exv10w6






Exhibit 10.6




JEFFERIES FINANCE LLC

520 Madison Avenue

New York, New York 10022




July 12, 2011




AMENDED AND RESTATED

COMMITMENT LETTER




Acadia Healthcare Company, Inc.

725 Cool Springs Blvd. Suite 600

Franklin, TN 37067





			
	Attention:      	 	Brent Turner, Co-President






			
	      Re:      	 	Acquisition of PHC, Inc.




Ladies and Gentlemen:




     You have advised Jefferies Finance LLC (“we”, “us” or “our”) that (i) Acadia Healthcare
Company, Inc., a Delaware corporation (the “Acquiror”, “Acadia” or “you”) intends to acquire all of
the issued and outstanding capital stock of PHC, Inc., a Massachusetts corporation (the “Target,”
and together with its subsidiaries, the “Acquired Business”), from the shareholders of the Target
(the “Target Shareholder”) in a merger transaction (the “Merger”) in which Target will be merged
with and into a subsidiary of the Company with Target surviving and each share of Target common
stock shall be exchanged for common stock of the Company based upon the exchange ratio set forth in
the Merger Agreement, dated as of May 23, 2011, by and among the Company, Target and Acadia Merger
Sub, LLC (the “Merger Agreement”), (ii) Acadia will refinance (together with any applicable
prepayment premium or fee, with the commitments thereunder being terminated, and all guarantees and
security in respect thereof being released) all of the existing debt (“Existing Debt”) of the
Acquiror and its subsidiaries and of the Acquired Business (other than indebtedness under the
Existing Credit Agreement (as defined below) and other indebtedness to be mutually agreed upon)
(the “Refinancing”) and (iii) to pay a dividend to Acadia’s stockholders in an amount not to exceed
$90.0 million (the “Distribution”), provided that to the extent the Distribution is less than $90.0
million, the Company will issue promissory notes to the extent of the shortfall (the “Promissory
Notes”), which Promissory Notes shall contain customary subordination provisions for debt held by
equity holders in transactions of this type (provided that, such Promissory Notes may pay interest
in cash in intervals and amounts to be mutually agreed). The “Sponsor” means Waud Capital and its
affiliates. Capitalized terms used but not defined herein and defined in any exhibit hereto have
the meanings assigned to them in such exhibit.



     You have advised us that the total purchase price for the Merger (including fees, commissions
and expenses and the Refinancing) and the Distribution will be financed from the following sources:




          (i) the issuance and sale (the “Notes Offering”) of senior unsecured notes (the
“Notes”) yielding gross proceeds of $150.0 million (or, if the offering of the Notes is not
consummated prior to, or concurrently with, the Merger, the drawdown of senior increasing
rate



 









 






loans (the “Bridge Loans”) under a senior unsecured bridge loan facility having the
terms set forth in Exhibits A and B hereto (the “Bridge Loan Facility”) in
aggregate principal amount of $150.0 million) (in no event shall the amount of the Bridge
Loan Facility be less than $150 million), and




          (ii) the issuance by the Borrower to the Target Shareholders of the Borrower’s common
stock and the payment to the shareholders of the Target of $5.0 million in respect of such
stockholders’ Class B Common Stock (the “Stockholder Payment”).



     The transaction described in clause (i) above is referred to as the “Debt Financing” and,
together with the Merger, the Refinancing, the Distribution, the Stockholder Payment and the
payment of all related fees, premiums, costs, commissions and expenses are collectively referred to
as the “Transactions.” You and your subsidiaries (including, following the Merger, the Target and
its subsidiaries) are collectively referred to herein as the “Company.” The closing date of the
Transactions is referred to herein as the “Closing Date.” As used in this Commitment Letter and
the other Debt Financing Letters (as defined below), the words “include,” “includes” and
“including” shall be deemed to be followed by the phrase “without limitation.” This Commitment
Letter amends and restates in its entirety the commitment letter, dated as of May 23, 2011, between
you and us.



     1. The Commitments.



     We are pleased to inform you that we hereby commit, directly or through one or more of our
affiliates (other than Excluded Affiliates), to provide 100% of the entire aggregate principal
amount of the Bridge Loan Facility. The commitments described in this Section 1 are
collectively referred to herein as the “Commitments.” Our Commitments are subject to the Specified
Conditions (as defined in Section 3 below) and are on the terms set forth in (i) this
letter (including the exhibits, schedules and annexes hereto, collectively, this “Commitment
Letter”), (ii) the fee letter, dated as of May 23, 2011 (the “Fee Letter”), between you and us, and
(iii) the engagement letter, dated as of May 23, 2011 (including any exhibits, schedules and
annexes thereto, collectively, the “Engagement Letter” and together with this Commitment Letter and
the Fee Letter, the “Debt Financing Letters”), between you and Jefferies & Company, Inc. (“Jefco”).



     The terms of this Commitment Letter are intended as an outline of principally all of the
material provisions of the Bridge Loan Facility, including all of the terms, conditions, covenants,
representations, warranties, default clauses and other provisions that will be contained in the
credit agreement relating to the Bridge Loan Facility, which credit agreement and other definitive
debt documents shall be prepared by our counsel and be mutually acceptable to you and us
(collectively, the “Definitive Debt Documents”). For the avoidance of doubt, the Definitive Debt
Documents governing or evidencing the Bridge Loans, the Extended Term Loans and the Exchange Notes
(collectively, the “Bridge Loan Documents”) shall not contain (A) any representations or warranties
other than those described under the caption “Representations and Warranties” as set forth in
Exhibits A and B hereto, (B) any affirmative or negative covenants other than those described under
the captions “Affirmative Covenants” and “Negative Covenants” as set forth in Exhibits A and B
hereto or any financial covenant, (C) any defaults or events of default other than those described
under the caption “Events of Default” as set forth in Exhibits A and B hereto, and (D) any
conditions precedent to the closing of the Bridge Loan Facility and the making of the initial loans
and other extensions of credit under the Bridge Loan Facility other than the Specified Conditions
(as defined in Section 3 below); it being understood and agreed that the Bridge
Loan Documents for the Bridge Loan Facility shall give due regard (as applicable) for the Credit
Agreement, dated as of April 1, 2011 (as amended by Amendment No. 1, dated as of the date hereof and
Amendment No. 2 dated as of the date hereof, the “Existing Credit Agreement”), among you, your
affiliates party thereto as guarantors, the Lenders party thereto, Bank of America, N.A. as
Administrative Agent, Fifth



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Third Bank, as Syndication Agent, General Electric Capital Corporation, as Documentation Agent
and Merrill Lynch, Pierce, Fenner & Smith Incorporated, as Sole Lead Arranger and Book Manager (and
the related guarantee agreements executed and/or delivered in connection therewith), as modified by
the terms set forth in Exhibits A, to reflect the agency and other standard provisions of the
Administrative Agent, and by such other modifications customary for transactions of this type
giving due regard to prevailing conditions in the syndicated loan and financial markets and the
operational requirements of the Borrower and its subsidiaries (after giving effect to the
Transactions) in light of their size, industry, businesses and business practices (collectively,
the “Documentation Principles”).




     Those matters that are not covered or made clear in the Debt Financing Letters are subject to
the mutual and reasonable agreement of the parties. No party has been authorized by us to make any
oral or written statements or representations that are inconsistent with the Debt Financing
Letters.



     2. Titles and Roles. As consideration for the Commitments, you hereby agree that:



          (a) You hereby retain:





          (i) Jefco to act in the capacities and in connection with the matters set forth in the
Engagement Letter, and




          (ii) Jefferies Finance or its designee to act as the sole administrative agent, sole
collateral agent, sole book-runner, sole lead arranger and sole syndication agent for you, the
Target and its subsidiaries and its parent holding companies in connection with the Bridge Loan
Facility.



          (b) No other titles shall be awarded and no compensation (other than that expressly
contemplated by the Debt Financing Letters) shall be paid in connection with the Bridge Loan
Facility and the Notes Offering unless otherwise agreed to in writing by you and us.




     3. Conditions Precedent. The closing of the Bridge Loan Facility and the making of
the initial loans and other extensions of credit under the Bridge Loan Facility are, subject to
Section 15 below, solely conditioned upon satisfaction or waiver by us of each of the
conditions precedent set forth or referred to in Exhibit C hereto (the “Specified
Conditions”).



     It is understood and agreed that the only representations and warranties the accuracy of which
shall be a condition to the availability of the Bridge Loan Facility on the Closing Date shall be
(i) such of the representations and warranties made by (or with respect to) the Acquired Business
in the Purchase Agreement as are material to the interests of the Lenders, but only to the extent
that you have (or your applicable affiliate has) the right to terminate your (or its) obligations
under the Purchase Agreement or decline to consummate the Merger as a result of a breach of such
representations and warranties and (ii) the Specified Representations (as defined below). For
purposes hereof, “Specified Representations” means the representations and warranties set forth in
the Definitive Debt Documents relating to corporate or other organizational existence,
organizational power and authority (as to execution, delivery and performance of the applicable
Definitive Debt Documents), the due authorization, execution, delivery and enforceability of the
applicable Definitive Debt Documents, solvency of the Borrower and its subsidiaries on a
consolidated basis on the Closing Date, no conflicts of the Definitive Debt Documents with, or
violation of, the charter documents, the absence of events of default under material indebtedness,
use of proceeds and Federal Reserve margin regulations, the Patriot Act, and the Investment Company
Act.



          (a) The terms of the Definitive Debt Documents shall be in a form such that they do not impair
availability of the Bridge Loan Facility on the Closing Date if the express conditions set forth in
Exhibit C are satisfied.







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This paragraph shall be referred to herein as the “Certain Funds Provision”.




