Exhibit 10.2

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Registration Rights Agreement

Dated as of November 13, 2007

By and among

The Providence Service Corporation

and

The Purchasers Named Herein

 

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REGISTRATION RIGHTS AGREEMENT

This Registration Rights Agreement (the “Agreement”) is made and entered into
this 13th day of November, 2007, among The Providence Service Corporation, a
Delaware corporation (the “Company”), and the purchasers named on Exhibit A of
the Purchase Agreement (as defined below) (collectively, the “Purchasers”).

This Agreement is made pursuant to the Note Purchase Agreement, dated
November 6, 2007, among the Company and the Purchasers, (the “Purchase
Agreement”), which provides for the sale by the Company to the Purchasers of
$70,000,000 aggregate principal amount of the Company’s 6.5% Convertible Senior
Subordinated Notes due 2014 (the “Notes”). The Notes together with the shares of
Common Stock (as defined below) into which the Notes are convertible are
referred to herein as the “Securities.” In order to induce the Purchasers to
enter into the Purchase Agreement, the Company has agreed to provide the
registration rights set forth in this Agreement. The execution of this Agreement
is a condition to the closing under the Purchase Agreement.

In consideration of the foregoing, the parties hereto agree as follows:

 

  1. Definitions.

As used in this Agreement, the following capitalized defined terms shall have
the following meanings:

“1933 Act” shall mean the Securities Act of 1933, as amended.

“1934 Act” shall mean the Securities Exchange Act of l934, as amended.

“1939 Act” shall mean the Trust Indenture Act of 1939, as amended.

“Additional Interest” shall have the meaning set forth in Section 2.4.

“Affiliate” shall have the meaning given to it in the Indenture.

“Acquisition Agreement” shall mean the Agreement and Plan of Merger, dated as of
the date hereof, by and among Target, Sellers, the Company, PRSC Acquisition
Corporation and [stockholder representative].

“Automatic Shelf Registration Statement” shall have the meaning set forth in
Rule 405 of the 1933 Act.

“Beneficially Own” or “Beneficial Ownership” shall have the meaning set forth in
Rule 13d-3 of the rules and regulations promulgated under the Exchange Act,
except that for purposes of this Agreement the words “within sixty days” in Rule
13d-3(d)(1)(i) shall not apply, to the effect that a Person shall be deemed to
be the beneficial owner of a security if that Person has the right to acquire
beneficial ownership of such security at any time.

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“Business Day” shall mean any calendar day on which the New York Stock Exchange,
the NASDAQ Stock Market and the Securities and Exchange Commission are open for
trading or business, as the case may be.

“Closing Date” shall have the meaning given to it in the Purchase Agreement.

“Common Stock” shall mean any shares of common stock, $0.001 par value, of the
Company and any other shares of common stock as may constitute “Common Stock”
for purposes of the Indenture.

“Company” shall have the meaning set forth in the preamble and shall also
include the Company’s successors.

“Depositary” shall mean The Depository Trust Company and its successors or
assigns, or any other depositary appointed by the Company, provided, however,
that such appointed depositary must have an address in the Borough of Manhattan,
in the City of New York, unless no such depositary is available.

“Effectiveness Period” shall have the meaning set forth in Section 2.1(c).

“Holder” shall mean any Purchaser, for so long as it owns any Registrable
Securities, and each of its successors, assigns and direct and indirect
transferees who become registered owners of Registrable Securities under the
Indenture.

“Indenture” shall mean the Indenture, dated as of the date hereof, between the
Company and The Bank of New York Trust Company, N.A., as Trustee, as the same
may be amended, supplemented, waived or otherwise modified from time to time in
accordance with the terms thereof.

“Majority Holders” shall mean Holders holding over 50% of the aggregate
principal amount of the outstanding Notes constituting Registrable Securities
outstanding; provided, that, for the purpose of this definition, a holder of
shares of Common Stock into which the Notes were converted shall be deemed to
hold an aggregate principal amount of the Notes (in addition to the principal
amount of Notes held by such holder) equal to the product of (A) the quotient of
(x) the number of such shares of Common Stock held by such holder and (y) the
conversion rate (as expressed in the number of shares of Common Stock issuable
per $1,000 principal amount of the Notes) in effect at the time of the
conversion of the Notes into such shares of Common Stock as determined in
accordance with the Indenture and (B) $1,000, provided further, that whenever
the consent or approval of the Majority Holders or of a specified percentage of
the Holders of Registrable Securities is required hereunder, Notes, or Common
Stock into which the Notes were converted, held by the Company or any Affiliate
of the Company shall be disregarded in determining whether such consent or
approval was given by the Majority Holders or such specified percentage of the
Holders of Registrable Securities.

 

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“Permitted Transfer” shall have the meaning given such term in Section 7 of the
Purchase Agreement.

“Registrable Securities” shall mean (i) the Notes, (ii) the Conversion Shares
issued or issuable upon conversion of the Notes and (iii) any capital stock of
the Company issued or issuable, with respect to the Conversion Shares or the
Notes as a result of any stock split, stock dividend, recapitalization, exchange
or similar event or otherwise, without regard to any limitations on conversion
and/or redemption of the Notes; provided, however, that such Securities shall
cease to be Registrable Securities at the earliest when (i) a Shelf Registration
Statement with respect to such Securities shall have become effective under the
1933 Act and such Securities shall have been sold or transferred pursuant to
such Shelf Registration Statement, (ii) such Securities have been transferred in
compliance with Rule 144 under the 1933 Act (or any successor provision
thereto), or are transferable pursuant to paragraph (k) of such Rule 144 (or any
successor provision thereto) or (iii) such Securities shall have ceased to be
outstanding.

“Registration Default” shall have the meaning set forth in Section 2.4.

“Registration or Offering Expenses” shall mean any and all expenses incident to
performance of or compliance by the Company with this Agreement, including
without limitation: (i) all SEC registration and filing fees, (ii) all expenses
of the Company in preparing or assisting in preparing, word processing, printing
and distributing any Shelf Registration Statement and any Prospectus, and any
other documents relating to the performance of and compliance with this
Agreement, (iii) all fees and expenses incurred in connection with the listing,
if any, of any of the Registrable Securities on any securities exchange or
exchanges, (iv) all rating agency fees, if any (v) the fees and disbursements of
counsel for the Company and of the independent public accountants of the
Company, including the expenses of any “comfort letters” in connection with an
Underwritten Offering, (vi) the reasonable fees and expenses of the Trustee, and
any escrow agent or custodian, and (vii) the reasonable fees and expenses of a
single counsel to the Holders in connection with the Shelf Registration
Statement (not to exceed in the aggregate $10,000) and in connection with an
Underwritten Offering (not to exceed in the aggregate $50,000 for each
Underwritten Offering), which counsel shall be selected by the Majority Holders
and designated in writing to the Company, but excluding any underwriting
discounts and commissions and transfer taxes, if any, relating to the sale or
disposition of Registrable Securities by a Holder and, except as provided under
clause (vii) above, excluding all expenses and fees for all counsel and other
professionals representing the Holders.

“Rule 144A” means Rule 144A under the 1933 Act.

“SEC” shall mean the Securities and Exchange Commission or any successor agency
or government body performing the functions currently performed by the United
States Securities and Exchange Commission.

“Securities” shall have the meaning set forth in the preamble.

 

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“Shelf Effectiveness Deadline” shall have the meaning set forth in Section
2.1(a).

“Shelf Filing Deadline” shall have the meaning set forth in Section 2.1(a).

“Shelf Registration” shall mean a registration effected pursuant to Section 2.1.

“Shelf Registration Statement” shall mean a “shelf” registration statement of
the Company pursuant to the provisions of Section 2.1 of this Agreement which
covers all of the Registrable Securities on an appropriate form under Rule 415
under the 1933 Act, or any similar rule that may be adopted by the SEC, and all
amendments and supplements to such registration statement, including
post-effective amendments, in each case including the Prospectus contained
therein, all exhibits thereto and all materials incorporated by reference
therein; provided, however, that a registration statement shall not be deemed a
Shelf Registration Statement until such time as it includes a Prospectus
relating to the Securities.

“Suspension Period” shall have the meaning set forth in Section 2.5.

“Target” shall have the meaning set forth in the Purchase Agreement.

“Trustee” shall mean the trustee with respect to the Securities under the
Indenture.

“Underwriter” shall mean an underwriter, as defined in the 1933 Act, of the
Securities in connection with an offering thereof under a Shelf Registration
Statement.

“Underwritten Offering” shall have the meaning set forth in Section 5(a).

“Well-Known Seasoned Issuer” shall have the meaning set forth in Rule 405 of the
1933 Act.

 

  2. Registration Under the 1933 Act.

2.1 Shelf Registration.

(a) The Company (i) shall, at its cost, no later than 45 calendar days following
the Closing Date (the “Shelf Filing Deadline”), file with the SEC a Shelf
Registration Statement relating to the offer and sale of the Registrable
Securities by the Holders that have provided the Questionnaire and the other
information pursuant to Section 2.1(d) and (ii) shall use commercially
reasonable efforts to cause such Shelf Registration Statement to be declared
effective under the 1933 Act as soon as practicable and in any event by the
later of (x) 90 calendar days following the Closing Date, (y) 45 calendar days
following either the consummation of the acquisition pursuant to the Acquisition
Agreement or the termination of the Acquisition Agreement, or (z) if on the last
date in (x) above, the Company would be required to include or incorporate by
reference on a Form S-3 financial statements for the year ended December 31,
2007 and the Company has not yet filed its Form 10-K, the 5th calendar day after
the earlier of the day on which such Form 10-K is filed or is required to be
filed with the SEC (collectively, the “Shelf Effectiveness

 

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Deadline”). The Shelf Registration Statement shall contain (except if otherwise
directed by the Majority Holders) the “Selling Stockholders” and “Plan of
Distribution” sections in substantially the form attached hereto as Exhibit A,
subject to any changes the Company reasonably deems necessary or appropriate to
satisfy any comments with respect to the Shelf Registration Statement (oral or
written) from the SEC. If the Company is a Well-Known Seasoned Issuer at the
time of filing the Shelf Registration Statement with the SEC, such Shelf
Registration Statement shall be designated by the Company as an Automatic Shelf
Registration Statement. The Company shall file with the SEC in accordance with
Rule 424 under the 1933 Act the final prospectus to be used in connection with
sales pursuant to such Shelf Registration Statement with the time periods
preceded by such Rule.

