Facilities and CIT will act as the sole lead
arranger and sole bookrunner for the Senior Secured Facilities. You agree that
no other agents or arrangers will be appointed, and no other titles or
compensation (other than as set forth in the Fee Letter) will be awarded or
paid, in connection with the Senior Secured Facilities unless approved by the
Commitment Parties.

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In consideration of the commitments and agreements of the Commitment Parties
hereunder, you agree to pay the nonrefundable fees described in the Term Sheet
and the Fee Letter.

The Commitment does not set forth all of the terms and conditions of the
proposed financing; rather, it only summarizes the major points of understanding
which will be the basis of the final financing agreements and related
documentation (which are collectively referred to herein as the “Loan
Documents”) which will be drafted by, and will be in form and substance
satisfactory to, the Commitment Parties and their counsel for healthcare
industry senior debt financing transactions of this kind. All terms used in this
Commitment Letter and not otherwise defined herein shall have the meanings
ascribed to them in the Term Sheet.

The Commitment is issued by the Commitment Parties based upon the financial and
other information regarding the Borrower and the Target and the Transaction
previously provided to the Commitment Parties. Accordingly, the Commitment and
the structure and terms of the Senior Secured Facilities set forth in the Term
Sheet are subject to the fulfillment to the satisfaction of the Commitment
Parties of the following conditions (in addition to those set forth in the Term
Sheet): (i) there shall not have occurred after December 31, 2006 any event,
development or circumstance that has had or could reasonably be expected to have
a material adverse effect on the business, assets, liabilities (actual or
contingent), operations, condition (financial or otherwise) or prospects of the
Borrower and its subsidiaries, taken as a whole; (ii) there shall not have
occurred a Target Material Adverse Effect (as defined below); (iii) the
Commitment Parties shall not become aware of any information or other matter
(including new or updated financial information or projections) concerning the
Borrower or the Target and their respective subsidiaries or the Transaction that
differs from, or is inconsistent with, the information previously provided to
the Commitment Parties by or on behalf of the Borrower in any material respect
or that could reasonably be expected to impair syndication of the Senior Secured
Facilities; (iv) CIT shall have determined that there are no competing issuances
of debt, securities or commercial bank facilities of the Borrower or Target or
any affiliates thereof, being offered, placed or arranged during or immediately
prior to the syndication of the Senior Secured Facilities, except (x) with the
prior written consent of CIT or (y) for any convertible debt to be issued by the
Borrower in connection with the Transaction; and (v) CIT having been afforded a
reasonable period (in any event not less than 30 consecutive days) following
launch of the general syndication of the Senior Secured Facilities and
immediately prior to the closing date to syndicate the Senior Secured
Facilities. Further, the Commitment is subject to there not having occurred at
any time during the period from the date hereof and prior to funding the Senior
Secured Facilities any disruption or adverse change in the financial, banking or
capital markets that, in the judgment of the Commitment Parties, could impair
the syndication of the Senior Secured Facilities.

“Target Material Adverse Effect” shall mean any occurrence, event, fact,
condition, effect or change, whether determined individually or in the
aggregate, that does, or is reasonably likely to, (a) have a material adverse
effect on the business (as presently conducted), operations, results of
operations, properties or financial condition of the Target and its
subsidiaries, taken as a whole, other than any occurrence, event, fact,
condition, effect or change (i) resulting from performance in accordance with
the express terms of the Merger Agreement by the parties thereto of their
respective covenants contained therein; (ii) impacting the economy, securities
markets, or financial markets generally; (iii) impacting the Target’s and its
subsidiaries’ industry in general and not specific to the Target or its
subsidiaries; (iv) resulting from the announcement or existence of the Merger
Agreement or the transactions contemplated thereby; or (v) attributable to any
natural disaster or any acts of terrorism, sabotage, military action or war
(whether or not declared); or (b) materially impair the ability of the Target to
perform its respective obligations under the Merger Agreement.

We reserve the right, prior to or after the execution of definitive
documentation for the Senior Secured Facilities, to syndicate all or a portion
of the Senior Secured Facilities to a group of financial institutions

 

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(together with CITHC, the “Lenders”) identified by us in consultation with you;
provided, such group shall not include any financial institution(s) identified
in writing by you to us prior to your acceptance hereof whose inclusion you
would reasonably object to. We intend to commence syndication efforts promptly
upon the execution of this Commitment Letter, and you agree actively to assist
us (including after the execution of such definitive documentation) in
completing a satisfactory syndication. Such assistance shall include, but not be
limited to (a) your using commercially reasonable efforts to ensure that any
syndication efforts benefit materially from your existing lending and investment
banking relationships and the existing lending and investment banking
relationships of the Target, (b) direct contact between senior management,
representatives and advisors of you and the Target and the proposed Lenders,
(c) assistance by you and the Target in the preparation of a Confidential
Information Memorandum for the credit facilities comprising the Senior Secured
Facilities and other marketing materials to be used in connection with the
syndications (the contents of which you will be solely responsible for),
(d) prior to the launch of the syndication, the obtaining of ratings for the
Senior Secured Facilities from each of Standard & Poor’s Ratings Services
(“S&P”) and Moody’s Investors Service, Inc. (“Moody’s”) and (e) the hosting,
with CIT, of one or more meetings of prospective Lenders.