     4. Syndication.



          (a) We reserve the right, at any time prior to or after execution of the Definitive Debt
Documents, to syndicate all or part of our Commitments to third parties identified by us acceptable
to you (subject to any contrary provisions in Exhibit A) (collectively, the “Investors”);
provided that we agree not to syndicate our commitments to (x) those banks, financial institutions
or other persons separately identified in writing by you or the Sponsor to us on or prior to the
execution of this Commitment Letter (provided that the Sponsor acknowledges that it shall only
identify a limited number of such persons), or (y) competitors of the Company identified by you in
writing to Jefferies Finance on or prior to the execution of this Commitment Letter or (z) Excluded
Affiliates (as defined below) (collectively, the “Disqualified Institutions”). Jefferies Finance
may assign (but may participate) all or any portion of its commitments hereunder prior to the
Closing Date except to any of its affiliates (other than an Excluded Affiliate); provided that (A)
Jefferies Finance shall not be relieved, released or novated from its obligations hereunder
(including its obligation to fund the Bridge Loan Facility on the date of the consummation of the
Merger with the proceeds of the initial funding under the Bridge Loan Facility) in connection with
any syndication, assignment or participation of the Bridge Loan Facility, including its commitments
in respect thereof, until after the Closing Date has occurred, (B) no assignment or novation by
Jefferies Finance shall become effective as between you and Jefferies Finance with respect to all
or any portion of Jefferies Finance’s commitments in respect of the Bridge Loan Facility until the
initial funding of the Bridge Loan Facility and (C) unless you otherwise agree in writing,
Jefferies Finance shall retain exclusive control over all rights and obligations with respect to
its Commitments in respect of the Bridge Loan Facility, including all rights with respect to
consents, modifications, supplements, waivers and amendments until the Closing Date has occurred.
We will exclusively manage all aspects of any syndication in consultation with you, including
decisions as to the selection of prospective Investors to be approached, when they will be
approached, when their commitments will be accepted, which prospective Investors will participate
(subject to your and the Sponsor’s reasonable consent and excluding Disqualified Institutions), the
allocation of the commitments among the Investors, and the amount and distribution of fees. To
assist us in our syndication efforts until the earlier of 60 days after the Closing Date and
achieving Successful Syndication (as defined in the Fee Letter), you agree to prepare and provide
(and to use commercially reasonable efforts to cause the Acquired Business to prepare and provide)
all customary information with respect to the Company and the Transactions, including the
Projections (as defined below) as we may reasonably request in connection with the syndication of
the Commitments, provided that, following the consummation of the Merger, you shall cause the
Acquired Business to prepare and provide us with such information. Notwithstanding anything to the
contrary contained in this Section 4, the syndication of the Bridge Loan Facility shall not
be a condition precedent to the closing of the Bridge Loan Facility and the making of the initial
loans and other extensions of credit thereunder. “Excluded Affiliates” means our affiliates that
are engaged as principals primarily in private equity or venture capital.




          (b) We intend to commence our syndication efforts promptly upon execution of this Commitment
Letter, and you agree to assist us actively (and, in all events, using your commercially reasonable
efforts to cause the Acquired Business to assist us actively) from the date of this Commitment
Letter until the earlier to occur of (i) a Successful Syndication (as defined in the Fee Letter)
and (ii) 60 days after the Closing Date. Such assistance shall include:





          (i) using your commercially reasonable efforts to ensure that our efforts benefit from
your existing lending and investment banking relationships,




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          (ii) direct contact at mutually agreed upon times between your senior management,
representatives and advisors, on the one hand, and the senior management, representatives
and advisors of the proposed Investors, on the other hand (and (x) prior to the consummation
of the Merger, your using commercially reasonable efforts to cause, and (y) thereafter, to
cause direct contact between senior management, representatives and advisors of the Acquired
Business, on the one hand, and the senior management, representatives and advisors of the
proposed Investors, on the other hand),




          (iii) your assistance in the preparation of one or more confidential information
memoranda (each, a “Confidential Information Memorandum”), and other customary marketing
materials to be used in connection with the syndication of our Commitments (together with
all Confidential Information Memoranda, the “Materials”),




          (iv) using your commercially reasonable efforts to obtain, prior to the commencement of
the Required Marketing Period, monitored public corporate (or corporate family) ratings from
each of Standard & Poor’s Ratings Services, a division of the McGraw-Hill Companies, Inc.
(“S&P”), and Moody’s Investors Service, Inc. (“Moody’s”) for the Acquiror and monitored
public ratings from each of S&P and Moody’s for the Notes, and




          (v) the hosting, with us, of one or more meetings with prospective Investors at such
times and in such places as may be mutually agreed (certain of which meetings may be via
telephonic conference in our reasonable determination).



          (c) You agree, at our reasonable request, to assist in the preparation of a version of any
Materials consisting exclusively of information and documentation that is either (i) publicly
available or (ii) not material with respect to the Company any of or its securities for purposes of
United States federal and state securities laws (such information and Materials, “Public Investor
Information”). Any information and documentation that is not Public Investor Information is
referred to herein, as “Material Non-Public Information”. In addition, you agree that, unless
specifically labeled “Private — Contains Non-Public Information,” no Materials disseminated to
potential Investors in connection with the syndication of the Bridge Loan Facility, whether through
an Internet website, electronically, in presentations, at meetings or otherwise, will contain any
Material Non-Public Information. You acknowledge and agree that the following documents contain and
shall contain solely Public Investor Information (unless you notify us promptly that any such
document contains Material Non-Public Information): (i) drafts and final Definitive Debt Documents
with respect to the Bridge Loan Facility, (ii) administrative materials prepared by us for
prospective Investors (including an Investor meeting invitation, Investor allocation, if any, and
funding and closing memoranda), and (iii) notification of changes in the terms of the Bridge Loan
Facility.




          (d) You agree that all Materials and Information (as defined below) (including draft and
execution versions of the Definitive Debt Documents may be disseminated in accordance with our
standard syndication practices (including through hard copy and via one or more internet sites
(including an IntraLinks, SyndTrak or similar workspace), e-mail or other electronic
transmissions). Without limiting the foregoing, you authorize, and will use commercially
reasonable efforts to obtain contractual undertakings from the Acquired Business to authorize, the
use of your and their and their logos in connection with any such dissemination. You further agree
that, at our expense, we may place advertisements in financial and other newspapers and periodicals
or on a home page or similar place for dissemination of information on the Internet or worldwide
web as we may choose, and circulate similar promotional materials, after the closing of the
Transactions in the form of a “tombstone” or otherwise, containing information customarily included
in such advertisements and materials, including (i) the






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names of the Company and its subsidiaries (or any of them), (ii) our and our affiliates’
titles and roles in connection with the Transactions, and (iii) the amount, type and closing date
of such Transactions.




     5. Information. You represent and warrant that:



          (a) all written information (including the Materials but excluding the Projections, budgets,
estimates and general economic or industry specific information, the “Information”) about the
Company or (to the best of your knowledge) the Acquired Business that has been or will be made
available to us by or on behalf of you or the Acquired Business or any of your or their respective
its representatives is or will be, when furnished, taken as a whole, complete and correct in all
material respects (after giving effect to all supplements thereto),




          (b) none of the Information shall, when furnished or on the Closing Date, contain any untrue
statement of a material fact or omit to state a material fact necessary to make the statements
contained therein not materially misleading, taken as a whole, in light of the circumstances under
which such statements are made (after giving effect to all supplements thereto), and




          (c) all projections and other forward-looking information that have been or will be made
available to us by or on behalf of you or any of your representatives (collectively, the
“Projections”) have been or will be prepared in good faith based upon assumptions that are
reasonable at the time made and at the time the related Projections are made available to us (it
being understood and agreed that financial projections are not a guarantee of financial performance
and actual results may differ from financial projections and such differences may be material).




     You agree that if at any time, on or prior to the earlier of (i) a Successful Syndication and
(ii) 60 days after the Closing Date, any of the representations and warranties in the preceding
sentence would be incorrect if the Information or Projections were then being furnished, and such
representations and warranties were then being made, at such time, you covenant to (i) promptly
notify us of such occurrence and (ii) supplement promptly the Information and/or the Projections,
as the case may be, so that such representations and warranties will be correct under those
circumstances.



     You shall be solely responsible for Information, including the contents of all Materials. We
(i) will be relying on Information and data provided by or on behalf of you or the Acquired
Business or any of your or its representatives or otherwise available from generally recognized
public sources, without having independently verified the accuracy or completeness of the same,
(ii) do not assume responsibility for the accuracy or completeness of any such Information and data
and (iii) will not make an appraisal of your assets or liabilities or the Acquired Business.



     6. Clear Market. You agree that, from May 23, 2011 until the earlier of (a) 60 days
after the Closing Date and (b) the date on which we (and our affiliates) have consummated a
Successful Syndication (as defined in the Fee Letter), you will not, and you will not permit the
Acquired Business or any of your subsidiaries to, directly or indirectly, (i) syndicate, place,
sell or issue, (ii) attempt or offer to syndicate, place, sell or issue, (iii) announce or
authorize the announcement of the syndication, placement, sale or issuance of, or (iv) engage in
discussions concerning the syndication, placement, offering, sale or issuance of, any debt
facility, or debt, or preferred equity security of you, the Acquired Business or any of your
subsidiaries (other than the Notes Offering, the Promissory Notes and the Bridge Loan Facility,
debt incurred in the ordinary course of business, capital lease obligations, purchase money debt
incurred in connection with equipment and other indebtedness the aggregate principal amount of
which does not exceed $1,000,000 individually or $5,000,000 in the aggregate, unless, in each case
such action would have a material adverse impact on our ability to successfully syndicate the
Bridge Loan



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Facility, and intercompany indebtedness), without our prior written consent, which may be
given or withheld in our sole discretion.




     7. Fees and Expenses. As consideration for the Commitments and our other undertakings
hereunder, you hereby agree to pay or cause to be paid to us, for our own account, and Jefco, for
its own account, the fees, expenses and other amounts set forth in the Debt Financing Letters.



     8. Indemnification and Waivers. As consideration for the Commitments and our other
undertakings hereunder, you agree to the provisions with respect to indemnification, waivers and
other matters contained in Annex A hereto, which is hereby incorporated by reference in
this Commitment Letter.



     9. Confidentiality. This Commitment Letter is delivered to you on the understanding
that neither the existence of this Commitment Letter or any other Debt Financing Letter nor any of
their terms or substance will be disclosed, directly or indirectly, to any other person or entity
except (a) as required by applicable law or compulsory legal process or pursuant to the order of
any court or administrative agency in any pending legal or administrative proceeding (in which case
you agree, to the extent not prohibited by applicable law, to inform us promptly thereof), (b) to
your or the Sponsor’s officers, directors, employees, attorneys, accountants and advisors on a
confidential and need-to-know basis and only in connection with the Transactions, (c) the
information contained in this Commitment Letter (but not any other Debt Financing Letter) may be
disclosed to rating agencies in connection with their review of the Bridge Loan Facility and the
Notes Offering or the Company and/or the Acquired Business, (d) the information contained in this
Commitment Letter (but not any other Debt Financing Letter) may be disclosed in any Confidential
Information Memorandum and any offering materials for the Notes Offering, (e) this Commitment
Letter (but not any other Debt Financing Letter (unless otherwise disclosed by us to them)) may be
disclosed to the Acquired Business and its respective officers, directors, employees, attorneys,
accountants and advisors, in each case on a confidential and need-to-know basis and only in
connection with the Transactions and (f) to the extent required by applicable law, this Commitment
Letter and the existence and contents of the Fee Letter in any proxy, public filing, prospectus,
offering memorandum or offering circular in connection with the Merger or the financing thereof
(provided that any information about fees disclosed in reliance of this clause (f) shall be limited
to the aggregate fee amount contained in the Fee Letter disclosed as part of Projections, pro forma
information or a generic disclosure of aggregate sources and uses related to fee amounts related to
the Transactions to the extent customary or required in offering and marketing materials for the
Notes, the Bridge Loan Facility or in any public filing relating to the Transactions).