(b) In the event that Form S-3 is not available for the registration of the
resale of Registrable Securities hereunder, the Company shall (i) register the
resale of the Registrable Securities on another appropriate form reasonably
acceptable to the Majority Holders and (ii) undertake to register the
Registrable Securities on Form S-3 as soon as such form is available, provided
that the Company shall maintain the effectiveness of the Shelf Registration
Statement then in effect until such time as a Shelf Registration Statement on
Form S-3 covering the Registrable Securities has been declared effective by the
SEC.

(c) The Company shall, at its cost, use commercially reasonable efforts, subject
to Section 2.5, to keep the Shelf Registration Statement continuously effective
in order to permit the Prospectus forming part thereof to be usable by Holders
until the earlier of (i) such time as all of the Securities cease to be
Registrable Securities and (ii) the date that is two years after the last day of
original issuance of the Securities (the “Effectiveness Period”).

(d) Notwithstanding any other provision hereof, no Holder of Registrable
Securities may include any of its Registrable Securities in the Shelf
Registration Statement pursuant to this Agreement unless the Holder furnishes to
the Company a fully completed notice and questionnaire in the form attached
hereto as Exhibit B (the “Questionnaire”) and such other information in writing
as the Company may reasonably request in writing for use in connection with the
Shelf Registration Statement or Prospectus included therein and in any
application to be filed with or under state securities laws. At least 30 days
prior to the filing of the Shelf Registration Statement, the Company will
provide notice to the Holders of its intention to file the Shelf Registration
Statement; provided, however, that if the Company elects to register the
Registrable Securities pursuant to a Prospectus to a Shelf Registration
Statement that has already been declared effective, the Company will provide
notice to the Holders of its intention to file the initial Prospectus at least
20 days prior to such filing. In order to be named as a selling securityholder
in the Shelf Registration Statement or Prospectus at the time of effectiveness
of the Shelf Registration Statement or such Prospectus, as applicable, each
Holder must no later than 20 days following notice by the Company of such
filing, furnish in writing the completed Questionnaire and such other
information that the Company may reasonably request in writing, if any, to the
Company and the Company will include the information from the completed
Questionnaire and such other information, if any, in the Shelf Registration
Statement and the Prospectus, as necessary and in a manner, so that upon
effectiveness of the Shelf Registration Statement the Holder will be permitted
to deliver the

 

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Prospectus to purchasers of the Holder’s Registrable Securities. From and after
the date that the Shelf Registration Statement becomes effective, upon receipt
of a completed Questionnaire and such other information that the Company may
reasonably request in writing, if any, the Company will use commercially
reasonable efforts to file within 10 Business Days any amendments or supplements
to the Shelf Registration Statement necessary for such Holder to be named as a
selling securityholder in the Prospectus contained therein to permit such Holder
to deliver the Prospectus to purchasers of the Holder’s Securities (subject to
the Company’s right to suspend the Shelf Registration Statement as described in
Section 2.5 below); provided, however, that the Company shall not be required to
filed more than one post-effective amendment to the Shelf Registration Statement
in any calendar quarter for all such Holders. Holders that do not deliver a
completed written Questionnaire and such other information, as provided for in
this Section 2.1(d), will not be named as selling securityholders in the
Prospectus. Each Holder named as a selling securityholder in the Prospectus
agrees to promptly furnish to the Company in writing all information required to
be disclosed in order to make information previously furnished to the Company by
the Holder not materially misleading and any other information regarding such
Holder and the distribution of such Holder’s Registrable Securities as the
Company may from time to time reasonably request in writing.

(e) Each Holder agrees that if such Holder wishes to sell Registrable Securities
pursuant to a Shelf Registration Statement and related Prospectus it will do so
only in accordance with Section 2.1(d) and subject to Section 2.5. Each Holder
agrees not to sell any Registrable Securities pursuant to the Shelf Registration
Statement without delivering, or causing to be delivered, a Prospectus
(excluding those materials incorporated by reference therein) to the purchaser
thereof, unless exempted from such prospectus delivery requirements.

The Company agrees to supplement or amend the Shelf Registration Statement if
required by the 1933 Act or the rules and regulations thereunder or by the
instructions applicable to the registration form used by the Company, or to the
extent the Company does not reasonably object, as reasonably requested by the
Purchasers with respect to information relating to such Purchasers or by the
Trustee on behalf of the Holders covered by such Shelf Registration Statement
with respect to information relating to such Holders, and to furnish to the
Holders of Registrable Securities copies of any such supplement or amendment
promptly after it is used or filed with the SEC.

2.2 Expenses. The Company shall pay all Registration and Offering Expenses in
connection with the registration pursuant to Section 2.1. Each Holder shall pay
all underwriting and placement discounts and commissions, agency and placement
fees, brokers commissions and transfer taxes, if any, relating to the sale or
disposition of such Holder’s Registrable Securities.

2.3 Effectiveness. After a Shelf Registration Statement is effective, if the
offering of Registrable Securities pursuant to a Shelf Registration Statement is
interfered with by any stop order, injunction or other order or requirement of
the SEC or any other governmental agency or court, such Shelf Registration
Statement will be deemed not to have been effective during the period of such
interference, until the offering of Registrable Securities pursuant to such
Shelf Registration Statement may legally resume.

 

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2.4 Interest. In the event that (a) a Shelf Registration Statement has not been
filed by the Shelf Filing Deadline, (b) a Shelf Registration Statement has not
become effective by the Shelf Effectiveness Deadline, (c) after the Shelf
Registration Statement has become effective, subject to Section 2.5, the Shelf
Registration Statement fails to be effective or usable by the Holders without
being succeeded within seven business days by a post-effective amendment or a
report filed with the SEC pursuant to the 1934 Act that cures the failure to be
effective or usable or (d) the Shelf Registration Statement is unusable by the
Holders for any reason, and the number of days for which the Shelf Registration
Statement shall not be usable exceeds any Suspension Period permitted by Section
2.5 hereunder (each such event being a “Registration Default”), additional
interest (“Additional Interest”), will accrue on the Notes that are Registrable
Securities at a rate per annum of 0.50% of the principal amount of the Notes
that are Registrable Securities, payable periodically on May 15 and November 15
each year; provided, however, that, in no event shall Additional Interest accrue
at a rate per annum exceeding 0.50% of the principal amount of the Notes that
are Registrable Securities; provided further that no Additional Interest shall
accrue under clauses (c) and (d) above with respect to any Holder that (x) does
not deliver to the Company a completed Questionnaire and such other information
that the Company may reasonably request, if any, as provided for in Section
2.1(d), and (y) is not named as a selling securityholder in the Shelf
Registration Statement. Notwithstanding the foregoing, in no event will
Additional Interest be payable in connection with a Registration Default
relating to a failure to register the Common Stock into which the Notes are
convertible; for the avoidance of doubt, if none of the Securities are
registered then Additional Interest only will be payable in connection with the
Registration Default relating to the failure to register the Notes. Upon the
cure of all Registration Defaults then continuing, the accrual of Additional
Interest will automatically cease and the interest rate borne by the Notes will
revert to the original interest rate at such time. Additional Interest shall be
computed based on the actual number of days elapsed in each six-month period
between payment dates in which the Shelf Registration Statement is not effective
or is unusable. Holders who have converted Notes into Common Stock will not be
entitled to receive any Additional Interest with respect to such Common Stock or
the principal amount of the Notes converted.

The Trustee shall be entitled, but shall not be obligated, on behalf of the
Holders of Registrable Securities, to seek any available remedy for the
enforcement of this Agreement, including for the payment of any Additional
Interest. Notwithstanding the foregoing, the parties agree that the sole
monetary damages payable for a violation of the terms of this Agreement with
respect to which Additional Interest are expressly provided shall be such
Additional Interest. Nothing shall preclude a Holder of Registrable Securities
from pursuing or obtaining specific performance or equitable relief with regard
to this Agreement. Each obligation to pay Additional Interest shall be deemed to
accrue from and including the day following the Registration Default to but
excluding the day on which the Registration Default is cured.

A Registration Default under clause (a) above shall be cured on the date that
the Shelf Registration Statement is filed with the SEC. A Registration Default
under clause (b) above shall be cured on the date that the Shelf Registration
Statement becomes effective. A Registration Default under clauses (c) or
(d) above shall be cured on the date an amended Shelf Registration Statement

 

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becomes effective or the Company otherwise declares the Shelf Registration
Statement and the Prospectus useable, as applicable.

The parties agree that the Additional Interest provided for in this Section 2.4
constitutes a reasonable estimate of the damages that may be incurred by Holders
of Registrable Securities and does not constitute a penalty.

2.5 Suspension. Notwithstanding any other provision hereof, the Company may
suspend the use of any Prospectus, without incurring or accruing any obligation
to pay Additional Interest pursuant to Section 2.4, for a period not to exceed
30 days in any 90-day period or an aggregate of 90 days in any 360-day period
(each, a “Suspension Period”), if the Company shall have determined in good
faith that because of valid business reasons (not including avoidance of the
Company’s obligations hereunder), including without limitation plans for a
registered public offering, an acquisition or other proposed or pending
corporate developments and similar events or because of filings with the SEC, it
is in the best interests of the Company to suspend such use, and prior to
suspending such use the Company provides the Holders with written notice of such
suspension (provided that in each notice the Company will not disclose the
content of such material, non-public information to the Holders), which notice
need not specify the nature of the event giving rise to such suspension (and,
upon receipt of such notice, each Holder agrees not to sell any Registrable
Securities pursuant to the Shelf Registration Statement until such Holder is
advised in writing that the Prospectus may be used, which notice the Company
agrees to provide promptly following the lapse of the event or circumstances
giving rise to such suspension). Each Holder shall keep confidential any
communications received by it from the Company regarding the suspension of the
use of the Prospectus (including, without limitation, the fact of the
suspension), except as required by applicable law.