CIT will manage all aspects of any syndication, including decisions as to the
selection of institutions to be approached and when they will be approached,
when their commitments will be accepted, which institutions will participate and
any applicable titles, the allocation of the commitments among the Lenders and
the amount and distribution of fees among the Lenders. To assist CIT in its
syndication efforts, you agree promptly to prepare and provide (and to use
commercially reasonable efforts to cause the Target to provide) to CIT all
information with respect to the Target and its subsidiaries, the Transaction and
the other transactions contemplated hereby, including all financial information
and projections (the “Projections”), as we may reasonably request. The
agreements in this paragraph shall survive termination of this Commitment and
the closing of the Senior Secured Facilities.

You hereby represent and covenant that (i) all written information, other than
Projections, which has been or is hereafter made available to the Commitment
Parties by you or on your behalf or your representatives in connection with the
transactions contemplated hereby (“Information”) is or, when furnished, will be
complete and correct in all material respects and does not and will not contain
any untrue statement of a material fact or omit to state a material fact
necessary to make the statements contained therein not materially misleading in
light of the circumstances under which such statements are made, and (ii) the
Projections that have been or will be made available to Commitment Parties have
been and will be prepared in good faith based upon assumptions that you believe
are reasonable at the time made and at the time made available to CIT. You
hereby agree to supplement the Information and the Projections from time to time
until the closing date of the Senior Secured Facilities so that the
representation and warranty in the preceding sentence is correct on the closing
date of the Senior Secured Facilities. In structuring and entering into the
Senior Secured Facilities, the Commitment Parties will be using and relying on
the Information and the Projections without independent verification thereof.

You agree (a) to indemnify and hold harmless each Commitment Party and the
Lenders and their respective affiliates and controlling persons and the
respective officers, directors, employees, agents, members and successors and
assigns of each of the foregoing (each, an “Indemnified Person”) from and
against any and all losses, claims, damages, liabilities and expenses, joint or
several, to which any such Indemnified Person may become subject arising out of
or in connection with this Commitment Letter (including the Term Sheet), the Fee
Letter, the Transaction, the Senior Secured Facilities or any related
transaction or any claim, litigation, investigation or proceeding relating to
any of the foregoing, regardless of whether any such Indemnified Person is a
party thereto, and to reimburse each such Indemnified Person upon demand for any
reasonable legal or other expenses incurred in connection with investigating or
defending any of the foregoing; provided that the foregoing indemnity will not,
as to any Indemnified Person, apply to losses, claims, damages, liabilities or
related expenses to the extent they are found in a

 

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final, non-appealable judgment of a court of competent jurisdiction to have
resulted from the willful misconduct or gross negligence of such Indemnified
Person, and (b) to reimburse each Indemnified Person from time to time, upon
presentation of a summary statement, for all reasonable out-of-pocket expenses
(including but not limited to expenses of the Commitment Parties’ due diligence
investigation, syndication expenses, travel expenses, reasonable fees,
disbursements and other charges of counsel to the Commitment Parties), in each
case incurred in connection with the Senior Secured Facilities and the
preparation of this Commitment Letter, the Fee Letter, the definitive
documentation for the Senior Secured Facilities and any security arrangements in
connection therewith. Notwithstanding any other provision of this Commitment
Letter, no Indemnified Person shall be liable for (i) any damages arising from
the use by others of information or other materials obtained through electronic,
telecommunications or other information transmission systems, except to the
extent such damages are found in a final, non-appealable judgment of a court of
competent jurisdiction to have resulted from the willful misconduct or gross
negligence of such Indemnified Person or (ii) any indirect, special, punitive or
consequential damages in connection with its activities related to the Senior
Secured Facilities.

You acknowledge that the Commitment Parties and their affiliates may be
providing debt financing, equity capital or other services (including financial
advisory services) to other persons in respect of which you may have conflicting
interests regarding the transactions described herein and otherwise. Neither the
Commitment Parties nor any of their affiliates will use confidential information
obtained from you by virtue of the transactions contemplated by this Commitment
Letter or their other relationships with you in connection with the performance
by them of services for other persons, and neither the Commitment Parties nor
any of their affiliates will furnish any such information to other persons. You
also acknowledge that neither the Commitment Parties nor any of their affiliates
have any obligation to use in connection with the transactions contemplated by
this Commitment Letter, or to furnish to you, confidential information obtained
by them from other persons.

This Commitment Letter is delivered to you on the understanding that none of
this Commitment Letter, the Term Sheet or the Fee Letter nor any of their terms
or substance shall be disclosed by you, directly or indirectly, to any other
person except (a) to your respective officers, employees, attorneys, accountants
and advisors on a confidential and need-to-know basis, (b) as required by
applicable law or compulsory legal process (in which case you agree to inform us
promptly thereof) and (c) with respect to the Commitment Letter and Term Sheet
only, after your acceptance of the Commitment Letter, to the Target and the
Sellers and their respective attorneys, accountants and advisors on a
confidential and need-to-know basis; provided, however, that such disclosure
shall be made only on the condition that such matters may not, except as
required by law, be further disclosed. None of this Commitment Letter, the Term
Sheet or the Fee Letter nor any of their terms or substance shall be disclosed
by the Borrower directly or indirectly to any other potential source of
financing. No person, other than the parties hereto, is entitled to rely upon
this Commitment Letter or any of its contents or have any beneficial or legal
right, remedy, or claim hereunder. No person shall, except as required by law,
use the name of, or refer to, Agent, or any of its affiliates, in any
correspondence, discussions, press release, advertisement or disclosure made in
connection with the Senior Secured Facilities without the prior written consent
of Agent.