     We and our affiliates shall use all information received by us and them from you, the Acquired
Business or your or its respective affiliates and representatives in connection with the
Acquisition and the related transactions solely for the purposes of providing the services
contemplated by this Commitment Letter and shall treat confidentially all such information;
provided, however, that nothing herein shall prevent us from disclosing any such information (a) to
Moody’s and S&P on a confidential basis, (b) to any Investors or participants or prospective
Investors or participants (other than Disqualified Institutions), (c) in any legal, judicial,
administrative proceeding or other compulsory process or otherwise as required by applicable law,
rule or regulations (in which case we will promptly notify you, in advance, to the extent permitted
by law, rule or regulation), (d) upon the request or demand of any governmental or regulatory
authority having jurisdiction over us or any of our affiliates or upon the good faith determination
by counsel that such information should be disclosed in light of ongoing oversight or review by any
governmental or regulatory authority having jurisdiction over us or our affiliates (in which case
we shall, except with respect to any audit or examination conducted by accountants or any
governmental regulatory authority exercising examination or regulatory authority, promptly notify
you, in advance, to the extent lawfully permitted to do so), (e) to the officers, directors,
employees, legal counsel,



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independent auditors, professionals and other experts or agents of us (collectively,
“Representatives”) on a reasonable “need-to-know” basis in connection with this transaction and who
are informed of the confidential nature of such information and are or have been advised of their
obligation to keep information of this type confidential, (f) to any of our respective affiliates,
Representatives of our affiliates (provided that any such affiliate, Representative is advised of
its obligation to retain such information as confidential, and we shall be responsible for our
affiliates’ and our affiliates’ Representatives’ compliance with this paragraph) solely in
connection with the Transactions, (g) to the extent any such information is or becomes publicly
available other than by reason of disclosure by us, our affiliates or Representatives in breach of
this Commitment Letter and (h) to establish a “due diligence” defense; provided that the disclosure
of any such information to any Lenders or prospective Lenders or participants or prospective
participants referred to above shall be made subject to the acknowledgment and acceptance by such
Lender or prospective Lender or participant or prospective participant that such information is
being disseminated on a confidential basis (on substantially the terms set forth in this paragraph
or as is otherwise reasonably acceptable to you and us, including, without limitation, as agreed in
any confidential information memorandum or other marketing materials) in accordance with our
standard syndication processes or customary market standards for dissemination of such type of
information. Our obligations under this paragraph shall automatically terminate and be superseded
by the confidentiality provisions in the Definitive Debt Documents upon the execution and delivery
thereof and in any event shall terminate on May 23, 2012.




     Notwithstanding anything herein to the contrary, you and we (and any of your and our
respective employees, representatives or other agents) may disclose to any and all persons, without
limitation of any kind, the tax treatment and tax structure of the transactions contemplated by the
Debt Financing Letters and all materials of any kind (including opinions or other tax analyses)
that are provided to you or us relating to such tax treatment and tax structure, except that (i)
tax treatment and tax structure shall not include the identity of any existing or future party (or
any affiliate of such party) to any Debt Financing Letter, and (ii) neither you nor we shall
disclose any information relating to such tax treatment and tax structure to the extent
nondisclosure is reasonably necessary in order to comply with applicable securities laws. For this
purpose, the tax treatment of the transactions contemplated by the Debt Financing Letters is the
purported or claimed U.S. federal income tax treatment of such transactions and the tax structure
of such transactions is any fact that may be relevant to understanding the purported or claimed
U.S. federal income tax treatment of such transactions.



     10. Conflicts of Interest. You acknowledge and agree that:



          (a) we and/or our affiliates and subsidiaries (the “Jefferies Group”), in our and their
respective capacities as principal or agent are involved in a wide range of commercial banking and
investment banking activities globally (including investment advisory, asset management, research,
securities issuance, trading, and brokerage) from which conflicting interests or duties may arise
and, therefore, conflicts may arise between (i) our interests and duties hereunder and (ii) the
duties or interests of another member of the Jefferies Group,




          (b) we and any other member of the Jefferies Group may, at any time, (i) provide services to
any other person, (ii) engage in any transaction (on our or its own account or otherwise) with
respect to you or any member of the same group as you or (iii) act in relation to any matter for
any other person whose interests may be adverse to you or any member of your group (a “Third
Party”), and may retain for our or its own benefit any related remuneration or profit,
notwithstanding that a conflict of interest exists or may arise and/or any member of the Jefferies
Group is in possession or has come or comes into possession (whether before, during or after the
consummation of the transactions contemplated hereunder) of information confidential to you;
provided that such information confidential to you shall not be (x) used by us or any other member
of the Jefferies Group in performing services to




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any Third Party or (y) shared with any Third Party to whom we are providing services, except
at your direction.




          (c) information that is held elsewhere within us or the Jefferies Group, but of which none of
the individual directors, officers or employees having primary responsibility for the consummation
of the transactions contemplated by the Debt Financing Letters actually has knowledge (or can
properly obtain knowledge without breach of internal procedures), shall not for any purpose be
taken into account in determining our responsibilities to you hereunder,




          (d) neither we nor any other member of the Jefferies Group shall have any duty to disclose to
you, or utilize for your benefit, any non-public information acquired in the course of providing
services to any other person, engaging in any transaction (on our or its own account or otherwise)
or otherwise carrying on our or its business,




          (e) (i) neither we nor any of our affiliates have assumed any advisory responsibility or any
other obligation in favor of the Acquiror or its subsidiaries or any of their respective affiliates
except the obligations expressly provided for under the Debt Financing Letters, (ii) we and our
affiliates, on the one hand, and each of the Acquiror and its affiliates, on the other hand, have
an arm’s-length business relationship that does not directly or indirectly give rise to, nor does
any of the Acquiror or its affiliates rely on, any fiduciary duty on the part of us or any of our
affiliates and (iii) we are (and are affiliated with) full service financial firms and as such may
effect from time to time transactions for our own account or the account of customers, and hold
long or short positions in debt, equity-linked or equity securities or loans of companies that may
be the subject of the transactions contemplated by this Commitment Letter (and, in particular, we
and any other member of the Jefferies Group may at any time hold debt or equity securities for our
or its own account in the Company). With respect to any securities and/or financial instruments so
held by us, any of our affiliates or any of our respective customers, all rights in respect of such
securities and financial instruments, including any voting rights, will be exercised by the holder
of such rights, in its sole discretion. You hereby waive and release, to the fullest extent
permitted by law, any claims you have, or may have, with respect to (i) any breach or alleged
breach of fiduciary duty or (ii) any conflict of interest arising from the aforementioned
transactions, activities, investments or holdings, or arising from our failure or the failure of
any of our affiliates to bring such transactions, activities, investments or holdings to your
attention, and




          (f) neither we nor any of our affiliates are advising you as to any legal, tax, investment,
accounting or regulatory matters in any jurisdiction. You shall consult with your own advisors
concerning such matters and shall be responsible for making your own independent investigation and
appraisal of the transactions contemplated by the Debt Financing Letters, and neither we nor our
affiliates shall have responsibility or liability to you with respect thereto. Any review by us, or
on our behalf, of the Company, the Transactions, the other transactions contemplated by the Debt
Financing Letters or other matters relating to such transactions will be performed solely for our
benefit and shall not be on behalf of you or any of your affiliates.




     11. Choice of Law; Jurisdiction; Waivers. The Debt Financing Letters shall be
governed by, and construed in accordance with, the laws of the State of New York without regard to
conflict of law principles (other than sections 5-1401 and 5-1402 of the New York General
Obligations Law); provided, however, that the interpretation of the definition of Phoenix
Material Adverse Effect (and whether or not a Phoenix Material Adverse Effect has occurred) and
Ajax Material Adverse Effect (and whether or not an Ajax Material Adverse Effect has occurred) in
this Commitment Letter and the other exhibits and annexes hereto shall be governed by, and
construed in accordance with, the laws of the State of Delaware, regardless of the laws that might
otherwise govern under applicable principles of conflicts of laws thereof. To the fullest extent
permitted by applicable law, you and we hereby irrevocably submit to the exclusive



9









 




jurisdiction of any New York State court or federal court sitting in the County of New York
and the Borough of Manhattan in respect of any claim, suit, action or proceeding arising out of or
relating to the provisions of any Debt Financing Letter, the Transactions or any of the other
transactions contemplated hereby or thereby and irrevocably agree that all claims in respect of any
such claim, suit, action or proceeding may be heard and determined in any such court and that
service of process therein may be made by certified mail, postage prepaid, to your or our address,
as the case may be, set forth above. You and we hereby waive, to the fullest extent permitted by
applicable law, any objection that you or we may now or hereafter have to the laying of venue of
any such claim, suit, action or proceeding brought in any such court, and any claim that any such
claim, suit, action or proceeding brought in any such court has been brought in an inconvenient
forum. You and we hereby waive, to the fullest extent permitted by applicable law, any right to
trial by jury with respect to any claim, suit, action or proceeding arising out of or relating to
the Debt Financing Letters, any of the Transactions or any of the other transactions contemplated
hereby or thereby. The provisions of this Section 11 are intended to be effective upon the
execution of this Commitment Letter without any further action by you, and the introduction of a
true copy of this Commitment Letter into evidence shall be conclusive and final evidence as to such
matters.




     12. Miscellaneous.



          (a) This Commitment Letter may be executed in one or more counterparts, each of which will be
deemed an original, but all of which taken together will constitute one and the same instrument.
Delivery of an executed signature page of this Commitment Letter by facsimile, PDF or other
electronic transmission will be effective as delivery of a manually executed counterpart hereof.




