Issue of Equity & Notice of General Meeting

CareTech Holdings PLC

("CareTech" or the "Company")

Issue of Equity & Notice of General Meeting

Placing of New Ordinary Shares to raise £15m to fund strong acquisition pipeline

CareTech Holdings PLC (AIM: CTH), a leading UK provider of specialist social care services, is pleased to announce a placing of 3,750,000 New Ordinary Shares at 400p per share conditional on the approval of certain resolutions at a General Meeting to be held on 15 March 2010 (the "Placing").

The Placing will raise approximately £15 million of funds before expenses. The Placing Shares, which equate to approximately 7.57 per cent. of the enlarged issued share capital of the Company, have been placed by Brewin Dolphin Limited with institutional investors. Immediately following the Placing, the Company's issued share capital will consist of 49,541,223 ordinary shares of 0.5p each.

Background to and reasons for the Placing:

·; The Directors have identified a substantial pipeline of acquisition opportunities which are greater in volume and are becoming available at more competitive prices, than at anytime since the Company floated in 2005. Whilst the timing of these opportunities remains uncertain, the Board believes that by increasing available headroom now, the Company will be best placed to take advantage of these opportunities as they arise;

·; The Company is in advanced discussions with a small group of banks to increase its banking facilities. We would expect to make a further announcement on this in due course; and

·; The Board believes that the Company will have in place, through the combination of the Placing and the proposed new banking facilities, an appropriately strong and flexible capital structure to pursue its strategic objectives.

Farouq Sheikh, Executive Chairman of CareTech commented:

" We are pleased to announce this placing, which together with the planned increase in our debt facilities, gives the Company substantially increased firepower to pursue opportunities to enhance its organic growth story with selected tactical and strategic acquisitions in our core markets.

"We are seeing more corporate opportunities at sensible prices than at any time since flotation and believe the Company has a strong platform and a market leading team to take advantage of these at the earliest opportunity. We are delighted to welcome the support of both existing and new investors for our strategy and look forward to the next phase in the development of the Company with confidence."

Details on the Proposed Placing

The New Ordinary Shares will rank pari passu in all respects with the existing Ordinary Shares. Application will be made for the admission of the New Ordinary Shares to trading on AIM and it is envisaged that Admission will take effect on 16 March 2010 and dealings in the New Ordinary Shares will commence immediately thereafter.

For the avoidance of doubt, the New Ordinary Shares will be issued after the Record Date in respect of the final dividend declared on 9 December 2009 and so will be issued ex-dividend.

Details of the proposed use of the proceeds are detailed in the chairman's letter contained within the circular to Shareholders posted today and the extracts of the circular set out below. Definitions in this announcement shall bear the same meaning as those in the circular to Shareholders.

The General Meeting is to be held on 15 March 2010 at 5th Floor, Metropolitan House, 3 Darkes Lane Potters Bar, EN6 1AG at 10.00 a.m.

Extracts from the circular to shareholders posted today:

Details of the Placing

Subject to Shareholders' approval of the Resolutions, it is intended that the Company will raise cash of £15 million (before expenses) by way of a placing of 3,750,000 New Ordinary Shares at 400p per share arranged by Brewin Dolphin. The New Ordinary Shares have been placed conditionally with institutional investors (including certain existing Shareholders). The Placing is conditional, inter alia, on the passing of the Resolutions and on Admission occurring.

The New Ordinary Shares will rank pari passu in all respects with the existing Ordinary Shares. Application will be made for the admission of the New Ordinary Shares to trading on AIM and it is envisaged that Admission will take effect on 16 March 2010 and dealings in the New Ordinary Shares will commence immediately thereafter. Details of the proposed use of the proceeds of the Placing are set out later in this document.

Following approval of the Resolutions and Admission taking place, CareTech will have 49,541,223 Ordinary Shares in issue. The New Ordinary Shares will represent approximately 7.57 per cent of the Enlarged Share Capital. The total dilutive effect of the fundraising is 7.57 per cent.

The New Ordinary Shares will be issued credited as fully paid and will rank pari passu in all respects with the Existing Ordinary Shares including the right to receive and retain all dividends and other distributions declared, paid or made in respect of the Ordinary Shares after Admission.

For the avoidance of doubt, the New Ordinary Shares will be issued after the Record Date in respect of the final dividend declared on 9 December 2009 and so will be issued ex-dividend.

The Resolutions include a resolution to disapply statutory pre-emption rights. The passing of this resolution enables cash to be raised by the Company without the cost and lengthy timescale required to put a full offer of participation to all Shareholders. In the Directors' opinion, for a fundraising of this size, the costs of a full offer of participation would not be in the interests of Shareholders.

Placing Agreement

On 25 February 2010, CareTech entered into the Placing Agreement pursuant to which Brewin Dolphin has agreed conditionally, as agent for the Company, to use its reasonable endeavours to procure subscribers for the New Ordinary Shares at the Placing Price.