You hereby agree that, on or after the closing of the Senior Secured Facilities,
Agent or any of its affiliates may place “tombstone” advertisements (which may
include any of the Borrower’s trade names or corporate logos and a brief
description of the Senior Secured Facilities and the Transaction) in
publications or other media of their choice (including without limitation
“e-tombstones” published or otherwise circulated in electronic form and related
hyperlinks to the Borrower’s corporate website) at Agent’s own expense. In
addition, Agent may disclose the information about the Senior Secured Facilities
and the Transaction to market data collectors and similar service providers to
the financing community.

 

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The compensation, reimbursement, indemnification, confidentiality, governing law
and waiver of jury trial provisions contained herein and in the Fee Letter shall
remain in full force and effect regardless of whether definitive financing
documentation shall be executed and delivered and notwithstanding the
termination of this Commitment Letter or CITHC’s commitment hereunder.

The Commitment shall not be assignable by you without the prior written consent
of the Commitment Parties. The Commitment is intended to be solely for the
benefit of the parties hereto and is not intended to confer any benefits upon,
or to create any rights in favor of, any person other than the parties hereto
(and Indemnified Persons) and is not intended to create a fiduciary relationship
among the parties hereto. CITHC may assign its commitment hereunder to any of
its affiliates or any Lender. Any such assignment to an affiliate will not
relieve CITHC from any of its obligations hereunder unless and until such
affiliate shall have funded the portion of the commitment so assigned. Any
assignment to a Lender shall release CITHC from the portion of its commitment
hereunder so assigned. Any and all obligations of, and services to be provided
by, CIT and CITHC hereunder (including, without limitation, CITHC’s commitment)
may be performed and any and all rights of CIT and CITHC hereunder may be
exercised by or through any of their affiliates or branches. THIS COMMITMENT
LETTER SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE
STATE OF NEW YORK.

EACH OF THE PARTIES HERETO IRREVOCABLY WAIVES THE RIGHT TO TRIAL BY JURY IN ANY
ACTION, PROCEEDING, CLAIM OR COUNTERCLAIM BROUGHT BY OR ON BEHALF OF ANY PARTY
RELATED TO OR ARISING OUT OF THIS COMMITMENT LETTER OR THE PERFORMANCE OF
SERVICES HEREUNDER.

Each of the parties hereto hereby irrevocably and unconditionally (a) submits,
for itself and its property, to the non-exclusive jurisdiction of any New York
State court or Federal court of the United States of America sitting in New York
City, and any appellate court from any thereof, in any action or proceeding
arising out of or relating to this Commitment Letter or the transactions
contemplated hereby, or for recognition or enforcement of any judgment, and
agrees that all claims in respect of any such action or proceeding may be heard
and determined in such New York State or, to the extent permitted by law, in
such Federal court, (b) waives, to the fullest extent it may legally and
effectively do so, any objection which it may now or hereafter have to the
laying of venue of any suit, action or proceeding arising out of or relating to
this Commitment Letter or the transactions contemplated hereby in any New York
State or in any such Federal court and (c) waives, to the fullest extent
permitted by law, the defense of an inconvenient forum to the maintenance of
such action or proceeding in any such court.

Each of the Commitment Parties hereby notifies you that, pursuant to the
requirements of the USA Patriot Act, Title III of Pub. L. 107-56 (signed into
law on October 26, 2001) (the “Patriot Act”), it is required to obtain, verify
and record information that identifies the Borrower and each Guarantor (as
defined in the Term Sheet), which information includes names and addresses and
other information that will allow such Lender to identify the Borrower and each
Guarantor in accordance with the Patriot Act.

This Commitment Letter, together with the Term Sheet and the Fee Letter,
embodies the entire understanding among the parties hereto relating to the
matters discussed herein and therein and supersedes all prior discussions,
negotiations, proposals, agreements and understandings, whether oral or written,
relating to the subject matter hereof and thereof. No course of prior conduct or
dealings between the parties hereto, no usage of trade, and no parole or
extrinsic evidence of any nature, shall be used or be relevant to supplement,
explain or modify any term used herein. Any modification or waiver of the
Commitment or the terms hereof must be in writing, must be stated to be such and
must be signed by an authorized representative of each party hereto.

 

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If you wish to accept the Commitment, please return executed counterparts of
this Commitment Letter and the Fee Letter to CITHC, together with a wire
transfer to CITHC’s order in the amount required by the Fee Letter, on or before
5:00 p.m., New York City time, on November 6, 2007; otherwise, the offer set
forth herein shall automatically terminate on such date and time and be of no
further force or effect. In the event that the initial borrowing in respect of
the Senior Secured Facilities does not occur on or before December 31, 2007,
then this Commitment Letter and CITHC’s commitment and undertakings hereunder
shall automatically terminate unless the Commitment Parties shall, in their
discretion, agree to an extension. Before such date, the Commitment Parties may
terminate this Commitment Letter if any event occurs or information becomes
available that, in their judgment, results or is likely to result in the failure
to satisfy any condition precedent set forth or referred to herein or in the
Term Sheet or the other exhibits hereto.

[Remainder of page intentionally left blank.]

 

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This Commitment Letter may be executed in any number of counterparts, each of
which, when so executed, shall be deemed to be an original, but all such
counterparts shall together constitute but one and the same agreement. Delivery
of an executed counterpart of a signature page of this Commitment Letter by
facsimile or electronic transmission shall be effective as a delivery of a
manually executed counterpart of this Commitment Letter.