          (b) You may not assign any of your rights, or be relieved of any of your obligations, under
this Commitment Letter without our prior written consent (other than the assignment solely of your
rights hereunder to a domestic wholly-owned subsidiary formed for the purpose of consummating the
Merger reasonably acceptable to us), which may be given or withheld in our sole discretion (and any
purported assignment without such consent, at our sole option, shall be null and void). Any and
all obligations of, and services to be provided by, us hereunder (including the Commitments) may be
performed, and any and all of our rights hereunder may be exercised, by or through any of our
affiliates or branches (other than Excluded Affiliates) and we reserve the right to allocate, in
whole or in part, to our affiliates or branches (other than Excluded Affiliates) certain fees
payable to us in such manner as we and our affiliates (other than Excluded Affiliates) may agree in
our and their sole discretion. You further acknowledge that, subject to Sections 9(b) and 12(e)
herein, we may share with any of our affiliates, and such affiliates may share with us, any
information relating to the Transactions, you or the Acquired Business (and your and their
respective affiliates), or any of the matters contemplated in the Debt Financing Letters.




          (c) This Commitment Letter has been and is made solely for the benefit of you, us and the
Indemnified Parties (as defined in Annex A hereto) and your, our and their respective
successors and assigns, and nothing in this Commitment Letter, expressed or implied, is intended to
confer or does confer on any other person or entity any rights or remedies under or by reason of
this Commitment Letter or your and our agreements contained herein.




          (d) The Debt Financing Letters set forth the entire understanding of the parties hereto as to
the scope of the Commitments and our obligations hereunder and thereunder. The Debt Financing
Letters supersede all prior understandings and proposals, whether written or oral, between us and
you relating to any financing or the transactions contemplated hereby and thereby (other than as
set forth in the Engagement Letter, dated as of January 26, 2011, between the Target and Jefco and
the Engagement Letter, dated as of February 18, 2011, between the Target and Jefco, in each case as
amended or otherwise modified from time to time).





10












 





          (e) You acknowledge that one or more of our affiliates has been retained as a sell-side
financial advisor to the Target Shareholders (in such capacity and in
providing such services, the “Financial Advisor”) in connection with the Transactions. You agree to any such retention, and not
to assert any claim you might allege based on any actual or potential conflicts of interest that
might be asserted to arise or result from, on the one hand, (i) the engagement of the Financial
Advisor or (ii) us or the Financial Advisor or any of our or its affiliates arranging or providing
or contemplating arranging or providing financing for a competing bidder and, on the other hand,
our relationship with you as described and referred to in the Debt Financing Letters. You
acknowledge that, in its capacity as such, (A) the Financial Advisor may recommend to the Target
Shareholders that the Target Shareholders not pursue or accept your offer or proposal to acquire
the Acquired Business, (B) the Financial Advisor may advise the Target Shareholders and the
Acquired Business in other manners adverse to your interests, including by providing advice on
pricing, leverage levels, and timing and conditions of closing with respect to your bid, taking
other actions with respect to your bid and taking action under any definitive agreement between
you, the Target Shareholders and/or the Acquired Business, and (C) the Financial Advisor may
possess information about the Target Shareholders, the Acquired Business, the Acquisition and other
potential purchasers and their respective strategies and proposals, but the Financial Advisor shall
have no obligation to disclose to you the substance of such information or the fact that it is in
possession thereof.




          (f) You acknowledge that we and our affiliates may be arranging or providing (or contemplating
arranging or providing) a committed form of acquisition financing to other potential purchasers of
the Acquired Business and that, in such capacity, we and our affiliates may acquire information
about the Acquired Business, the Merger, and such other potential purchasers and their strategies
and proposals, but that nonetheless neither we nor our affiliates shall have any obligation to
disclose to you or your affiliates the substance of such information or the fact that we or our
affiliates are in possession thereof.




          (g) You agree that we or any of our affiliates may disclose nonconfidential information about
the Transactions to market data collectors and similar service providers to the financing
community.




          (h) We hereby notify you and, upon its becoming bound by the provisions hereof, each other
Credit Party (as defined in Exhibit A hereto), that pursuant to the requirements of the USA
PATRIOT Improvement and Reauthorization Act, Pub. L. 109-177 (signed into law March 9, 2006) (as
amended from time to time, the “Patriot Act”), we and each Investor may be required to obtain,
verify and record information that identifies the Credit Parties, which information includes the
name, address, tax identification number and other information regarding the Credit Parties that
will allow us or such Investor to identify the Credit Parties in accordance with the Patriot Act.
This notice is given in accordance with the requirements of the Patriot Act and is effective as to
us and each Investor. You agree that we shall be permitted to share any or all such information
with the Investors.




     13. Amendment; Waiver. This Commitment Letter may not be modified or amended except
in a writing duly executed by the parties hereto. No waiver by any party of any breach of, or any
provision of, this Commitment Letter shall be deemed a waiver of any similar or any other breach or
provision of this Commitment Letter at the same or any prior or subsequent time. To be effective,
a waiver must be set forth in writing signed by the waiving party and must specifically refer to
this Commitment Letter and the breach or provision being waived.



     14. Surviving Provisions. Notwithstanding anything to the contrary in this Commitment
Letter: (i) Sections 7 to and including 13 hereof, Section 15 hereof and
this Section 14 shall survive the expiration or termination of this Commitment Letter,
regardless of whether the Definitive Debt Documents have been executed and delivered or the
Transactions consummated(provided that Section 8



11









 




and Section 9 shall be superseded by the Definitive Debt Documents to the extent the
provisions of such Sections are expressly provided for in the Definitive Debt Documents) and (ii)
Sections 2 and 4 to and including 13 hereof shall survive execution and
delivery of the Definitive Debt Documents and the consummation of the Transactions.




     15. Expiration and Termination. Except with respect to any provision that expressly
survives pursuant to Section 14, this Commitment Letter (but not the other Debt Financing
Letters) will terminate automatically on the earliest of (i) the date of termination or expiry of
the Purchase Agreement or abandonment of the Merger, (ii) the closing of the Merger and funding of
the Bridge Loan Facility, (iii) 5:00 p.m., New York City time, on December 15, 2011 and (iv) notice
from you. In addition, our Commitment hereunder to provide Bridge Loans shall terminate upon the
closing of the sale of the Notes (in escrow or otherwise) and your receipt of gross proceeds equal
to at least $150 million.



[Remainder of page intentionally blank]






12









 








     We are pleased to have the opportunity to work with you in connection with this important
financing.



	 	 	 	 	 
	 	Very truly yours,



JEFFERIES FINANCE LLC

 	 
	 	By:  	
/s/ E. Joseph Hess	 
	 	 	Name:  	E. Joseph Hess	 
	 	 	Title:  	Managing Director	 
	 








13









 











Accepted and agreed to as of the

date first above written:




ACADIA HEALTHCARE COMPANY, INC.




	 	 	 	 	 	 

	By:

	 	/s/ Joey A. Jacobs	 
	 

	 	 	 
	 

	 	Name:	 	Joey A. Jacobs	 
	 

	 	Title:	 	Chief Executive Officer	 







14












 





ANNEX A TO COMMITMENT LETTER




INDEMNIFICATION AND WAIVER



     Except as otherwise defined in this Annex A, capitalized terms used but not defined
herein have the meanings assigned to them elsewhere in this Commitment Letter.


You hereby agree (i) to indemnify and hold harmless Jefferies Finance (“we” or “us”), the Investors
and each of our and their respective affiliates and subsidiaries (including Jefferies & Company,
Inc. (“Jefco”) and each of the respective officers, directors, partners, trustees, employees,
affiliates, shareholders, advisors, agents, representatives, attorneys-in-fact and controlling
persons of each of the foregoing (each, an “Indemnified Party”) from and against any and all
losses, claims, damages and liabilities (collectively, “Losses”) to which any such Indemnified
Party, directly or indirectly, may become subject arising out of, relating to, resulting from or
otherwise in connection with the Debt Financing Letters (other than the Engagement Letter), the
Debt Financing, the use of the proceeds therefrom, the Transactions, any of the other transactions
contemplated by the Debt Financing Letters (but not for financial advisory services provided by the
Financial Advisor acting in such capacity), or any action, claim, suit, litigation, investigation,
inquiry or proceeding (each, a “Claim”) directly or indirectly arising out of, relating to,
resulting from or otherwise in connection with any of the foregoing (IN ALL CASES, WHETHER OR NOT
CAUSED OR ARISING, IN WHOLE OR IN PART, OUT OF THE COMPARATIVE, CONTRIBUTORY OR SOLE NEGLIGENCE OF
THE INDEMNIFIED PERSON), regardless of whether any Indemnified Party is a named party thereto or
whether such Claim is brought by you, any of your affiliates or a third party and (ii) to promptly
reimburse each Indemnified Party at any time and from time to time following written demand for all
reasonable legal fees (limited to one counsel, one local counsel and, in the event of any actual or
potential conflict of interest, one additional counsel for each Indemnified Party subject to such
conflict) and reasonable out-of-pocket expenses incurred by it in connection with investigating,
preparing to defend or defending, or providing evidence in or preparing to serve or serving as a
witness with respect to, any Claim, directly or indirectly, arising out of, relating to, resulting
from or otherwise in connection with any of the foregoing (including in connection with the
enforcement of the indemnification obligations and waivers set forth in this Annex A);
provided, however, that no Indemnified Party will be entitled to indemnity and waivers hereunder in
respect of any Loss to the extent that (A) it is found by a final, non-appealable judgment of a
court of competent jurisdiction that such Loss resulted directly from the bad faith, gross
negligence or willful misconduct of such Indemnified Party, (B) result directly from a Claim
brought by you against an Indemnified Party for a material breach of our initial funding
obligations under the Commitment Letter, if you have obtained a final and nonappealable judgment in
its favor on such Claim as determined by a court of competent jurisdiction or (C) it results from a
dispute solely between the Indemnified Parties and not (1) involving any action or inaction by you
or any of your subsidiaries or (2) relating to any action of such Indemnified Party in its capacity
as Administrative Agent or Arranger. In addition, in no event will any person be liable for
consequential, special, exemplary, punitive or indirect damages (including any loss of profits,
business or anticipated savings), whether, directly or indirectly, as a result of any failure to
fund all or any portion of the Debt Financing or otherwise arising out of, relating to, resulting
from or otherwise in connection with the Debt Financing or arising out of, relating to, resulting
from or otherwise in connection with any Claim or otherwise (provided that the foregoing shall in
no event affect you obligation to indemnify any Indemnified Party as a set forth in this Annex A
for Claims not raised by such Indemnified Party). In addition, no Indemnified Party will be liable
for any damages arising from the use by unauthorized persons of Information, Projections or other
Materials sent through electronic, telecommunications or other information transmission systems
that are intercepted or otherwise obtained by such persons, except to the extent it is found by a
final, non-appealable judgment of a court of competent jurisdiction that such Loss resulted
directly from the bad faith, gross negligence or willful misconduct of such Indemnified Party.