2.6 Underwriter. Neither the Company nor any Subsidiary (as defined in the
Purchase Agreement) nor affiliate thereof shall identify any Holder as an
underwriter in any public disclosure or filing with the SEC or The NASDAQ Global
Select Market; provided, however, that the foregoing shall not prohibit the
Company from including the disclosure found in the “Plan of Distribution”
section attached hereto as Exhibit A in the Shelf Registration Statement.

 

  3. Registration Procedures.

In connection with the obligations of the Company with respect to the Shelf
Registration, the Company shall:

(a) at a reasonable time prior to filing the Shelf Registration Statement, any
Prospectus forming a part thereof, any amendment to the Shelf Registration
Statement or amendment or supplement to such Prospectus (other than amendments
and supplements that do nothing more than name Holders and provide information
with respect thereto), (i) furnish to the Purchasers or any Underwriter or
designee thereof and one special counsel to the Purchasers or any Underwriter or
designee thereof copies of all such documents proposed to be filed, (ii) use
commercially reasonable efforts to address in each such document when so filed
with the SEC such

 

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comments as the Purchasers or any Underwriter or designee thereof and such
special counsel to the Purchasers or any Underwriter or designee thereof
reasonably shall propose within three (3) Business Days of the delivery of such
copies to the Purchasers or any Underwriter or designee thereof and counsel to
the Purchaser or any Underwriter or designee thereof and (iii) not file any
Shelf Registration Statement or amendment or supplement thereto in a form to
which counsel to a majority of the Holders (as designated in writing to the
Company) reasonably objects. In addition, if any Holder that has provided the
Questionnaire and the other information required by Section 2.1(d) shall so
request in writing, a reasonable time prior to filing any such documents, the
Company shall furnish to such Holder copies of all such documents proposed to be
filed and use commercially reasonable efforts to reflect in each such document
when so filed with the SEC such comments as such Holder reasonably shall propose
within three (3) Business Days of the delivery of such copies to such Holder;

(b) ensure that each Shelf Registration Statement (including any amendments or
supplements thereto and prospectuses contained therein) shall not contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein, or necessary to make the statements therein (in the case of
prospectuses, in the light of the circumstances in which they were made) not
misleading.

(c) prepare and file with the SEC such amendments and post-effective amendments
to the Shelf Registration Statement as may be necessary under applicable law to
keep the Shelf Registration Statement effective for the Effectiveness Period,
subject to Section 2.5; and cause each Prospectus to be supplemented by any
required prospectus supplement, and as so supplemented to be filed in compliance
with Rule 424 (or any similar provision then in force) under the 1933 Act and
use commercially reasonable efforts to comply during the Effectiveness Period
with the provisions of the 1933 Act, the 1934 Act and the rules and regulations
thereunder required to enable the disposition of all Registrable Securities
covered by the Shelf Registration Statement in accordance with the intended
method or methods of distribution (as provided to the Company in the
Questionnaires) by the selling Holders thereof;

(d) (i) notify each Holder of Registrable Securities of the filing of a Shelf
Registration Statement or any post-effective amendment to a Shelf Registration
Statement and of when any such Shelf Registration Statement or any
post-effective amendment to a Shelf Registration Statement has become effective;
(ii) during the Effectiveness Period, furnish to each Holder of Registrable
Securities that has provided the Questionnaires and the information required by
Section 2.1(d) and to each Underwriter, if any, without charge, as many copies
of each Prospectus, including each preliminary Prospectus, and any amendment or
supplement thereto and such other documents as such Holder or Underwriter may
reasonably request in writing, including financial statements and schedules and,
if such Holder or Underwriter so requests, all exhibits thereto in connection
with the sale or other disposition of the Registrable Securities; and
(iii) subject to Section 2.5 and to any notice by the Company in accordance with
Section 3(f) of the existence of any fact of the kind described in Sections
3(f)(i), (ii), (iii), (iv) and (v), hereby consent to the use of the Prospectus
or any amendment or supplement thereto by each of the selling Holders and

 

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Underwriters of Registrable Securities that has provided the Questionnaire and
the other information required by Section 2.1(d) in connection with the offering
and sale of the Registrable Securities covered by such Prospectus or any
amendment or supplement thereto in the manner set forth therein;

(e) use commercially reasonable efforts to register or qualify or cooperate with
the Holders and Underwriters in connection with the registration or
qualification (or exemption from such registration or qualification) of the
Registrable Securities under all applicable state securities or “blue sky” laws
of such jurisdictions as any Holder of Registrable Securities covered by a Shelf
Registration Statement and each Underwriter shall reasonably request in writing,
and do any and all other acts and things which may be reasonably necessary or
advisable to enable each such Holder and Underwriter to consummate the
disposition in each such jurisdiction of such Registrable Securities owned by
such Holder; provided, however, that the Company shall not be required to
(i) qualify as a foreign corporation or as a dealer in securities in any
jurisdiction where it would not otherwise be required to qualify but for this
Section 3(e), or (ii) take any action which would subject it to general service
of process or taxation in any such jurisdiction where it is not then so subject;

(f) notify as promptly as reasonably practicable each Holder of Registrable
Securities under a Shelf Registration that has provided the Questionnaire and
the other information required by Section 2.1(d) and, if requested by such
Holder, confirm such advice in writing promptly (i) of any request, following
the effectiveness of the Shelf Registration Statement under the 1933 Act, by the
SEC or any state securities authority for post-effective amendments and
supplements to a Shelf Registration Statement and Prospectus or for additional
information after the Shelf Registration Statement has become effective, (ii) of
the issuance by the SEC or any state securities authority of any stop order
suspending the effectiveness of a Shelf Registration Statement or the initiation
of any proceedings for that purpose, (iii) of the occurrence (but not the nature
of or details concerning) of any event or the discovery of any facts during the
period a Shelf Registration Statement is effective which makes any statement
made in such Shelf Registration Statement or the related Prospectus untrue in
any material respect or which requires the making of any changes in such Shelf
Registration Statement or Prospectus in order to make the statements therein not
misleading, (provided, however, that no notice by the Company shall be required
pursuant to this clause (iii) in the event that the Company either promptly
files a Prospectus supplement to update the Prospectus or a Form 8-K or other
appropriate 1934 Act report that is incorporated by reference into the Shelf
Registration Statement, which, in either case, contains the requisite
information that results in such Shelf Registration Statement no longer
containing any untrue statement of material fact or omitting to state a material
fact necessary to make the statements therein not misleading), (iv) of the
receipt by the Company of any notification with respect to the suspension of the
qualification of the Registrable Securities for sale in any jurisdiction or the
initiation or threatening of any proceeding for such purpose and (v) of any
determination by the Company that a post-effective amendment to such Shelf
Registration Statement would be required by applicable law;

(g) provided a Holder then holds at least $25 million aggregate principal amount
of Registrable Securities, as promptly as reasonably practicable furnish to such
Holder and any Underwriter or designee thereof on behalf of the Holders and one
counsel to the Holder selected

 

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by the Majority Holders (i) copies of any comment letters received from the SEC
with respect to a Shelf Registration Statement or any documents incorporated
therein and (ii) any other request by the SEC or any state securities authority
for amendments or supplements to a Shelf Registration Statement and Prospectus
or for additional information with respect to the Shelf Registration Statement
and Prospectus;

(h) use commercially reasonable efforts to prevent the issuance of any stop
order or other suspension of effectiveness of a Shelf Registration Statement, or
the suspension of the qualification of any of the Registrable Securities for
sale in any jurisdiction and, if such an order or suspension is issued use
commercially reasonable efforts to obtain the withdrawal of any such order or
suspension at the earliest practicable moment or, if any such order or
suspension is made effective during any Suspension Period, at the earliest
practicable moment after the Suspension Period;

(i) upon the occurrence of any event or the discovery of any facts, each as
contemplated by Sections 3(f)(i), (ii), (iii), (iv) and (v), as promptly as
practicable after the occurrence of such an event, use commercially reasonable
efforts to prepare a supplement or post-effective amendment to the Shelf
Registration Statement or the related Prospectus or any document incorporated
therein by reference or file any other required document so that, as thereafter
delivered to the purchasers of the Registrable Securities, such Prospectus will
not contain at the time of such delivery any untrue statement of a material fact
or omit to state a material fact necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading. At such
time as such public disclosure is otherwise made or the Company determines that
such disclosure is not necessary, in each case to correct any misstatement of a
material fact or to include any omitted material fact, the Company agrees
promptly to notify each Holder that has provided the Questionnaire and the other
information required by Section 2.1(d) of such determination and to furnish each
Holder such number of copies of the Prospectus as amended or supplemented, as
such Holder may reasonably request;

(j) use commercially reasonable efforts to cause the Indenture to be qualified
under the 1939 Act in connection with the registration of the Registrable
Securities, (ii) cooperate with the Trustee and the Holders to effect such
changes to the Indenture as may be required for the Indenture to be so qualified
in accordance with the terms of the 1939 Act, and (iii) execute, and use
commercially reasonable efforts to cause the Trustee to execute, all documents
as may be required to effect such changes, and all other forms and documents
required to be filed with the SEC to enable the Indenture to be so qualified in
a timely manner;

(k) use commercially reasonable efforts to cause all Registrable Securities to
be listed on any securities exchange or inter-dealer quotation system on which
similar securities issued by the Company are then listed;

 

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(l) make generally available to its security holders, as soon as reasonably
practicable, earning statements covering at least 12 months (which need not be
audited) satisfying the provisions of Section 11(a) of the 1933 Act and Rule 158
thereunder; and

(m) make a commercially reasonable effort to provide such information as is
required for any filings required to be made with the National Association of
Securities Dealers, Inc., if any.