Very truly yours,

 

CIT HEALTHCARE LLC By:  

/s/ Gregory Park

Name:   Gregory Park Title:   Managing Director CIT CAPITAL SECURITIES LLC By:  

/s/ Gregory Park

Name:   Gregory Park Title:   Senior Vice President

The Foregoing Is Hereby Accepted

And Agreed To In All Respects By The Undersigned

THE PROVIDENCE SERVICE CORPORATION By:  

/s/ Fletcher McCusker

Name:   Fletcher McCusker Title:   Chief Executive Officer

 

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APPENDIX A

SUMMARY TERMS AND CONDITIONS

The Providence Service Corporation

November 6, 2007

$253,000,000 Senior Secured Facilities

The Summary Terms and Conditions outlined below is the “Term Sheet” referred to
in the Commitment Letter, dated November 6, 2007, from CITHC and CIT to The
Providence Service Corporation (the “Commitment Letter”) that describes the
Senior Secured Facilities. Terms used in this Term Sheet without definition have
the meanings assigned to such terms in the Commitment Letter.

 

Borrower:    The Providence Service Corporation (the “Borrower”). Guarantors:   
All present and future direct or indirect domestic subsidiaries of Borrower
(other than Provado Insurance Services, Inc., Social Services Providers Captive
Insurance Co., and each direct and indirect not-for-profit subsidiary of the
Borrower (collectively, the “Excluded Subsidiaries”), which will not be included
in determining EBITDA).

Administrative,

Collateral Agent:

   CIT Healthcare LLC (“CITHC” or “Agent”). Lenders:    A syndicate of financial
institutions (including CITHC) to be arranged by the Arranger.

Sole Arranger,

Sole Bookrunner:

   CIT Capital Securities LLC (“CIT” or “Arranger”).

Senior Credit

Facilities:

   Senior secured credit facilities (the “Senior Secured Facilities”) in an
aggregate principal amount not to exceed $253,000,000 consisting of the
following:

 

$173,000,000    6-year term loan facility; $40,000,000    delayed draw term loan
facility maturing on the date of the term loan facility; and $40,000,000   
5-year revolving credit facility.

Closing Date:    The date on which the Senior Secured Facilities close (the
“Close Date”).

TERM LOAN FACILITY

Facility:    Term loan in an amount not to exceed $173,000,000 (the “Term
Loan”). Amortization:    The Term Loan will be repayable in 23 consecutive
quarterly principal installments, commencing on March 31, 2008 and with a final
payment due on the Term Loan Maturity Date. The quarterly payments in each year
will be substantially equal and the aggregate annual payments will be
substantially equal to the respective percentage set forth below of the Term
Loan on the Close Date:

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Loan Year

   Annual Amount  

Year 1

   5.0 %

Year 2

   7.5 %

Year 3

   10.0 %

Year 4

   12.5 %

Year 5

   15.0 %

Year 6

   50.0 %

       Interest Rate:    See Schedule A hereto. Maturity:    The sixth
anniversary of the Close Date (the “Term Loan Maturity Date”). Availability:   
The Term Loan will be fully drawn on the Close Date. Amounts borrowed and repaid
under the Term Loan may not be re-borrowed. Use of Proceeds:    The Term Loan
will be used (subject to the terms and conditions of the Loan Documentation) to:
(i) finance the acquisition of the Target (the “Transaction”), (ii) refinance
certain existing indebtedness, and (iii) pay related transaction fees and
expenses relating to the Transaction.

DELAYED DRAW TERM LOAN

Facility:    Delayed draw term loan in an amount not to exceed $40,000,000 (the
“Delayed Draw Term Loan”). Amortization:    The Delayed Draw Term Loan shall be
repayable in consecutive quarterly principal installments on the same dates as
the Term Loan and with a final payment due on the Delayed Draw Term Loan
Maturity Date and in an amount equal to the percentage of the initial principal
amount of the Delayed Draw Term Loan equal to the percentage of the Term Loan
paid on such date; provided, that an amount equal to the percentage of the
Delayed Draw Term Loan equal to the percentage of the Term Loan repaid prior to
the date of the Delayed Draw Term Loan shall be repaid in equal quarterly
installments on each scheduled principal repayment date. Interest Rate:    See
Schedule A hereto. Maturity:    The sixth anniversary of the Close Date (the
“Delayed Draw Term Loan Maturity Date”). Availability:    The Delayed Draw Term
Loan may be borrowed in a single borrowing on or before March 31, 2009. The
Delayed Draw Term Loan shall be unfunded on the Close Date. Amounts borrowed and
repaid under the Delayed Draw Term Loan may not be re-borrowed. Delayed Draw
Fees:    An unused line fee at a rate per annum equal to 1.25% shall be payable
on the daily unutilized portion of the Delayed Draw Term Loan. Such fee will be
payable quarterly in arrears on the last day of each quarter and on the earlier
of the date of termination of the Delayed Draw Term Loan commitment and the date
of funding of the Delayed Draw Term Loan.

 

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Use of Proceeds:    The Delayed Draw Term Loan will be used solely to fund
potential earnout obligations pursuant to the terms of the Merger Agreement. The
Borrower has the right to terminate this facility. REVOLVING CREDIT FACILITY
Facility:    $40,000,000 revolving credit facility, including a sub-limit for
the issuance of letters of credit (amount, terms and conditions to be
determined) (the “Revolver”). Interest Rate:    See Schedule A hereto. Maturity:
   The fifth anniversary of the Close Date (the “Revolver Maturity Date”).
Availability:    Amounts under the Revolver may be borrowed, repaid and
reborrowed from the closing date until the Revolver Maturity Date. The Revolver
shall be unfunded on the Close Date; however, up to $15,000,000 of rollover
letters of credit of the Target shall be available to be brought under the
Revolver on the Close Date and shall be deemed usage of the Revolver.