Annex A-1









 





     You shall not settle or compromise or consent to the entry of any judgment in or otherwise
seek to terminate any pending or threatened Claim in which any Indemnified Party is or could be a
party and as to which indemnification or contribution could have been sought by such Indemnified
Party hereunder whether or not such Indemnified Party is a party to any Debt Financing Letter,
unless (i) such Indemnified Party and each other Indemnified Party from which such Indemnified
Party could have sought indemnification or contribution have given their prior written consent,
such consent not to be unreasonably withheld, conditioned or delayed or (ii) the settlement,
compromise, consent or termination includes an express unconditional release of all Indemnified
Parties and their respective affiliates from all Losses, directly or indirectly, arising out of,
relating to, resulting from or otherwise in connection with such Claim.



     If for any reason (other than the express carve-outs set forth above) the foregoing indemnity
is unavailable to an Indemnified Party or insufficient to hold an Indemnified Party harmless, then
you to the fullest extent permitted by law, shall contribute to the amount paid or payable by such
Indemnified Party as a result of such Losses in such proportion as is appropriate to reflect the
relative benefits received by you, on the one hand, and by us, on the other hand, from the
Transactions or, if allocation on that basis is not permitted under applicable law, in such
proportion as is appropriate to reflect not only the relative benefits received by you, on the one
hand, and us, on the other hand, but also the relative fault of you, on the one hand, and us, on
the other hand, as well as any relevant equitable considerations. Notwithstanding the provisions
hereof, the aggregate contribution of all Indemnified Parties to all Losses shall not exceed the
amount of fees actually received by us and Jefco pursuant to the Fee Letter and the Engagement
Letter. For the purposes of this paragraph, it is hereby further agreed that (i) the relative
benefits to you, on the one hand, and us, on the other hand, with respect to the Transactions shall
be deemed to be in the same proportion as (x) the total value paid or received or contemplated to
be paid or received by you, your equityholders and/or your or their respective affiliates, as the
case may be, in the Transactions, whether or not the Transactions are consummated, bears to (y) the
fees actually paid to us and Jefco under the Fee Letter and the Engagement Letter and (ii) the
relative fault of you, on the one hand, and us, on the other hand, with respect to the Transactions
shall be determined by reference to, among other things, whether any untrue or alleged untrue
statement of a material fact or the omission or alleged omission to state a material fact relates
to information supplied by you, any of your affiliates and/or any of your or their respective
officers, directors, partners, trustees, employees, affiliates, shareholders, advisors, agents,
representatives, attorneys-in-fact and controlling persons (collectively, the “Acquiror Group”) or
by us, as well as your and our relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission.



     The indemnity, contribution and expense reimbursement obligations set forth herein (i) shall
be in addition to any liability you may have to any Indemnified Party at law, in equity or
otherwise, (ii) shall survive the expiration or termination of the Debt Financing Letters
(notwithstanding any other provision of any Debt Financing Letter or the Definitive Debt
Documents), (iii) shall apply to any modification, amendment, waiver or supplement of our and any
of our affiliates’ commitment and/or engagement, (iv) shall remain operative and in full force and
effect regardless of any investigation made by or on behalf of us or any other Indemnified Party
and (v) shall be binding on any successor or assign of you and the successors or assigns to any
substantial portion of your business and assets.



* * *



Annex A-2









 





EXHIBIT A TO COMMITMENT LETTER




SUMMARY OF TERMS OF THE BRIDGE LOANS



     Set forth below is a summary of certain of the terms of the Bridge Loan Facility and the
documentation related thereto. Capitalized terms used and not otherwise defined in this
Exhibit A have the meanings set forth elsewhere in this Commitment Letter.



	 	 	 	 	 

	I.

	 	Parties	 	 
	 
	 	 	 	 
	 

	 	Borrower
	 	Acadia Healthcare Company, Inc. (the “Borrower”).
	 
	 	 	 	 
	 

	 	Guarantors
	 	Each of the Borrower’s direct and indirect
wholly-owned subsidiaries (other than any
subsidiary that is a “controlled foreign
corporation” within the meaning of section 957
of the United States Tax Code of 1986, as
amended (a “CFC”), to the extent making such
CFC a guarantor would be reasonably likely to
result in material adverse tax consequences to
the Borrower) (collectively, the “Guarantors;”
the Borrower and the Guarantors, collectively
with the Borrower, the “Credit Parties”);
provided that Guarantors shall not include (a)
unrestricted subsidiaries, (b) immaterial
subsidiaries, (c) special purpose entities, if
any, (d) captive insurance companies, if any and
(e) any subsidiary (1) that is prohibited by
applicable law, rule or regulation from
guaranteeing the Bridge Loans or (2) which would
result in a material adverse tax consequence to
the Borrower or one of its subsidiaries
(including as a result of the operation of
Section 956 of the IRS Code or any similar law
or regulation in any applicable jurisdiction;
provided that the foregoing clauses (a), (b),
(c) and (d) shall be subject to mutually agreed
parameters.
	 
	 	 	 	 
	 

	 	Sole Lead Arranger, Sole
Syndication Agent and Sole
Book-Runner
	 	
Jefferies Finance LLC (“Jefferies Finance”) (in
such capacities, the “Arranger”). The Arranger
will perform the duties customarily associated
with such role.
	 
	 	 	 	 
	 

	 	Administrative Agent
	 	Jefferies Finance (in such capacity together
with permitted successors and assigns, the
“Administrative Agent”). The Administrative
Agent will perform the duties customarily
associated with such role.
	 
	 	 	 	 
	 

	 	Lenders
	 	A syndicate of banks, financial institutions and
other entities, excluding Disqualified
Institutions (collectively, the “Lenders”)
arranged by the Arranger and in consultation
with the Borrower.






Exhibit A-1









 





	 	 	 	 	 

	 
	 	 	 	 
	 

	 	Closing Date
	 	The date, on or before the date on which the
Commitments are terminated in accordance with
Section 15 of this Commitment Letter, on which
the Merger is consummated (the “Closing Date”).
	 
	 	 	 	 
	 

	 	Bridge Loan Documents
	 	The definitive documentation governing or
evidencing the Bridge Loans, the Extended Term
Loans and the Exchange Notes which is consistent
with the Documentation Principles (collectively,
the “Bridge Loan Documents”).
	 
	 	 	 	 
	II.

	 	Bridge Loan Facility	 	 
	 
	 	 	 	 
	 

	 	Bridge Loans
	 	An aggregate principal amount of $150.0 million
of senior increasing rate bridge loans (the
“Bridge Loans”). At the option of the Lenders,
the Bridge Loans may be replaced with, or
originally made in the form of, notes on
identical economic terms.
	 
	 	 	 	 
	 

	 	Use of Proceeds
	 	To finance, in part, the Merger, to finance the
Refinancing, the Distribution, the Stockholder
Payment and to pay fees, costs, premiums,
commissions and expenses in connection with the
foregoing.
	 
	 	 	 	 
	 

	 	Maturity
	 	One year from the initial funding date of the
Bridge Loans (the “Bridge Loan Maturity Date”).
	 
	 	 	 	 
	 

	 	Rollover
	 	If the Bridge Loans are not repaid in full on or
prior to the Bridge Loan Maturity Date and the
Borrower has paid the Rollover Fee (as set forth
in the Fee Letter), and provided that no
Conversion Default (as defined below) has
occurred and is continuing, the Bridge Loans
shall be automatically converted on the Bridge
Loan Maturity Date into senior term loans due on
the date that is six years after of the Bridge
Loan Maturity Date (the “Extended Term Loans”)
in an aggregate principal amount equal to the
aggregate principal amount of Bridge Loans so
converted. The Extended Term Loans will have
the terms set forth in Exhibit B to this
Commitment Letter. Under certain circumstances
to be determined by the Arranger, Extended Term
Loans may be exchanged by the holders thereof
for exchange notes (“Exchange Notes”), which
will have the terms set forth in Exhibit B to
this Commitment Letter; provided, that no
Exchange Notes shall be issued until the
Borrower shall have received requests to issue
at least $50.0 million in the aggregate
principal amount of Exchange Notes. The
Exchange Notes will be issued under an indenture
that will have the terms set forth in Exhibit B
to this Commitment Letter.






Exhibit A-2









 





	 	 	 	 	 

	 
	 	 	 	 
	 

	 	 	 	“Conversion Default” shall mean (i) Demand
Failure Default, (ii) any payment or
“bankruptcy default” (to be defined in the
Bridge Loan Documents) or (iii) any failure to
pay fees when due under the Fee Letter.
	 
	 	 	 	 
	 

	 	 	 	The Extended Term Loans will be governed by the
provisions of the Bridge Loan Documents and will
have the same terms as the Bridge Loans except
as expressly set forth in Exhibit B to this
Commitment Letter.
	 
	 	 	 	 
	III.

	 	Certain Payment Provisions	 	 
	 
	 	 	 	 
	 

	 	Interest
	 	The Bridge Loans will bear interest at a rate
per annum equal to the higher of (i) 1.50% and
(ii) three-month LIBOR, adjusted quarterly,
plus, in either case, a spread of 7.75% (the
“Rate”), and as further increased pursuant to
the provisions of the Fee Letter, but in no
event to exceed the Interest Rate Cap (as
defined in the Fee Letter), after giving effect
to any default interest.
	 
	 	 	 	 
	 

	 	 	 	Interest will be payable quarterly in arrears,
on the Bridge Loan Maturity Date and on the date
of any prepayment of the Bridge Loans. For
amounts outstanding after the Bridge Loan
Maturity Date, interest will be payable on
demand at the default rate, unless the Bridge
Loans are converted on or prior to such date.
	 
	 	 	 	 
	 

	 	Default Rate
	 	At any time (x) during the continuance of any
payment or bankruptcy default or (y) upon the
election of the Required Lenders or the
Administrative Agent, after the occurrence and
during the continuance of any other event of
default, the Bridge Loans and other obligations
under the Bridge Loan Facility shall bear
interest at 2.00% above the rate otherwise
applicable to the Bridge Loans and shall be
payable in cash on demand.
	 