(n) furnish to each Holder whose Registrable Securities are included in any
Shelf Registration Statement, without charge, to the extent requested by a
Holder, (i) promptly after the same is prepared and filed with the SEC, at least
one copy of such Shelf Registration Statement and any amendment(s) thereto,
including financial statements and schedules, all documents incorporated therein
by reference, if requested by a Holder, all exhibits and each preliminary
prospectus, (ii) upon the effectiveness of any Shelf Registration Statement, ten
(10) copies of the prospectus included in such Shelf Registration Statement and
all amendments and supplements thereto (or such other number of copies as such
Holder may reasonably request) and (iii) such other documents, including copies
of any preliminary or final prospectus, as such Holder may reasonably request
from time to time in order to facilitate the disposition of the Registrable
Securities owned by such Holder.

(o) Within two (2) Business Days after a Shelf Registration Statement which
covers Registrable Securities is ordered effective by the SEC, the Company shall
deliver to the transfer agent for such Registrable Securities (with copies to
the Holders whose Registrable Securities are included in such Shelf Registration
Statement) confirmation that such Shelf Registration Statement has been declared
effective by the SEC.

(p) The Company shall cooperate with the Holders who hold Registrable Securities
being offered and, to the extent applicable, facilitate the timely preparation
and delivery of certificates (not bearing any restrictive legend) representing
the Registrable Securities to be offered pursuant to a Shelf Registration
Statement and enable such certificates to be in such denominations or amounts,
as the case may be, as the Holders may reasonably request and registered in such
names as the Holders may request.

Without limiting the provisions of Section 2.1(d), the Company may (as a
condition to such Holder’s participation in the Shelf Registration) require each
Holder of Registrable Securities to furnish to the Company such information
regarding the Holder and the proposed distribution by such Holder of such
Registrable Securities as the Company may from time to time reasonably request
in writing. Each Holder agrees promptly to furnish to the Company in writing all
information required to be disclosed in order to make the information previously
furnished to the Company by such Holder not misleading, any other information
regarding such Holder and the distribution of such Registrable Securities as may
be required to be disclosed in the Prospectus or Shelf Registration Statement
under applicable law or pursuant to SEC comments and any information otherwise
reasonably required by the Company to comply with applicable law or regulations.

 

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Each Holder agrees that, upon receipt of any notice from the Company of the
happening of any event or the discovery of any facts, each of the kind described
in Section 3(f)(i), (ii), (iii), (iv) and (v), such Holder will forthwith
discontinue disposition of Registrable Securities pursuant to the Prospectus
included in the Shelf Registration Statement until such Holder’s receipt of the
copies of the supplemented or amended Prospectus contemplated by Section 3(i) or
written notice from the Company that the Shelf Registration Statement is again
effective and no amendment or supplement is needed, and, if so directed by the
Company, such Holder will deliver to the Company (at its expense) all copies in
such Holder’s possession, other than permanent file copies then in such Holder’s
possession, of the Prospectus covering such Registrable Securities at the time
of receipt of such notice.

 

  4. Reports Under the 1934 Act.

With a view to making available to the Holders the benefits of Rule 144
promulgated under the 1933 Act or any other similar rule or regulation of the
SEC that may at any time permit the Holders to sell securities of the Company to
the public without registration (“Rule 144”), the Company agrees to:

(a) make and keep public information available, as those terms are understood
and defined in Rule 144;

(b) file with the SEC in a timely manner all reports and other documents
required of the Company under the 1933 Act and the 1934 Act so long as the
Company remains subject to such requirements and the filing of such reports and
other documents is required for the applicable provisions of Rule 144; and

(c) furnish to each Holder so long as such Holder owns Registrable Securities,
promptly upon request, (i) a written statement by the Company, if true, that it
has complied with the reporting requirements of Rule 144, the 1933 Act and the
1934 Act, (ii) a copy of the most recent annual or quarterly report of the
Company and such other reports and documents so filed by the Company, and
(iii) such other information as may be reasonably requested to permit the
Holders to sell such securities pursuant to Rule 144 without registration.

 

  5. Indemnification; Contribution.

(a) Indemnification by the Company. The Company agrees to indemnify and hold
harmless each Purchaser, each Holder who provided the Questionnaire and the
other information to the Company in accordance with Section 2.1(d), and each of
their respective directors, officers and employees and agents and each Person,
if any, who controls such Purchaser or Holder within the meaning of Section 15
of the 1933 Act or Section 20 of the 1934 Act (each of the foregoing is referred
to herein as an “indemnified party”) (i) against any loss, claim, damage,
liability or expense, as incurred, to which such indemnified party may become
subject, insofar as such loss, claim, damage, liability or expense (or actions
in respect thereof as contemplated below) arises out of or is based upon (x) any
untrue statement or alleged untrue statement of a material fact

 

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contained in the Shelf Registration Statement (or any amendment or supplement
thereto), including all documents incorporated therein by reference, or the
omission or alleged omission therefrom of a material fact, in each case,
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading, (y) any untrue
statement or alleged untrue statement of a material fact contained in any
preliminary prospectus or the Prospectus (or any amendment or supplement
thereto), including all documents incorporated therein by reference, or the
omission or alleged omission therefrom of a material fact, in each case,
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading or (z) any violation or
alleged violation by the Company of the 1933 Act, the 1934 Act, and any other
federal or state securities law, or any rule or regulation thereunder relating
to the offer or sale of the Registrable Securities pursuant to a Shelf
Registration Statement (the matters in the foregoing clauses (x) through
(z) being collectively, “Violations”); (ii) against any and all loss, liability,
claim, damage and expense whatsoever, as incurred, to the extent of the
aggregate amount paid in settlement of any litigation, or any investigation or
proceeding by any governmental agency or body, commenced or threatened, or of
any claim whatsoever based upon any Violation; provided, that (subject to
Section 5(d) below) any such settlement is effected with the written consent of
the Company; and (iii) against any and all reasonable out-of-pocket expense
whatsoever, as incurred (including the reasonable fees and disbursements of
counsel), reasonably incurred in investigating, preparing or defending against
any litigation, or any investigation or proceeding by any governmental agency or
body, commenced or threatened, or any claim whatsoever based upon any Violation,
to the extent that any such expense is not paid under subparagraph (i) or
(ii) above; and to reimburse each indemnified party for any and all expenses
(including the fees and disbursements of counsel chosen by the indemnified
parties) as such expenses are reasonably incurred by such indemnified party in
connection with investigating, defending, settling, compromising or paying any
such loss, claim, damage, liability, expense or action; provided, however, that
the foregoing indemnity agreement shall not apply to any loss, claim, damage,
liability or expense to the extent, but only to the extent, (A) arising out of
or based upon any untrue statement or alleged untrue statement or omission or
alleged omission made in reliance upon and in conformity with written
information furnished to the Company by any indemnified party expressly for use
in the Shelf Registration Statement (or any amendment or supplement thereto),
any preliminary prospectus or the Prospectus (or any amendment or supplement
thereto) or (B) as is finally judicially determined to have resulted from the
gross negligence, willful misconduct or bad faith of an indemnified party. The
indemnity agreement set forth in this Section 5(a) shall be in addition to any
liabilities that the Company may otherwise have.

(b) Indemnification by the Holders. Each Holder who has provided the
Questionnaire and the other information to the Company in accordance with
Section 2.1(d), severally, but not jointly, agrees to indemnify and hold
harmless the Company, each Purchaser and the other selling Holders who have
provided the Questionnaire and the other information to the Company in
accordance with Section 2.1(d), and each of their respective directors,
officers, employees and agents and each Person, if any, who controls the
Company, any Purchaser or any other selling Holder within the meaning of
Section 15 of the 1933 Act or Section 20 of the 1934 Act, against any and all
loss, liability, claim, damage and expense described in the indemnity contained
in

 

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Section 5(a), as incurred, but only with respect to untrue statements or
omissions, or alleged untrue statements or omissions, made in the Shelf
Registration Statement (or any amendment thereto), any preliminary prospectus or
the Prospectus included therein (or any amendment or supplement thereto) in
reliance upon and in conformity with written information with respect to such
Holder furnished to the Company by or on behalf of such Holder expressly for use
in the Shelf Registration Statement (or any amendment thereto), such preliminary
prospectus or the Prospectus (or any amendment or supplement thereto).

(c) Notifications and Other Indemnification Procedures. Promptly after receipt
by an indemnified party under this Section 5 of notice of the commencement of
any action, such indemnified party will, if a claim in respect thereof is to be
made against an indemnifying party under this Section 5, notify the indemnifying
party in writing of the commencement thereof, but the failure to so notify the
indemnifying party (1) will not relieve it from liability under paragraph (a),
(b) or (c) above unless and to the extent it did not otherwise learn of such
action and such failure results in the forfeiture by the indemnifying party of
substantial rights and defenses and (2) will not, in any event, relieve the
indemnifying party from any obligations to any indemnified party other than the
indemnification obligation provided in paragraph (a), (b) or (c) above. In case
any such action is brought against any indemnified party and such indemnified
party seeks or intends to seek indemnity from an indemnifying party, the
indemnifying party will be entitled to participate in, and, to the extent that
it shall elect, jointly with all other indemnifying parties similarly notified,
by written notice delivered to the indemnified party promptly after receiving
the aforesaid notice from such indemnified party, to assume the defense thereof
with counsel reasonably satisfactory to such indemnified party; provided,
however, if the defendants in any such action include both the indemnified party
and the indemnifying party and the indemnified party shall have reasonably
concluded that a conflict may arise between the positions of the indemnifying
party and the indemnified party in conducting the defense of any such action or
that there may be legal defenses available to it and/or other indemnified
parties that are different from or additional to those available to the
indemnifying party, the indemnified party or parties shall have the right to
select separate counsel to assume such legal defenses and to otherwise
participate in the defense of such action on behalf of such indemnified party or
parties. Upon receipt of notice from the indemnifying party to such indemnified
party of such indemnifying party’s election so to assume the defense of such
action and approval by the indemnified party of counsel, the indemnifying party
will not be liable to such indemnified party under this Section 5 for any legal
or other expenses subsequently incurred by such indemnified party in connection
with the defense thereof unless (i) the indemnified party shall have employed
separate counsel in accordance with the proviso to the preceding sentence (it
being understood, however, that the indemnifying party shall not be liable for
the expenses of more than one separate counsel (other than local counsel),
reasonably approved by the indemnifying party, representing the indemnified
parties who are parties to such action) or (ii) the indemnifying party shall not
have employed counsel satisfactory to the indemnified party to represent the
indemnified party within a reasonable time after notice of commencement of the
action, in each of which cases the fees and expenses of counsel shall be at the
expense of the indemnifying party.