Letter of Credit

Issuing Bank:

   The Agent and/or certain Lenders (each, an “L/C Issuer”) shall either issue
letters of credit directly or select another banking or financial institution to
issue letters of credit as to which L/C Issuer shall issue letter of credit
participation or support agreements (such letters of credit and letter of credit
participation or support agreements are referred to herein as “L/Cs”).    To the
extent that the Borrower does not reimburse the L/C Issuer for drawings under
L/Cs, the lenders under the Revolver shall be unconditionally obligated to fund
participations therein on a ratable basis. Revolver Fees:    An unused line fee
at a rate per annum equal to 0.75% shall be payable on the daily unutilized
portion of the Revolver. Such fee will be payable quarterly in arrears on the
last day of each quarter and on the date of termination of the Revolver
commitment. The undrawn amount of outstanding L/Cs shall count as utilization of
the Revolver for purposes of calculating this fee.    A letter of credit fee
shall be payable to the Agent on behalf of each Revolver Lender with respect to
such Revolver Lender’s participation in the L/Cs at the applicable margin per
annum used for determining interest payable in respect of LIBOR loans made under
the Revolver on the average daily undrawn amount of L/Cs, payable quarterly in
arrears. The Borrower shall also be responsible for paying any fees, costs or
expenses (including fronting fees) due to any banking or financial institution
(other than the Agent) for any L/Cs issued by such other banking or financial
institution in reliance on credit support furnished by the Agent.    The other
fees are set forth in the Fee Letter.

 

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Use of Proceeds:    The Revolver will be used: (i) to fund ongoing working
capital requirements; (ii) for permitted acquisitions and (iii) for general
corporate purposes. CERTAIN PAYMENT TERMS

Optional

Prepayment:

   The Borrower may prepay principal amounts outstanding under the Term Loan,
the Delayed Draw Term Loan and the Revolver, and may terminate commitments under
the Delayed Draw Term Loan and Revolver, from time to time without premium or
penalty (except that LIBOR-based loans may only be prepaid at the end of the
applicable interest period, unless the Borrower pays all breakage costs
associated with such prepayment), subject to applicable minimum amounts to be
mutually agreed upon.

Mandatory

Prepayment:

   In addition to the scheduled amortization payments of the Term Loan and the
Delayed Draw Term Loan, Borrower will be required to make mandatory prepayments
in respect of the Term Loan in an amount equal to (in each case, subject to such
exceptions to be mutually agreed upon):   

-   100% of the net cash proceeds (to be defined) from any sale or other
disposition of assets of the Borrower or its subsidiaries (subject to certain
exceptions to be determined) other than net cash proceeds of sales or other
dispositions of inventory, and other assets in the ordinary course of business
and net cash proceeds up to an amount to be determined that are reinvested in
other assets useful in the business of the Borrower and its subsidiaries within
a period of days to be agreed upon of their receipt upon terms and conditions to
be mutually agreed upon;

  

-   50% of the net cash proceeds from the issuance of any equity securities of
the Borrower or any subsidiaries of the Borrower (other than (i) issuances of
equity interests of the Borrower in connection with customary compensation or
benefit programs, (ii) sales or issuances equity interests of the Borrower in
connection with permitted mergers or acquisitions or (iii) issuances of equity
interests of subsidiaries of the Borrower to the Borrower or to other
subsidiaries of the Borrower (other than to the Excluded Subsidiaries));

  

-   100% of the net cash proceeds from the incurrence of indebtedness by the
Borrower or any of its subsidiaries (other than indebtedness otherwise permitted
by the Loan Documentation); and

  

-   100% of the net cash proceeds from insurance paid on account of any loss of
any property or assets of the Borrower or its subsidiaries (other than net cash
proceeds that are reinvested, or that the Borrower has entered into a binding
contract to reinvest, in the business of the Borrower and its subsidiaries (or
used to replace damaged or destroyed assets) within a period of days to be
agreed).

   The Borrower will also be required to make mandatory prepayments in respect
of the Term Loan and the Delayed Draw Term Loan in an amount equal to 75%

 

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   of “excess cash flow” (to be defined in the Loan Documentation; with such
definition to include, without limitation, an adjustment to accommodate the
build up of a reserve in 2008, with such adjustment to remain in place for 2008
as long as the reserve balance is below $10,000,000, to pay a portion of the
earnout payment and payments to optionholders, in each case as provided in the
Merger Agreement, in the event the shareholders of the Borrower do not approve
at the 2008 annual meeting or before such annual meeting the required increase
in the Borrower’s capital stock) of the Borrower and its subsidiaries for each
fiscal year (commencing with the fiscal year ending December 31, 2008).    All
such prepayments shall be applied ratably between the Term Loan and the Delayed
Draw Term Loan and ratably to each of the remaining amortization payments
thereunder. Notwithstanding the foregoing, when there are no longer outstanding
loans under the Term Loan and the Delayed Draw Term Loan, mandatory prepayments
will be applied first, to prepay outstanding loans under the Revolver and
second, to cash collateralize outstanding letters of credit, in each case, with
no corresponding permanent reduction of commitments under the Revolver, with the
lenders thereunder having the right to reject the same, in which case the
amounts so rejected shall be offered ratably to each non-rejecting lender
thereunder. COLLATERAL    The Senior Secured Facilities (including any
obligations under hedging arrangements provided by the Lenders) will be secured
by a perfected first priority security interest (subject to permitted
encumbrances to be agreed upon) in all assets (both real, mixed and personal
property), in each case, whether now owned or hereafter acquired, including,
without limitation, all receivables, accounts, inventory, general intangibles
(including payment intangibles), property, plant and equipment, fee owned real
property and patents and other intellectual properties of the Borrower and
Borrower’s present and future domestic subsidiaries whether now owned or
hereafter acquired, and all proceeds and products of any of the foregoing
(including insurance proceeds). The Senior Secured Facilities will also be
collateralized by a perfected first priority pledge of 100% (or 65% in the case
of the equity interest of any foreign subsidiaries) of the issued and
outstanding capital stock or other equity interests of the Borrower’s direct or
indirect subsidiaries, whether now owned or hereafter acquired, and a pledge of
all intercompany indebtedness and, in all cases, all proceeds and products
thereof.    The foregoing security shall ratably secure the Senior Secured
Facilities and any permitted interest rate swap or similar hedging arrangements
between the Borrower or Guarantors and a Lender or its affiliates under the
Senior Secured Facilities. CERTAIN CONDITIONS