	 	 	 	 
	 

	 	 	 	Notwithstanding anything to the contrary set
forth herein, in no event shall any cap
(including the Rate and the Interest Rate Cap
(as defined in the Fee Letter)) or limit on the
yield or interest rate payable with respect to
the Bridge Loans, Extended Term Loans or
Exchange Notes (including any limit upon the
amount of interest payable in cash) limit or
otherwise affect the payment in cash of any
default rate of interest in respect of any
Bridge Loans, Extended Term Loans or Exchange
Notes.
	 
	 	 	 	 
	 

	 	Optional Repayment
	 	The Bridge Loans may be repaid, in whole or in
part, on a pro rata basis, at the option of the
Borrower at any time upon two business days’
prior written notice, at a price equal to 100%
of the principal amount thereof, plus all
accrued and unpaid interest and fees to the date of






Exhibit A-3









 





	 	 	 	 	 

	 
	 	 	 	 
	 

	 	 	 	repayment.
	 
	 	 	 	 
	 

	 	Mandatory Repayment
	 	Subject to any amounts required under the
Existing Credit Agreement and other exceptions
to be mutually agreed, the Borrower will repay
the Bridge Loans with the net cash proceeds from
(i) any direct or indirect public offering or
private placement of Notes or any other issuance
or sale of (x) debt securities or equity
securities of the Borrower or a parent holding
company of the Borrower or (y) debt securities
of any of their subsidiaries, (ii) the
incurrence of any other indebtedness for
borrowed money (other than certain other limited
exceptions to be agreed upon) by the Borrower, a
parent holding company of the Borrower or any of
their subsidiaries, (iii) sales of assets or any
issuance or sales of equity of any subsidiary of
the Borrower (in each case, with customary
exceptions and reinvestment rights to be
mutually agreed upon) or receipt of insurance or
condemnation proceeds by the Borrower, a parent
holding company of the Borrower or any of their
subsidiaries and (iv) 50% of excess cash flow
(to be defined in a manner reasonably
satisfactory to the Arranger) for each fiscal
year of the Borrower (commencing with the fiscal
year in which the Closing Date occurs), in each
case, at 100%, of the principal amount of the
Bridge Loans repaid, plus accrued fees and all
accrued and unpaid interest and fees to the date
of the repayment.
	 
	 	 	 	 
	 

	 	Change of Control
	 	Each holder of the Bridge Loans will be entitled
to require the Borrower, and the Borrower shall
offer, to repay the Bridge Loans held by such
holder, at a price of 100% of the principal
amount thereof, plus all accrued fees and all
accrued and unpaid interest to the date of
repayment, upon the occurrence of a “change of
control” (to be defined in the Bridge Loan
Documents in a manner reasonably satisfactory to
the Arranger and the Borrower).
	 
	 	 	 	 
	IV.

	 	Guarantees
	 	The Guarantors will unconditionally guarantee
the obligations of each Credit Party in respect
of the Bridge Loans (the “Guarantees”). Such
Guarantees will be in form and substance
reasonably satisfactory to the Administrative
Agent and the Arranger. All Guarantees shall be
guarantees of payment and performance, and not
of collection.
	 
	 	 	 	 
	V.

	 	Other Provisions	 	 
	 
	 	 	 	 
	 

	 	Representations and Warranties
	 	Consistent with the Documentation Principles
(subject to qualifications, exceptions and
limitations to be mutually agreed upon and
applicable to the Borrower and its






Exhibit A-4









 





	 	 	 	 	 

	 
	 	 	 	 
	 

	 	 
	 	restricted subsidiaries) and including: organization and
powers; authorization, execution, delivery and
enforceability of Bridge Loan Documents; no
conflicts; financial statements, projections, no
undisclosed liabilities and other information;
no material adverse effect; properties; (subject
to ordinary wear and tear, casualty and
condemnation); intellectual property; equity
interests and subsidiaries; litigation and
compliance with laws (including healthcare and
other regulatory matters); organizational
documents and material agreements; federal
reserve regulations; governmental and
third-party approvals; Investment Company Act of
1940, as amended, and other laws restricting
incurrence of debt; use of proceeds; taxes;
accuracy and completeness of written disclosure;
labor matters; solvency of the Borrower and its
subsidiaries (on a consolidated basis); employee
benefit plans and ERISA; healthcare and
environmental matters; insurance; reimbursement
from payors; licensing and accreditation;
acquisition documents; and anti-terrorism laws,
money laundering activities and dealing with
embargoed persons.
	 
	 	 	 	 
	 

	 	Covenants
	 	The Bridge Loan Documents will contain such
affirmative and negative covenants as are usual
and customary for bridge loan financings of this
type and consistent with the Documentation
Principles, it being understood and agreed that
the covenants of the Bridge Loans (and the
Extended Term Loans and the Exchange Notes) will
be incurrence-based covenants based on those
contained in the preliminary offering memorandum
or prospectus used to market the Notes prior to
the Closing Date; provided, that prior to the
Bridge Loan Maturity Date, the covenants of the
Bridge Loans
will be more restrictive than those of the
Extended Term Loans, the Exchange Notes and the
preliminary offering memorandum or prospectus
used to market the Notes prior to the Closing
Date, as reasonably agreed by the Arranger and
the Borrower consistent with Documentation
Principles.
	 
	 	 	 	 
	 

	 	Events of Default; Remedies
	 	The Bridge Loan Documents will contain such
events of default (including grace periods) as
are usual and customary for bridge loan
financings of this type and consistent with
Documentation Principles; including nonpayment
of principal, interest or other amounts;
violations of covenants; incorrectness of
representation and warranties in any material
respect; cross payment default at maturity and
cross acceleration, in each case to material
indebtedness; bankruptcy; material judgments;
ERISA events; and actual or asserted invalidity of






Exhibit A-5









 





	 	 	 	 	 

	 
	 	 	 	 
	 

	 	 
	 	guarantees.
	 
	 	 	 	 
	 

	 	Voting
	 	Amendments and waivers with respect to the
Bridge Loan Documents will require the approval
of Lenders holding not less than a majority of
the aggregate principal amount of the Bridge
Loans, Extended Term Loans or Exchange Notes, as
the case may be, except that (i) the consent of
each Lender directly affected thereby shall be
required with respect to (a) reductions in the
amount or extensions of the final maturity of
any Bridge Loan, Extended Term Loan or Exchange
Note, as the case may be, or the reduction of
the non-redeemability period for any Exchange
Note, as applicable, (b) reductions in the rate
of interest (other than a waiver of default
interest, defaults, or events of default) or any
fee or other amount payable or extensions of any
scheduled due date thereof, (c) increases in the
amount or extensions of the expiration date of
any Lender’s commitment or (d) modifications to
the assignment provisions of the Bridge Loan
Documents that further restrict assignments
thereunder, and (ii) the consent of 100% of the
Lenders shall be required with respect to (a)
reductions of any of the voting percentages or
the pro rata provisions, (b) releases of all or
substantially all of the value of the guarantees
of the Guarantors, or of all or substantially
all of the Collateral (other than in connection
with a permitted asset sale), (c) alterations of
(or additions to) the restrictions on the
ability of Lenders to exchange Extended Term
Loans for Exchange Notes, (d) modification of
the principal amount of Exchange Notes into
which the Extended Term Loans may be exchanged
or (e) assignments by any Credit Party of its
rights or obligations under the Bridge Loan
Facility.
	 
	 	 	 	 
	 

	 	Transferability
	 	Each holder of Bridge Loans will be free to sell
or transfer all or any part of its Bridge Loans
to any third party in accordance with applicable
law with the consent of the Administrative Agent
(not to be unreasonably withheld) in compliance
with applicable law (provided that such holder
shall give prompt written notice to the
Administrative Agent and the Borrower of any
such sale or transfer); provided that for the
six month period commencing on the Closing Date
and so long as no event of default exists, the
consent of the Borrower shall be required with
respect to any assignment that would result in
the Arranger collectively holding less than
50.1% of the aggregate outstanding principal
amount of the Bridge Loans. Each holder of
Bridge Loans will be free to pledge any or all
of the Bridge Loans in accordance with
applicable law.






Exhibit A-6









 





	 	 	 	 	 

	 
	 	 	 	 
	 

	 	Cost and Yield Protection
	 	Each holder of Bridge Loans will receive cost
and interest rate protection customary for
facilities and transactions of this type (as
reasonably determined by the Arranger),
including compensation in respect of
prepayments, taxes (including gross-up
provisions for withholding taxes imposed by any
governmental authority and income taxes
associated with all gross-up payments), changes
in capital requirements, guidelines or policies
or their interpretation or application,
illegality, change in circumstances, reserves
and other provisions deemed necessary by the
Arranger to provide customary protection for
U.S. and non-U.S. financial institutions and
other lenders (including relating to the
Dodd-Frank Act and the rules and regulations
with respect thereto).
	 
	 	 	 	 
	 

	 	Expenses
	 	The Borrower shall pay, promptly following
written demand, on the Closing Date and from
time to time thereafter, promptly following
written demand documentation reasonably
supporting such request), (i) all reasonable and
documented out-of-pocket expenses of the
Administrative Agent, the Syndication Agent and
the Arranger associated with the syndication of
the Bridge Loan Facility and the preparation,
negotiation, execution, delivery, filing and
administration of the Bridge Loan Documents and
any amendment or waiver with respect thereto
(including the reasonable and documented fees,
disbursements and other charges of one primary
counsel and one local counsel and, in the event
of any actual or potential conflict of interest,
one additional counsel for each Indemnified
Party subject to such conflict and the
reasonable charges of IntraLinks, SyndTrak or a
similar service and (ii) all out-of-pocket
expenses of the Administrative Agent, the
Syndication Agent, the Arranger, any other agent
appointed in respect of the Bridge Loan Facility
and the Lenders (including the fees,
disbursements and other charges of internal and
external counsel and consultants) in connection
with the enforcement of, or preservation of
rights under, the Bridge Loan Documents.
	 