 

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(d) Settlements. The indemnifying party under this Section 5 shall not be liable
for any settlement of any proceeding effected without its written consent, which
shall not be withheld unreasonably, but if settled with such consent or if there
is a final judgment for the plaintiff, the indemnifying party agrees to
indemnify the indemnified party against any loss, claim, damage, liability or
expense by reason of such settlement or judgment. Notwithstanding the foregoing
sentence, if at any time an indemnified party shall have requested an
indemnifying party to reimburse the indemnified party for fees and expenses of
counsel as contemplated by Section 5(c) hereof, the indemnifying party agrees
that it shall be liable for any settlement of any proceeding effected without
its written consent if (i) such settlement is entered into more than 30 days
after receipt by such indemnifying party of the aforesaid request, (ii) such
indemnifying party shall have received notice of the terms of such settlement at
least 45 days prior to such settlement being entered into and (iii) such
indemnifying party shall not have reimbursed the indemnified party in accordance
with such request prior to the date of such settlement. No indemnifying party
shall, without the prior written consent of the indemnified party, effect any
settlement, compromise or consent to the entry of judgment in any pending or
threatened action, suit or proceeding in respect of which any indemnified party
is or could have been a party and indemnity was or could have been sought
hereunder by such indemnified party, unless such settlement, compromise or
consent (x) includes an unconditional release of such indemnified party from all
liability on claims that are the subject matter of such action, suit or
proceeding and (y) does not include a statement as to or an admission of fault,
culpability or a failure to act by or on behalf of any indemnified party.

(e) If the indemnification provided for in this Section 5 is for any reason
unavailable to or insufficient to hold harmless an indemnified party in respect
of any losses, liabilities, claims, damages or expenses referred to therein,
then each indemnifying party shall contribute to the aggregate amount of such
losses, liabilities, claims, damages and expenses incurred by such indemnified
party, as incurred, in such proportion as is appropriate to reflect the relative
fault of the Company on the one hand and the Holders on the other hand in
connection with the statements or omissions which resulted in such losses,
liabilities, claims, damages or expenses, as well as any other relevant
equitable considerations.

The relative fault of the indemnifying parties on the one hand and the
indemnified parties and the Purchasers on the other hand shall be determined by
reference to, among other things, whether any such untrue or alleged untrue
statement of a material fact or omission or alleged omission to state a material
fact relates to information supplied by the Company, or by the Holders and the
parties’ relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission.

The Company and the Holders agree that it would not be just and equitable if
contribution pursuant to this Section 5 were determined by pro rata allocation
or by any other method of allocation which does not take account of the
equitable considerations referred to above in this Section 5. The aggregate
amount of losses, liabilities, claims, damages and expenses incurred by an
indemnified party and referred to above in this Section 5 shall be deemed to
include any reasonable out-of-pocket legal or other expenses reasonably incurred
by such indemnified party in investigating,

 

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preparing or defending against any litigation, or any investigation or
proceeding by any governmental agency or body, commenced or threatened, or any
claim whatsoever based upon any such untrue or alleged untrue statement or
omission or alleged omission.

Notwithstanding the provisions of this Section 5, no Holder shall be required to
indemnify or contribute any amount in excess of the amount by which the total
price at which the Securities sold by such Holder exceeds the amount of any
damages which such Holder has otherwise been required to pay by reason of such
untrue or alleged untrue statement or omission or alleged omission.

No Person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the 1933 Act) shall be entitled to contribution from any Person
who was not guilty of such fraudulent misrepresentation.

For purposes of this Section 5, each director, officer, employee and agent of
Holder, or each Person, if any, who controls any Holder within the meaning of
Section 15 of the 1933 Act or Section 20 of the 1934 Act shall have the same
rights to contribution as such Holder, and each director, officer, employee or
agent of the Company, and each Person, if any, who controls the Company within
the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act shall
have the same rights to contribution as the Company.

 

  6. Underwritten Offerings

(a) With the prior consent of the Company, which consent shall not be
unreasonably withheld, Holders of at least $25 million in aggregate principal
amount of the Notes may sell Registrable Securities (in whole or in part) in a
registration in which such securities are sold to an underwriter for reoffering
to the public pursuant to the Shelf Registration Statement (an “Underwritten
Offering”). Upon receipt of such a request, the Company shall provide all
Holders written notice of the request, which notice shall inform such Holders
that they have the opportunity to participate in the Underwritten Offering. In
any such Underwritten Offering, the Underwriters will be selected by, and the
underwriting arrangements with respect thereto (including the size of the
offering) will be approved by the Majority Holders of the Registrable Securities
to be included in such offering; provided, however, that such Underwriters and
underwriting arrangements must be reasonably satisfactory to the Company. No
Holder may participate in any Underwritten Offering contemplated hereby unless
(a) such Holder agrees to sell such Holder’s Registrable Securities to be
included in the Underwritten Offering in accordance with any approved
underwriting arrangements, (b) such Holder completes and executes all reasonable
questionnaires, powers of attorney, indemnities, underwriting agreements,
lock-up letters and other documents required under the terms of such approved
underwriting arrangements, and (c) if such Holder has not already done so, such
Holder returns a completed and signed Notice and Questionnaire to the Company in
accordance with Section 2.1(c) hereof within a reasonable amount of time before
such Underwritten Offering. Notwithstanding the foregoing, upon receipt of a
request from the Underwriters or a representative of holders of a majority of
the Registrable Securities to be included in an Underwritten Offering to prepare
and file an amendment or supplement to the Shelf Registration Statement and
Prospectus in

 

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connection with an Underwritten Offering, the Company may delay the filing of
any such amendment or supplement for up to 30 days if the Board of Directors of
the Company shall have determined in good faith that the Company has a bona fide
business reason for such delay.

(b) To the extent the Shelf Registration Statement is effective and available
for use at the time of any proposed sale or offer of any Securities by any
Purchaser participating in such Underwritten Offering, each such Purchaser
agrees that the sale and offer of such Securities made by it shall be made
pursuant to such effective Shelf Registration Statement such that the transferee
of such Securities will receive unrestricted Securities.

(c) In furtherance of the Company’s undertakings, and subject to the
limitations, in Section 5(a), the Company agrees to use commercially reasonable
efforts to enter into such customary agreements (on terms reasonably acceptable
to the Company) and take all other customary and appropriate actions in order to
expedite or facilitate the disposition of the Registrable Securities being
offered and sold in an Underwritten Offering in which the Company provides
cooperation, including, but not limited to:

(i) obtaining opinions of counsel to the Company and updates thereof addressed
to each selling Purchaser and the Underwriters covering matters as are
customarily requested in opinions covering secondary resale offerings of
companies of comparable size, maturities and lines of business as the Company;

(ii) obtaining “comfort” letters and updates thereof from the Company’s
independent certified public accountants (and, if necessary, any other
independent certified public accountants of any subsidiary of the Company or of
any business acquired by the Company for which financial statements are, or are
required to be, included in the Shelf Registration Statement) addressed to the
Underwriters, and use commercially reasonable efforts to have such letter
addressed to the selling Purchasers (to the extent consistent with AU 722,
Interim Financial Information, of the Public Company Accounting Oversight Board
(United States), such letters covering matters as are customarily requested in
comfort letters covering secondary resale offerings of companies of comparable
size, maturities and lines of business as the Company;

(iii) making reasonably available for inspection by each Purchaser and the
Underwriters participating in any Underwritten Offering, and any attorney,
accountant or other agent retained by any such Purchaser or Underwriter all
relevant financial and other records and pertinent corporate documents of the
Company as are customarily made available in secondary resale offerings of
companies of comparable size, maturities and lines of business as the Company;

(iv) causing the Company’s officers, directors, employees, accountants and
auditors to supply all relevant information, and causing appropriate persons to
be reasonably available for discussions concerning such documents, as reasonably
requested by any such Purchaser, Underwriter, attorney, accountant or agent in
connection with any such Underwritten Offering as is customary for similar due
diligence examinations;

 

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(v) delivering such documents and certificates to the Purchasers and the
Underwriters as may be reasonably requested by such Purchasers or Underwriters
and as are customarily delivered in secondary resale offerings of companies of
comparable size, maturities and lines of business as the Company;

(vi) making appropriate members of senior management reasonably available to
participate in conference calls with potential investors and make presentations
to ratings agencies as is reasonably necessary and customary in secondary resale
offerings of companies of comparable size, maturities and lines of business as
the Company; and

(vii) if an underwriting or purchase, sale or agency agreement is entered into,
causing the same to set forth indemnification provisions and procedures
substantially equivalent to the indemnification provisions and procedures set
forth in Section 5 with respect to the Underwriters and all other parties to be
indemnified pursuant to said Section or, at the request of any Underwriters, in
the form customarily provided to such Underwriters in similar types of
transactions.