Conditions

Precedent:

   Closing and the initial funding under the Senior Secured Facilities will be
subject to the satisfaction of all conditions precedent deemed necessary or
appropriate by Agent and Lenders, including but not limited to:

 

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-   Execution and delivery of satisfactory Loan Documentation;

  

-   After giving effect to the Transaction including any loans to be made on the
Close Date, (i) the ratio of the Borrower’s total debt (including convertible
debt and capital leases but excluding (a) all contingent obligations arising
under or in connection with surety bonds and (b) all letters of credit) to
EBITDA (adjusted in a manner satisfactory to the Agent) for the twelve month
period ended September 30, 2007 shall not exceed 4.55x and (ii) the ratio of
senior indebtedness (including capital leases but excluding (a) all contingent
obligations arising under or in connection surety bonds and (b) all letters of
credit) to EBITDA (adjusted in a manner satisfactory to Agent) for the twelve
month period ended September 30, 2007 shall not exceed 3.25x;

  

-   After giving effect to the Transaction, the Borrower and its subsidiaries
shall not have less than $25,000,000 in cash free of any liens or other
encumbrances, except in favor of the lenders under the Senior Secured
Facilities;

  

-   The pro forma EBITDA (adjusted in a manner satisfactory to Agent which for
this purpose will include (a) the normalization of EBITDA of WCG International
Consultants Ltd. in the amount of $2,800,000 and (b) add-backs to the Target
EBITDA totaling $3,336,000 from non-cash stock-based compensation; legal,
accounting, and banking fees; and royalty payments) of the Borrower (after
giving effect to the Transaction) for the twelve month period ended
September 30, 2007 shall not be less than $53,000,000;

  

-   The Borrower and its subsidiaries shall have no borrowed indebtedness that
will survive the closing of the Senior Secured Facilities other than (i) the
Senior Secured Facilities and (ii) other scheduled debt, which may include
certain capital leases and other customary obligations, existing on the Close
Date and reasonably approved by the Agent. The Agent shall have received, in
form and substance satisfactory to Agent, pay-off letters relating to existing
outstanding indebtedness;

  

-   Agent and Lenders shall have received ACCORD insurance certificates
evidencing insurance coverages and amounts reasonably satisfactory to the Agent
and appropriate endorsements in favor of the Agent with respect thereto (it
being understood that information previously provided to the Agent concerning
the Borrower’s and the Target’s insurance coverages and amounts is satisfactory
to the Agent);

  

-   Evidence of a valid and perfected first priority security interest (subject
to permitted encumbrances to be agreed upon) in the Collateral, including UCC
and other applicable lien search reports;

  

-   All conditions to the consummation of the Transaction shall have been
satisfied, except the funding of the purchase price, in accordance with a merger
agreement in form and substance satisfactory to the Agent, including the
provision that management of the Target will exchange at

 

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     least $13,000,000 of the proceeds received from the merger for equity in
the Borrower and no provision of such agreement shall have been waived, amended
or supplemented in a manner which is adverse to the interests of the Lenders
without the consent of the Lenders; and all transaction fees for which the
Borrower is responsible, other than legal fees, incurred in connection with the
Transaction (including the Senior Secured Facilities and the issuance of
convertible securities) shall not exceed $20,000,000;

  

-   All governmental and third party approvals necessary in connection with the
Transaction shall have been obtained and be in full force and effect, and all
waiting periods shall have expired without any action being taken or threatened
by any authority that would restrain or otherwise impose adverse conditions on
the Transaction;

  

-   Borrower has issued convertible securities on terms satisfactory to the
Arranger, including market subordination terms, and in connection therewith has
received gross proceeds of not less than $70,000,000;

  

-   Agent and Lenders shall have received all fees, costs and expenses payable
on or prior to the Close Date;

  

-   There has been no (i) event, development or circumstance that has had or
could reasonably be expected to have a material adverse effect on the business,
assets, liabilities (actual or contingent), operations, condition (financial or
otherwise) or prospects of the Borrower and its subsidiaries, taken as a whole,
since the last audited financial statements submitted to the Agent or (ii)
Target Material Adverse Effect; and

  

-   Agent shall have received such legal opinions, officer solvency certificates
and other documents and instruments as are customary for transactions of this
type or as it may reasonably request.

Conditions to

Extensions of

Credit:

   The making of each extension of credit (including amendments, extensions and
increases of L/Cs) shall be conditioned upon (i) the accuracy in all material
respects of all representations and warranties contained in the Loan
Documentation (including, without limitations, the material adverse change and
litigation representations) and (ii) there being no default or event of default
in existence at the time of, or after giving effect to the making of, such
extension of credit (and in the case of the Delayed Draw Term Loan, no default
under any financial covenant after giving pro forma effect thereto). CERTAIN
DOCUMENTATION MATTERS

Loan

Documentation:

   The Senior Secured Facilities will be subject to the terms and conditions set
forth in a definitive credit agreement, related security agreement(s),
guarantees, pledge agreements, mortgages, assignment agreements and other
instruments and documents, all of which will be acceptable to the Agent, in its
reasonable judgment, the Lenders and their legal counsel (collectively, the
“Loan Documentation”).