The Placing Agreement is conditional (inter alia) upon Admission taking place by 8.00 a.m. on 16 March 2010 (or such later date as CareTech and Brewin Dolphin agree, being not later than 8.00 a.m. on 23 March 2010).

The Placing Agreement contains warranties and indemnities from CareTech in favour of Brewin Dolphin which are customary for this type of agreement. Under the Placing Agreement, CareTech has agreed to pay Brewin Dolphin commission on the aggregate value of the New Ordinary Shares placed at the Placing Price and the costs and expenses of the Placing together with any applicable VAT. The Placing Agreement contains provisions entitling Brewin Dolphin to terminate the Placing Agreement at any time prior to Admission in certain circumstances including, amongst other things, in the event of a material breach of the warranties set out in the Placing Agreement.

Current trading & Outlook

The preliminary results for the year to 30 September 2009 which were released on 9 December 2009 can be found on the Company's website: www.caretech-uk.com. In the preliminary results announcement, the Company made the following statement in relation to its outlook:

"The pressures on public spending are well documented and will inevitably result in local authorities seeking cost-effective solutions to satisfy their duty of social care. We are confident that CareTech is well placed to meet the needs of service users and form strategic partnerships with local authorities to deliver high quality care pathway solutions. We look forward with confidence that the Group can deliver further growth from the opportunities that arise."

There have been no material changes to CareTech's trading since this announcement and the Company continues to trade in line with the Board's expectations.

General Meeting

The Company's annual general meeting will be held on 10 March 2010, at which the Company has requested a general authority to allot Ordinary Shares up to a nominal value of £76,315, and a general authority to allot Ordinary Shares up to a nominal value of £11,447 on a non pre‑emptive basis (representing five per cent of the issued share capital as at 3 February 2010, in line with current best practice recommendations issued by the Pre‑Emption Group). If granted, this authority would be insufficient to issue the Placing Shares.

Accordingly, in order for the Company to issue the Placing Shares, the Company needs to obtain separate approval from its Shareholders to authorise the Directors to allot the Placing Shares and to disapply the pre‑emption rights set out in the Companies Act 2006 in respect of the issue of the Placing Shares.

The authorities granted by the Resolutions will be in addition to the general authorities due to be granted at the Company's annual general meeting to be held on 10 March 2010.

In accordance with section 571(6) of the Companies Act 2006, (a) the reasons for the Directors' recommendation to vote in favour of the Resolutions are set out in the paragraph entitled "Recommendation" on page 7 of this document, (b) the amount to be paid to the Company in connection with the allotment of the Placing Shares is approximately £15 million; and (c) the Directors believe that the proposed disapplication of pre-emption rights pursuant to Resolution 2 is necessary in order to enable the Company to carry out the Placing without incurring the substantial costs and delays that would be involved in a public offering.

The GM has been convened for 10.00 am on 15 March 2010 at 5th Floor, Metropolitan House, 3 Darkes Lane, Potters Bar, EN6 1AG, to enable Shareholders to consider and, if thought fit, pass the Resolutions.

Resolution 1, which will be proposed as an ordinary resolution and which is conditional upon the Placing Agreement becoming unconditional in all respects (save only for the passing of the Resolutions and Admission) and not being terminated in accordance with its terms, is to authorise the Directors to allot the New Ordinary Shares in connection with the Placing up to £18,750 in nominal value provided that such authority shall expire on the date falling 18 months after the date of the resolution.

Resolution 2, which will be proposed as a special resolution and which is subject to the passing of Resolution 1 and the Placing Agreement becoming unconditional in all respects (save only for the passing of the Resolutions and Admission) and not being terminated in accordance with its terms, disapplies Shareholders' statutory pre-emption rights in relation to the issue of the New Ordinary Shares pursuant to the Placing up to an aggregate nominal amount of £18,750 provided that such authority shall expire on the date falling 18 months after the date of the resolution.

Action to be taken

The Placing is conditional, inter alia, on passing of the Resolutions at the GM and upon Admission taking place. For this reason, the Resolutions included in the Notice of the GM (which is set out at the end of this document) are being proposed. You will find enclosed with this document a Form of Proxy for use at the GM. Whether or not you propose to attend the GM in person, you are asked to complete the form of proxy and return it to the Capita Registrars at PXS, 34 Beckenham Road, Beckenham, Kent BR3 4TU, so as to arrive as soon as possible, but in any event so as to be received not less than 48 hours before the time of the meeting or of any adjournment of the meeting. Completion and return of a Form of Proxy will not preclude you from attending and voting at the GM in person if you wish.

Recommendation

The Directors believe that the Placing, as described in this Circular, is in the best interests of the Company and its Shareholders. Accordingly, the Directors unanimously recommend that you vote in favour of the Resolutions to be proposed at the General Meeting. The Directors intend to vote in favour of these Resolutions in respect of their own beneficial holdings amounting to 14,328,415 Ordinary Shares (representing approximately 31.3% of the Company's issued share capital).