In connection with any Underwritten Offering in which the Company provides
assistance to the Purchasers or the Underwriters thereto, the Company may
require each Purchaser or Underwriter, and their attorneys, accountants or
agents retained by them, to maintain in confidence and not to disclose to any
other person any information or records provided as part of such assistance and
reasonably designated by the Company as being confidential, until such time as
(A) such information becomes a matter of public record (whether by virtue of its
inclusion in such registration statement or otherwise), or (B) such person shall
be required so to disclose such information pursuant to a subpoena or order of
any court or other governmental agency or body having jurisdiction over the
matter (subject to the requirements of such order, and only after such person
shall have given the Company prompt prior written notice of such requirement),
or (C) such information is required to be set forth in the Shelf Registration
Statement or the prospectus included therein or in an amendment to such Shelf
Registration Statement or an amendment or supplement to such prospectus in order
that such Shelf Registration Statement, prospectus, amendment or supplement,
complies with applicable requirements of the federal securities laws and the
rules and regulations of the Commission and does not contain an untrue statement
of a material fact or omit to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading in
light of the circumstances then existing or (D) such information becomes
available to any such person from a source other than the Company and such
source is not bound by a confidentiality agreement or other confidentiality
obligations or duties, as the case may be.

 

  7. Miscellaneous.

7.1 No Inconsistent Agreements. The Company has not entered into and the Company
will not after the date of this Agreement enter into any agreement with respect
to its securities which conflicts with the rights granted to the Holders of
Registrable Securities in this Agreement. The rights granted to the Holders
hereunder do not for the term of this Agreement

 

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conflict with the rights granted to the holders of the Company’s other issued
and outstanding securities under any such agreements.

7.2 Amendments and Waivers. The provisions of this Agreement may not be amended,
qualified, modified or supplemented, and waivers or consents to departures from
the provisions hereof may not be given, unless the Company has obtained the
written consent of the Majority Holders; provided, however, that no amendment,
qualification, supplement, waiver or consent with respect to Sections 2.4 and 5
hereof shall be effective as against any Holder of Registered Securities unless
consented to in writing by such Holder; and provided, further, that the
provisions of this Section 7.2 may not be amended, qualified, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given, unless the Company has obtained the written consent of each
Holder, except that any provision of this Section 6.2 which provides that an
amendment to this Agreement may be made upon the written consent of the Majority
Holders may itself be amended, qualified, modified or supplemented, and waivers
or consents to departures from any such provision may be given if the Company
obtains the written consent of the Majority Holders; and provided further, that
any amendment to this Agreement that disproportionately adversely affects any
Holder shall require the prior written consent of such Holder. Notwithstanding
the foregoing (except the foregoing provisos), (i) a waiver or consent to
departure from the provisions hereof with respect to a matter that relates
exclusively to the rights of Holders whose Registrable Securities are being sold
pursuant to a Shelf Registration Statement and that does not directly or
indirectly affect the rights of other Holders may be given by the Majority
Holders, determined on the basis of the Registrable Securities being sold rather
than registered under such Shelf Registration Statement and (ii) this Agreement
may be amended by a written agreement between the Company and the Purchasers,
without the consent of the Holders of the Registrable Securities, in order to
cure any ambiguity or to correct or supplement any provision contained herein,
provided that no such amendment shall adversely affect the interest of the
Holders of Registrable Securities. Each Holder of Registrable Securities
outstanding at the time of any amendment, modification, waiver or consent
pursuant to this Section 7.2, shall be bound by such amendment, modification,
waiver or consent, whether or not any notice or writing indicating such
amendment, modification, waiver or consent is delivered to such Holder.

7.3 Notices. All notices, consents and other communications provided for or
permitted hereunder shall be made in writing by hand delivery, registered
first-class mail, facsimile, or any courier guaranteeing overnight delivery
(a) if to a Holder, in the manner set forth in Section 12.03(b) of the
Indenture; and (b) if to the Company, initially at the Company’s address set
forth in the Purchase Agreement, and thereafter at such other address of which
notice is given in accordance with the provisions of this Section 7.3

All such notices and communications shall be deemed to have been duly given when
delivered in person or by private courier with receipt, if telefaxed when verbal
or email confirmation from the recipient is received, or three (3) days after
being deposited in the United States mail, first-class, registered or certified,
return receipt requested, with postage paid.

 

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Copies of all such notices, demands, or other communications to any Holder shall
be deemed to have been duly given, if such notice has been duly given to the
Trustee under the Indenture, at the address specified in such Indenture.

7.4 Successor and Assigns. This Agreement shall inure to the benefit of and be
binding upon the successors, assigns and transferees of each of the parties,
including, without limitation and without the need for an express assignment,
subsequent Holders; provided, however, that, nothing herein shall be deemed to
permit any assignment, transfer or other disposition of Registrable Securities
in violation of the terms of the Purchase Agreement or the Indenture. If any
transferee of any Holder shall acquire Registrable Securities, in any manner,
whether by operation of law or otherwise, such Registrable Securities shall be
held subject to all of the terms of this Agreement, and by taking and holding
such Registrable Securities such person shall be conclusively deemed to have
agreed to be bound by and to perform all of the terms and provisions of this
Agreement, including the restrictions on resale set forth in this Agreement and,
if applicable, the Purchase Agreement, and such person shall be entitled to
receive the benefits hereof.

7.5 Third Party Beneficiaries. Each Holder of Registrable Securities shall be a
third party beneficiary to the agreements made hereunder between the Company, on
the one hand, and the Purchasers, on the other hand, and shall have the right to
enforce such agreements directly to the extent it deems such enforcement
necessary or advisable to protect its rights hereunder.

7.6 Specific Enforcement. Without limiting the remedies available to the
Purchasers and the Holders, the Company acknowledges that any failure by the
Company to comply with its obligations under Section 2.1 may result in material
irreparable injury to the Purchasers or the Holders for which there is no
adequate remedy at law, that it may not be possible to measure damages for such
injuries precisely and that, in the event of any such failure, any Purchaser or
any Holder may seek such relief as may be required to specifically enforce the
Company’s obligations under Sections 2.1; provided, however, that without
limiting the ability of the any Holder to specifically enforce such obligations,
with respect to the terms of this Agreement for which Additional Interest
pursuant to Section 2.4 is expressly provided as a remedy for a violation of
such terms, such Additional Interest shall be the sole remedy for such
violation.

7.7 Counterparts. This Agreement may be executed in any number of counterparts
and by the parties hereto in separate counterparts, each of which when so
executed shall be deemed to be an original and all of which taken together shall
constitute one and the same agreement.

7.8 Headings. The headings in this Agreement are for convenience of reference
only and shall not limit or otherwise affect the meaning hereof.

7.9 GOVERNING LAW. All questions concerning the construction, validity,
enforcement and interpretation of this Agreement shall be governed by the
internal laws of the State of New York, without giving effect to any choice of
law or conflict of law provision or rule (whether of the State of New York or
any other jurisdictions) that would cause the application of the laws of

 

-21-

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any jurisdictions other than the State of New York. Each party hereby
irrevocably submits to the exclusive jurisdiction of the state and federal
courts sitting in The City of New York, Borough of Manhattan, for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein, and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that
such suit, action or proceeding is brought in an inconvenient forum or that the
venue of such suit, action or proceeding is improper. Each party hereby
irrevocably waives personal service of process and consents to process being
served in any such suit, action or proceeding by mailing a copy thereof to such
party at the address for such notices to it under this Agreement and agrees that
such service shall constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in any way any right
to serve process in any manner permitted by law. EACH PARTY HEREBY IRREVOCABLY
WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE
ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION HEREWITH OR ARISING OUT
OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.

7.10 Severability. In the event that any one or more of the provisions contained
herein, or the application thereof in any circumstance, is held invalid, illegal
or unenforceable, the validity, legality and enforceability of any such
provision in every other respect and of the remaining provisions contained
herein shall not be affected or impaired thereby.

7.11 Entire Agreement. This Agreement is intended by the parties as a final
expression of their agreement and intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein. There are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to herein
with respect to the registration rights granted by the Company with respect to
the Registrable Securities. This Agreement supersedes all prior agreements and
understandings between the parties with respect to such subject matter.

IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.

 

THE PROVIDENCE SERVICE CORPORATION By:   /s/ Fletcher Jay McCusker   Name:  
Fletcher Jay McCusker   Title:   Chief Executive Officer and Chairman of the
Board

 

-22-

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Confirmed and accepted as of the date first above written:

 

ARISTEIA INTERNATIONAL LIMITED By:   /s/ Chong Park   Name:   Chong Park  
Title:  

Portfolio Manager, Direct Investments,
Aristeia Capital, L.L.C., its Investment Manager

 

ARISTEIA PARTNERS, L.P. By:   /s/ Chong Park   Name:   Chong Park   Title:  
Portfolio Manager, Direct Investments

 

ARISTEIA SPECIAL INVESTMENTS MASTER, L.P. By:   /s/ Chong Park   Name:   Chong
Park   Title:  

Portfolio Manager, Direct Investments,
Aristeia Capital, L.L.C., its Investment Manager

 

GLG MARKET NEUTRAL FUND By:  

GLG Partners LP acting as Investment Manager for GLG Market Neutral Fund

  By:   /s/ Bob Price     Name:   Bob Price     Title:   Head of Operations    
  GLG Partners LP

 

-23-

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CQS CONVERTIBLE AND QUANTITATIVE STRATEGIES MASTER FUND LIMITED By:   /s/ Alanna
Lee   Name:   Alanna Lee   Title:  

Authorised Signatory of CQS (UK) LLP as Investment Advisor

 

STEELHEAD INVESTMENTS LTD. By:   HBK Services LLC, Investment Advisor   By:  
/s/ J. Baker Gentry, Jr.     Name:   J. Baker Gentry, Jr.     Title:  
Authorized Signatory

 

HIGHBRIDGE CAPITAL By:  

Highbridge Capital Management, LLC, as trading manager

  By:   /s/ Noah Greenhill     Name:   Noah Greenhill     Title:   Managing
Director

 

CC ARBITRAGE LTD. By:   /s/ Allan Weine   Name:   Allan Weine   Title:  
Managing Director

 

FORE CONVERTIBLE MASTER FUND LTD. By:   Fore Research & Management, LP   By:  
/s/ Daniel Agranoff     Name:   Daniel Agranoff     Title:   Chief Financial
Officer

 

-24-

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KINGS ROAD INVESTMENTS LTD. By:   /s/ Erik Caspersen   Name:   Erik Caspersen  
Title:   Authorized Signatory DEUTSCHE BANK AG, LONDON BRANCH By:   /s/ Jeremy
Benkiewicz   Name:   Jeremy Benkiewicz   Title:   Managing Director By:   /s/
George Pan   Name:   George Pan   Title:   Managing Director

 

RADCLIFFE SPC, LIMITED FOR AND ON BEHALF OF THE CLASS A SEGREGATED PORTFOLIO By:
  RG Capital Management, L.P.   By:   RGC Management Company, LLC     By:   /s/
Gerald F. Stahlecker       Name:   Gerald F. Stahlecker       Title:   Managing
Director

 

-25-

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EXHIBIT A

SELLING SECURITYHOLDERS

The shares of common stock that may be offered pursuant to this prospectus will
be offered by the selling securityholders. For additional information regarding
the issuance of the shares of common stock and the notes upon conversion of
which such shares are issuable, see “Private Placement of Convertible Notes”
above. We are registering the notes and shares of common stock issuable upon
conversion of notes in order to permit the selling stockholders to offer the
shares of common stock issuable upon conversion of the notes for resale from
time to time. Except for the ownership of the notes issued pursuant to the
Purchase Agreement, the selling stockholders have not had any material
relationship with us within the past three years.