 

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Representations

and Warranties:

   The Senior Secured Facilities will contain such representations and
warranties by the Borrower as are usual and customary for healthcare financings
of this kind, including, without limitation, corporate power and authority, due
organization and authorization, execution, delivery and enforceability of the
Loan Documentation, no default, financial condition and solvency, no material
adverse change, title to properties, sufficiency of assets and rights, liens,
litigation, payment of taxes, insurance, subsidiaries, business locations, labor
matters, material contracts, investment company regulations, brokers’ fees,
compliance with laws, healthcare permits and compliance with specific state and
federal healthcare laws, environmental and ERISA matters, consents and
approvals, and full disclosure (subject to qualifications to be agreed).
Reporting:    The Borrower will provide the Agent and Lenders with periodic
financial reporting, including: audited annual financial statements; unaudited
quarterly financial statements; annual financial projections; compliance
certificates; notice of material events and such other information reasonably
requested by the Agent or any Lender. Covenants:    The Senior Secured
Facilities will contain such affirmative covenants as are usual and customary
for financings of this kind (subject to qualifications to be agreed upon), and
will likely include, but not be limited to: receipt of timely and accurate
financial information; notification of litigation, investigations, environmental
and ERISA matters and other material adverse changes; payment and performance of
obligations; maintenance of existence; maintenance of property and insurance
(including hazard coverage); maintenance of accurate records and accounts;
inspection of property and books and records; compliance with laws (including,
without limitation, environmental laws); maintenance of licenses, permits and
franchises issued or granted by any governmental authority; use of proceeds;
payment of taxes; ERISA; further assurances (including with respect to security
interests in future subsidiaries and after-acquired property); annual lenders’
meetings; and interest rate hedging requirements.    The Senior Secured
Facilities will contain such negative covenants as are usual and customary for
financings of this kind (subject to qualifications to be agreed upon), and will
likely include, but not be limited to: restrictions and limitations against
incurring additional indebtedness and guarantee obligations; encumbrances, liens
and other obligations; restrictive payments (including, but not limited to,
distributions and dividends); loans and investments (including limitations on
investments in Excluded Subsidiaries); mergers, consolidations and acquisitions;
sale and leaseback transactions; asset transfers and dispositions; changes in
business; transactions with affiliates; prepayments of and amendments to
indebtedness (including, without limitation, prepayment of, and amendments to,
any subordinated debt); restrictive agreements; ownership of subsidiaries; bank
accounts; amendments to organizational documents and the Merger Agreement; and
changes in fiscal year or accounting method.    Financial covenants will
include, but not be limited to: minimum fixed charge coverage ratio, maximum
total leverage ratio (and with debt to include outstanding letters of credit and
capital leases) and minimum liquidity.

 

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Events of Default:    Events of defaults will include those which are
customarily found in financing transactions of the type contemplated hereby,
including, but not limited to: nonpayment of principal when due; nonpayment of
interest, fees or other amounts; inaccuracy of representations and warranties;
violation of covenants (subject, in the case of certain affirmative covenants,
to a grace period to be agreed upon); cross-default to material indebtedness;
bankruptcy events; certain ERISA events; material judgments; actual or asserted
invalidity of any guarantee or security document provisions; change of control;
and adverse healthcare licensing or reimbursement events. Cash Management:   
Borrower shall implement cash management procedures (subject to customary
exceptions to full dominion and control over accounts into which proceeds from
government payors are paid directly) reasonably satisfactory to the Agent and
Arranger in a timeframe to be agreed upon between the parties, including blocked
account agreements that will provide for springing cash dominion following the
occurrence of an event of default.

Costs and

Expenses:

   The Borrower shall be responsible for the payment (whether or not the
transaction contemplated hereby closes or is consummated) of all of Agent’s and
the Arranger’s reasonable costs, fees and expenses of documenting and closing
the transaction contemplated hereby (including, without limitation, reasonable
costs, fees and expenses of outside legal counsel, travel, lodging and similar
expenses) or otherwise paid or incurred by Agent or the Arranger in connection
with the Loan Documentation or the transaction contemplated hereby, including,
but not limited to, those paid or incurred by Agent or the Arranger in
connection with the preparation, negotiation, execution and closing of the Loan
Documentation and the transaction contemplated hereby, the arrangement,
syndication and administration of the Senior Secured Facilities, the creation or
perfection of liens and security interests in connection therewith, and any
amendment, modification or waiver in respect of the Loan Documentation. The
Borrower shall also be responsible for all fees and expenses of Agent and
Lenders incurred or in connection with enforcing rights, remedies and actions
taken under the Senior Secured Facilities. Indemnification:    The Borrower
shall indemnify and hold harmless Agent, the Arranger and the Lenders, and their
respective affiliates and, in each case, such parties’ respective directors,
officers, employees, agents, representatives and controlling persons (each being
an “Indemnified Party”) from and against any and all claims, damages,
liabilities and expenses (including without limitation, fees and expenses of
counsel) that may be incurred by or asserted against such Indemnified Party in
connection with the investigation of, preparation for, or defense of any pending
or threatened claim or any action or proceeding (whether or not such Indemnified
Party is a party thereto) or otherwise arising out of or relating to any of the
transactions contemplated hereby, any commitment or similar letter issued in
connection therewith, any of the Loan Documentation, any of the transactions
contemplated thereby, or any action or omission of any Indemnified Party or
other matter or thing under or in connection with any of the foregoing, except
for (with respect to any Indemnified Party) any such claims, damages,
liabilities or expenses resulting

 

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   from such Indemnified Party’s own gross negligence or willful misconduct as
determined by a court of competent jurisdiction in a final nonappealable order
or judgment.