	 	 	 	 
	 

	 	Indemnification
	 	The Bridge Loan Documents will contain customary
indemnities (as reasonably determined by the
Administrative Agent) (but not for financial
advisory services provided by the Financial
Advisor acting in such capacity) for (i) the
Arranger, the Syndication Agent, the
Administrative Agent and the Lenders, (ii) each
affiliate of any of the foregoing persons and
(iii) each of the respective officers,
directors, partners, trustees, employees,
affiliates, shareholders, advisors, agents,
attorneys-in-fact and controlling persons of
each of the foregoing persons referred to in
clauses (i) and (ii) above






Exhibit A-7









 





	 	 	 	 	 

	 
	 	 	 	 
	 

	 	 
	 	provided, however,
that no Indemnified Party will be entitled to
indemnity and waivers hereunder in respect of
any Loss to the extent that (A) it is found by a
final, non-appealable judgment of a court of
competent jurisdiction that such Loss resulted
directly from the bad faith, gross negligence or
willful misconduct of such Indemnified Party or
(B) it results from a dispute solely between the
Indemnified Parties and not (1) involving any
action or inaction by you or any of your
subsidiaries or (2) relating to any action of
such Indemnified Party in its capacity as
Administrative Agent or Arranger; provided
further, that such indemnity shall only require
the reimbursement of reasonable fees and
expenses of one primary counsel for all
indemnified persons, one local counsel and, in
the event of any actual or potential conflict of
interest, one additional counsel for each
Indemnified Party subject to such conflict.
	 
	 	 	 	 
	 

	 	Governing Law and Forum
	 	State of New York.
	 
	 	 	 	 
	 

	 	Counsel to the Arranger, the
Administrative Agent and the
Collateral Agent
	 	

Proskauer Rose LLP.






* * *




Exhibit A-8












 





EXHIBIT B TO COMMITMENT LETTER




SUMMARY OF TERMS OF EXTENDED TERM LOANS

AND EXCHANGE NOTES



     Set forth below is a summary of certain of the terms of the Extended Term Loans and the
Exchange Notes and the documentation related thereto. Capitalized terms used and not otherwise
defined in this Exhibit B have the meanings set forth elsewhere in this Commitment Letter.



Extended Term Loans




     On the Bridge Loan Maturity Date, so long as no Conversion Default has occurred and is
continuing, the outstanding Bridge Loans will be converted automatically into Extended Term Loans.
The Extended Term Loans will be governed by the provisions of the Bridge Loan Documents and, except
as expressly set forth below, will have the same terms as the Bridge Loans.



	 	 	 

	Maturity

	 	The Extended Term Loans will mature on the sixth
anniversary of the Bridge Loan Maturity Date.
	 
	 	 
	Interest Rate

	 	The Extended Term Loans will bear interest at a
floating rate per annum (the “Interest Rate”)
equal to the maximum amount of the Rate
(including after giving effect to increases
thereto pursuant to the provisions of the Fee
Letter), without giving effect to any default
interest.
	 
	 	 
	 

	 	Interest will be payable in arrears at the end
of each fiscal quarter of the Borrower. Default
interest will be payable on demand.
	 
	 	 
	 

	 	Notwithstanding the foregoing, after the
occurrence and during the continuation of an
event of default or any payment or bankruptcy
default, interest will accrue on the Extended
Term Loans at the then-applicable rate plus
2.00% per annum.






Exhibit B-1









 





Exchange Notes




     At any time on or after the Bridge Loan Maturity Date, upon five or more business days’ prior
notice, the Extended Term Loans may, at the option of any Lender, be exchanged for a principal
amount of Exchange Notes equal to 100% of the aggregate principal amount of the Extended Term Loans
so exchanged (plus any accrued interest thereon not required to be paid in cash); provided,
that the Borrower shall not be obligated to issue any Exchange Notes until Lenders holding at least
$50 million of Extended Term Loans request such exchange. The Borrower will issue Exchange Notes
under an indenture (the “Indenture”) that complies with the Trust Indenture Act of 1939, as
amended. The Borrower will appoint a trustee reasonably acceptable to the Lenders.



	 	 	 

	Maturity Date

	 	The Exchange Notes will mature on the
sixth anniversary of the Bridge Loan
Maturity Date.
	 
	 	 
	Interest Rate

	 	Each Exchange Note will bear interest
(at the sole option of the holder of
such Exchange Note) at (i) a fixed rate
equal to the interest rate on the
Extended Term Loan surrendered in
exchange for such Exchange Note as of
the date of such exchange or (ii) a
floating rate per annum equal to
three-month LIBOR (as adjusted at the
end of each interest period and adjusted
for all applicable reserve requirements)
plus an applicable margin (to be
mutually determined).
	 
	 	 
	 

	 	Interest will be payable in arrears
semi-annually. Default interest will be
payable on demand.
	 
	 	 
	 

	 	Notwithstanding the foregoing, after the
occurrence and during the continuation
of an event of default or a payment or
bankruptcy default, interest will accrue
on the Extended Term Loans at the
then-applicable rate plus 2.00% per
annum.
	 
	 	 
	Transferability

	 	If the Extended Term Loans are converted
to Exchange Notes, the Borrower,
promptly following reasonable request by
any holder of such Exchange Notes or the
Administrative Agent, shall be required
to ensure that such Exchange Notes are
DTC-eligible.
	 
	 	 
	Optional Redemption

	 	Exchange Notes will be non-callable
until the third anniversary of the
Bridge Loan Maturity Date (subject to
“equity clawback” provisions acceptable
to the Arranger). Thereafter, each
Exchange Note will be callable at par
plus accrued interest plus a premium
equal to one half of the coupon on such
Exchange Note, which premium shall
decline ratably on each yearly
anniversary of the Bridge Loan Maturity
Date to zero on the date that is six
months prior to the maturity of the
Exchange Notes.
	 
	 	 
	 

	 	Prior to the third anniversary of the date of funding of the






Exhibit B-2









 





	 	 	 

	 
	 	 
	 

	 	Bridge Loans, the
Borrower may redeem such Exchange Notes
at a make-whole price based on U.S.
Treasury note with a maturity closest to
the third anniversary of such funding
date plus 50 basis points.
	 
	 	 
	 

	 	The optional redemption provisions will
be otherwise consistent with high yield
debt securities.
	 
	 	 
	Defeasance Provisions

	 	Customary defeasance provisions for high
yield offerings and transactions of this
type.
	 
	 	 
	Modification

	 	Customary modification provisions for
high yield offerings and transaction of
this type.
	 
	 	 
	Change of Control

	 	The Borrower will make an offer to
repurchase the Exchange Notes following
the occurrence of a “change of control”
(to be defined in a manner consistent
with Sponsor Precedent) at 101% of the
outstanding principal amount thereof.
	 
	 	 
	Registration Rights

	 	Within 120 days after the Bridge Loan
Maturity Date, the Borrower will file
and will use its best efforts to cause
to become effective as soon thereafter
as practicable, a shelf registration
statement with respect to the Exchange
Notes (a “Shelf Registration
Statement”). If a Shelf Registration
Statement is filed, the Borrower will
keep such registration statement
effective and available (subject to
customary exceptions) until it is no
longer needed, as reasonably determined
by the Arranger, to permit unrestricted
resales of all of the Exchange Notes and
in no event longer than two years. If,
within 270 days after the Bridge Loan
Maturity Date (the “Effectiveness
Date”), a Shelf Registration Statement
for the Exchange Notes has not been
declared effective, then the Borrower
will pay liquidated damages in the form
of increased interest of 25 basis points
per annum on the principal amount of
Exchange Notes and Extended Term Loans
outstanding to holders of such Exchange
Notes and Extended Term Loans who are
unable freely to transfer Exchange Notes
from and including the day that is 30
days after the Effectiveness Date to but
excluding the effective date of such
Shelf Registration Statement. On the
90th day after the Effectiveness Date,
the liquidated damages shall increase by
25 basis points per annum, and on each
90-day anniversary thereafter, shall
increase by 25 basis points per annum,
to a maximum increase in interest
pursuant to this sentence of 100 basis
points per annum. The Borrower will
also pay such liquidated damages for any
period of time (subject to customary
exceptions) following the effectiveness
of a Shelf Registration






Exhibit B-3









 





	 	 	 

	 
	 	 
	 

	 	Statement that
such Shelf Registration Statement is not
available for sales thereunder (subject
to customary exceptions). All accrued
liquidated damages will be paid on each
quarterly interest payment date. For the
avoidance of doubt, the amount of
liquidated damages payable hereunder is
in addition (and not otherwise subject)
to any other interest rate caps or
limitations contained in any Debt
Financing Letter. In addition, unless
and until the Borrower has consummated
the registered exchange offer and caused
the Shelf Registration Statement to
become effective, the holders of the
Exchange Notes will have the right to
“piggy-back” the Exchange Notes in the
registration of any debt securities
(subject to customary scale-back
provisions) that are registered by the
Borrower (other than on a Form S-4)
unless all the Exchange Notes, Bridge
Loans and Extended Term Loans will be
redeemed or repaid from the proceeds of
such securities.
	 
	 	 
	Covenants

	 	The Indenture will include covenants
similar to those contained in indentures
governing publicly traded high yield
debt securities (but more restrictive in
certain respects).
	 
	 	 
	Events of Default

	 	The Indenture will provide for events of
default similar to those contained in
indentures governing publicly traded
high yield debt securities.






* * *




Exhibit B-4












 





EXHIBIT C TO COMMITMENT LETTER




CLOSING CONDITIONS




     Capitalized terms used but not defined in this Exhibit C have the meanings assigned to
them elsewhere in this Commitment Letter. The closing of the Bridge Loan Facility and the making
of the loans under the Bridge Loan Facility are conditioned upon satisfaction of the Specified
Conditions (including, without limitation, the conditions precedent set forth or referred to in
this Exhibit C). For purposes of this Exhibit C, references to



“we”, “us” or “our”
means Jefferies Finance, Jefco and their respective affiliates.



GENERAL CONDITIONS




     1. Definitive Debt Documents. The Credit Parties shall have executed and delivered
the Bridge Loan Documents. All such Definitive Debt Documents shall be in full force and effect.