The following table sets forth the selling securityholders and other information
regarding the beneficial ownership of the shares of common stock by each of the
selling securityholders. The second column lists the number of shares of common
stock beneficially owned by each selling securityholder, based on its ownership
of the notes, as of             , 200_, assuming conversion of all notes held by
the selling securityholders on that date, without regard to any limitations on
conversions.

The third column lists the shares of common stock being offered by this
prospectus by each selling securityholder.

In accordance with the terms of a registration rights agreement among the
Company and the selling securityholders, this prospectus generally covers the
resale of the number of shares of common stock issued or issuable upon
conversion of the notes as of the trading day immediately preceding the date the
registration statement is initially filed with the SEC. Because the conversion
price of the notes may be adjusted, the number of shares that will actually be
issued may be more or less than the number of shares being offered by this
prospectus. The fourth column assumes the sale of all of the shares of common
stock offered by the selling securityholders pursuant to this prospectus.

Under the terms of the notes, a selling securityholder may not convert the notes
to the extent such conversion would cause such selling securityholder, together
with its affiliates, to beneficially own a number of shares of common stock
which would exceed 9.99% of our then outstanding shares of common stock
following such conversion, excluding for purposes of such determination shares
of common stock issuable upon conversion of the notes which have not been
converted. The number of shares in the third column does not reflect this
limitation. The selling securityholders may sell all, some or none of their
shares of common stock issuable upon conversion of the notes in this offering.
See “Plan of Distribution.”

 

A-1

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Name of Selling

Securityholder

   Principal
Amount at
Maturity of
Notes
Beneficially
Owned Prior to
Offering    Number of
Shares Owned
Prior to
Offering    Maximum
Number of
Notes to be
Sold Pursuant
to this
Prospectus    Maximum
Number of
Shares to be
Sold Pursuant
to this
Prospectus    Number of
Notes
Owned
After
Offering    Number of
Shares Owned
After Offering

Steelhead Investments Ltd. (1)

                  0

 

(1) HBK Investments L.P. may be deemed to have sole voting and sole dispositive
power over the securities pursuant to an Investment Management Agreement between
HBK Investments L.P. and Steelhead Investments Ltd. Additionally, the following
individuals may be deemed to have control over HBK Investments L.P.: Kenneth M.
Hirsh, Laurence H. Lebowitz, William E. Rose, David C. Haley and Jamiel A.
Akhtar. Steelhead Investments Ltd. is an affiliate of a registered broker-dealer
and has represented to the Company that it acquired the securities in the
ordinary course of business and, at the time of the purchase of the securities,
had no agreements or understandings, directly or indirectly, with any person to
distribute the securities.

 

A-2

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PLAN OF DISTRIBUTION

We are registering the shares of common stock issuable upon conversion of
convertible notes to permit the resale of these shares of common stock by the
holders of the notes from time to time after the date of this prospectus. We
will not receive any of the proceeds from the sale by the selling
securityholders of the shares of common stock issuable upon conversion of the
notes. We will bear all fees and expenses incident to our obligation to register
the shares of common stock issuable upon conversion of the notes.

The selling securityholders may sell all or a portion of the shares of common
stock issuable upon conversion of the notes beneficially owned by them and
offered hereby from time to time directly or through one or more underwriters,
broker-dealers or agents. If the shares of common stock issuable upon conversion
of the notes are sold through underwriters or broker-dealers, the selling
securityholders will be responsible for underwriting discounts or commissions or
agent’s commissions. The shares of common stock issuable upon conversion of the
notes may be sold in one or more transactions at fixed prices, at prevailing
market prices at the time of the sale, at varying prices determined at the time
of sale, or at negotiated prices. These sales may be effected in transactions,
which may involve crosses or block transactions,

 

  •  

on any national securities exchange or quotation service on which the securities
may be listed or quoted at the time of sale;

 

  •  

in the over-the-counter market;

 

  •  

in transactions otherwise than on these exchanges or systems or in the
over-the-counter market;

 

  •  

through the writing of options, whether such options are listed on an options
exchange or otherwise;

 

  •  

ordinary brokerage transactions and transactions in which the broker-dealer
solicits purchasers;

 

  •  

block trades in which the broker-dealer will attempt to sell the shares as agent
but may position and resell a portion of the block as principal to facilitate
the transaction;

 

  •  

purchases by a broker-dealer as principal and resale by the broker-dealer for
its account;

 

  •  

an exchange distribution in accordance with the rules of the applicable
exchange;

 

  •  

privately negotiated transactions;

 

A-3

--------------------------------------------------------------------------------

  •  

short sales;

 

  •  

sales pursuant to Rule 144;

 

  •  

broker-dealers may agree with the selling securityholders to sell a specified
number of such shares at a stipulated price per share;

 

  •  

a combination of any such methods of sale; and

 

  •  

any other method permitted pursuant to applicable law.

If the selling securityholders effect such transactions by selling common stock
issuable upon conversion of the notes to or through underwriters, broker-dealers
or agents, such underwriters, broker-dealers or agents may receive commissions
in the form of discounts, concessions or commissions from the selling
securityholders or commissions from purchasers of the notes or such common
stock, as applicable, for whom they may act as agent or to whom they may sell as
principal (which discounts, concessions or commissions as to particular
underwriters, broker-dealers or agents may be in excess of those customary in
the types of transactions involved). In connection with sales of the shares of
common stock issuable upon conversion of the notes or otherwise, the selling
securityholders may enter into hedging transactions with broker-dealers, which
may in turn engage in short sales of the shares of common stock issuable upon
conversion of the notes in the course of hedging in positions they assume. The
selling securityholders may also sell shares of common stock issuable upon
conversion of the notes short and deliver shares of common stock covered by this
prospectus to close out short positions and to return borrowed shares in
connection with such short sales. The selling securityholders may also loan or
pledge the notes or shares of common stock issuable upon conversion of the notes
to broker-dealers that in turn may sell such shares.

The selling securityholders may pledge or grant a security interest in some or
all of the notes or shares of common stock issuable upon conversion of the notes
owned by them and, if they default in the performance of their secured
obligations, the pledgees or secured parties may offer and sell the shares of
common stock issuable upon conversion of the notes from time to time pursuant to
this prospectus or any amendment to this prospectus under Rule 424(b)(3) or
other applicable provision of the Securities Act of 1933, as amended, amending,
if necessary, the list of selling securityholders to include the pledgee,
transferee or other successors in interest as selling securityholders under this
prospectus. The selling securityholders also may transfer and donate the notes
and shares of common stock issuable upon conversion of the notes in other
circumstances in which case the transferees, donees, pledgees or other
successors in interest will be the selling beneficial owners for purposes of
this prospectus.

The selling securityholders and any broker-dealer participating in the
distribution of the shares of common stock issuable upon conversion of the notes
may be deemed to be “underwriters” within the meaning of the Securities Act, and
any commission paid, or any discounts or concessions

 

A-4

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allowed to, any such broker-dealer may be deemed to be underwriting commissions
or discounts under the Securities Act.

Under the securities laws of some states, the shares of common stock issuable
upon conversion of the notes may be sold in such states only through registered
or licensed brokers or dealers. In addition, in some states the shares of common
stock issuable upon conversion of the notes may not be sold unless such shares
have been registered or qualified for sale in such state or an exemption from
registration or qualification is available and is complied with.

There can be no assurance that any selling securityholder will sell any or all
of the shares of common stock issuable upon conversion of the notes registered
pursuant to the registration statement, of which this prospectus forms a part.

The selling securityholders and any other person participating in such
distribution will be subject to applicable provisions of the Securities Exchange
Act of 1934, as amended, and the rules and regulations thereunder, including,
without limitation, Regulation M of the Exchange Act, which may limit the timing
of purchases and sales of any of the shares of common stock issuable upon
conversion of the notes by the selling securityholders and any other
participating person. Regulation M may also restrict the ability of any person
engaged in the distribution of the shares of common stock issuable upon
conversion of the notes to engage in market-making activities with respect to
the shares of common stock issuable upon conversion of the notes. All of the
foregoing may affect the marketability of the shares of common stock issuable
upon conversion of the notes and the ability of any person or entity to engage
in market-making activities with respect to the shares of common stock issuable
upon conversion of the notes.

We will pay all expenses of the registration of the shares of common stock
pursuant to the registration rights agreement, estimated to be $[            ]
in total, including, without limitation, Securities and Exchange Commission
filing fees and expenses of compliance with state securities or “blue sky” laws;
provided, however, that a selling securityholder will pay all underwriting
discounts and selling commissions, if any. We will indemnify the selling
securityholders against liabilities, including some liabilities under the
Securities Act, in accordance with the registration rights agreements, or the
selling securityholders will be entitled to contribution. We may be indemnified
by the selling securityholders against civil liabilities, including liabilities
under the Securities Act, that may arise from any written information furnished
to us by the selling securityholder specifically for use in this prospectus, in
accordance with the related registration rights agreement, or we may be entitled
to contribution.