Participation and

Assignment:

   The Lenders shall be permitted to assign all or a portion of their loans and
commitments with the consent, not to be unreasonably withheld, of (i) the
Borrower, unless (x) the assignee is a Lender, an affiliate of a Lender or an
approved fund or (y) an event of default has occurred and is continuing,
(ii) the Agent, unless a term loan is being assigned to a Lender, an affiliate
of a Lender or an approved fund and (iii) the Issuing Bank, unless a term loan
is being assigned. Non-pro rata assignments shall be permitted. In the case of
partial assignments (other than to another Lender, an affiliate of a Lender or
an approved fund), the minimum assignment amount shall be $1,000,000 in the case
of the Term Loan or the Delayed Draw Term Loan and $1,000,000 in the case of the
Revolver (unless otherwise agreed by the Borrower and the Agent). The Agent
shall receive a processing fee of $3,500 in connection with all assignments. The
Lenders shall also be permitted to sell participations in their loans.

Amendments

and Waivers:

   Subject to approval of Required Lenders (to be defined in a mutually
satisfactory manner) party to the relevant Loan Documentation, except that all
affected Lenders must consent to increases in commitment amounts, reductions in
principal, interest and fees, extensions of maturities and release of
substantially all of the guarantors and collateral. Yield Protection:    The
Loan Documentation shall contain customary provisions (i) protecting the Lenders
against increased costs or loss of yield resulting from changes in reserve, tax,
capital adequacy and other requirements of law and from the imposition of or
changes in withholding and other taxes and (ii) indemnifying Lenders for
“breakage costs” incurred in connection with, among other things, any prepayment
or conversion of LIBOR loan on a day other than the last day of the interest
period applicable thereto.

Governing

Law and

Jurisdiction:

   State of New York.

Waiver of

Jury Trial:

   Such waivers as are customary for financing transactions of the type
contemplated hereby.

Administrative

Agent’s Counsel:

   Shearman & Sterling LLP

 

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Schedule A

INTEREST RATES

 

Revolver:    Borrower will be required to pay interest on cash advances
outstanding under the Revolver at either: (i) the Base Rate plus 2.50% per annum
or (ii) LIBOR plus 3.50% per annum. Term Loan:    Borrower will be required to
pay interest on the Term Loan at either: (i) the Base Rate plus 2.50% per annum
or (ii) LIBOR plus 3.50% per annum.

Delayed Draw

Term Loan:

   Borrower will be required to pay interest on the Delayed Draw Term Loan at
either: (i) the Base Rate plus 2.50% per annum or (ii) LIBOR plus 3.50% per
annum. Base Rate:    The “Base Rate” will mean the greater of: (i) the Federal
Funds Rate plus 1/2 of 1% or (b) the per annum rate published from time to time
by The Wall Street Journal as the “prime rate” in effect for such day on
corporate loans posted by at least 75% of the nation’s 30 largest banks (or, if
The Wall Street Journal ceases publishing a base rate of the type described, the
highest per annum rate of interest published by the Federal Reserve Board in
Federal Reserve statistical release H.15 (519) entitled “Selected Interest
Rates” as the bank prime loan rate or its equivalent). Interest on Base Rate
loans will be computed and payable quarterly in arrears on the basis of a 360
day year and based on the actual number of days elapsed.    “Federal Funds Rate”
means, for any day, the rate per annum equal to the weighted average of the
rates on overnight federal funds transactions with members of the Federal
Reserve System arranged by federal funds brokers on such day, as published by
the Federal Reserve Bank on the business day next succeeding such day; provided
that (a) if such day is not a business day, the Federal Funds Rate for such day
shall be such rate on such transactions on the next preceding business day as so
published on the next succeeding business day, and (b) if no such rate is so
published on such next succeeding business day, the Federal Funds Rate for such
day shall be the average rate (rounded upward, if necessary, to a whole multiple
of 1/100 of 1%) charged to CITHC on such day on such transactions as determined
by the Agent, in its sole discretion. LIBOR:    “LIBOR” will mean the rate for
US Dollar deposits having a period of one, two, three or six months (as selected
by the Borrower) appearing on Reuters Screen LIBOR01 Page and adjusted for
applicable reserves. The Borrower may elect to use LIBOR provided (i) the
Borrower gives Agent at least three business days prior notice of such election
and (ii) no default is then outstanding under the Loan Documentation. Interest
on LIBOR-based loans will be computed and payable at the end of the applicable
interest period (or, in the case of any interest period longer than three
months, at the end of each three month period) in arrears on the basis of a
360-day year and based on the actual number of days elapsed.

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Default Interest:    Upon the occurrence and during the continuance of an Event
of Default (upon written notice, except in the case of any bankruptcy,
insolvency, reorganization, liquidation or other similar proceeding), amounts
outstanding under the Senior Secured Facilities shall bear interest at 2.00% per
annum above the rate otherwise applicable thereto and LIBOR-based loans and
conversions to LIBOR-based loans shall no longer be available. Overdue interest,
fees and other amounts shall accrue interest at 2.00% above the rate applicable
to Base Rate loans.

 

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