     2. Transactions. The Merger shall have been consummated (or substantially
simultaneously with the initial borrowing under the Bridge Facility) in all material respects in
accordance with an Agreement and Plan of Merger (together with the schedule and exhibits thereto,
the “Purchase Agreement”), to be entered into among the PHC, Inc., Acadia Healthcare Company, Inc
and Acadia Merger Sub, LLC, in form and substance reasonably satisfactory to us in each case (it
being understood that the form and substance of the Purchase Agreement, received by the Arranger on
May 23, 2011, is reasonably satisfactory) and no material provision of the Merger Agreement shall
have been waived, amended, supplemented or otherwise modified in a manner material and adverse to
the Lenders that has not been approved by us in writing (it being understood and agreed that any
(i) change resulting in a material reduction in the consideration to be paid, (ii) change to the
definition of “Ajax Material Adverse Effect”, “Phoenix Material Adverse Effect” or any similar
definition and (iii) modifications to any of the provisions relating to the Administrative Agent’s,
the Collateral Agent’s, the Arranger’s or any Lender’s liability, jurisdiction or status as a third
party beneficiary under the Purchase Agreement shall be deemed to be materially adverse to the
interest of the Lenders and the Arrangers). The Specified Purchase Agreement Representations and
the Specified Representations shall be true and correct in all material respects (and all respects
if qualified by materiality). The Merger Agreement shall be in full force and effect on the
Closing Date. The Board of Directors of the Target shall have approved the Merger (and such
approval shall continue until the consummation of the Merger).



     3. Refinancing of Existing Debt. Concurrently with the consummation of the Merger,
the Refinancing shall have been consummated, all commitments relating thereto shall have been
terminated, and all liens or security interests related thereto shall have been terminated or
released, in each case, on terms reasonably satisfactory to us. After giving effect to the
Transactions, the Company shall have outstanding no indebtedness or preferred stock (or direct or
indirect guarantee or other credit support in respect thereof) other than (i) the indebtedness in
respect of the Debt Financing, (ii) the Existing Credit Agreement and (iii) such other indebtedness
as may be agreed to by us. No provision of the Existing Credit
Agreement shall have been amended, supplemented, amended
and restated or otherwise modified without the prior written consent of the Arranger (which may not
be unreasonably withheld, conditioned or delayed). The amount of
Bridge Loans funded hereunder (when taken together with the amount of
Notes issued on or before the Closing Date) shall not be less than
$150 million.



     4. Consents and Approvals. All necessary governmental, regulatory and shareholder
approvals and consents necessary for the consummation of the Transactions shall have been obtained
and shall be in full force and effect, and all applicable waiting periods shall have expired
without any action being taken by any applicable authority that could reasonably be expected to
restrain, prevent or otherwise impose material and adverse conditions on any of the Transactions.



Exhibit C-1









 





     5. Financial Statements; Financial Performance. We shall have received (i) audited
consolidated financial statements of the Acquiror for the fiscal years ending December 31, 2010,
2009 and 2008, (ii) unaudited consolidated financial statements of the Acquiror for the quarter and
six-months ended June 30, 2010 and June 30, 2011 on or prior to August 15, 2011, (iii) audited
consolidated financial statements for the Acquired Business for the fiscal years ending June 30,
2010, 2009 and 2008, (iv) audited financial statements of the Acquired Business for the fiscal year
ended June 30, 2011 on or prior to September 15, 2011, (v) audited consolidated financial
statements of Youth & Family Centered Services, Inc. (“YFCS”) for the fiscal years ending December
31, 2010, 2009 and 2008, (vi) unaudited consolidated financial statements of the YFCS for the three
months ended March 31, 2010 and March 31, 2011, (vii) audited consolidated financial statements of
MeadowWood for the fiscal years ending December 31, 2010 and 2009, (viii) unaudited consolidated
financial statements of MeadowWood Behavioral Health (“MeadowWood”) for the quarter and six-months
ended June 30, 2010 and June 30, 2011 on or prior to September 15, 2011, and (ix) pro forma
financial statements meeting the requirements of Regulation S-X and giving effect to the Merger and
the acquisitions of YFCS by the Acquiror and MeadowWood by the Acquired Business.


Such financial statements shall show pro forma total leverage (using an indebtedness definition
consistent with Documentation Principles) of the Borrower and its consolidated subsidiaries after
giving effect to the Transactions (calculated in a manner we agree is appropriate) for the
twelve-month period ended not more than 45 days prior to the Closing Date of not greater than 5.85
to 1 (the “Closing Leverage Condition”).




          At least four (4) business days prior to the Closing Date, we shall have received evidence
reasonably satisfactory to us that after giving effect to the Merger on a Pro Forma Basis
Consolidated EBITDA (as defined in the Existing Credit Agreement) shall be not less than $53.5
million.




     6. Projections. You shall have delivered to us projections in form and substance
reasonably satisfactory to us (including the assumptions on which such projections are based) for
the Company for fiscal years 2011 through and including 2018 (it being understood and agreed that
the projections delivered to us on May 5, 2011 are satisfactory to us); provided, however, if you
are required to deliver to us updated projections pursuant to Section 4 of the Commitment Letter,
such projections shall be reasonably satisfactory to us.



     7. Material Adverse Effect. Since June 30, 2010 there shall not have been or have
occurred a Phoenix Material Adverse Effect (as defined in the Merger Agreement). Since December
31, 2010 there shall not have been or have occurred an Ajax Material Adverse Effect (as defined in
the Merger Agreement).



     8. Performance of Obligations. All costs, fees, expenses (including reasonable and
documented legal fees and out-of-pocket expenses, title premiums, survey charges and recording
taxes and fees) and other compensation and amounts contemplated by the Debt Financing Letters or
otherwise payable to us, the Lenders, the Investors or any of our or their respective affiliates,
shall have been paid to the extent due. The Debt Financing Letters shall be in full force and
effect. You shall have complied in all material respects with Section 6 (Clear Market) of the
Commitment Letter and Sections 2 (Market Flex) and 4 (Issuance of Permanent Instruments) of the Fee
Letter.



     9. Customary Closing Documents. All customary and reasonable closing documents
required to be delivered under the Definitive Debt Documents, including lien, litigation and tax
searches, and customary legal opinions, corporate records and documents from public officials and
officers’ certificates shall have been delivered. Without limiting the foregoing, you shall have
delivered (a) at least five business days prior to the Closing Date, all documentation and other
information required by bank



Exhibit C-2









 




regulatory authorities under applicable “know-your-customer” and anti-money laundering rules
and regulations, including the Patriot Act, and (b) a certificate from the chief financial officer
of the Company in form and substance satisfactory to us, as to the solvency of each of the Borrower
and its subsidiaries (on consolidated basis), immediately before and after giving effect to the
Transactions.




     10. Prior Marketing of Permanent Instruments.



          (a) Prior Marketing of Permanent Instruments. The Company shall have delivered to us in no
event later than 2 days prior to the start of the Required Marketing Period (defined below) an
initial draft of a customary Rule 144A confidential offering memorandum relating to the issuance of
the Notes, containing all financial statements and other data to be included therein (including all
audited financial statements, all unaudited financial statements (each of which shall have
undergone a SAS 100 review) and all appropriate pro forma financial statements) prepared in
accordance with, or reconciled to, generally accepted accounting principles in the United States
and prepared in accordance with Regulation S-X (other than Rules 3-10 and 3-16 of Regulation S-X),
and all other financial data (including selected financial data) and other information that would
be required in a registered offering of the Notes on a Form S-1 registration statement to the
extent the same is of the type and form customarily included in an offering memorandum for private
placements of non-convertible notes under Rule 144A (collectively, the “Required Information”) and
(ii) prior to the Required Marketing Period, a complete printed preliminary offering memorandum
(the “Preliminary Offering Memorandum”) usable in a customary high-yield road show relating to the
issuance of the Permanent Instruments that contains all Required Information. We shall have been
offered a period of not less than 15 business days prior to the Closing Date (or such shorter
period acceptable to us) to seek to place the Notes; provided that such period shall not include,
and shall be extended by, any day from and including August 19, 2011 through and including September 5, 2011 (such
period, as extended by the proviso, is the “Required Marketing Period”) to seek to place the Notes.
For clarification purposes, the Required Information shall include the following: (i) audited
consolidated financial statements of the Acquired Business for the fiscal year ending June 30, 2011
with respect to any Required Marketing Period ending after August 15, 2011, (ii) unaudited
consolidated interim financial statements for 2010 and 2011 for the Acquired Business, YFCS and
MeadowWood for the year to date period for any of the first three fiscal quarters ended more than
45 days prior to the pricing date for the offering of the Permanent Instruments, and (iii) pro
forma financial statements meeting the requirements of Regulation S-X and giving effect to the
Merger and the acquisitions of YFCS by the Acquiror and MeadowWood by the Acquired Business;
provided that no financial statements shall be required to include the disclosures required by
Rules 3-10 or 3-16 of Regulation S-X. Notwithstanding anything herein to the contrary, the Required
Information shall not include audited financial statements for MeadowWood other than for the years
ending December 31, 2009 and 2010.




          (b) Notwithstanding the foregoing, the Required Marketing Period shall be deemed not to have
commenced if, prior to the completion of the Required Marketing Period, (A) the Acquired Business’
auditor shall have withdrawn its audit opinion with respect to any year end audited financial
statements set forth in the Preliminary Offering Memorandum, (B) the financial statements included
in the Preliminary Offering Memorandum would be required to be updated under Rule 3-12 of
Regulation S-X in order to be sufficiently current on any day during the Required Marketing Period
to permit a registration statement using such financial statements to be declared effective by the
SEC on the last day of the Required Marketing Period, in which case the Required Marketing Period
shall not be deemed to commence until the receipt of updated financial information that would be
required under Rule 3-12 of Regulation S-X to permit a registration statement using such financial
statements to be declared effective by the SEC on the last day of such new Required Marketing
Period, and (C) the Company shall have publicly announced any intention to restate any material
financial information included in the Preliminary Offering Memorandum or that any such restatement
is under consideration, in which case the Required






Exhibit C-3









 







Marketing Period shall be deemed not to commence unless and until such restatement has been
completed or the Company has determined that no restatement shall be required.




     11. Comfort Letter. The independent accountants that have audited the financial
statements contained in the preliminary offering memorandum relating to the issuance of the Notes
shall make available and have delivered to us, (i) no later than the delivery to us of the
preliminary prospectus or preliminary offering memorandum in accordance with preceding paragraph,
in a form they are prepared to execute, a customary draft of a comfort letter (including, without
limitation, the items included in the “circle-up” and the degree of comfort provided with respect
thereto) prepared in accordance with the requirements of SAS 72 covering the financial statements
and other data included and incorporated by reference in the Preliminary Offering Memorandum (the
“Comfort Letter”), (ii) no later than the pricing of the offering of the Notes, an executed copy of
the Comfort Letter, and (iii) the date of consummation of the issuance of the Notes Offering, a
customary “bring down” comfort letter reasonably satisfactory to us.



     12. Delivery of Notice. The Administrative Agent shall have received a duly-completed
and timely-delivered notice of borrowing for the Bridge Loan Facility.



* * *





Exhibit C-4