Once sold under the registration statement, of which this prospectus forms a
part, the shares of common stock issuable upon conversion of the notes will be
freely tradable in the hands of persons other than our affiliates.

 

A-5

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EXHIBIT B

SELLING SECURITYHOLDER QUESTIONNAIRE

The undersigned beneficial owner (the “Selling Securityholder”) of the 6.5%
Convertible Senior Subordinated Notes due 2014 (the “Notes”) of The Providence
Service Corporation (the “Company”) or the shares of the Company’s Common Stock,
par value $0.001 per share, issuable upon conversion of the Notes (the “Common
Stock” and, together with the Notes, the “Registrable Securities”) hereby gives
notice to the Company of its intention to sell or otherwise dispose of
Registrable Securities beneficially owned by it and listed below in Item 3
(unless otherwise specified under Item 3) pursuant to the Shelf Registration
Statement. The undersigned, by signing and returning this Selling Securityholder
Questionnaire, understands that it will be bound by the terms and conditions of
this Selling Securityholder Questionnaire and the Registration Rights Agreement,
dated as of November 13, 2007, among the Company and the Purchasers thereto.

Pursuant to the Registration Rights Agreement, the undersigned has agreed to
indemnify and hold harmless the Company’s directors, the Company’s officers and
each person, if any, who controls the Company within the meaning of either
Section 15 of the Securities Act or Section 20 of the Securities Exchange Act of
1934, as amended (the “Exchange Act”), from and against certain losses arising
in connection with statements concerning the undersigned made in the Shelf
Registration Statement or the related prospectus in reliance upon the
information provided in this Selling Securityholder Questionnaire. The
undersigned hereby acknowledges its obligations under the Registration Rights
Agreement to indemnify and hold harmless certain persons set forth therein.

The undersigned hereby provides the following information to the Company and
represents and warrants that such information is accurate and complete:

 

(1)    (a)  

Full Legal Name of Selling Securityholder:

________________________________________________________________________________________________

   (b)  

Full Legal Name of Registered Holder (if not the same as (a) above) through
which Registrable Securities listed in (3) below are held:

________________________________________________________________________________________________

   (c)  

Full Legal Name of DTC Participant (if applicable and if not the same as (b)
above) through which Registrable Securities listed in (3) below are held:

________________________________________________________________________________________________

(2)    Address for Notices to Selling Securityholder:

___________________________________________________________________________________________________

___________________________________________________________________________________________________

   Telephone (including area
code):________________________________________________________________________
  
Fax (including area code):______________________________________________________________________________
   Contact
Person:______________________________________________________________________________________
(3)    Beneficial Ownership of Registrable Securities:

___________________________________________________________________________________________________

   (a)  

Type and Principal Amount/Number of Registrable Securities beneficially owned:

________________________________________________________________________________________________

--------------------------------------------------------------------------------

     (b)  

CUSIP No(s). of such Registrable Securities beneficially owned:

______________________________________________________________________________________________

(4)            Beneficial Ownership of Other Securities of the Company Owned by
the Selling Securityholder:    Except as set forth below in this Item (4), the
undersigned is not the beneficial or registered owner of any securities of
the Company other than the Registrable Securities listed above in Item (3).   
(a)  

Type and Amount of Other Securities beneficially owned by the Selling
Securityholder:

______________________________________________________________________________________________

   (b)  

CUSIP No(s). of such Other Securities beneficially owned:

______________________________________________________________________________________________

(5)    Relationship with the Company:    Except as set forth below, neither the
undersigned nor any of its affiliates, officers, directors or principal equity
holders
(5% or more) has held any position or office or has had any other material
relationship with the Company (or its
predecessors or affiliates) during the past three years.    State any exceptions
here:______________________________________________________________________ (6)
   Is the Selling Securityholder a registered broker-dealer?    Yes    ¨   
No     ¨    If “Yes”, please answer subsection (a) and subsection (b):   
            (a)    Did the Selling Securityholder acquire the Registrable
Securities as compensation for underwriting/broker-
                     dealer activities to the Company?   
                        Yes    ¨                            No     ¨   
            (b)    If you answered “No” to question 6(a), please explain your
reason for acquiring the Registrable Securities:

            ___________________________________________________________________________________________

            ___________________________________________________________________________________________

(7)    Is the Selling Securityholder an affiliate of a registered broker-dealer?
   Yes    ¨    No     ¨    If “Yes”, please identify the registered
broker-dealer(s), describe the nature of the affiliation(s) and answer
subsection
(a) and subsection (b):

            ___________________________________________________________________________________________

               (a)    Did the Selling Securityholder purchase the Registrable
Securities in the ordinary course of business (if
                     no, please explain)?                            Yes    ¨   
                        No     ¨             Explain:
                                        
                                                             (b)    Did the
Selling Securityholder have an agreement or understanding, directly or
indirectly, with any person
                     to distribute the Registrable Securities at the same time
the Registrable Securities were originally
                     purchased (if yes, please explain)?   
                        Yes    ¨            Explain:                         
                                                               
                        No     ¨ (8)    Is the Selling Securityholder a
non-public entity?    Yes    ¨

--------------------------------------------------------------------------------

   No     ¨    If “Yes”, please answer subsection (a):   

            (a)    Identify the natural person or persons that have voting or
investment control over the Registrable Securities that                      the
non-public entity owns:

            ______________________________________________________________________________________________

            ______________________________________________________________________________________________

(9)

   Plan of Distribution:    Except as set forth below, the undersigned Selling
Securityholder (including its donees and pledgees) intends to distribute the
Registrable Securities listed above in Item (3) pursuant to the Shelf
Registration Statement only as follows (if at all): Such Registrable Securities
may be sold from time to time directly by the undersigned Selling Securityholder
or, alternatively, in accordance with the Registration Rights Agreement, through
underwriters, broker-dealers or agents. If the Registrable Securities are sold
through underwriters or broker-dealers, the Selling Securityholders will be
responsible for underwriting discounts or commissions or agent commissions. Such
Registrable Securities may be sold in one or more transactions at fixed prices,
at prevailing market prices at the time of sale, at varying prices determined at
the time of sale, or at negotiated prices. Such sales may be effected in
transactions (which may involve cross or block transactions) (i) on any national
securities exchange or quotation service on which the Registrable Securities may
be listed or quoted at the time of sale, (ii) in the over-the-counter market,
(iii) in transactions otherwise than on such exchanges or services or in the
over-the-counter market, or (iv) through the writing of options. In connection
with sales of the Registrable Securities or otherwise, the undersigned Selling
Securityholder may enter into hedging transactions with broker-dealers, which
may in turn engage in short sales of the Registrable Securities in the course of
hedging positions they assume. The undersigned Selling Securityholder may also
sell Registrable Securities short and deliver Registrable Securities to close
out short positions, or loan or pledge Registrable Securities to broker-dealers
that in turn may sell such securities.    State any exceptions
here:____________________________________________________________________________

The undersigned Selling Securityholder acknowledges that it understands its
obligations to comply with the provisions of the Securities Exchange Act of
1934, as amended, and the rules thereunder relating to stock manipulation,
particularly Regulation M thereunder (or any successor rules or regulations), in
connection with any offering of Registrable Securities pursuant to the Shelf
Registration Agreement. The undersigned agrees that neither it nor any person
acting on its behalf will engage in any transaction in violation of such
provisions.

Pursuant to the Registration Rights Agreement, the Company has agreed under
certain circumstances to indemnify the Selling Securityholder against certain
liabilities.

In the event the undersigned transfers all or any portion of the Registrable
Securities listed in Item (3) above after the date on which such information is
provided to the Company other than pursuant to the Shelf Registration Statement,
the undersigned agrees to notify the transferee(s) at the time of the transfer
of its rights and obligations under this Selling Securityholder Questionnaire
and the Registration Rights Agreement.

In accordance with the undersigned’s obligation under the Registration Rights
Agreement to provide such information as may be required by law or by the staff
of the Commission for inclusion in the Shelf Registration Statement, the
undersigned agrees to promptly notify the

--------------------------------------------------------------------------------

Company of any inaccuracies or changes in the information provided herein that
may occur subsequent to the date hereof at anytime while the Shelf Registration
Statement remains effective. All notices hereunder and pursuant to the
Registration Rights Agreement shall be made in writing, by hand-delivery,
first-class mail, or air courier guaranteeing overnight delivery to the address
set forth below.

By signing below, the undersigned consents to the disclosure of the information
contained herein in its answers to Items (1) through (9) above and the inclusion
of such information in the Shelf Registration Statement and the related
prospectus. The undersigned understands that such information will be relied
upon by the Company in connection with the preparation or amendment of the Shelf
Registration Statement and the related prospectus.

Once this Selling Securityholder Questionnaire is executed by the undersigned
and received by the Company, the terms of this Selling Securityholder
Questionnaire, and the representations, warranties and agreements contained
herein, shall be binding on, shall inure to the benefit of and shall be
enforceable by the respective successors, heirs, personal representatives, and
assigns of the Company and the undersigned with respect to the Registrable
Securities beneficially owned by the undersigned and listed in Item (3) above.
This Selling Securityholder Questionnaire shall be governed in all respects by
the laws of the State of New York.

IN WITNESS WHEREOF, the undersigned, by authority duly given, has caused this
Selling Securityholder Questionnaire to be executed and delivered either in
person or by its duly authorized agent.

Dated:                    

 

  Beneficial Owner By:     Name:     Title:    

--------------------------------------------------------------------------------

PLEASE RETURN THE COMPLETED AND EXECUTED

SELLING SECURITYHOLDER QUESTIONNAIRE TO THE COMPANY AT:

THE PROVIDENCE SERVICE CORPORATION

5524 East Fourth Street

Tucson, Arizona 85711

Fax: (520) 747-6605

Attn: Fred Furman, General Counsel and Executive Vice President