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AMENDED AND RESTATED STOCK PURCHASE AGREEMENT

Purchase and Sale Agreement

AMENDED AND RESTATED STOCK PURCHASE AGREEMENT | Document Parties: FHC Health Systems, Inc | Psychiatric Solutions, Inc You are currently viewing:
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FHC Health Systems, Inc | Psychiatric Solutions, Inc

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Title: AMENDED AND RESTATED STOCK PURCHASE AGREEMENT
Governing Law: Delaware     Date: 12/7/2006
Industry: Healthcare Facilities     Law Firm: Skadden Arps;Waller Lansden     Sector: Healthcare

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Exhibit 2

 

AMENDED AND RESTATED

STOCK PURCHASE AGREEMENT

by and between

FHC HEALTH SYSTEMS, INC.

and

PSYCHIATRIC SOLUTIONS, INC.

Dated as of October 27, 2006

 

 

 

 

TABLE OF CONTENTS

 

 

 

 

 

 

 

 

Page

 

ARTICLE I DEFINITIONS

 

 

1

 

ARTICLE II PURCHASE AND SALE; CLOSING

 

 

8

 

2.1 Sale of the ABS Shares

 

 

8

 

2.2 Consideration

 

 

9

 

2.3 Closing

 

 

9

 

2.4 Deliveries of Seller at Closing

 

 

9

 

2.5 Deliveries of Purchaser at Closing

 

 

9

 

2.6 Additional Acts

 

 

9

 

ARTICLE III REPRESENTATIONS AND WARRANTIES OF SELLER

 

 

10

 

3.1 Organization of Seller

 

 

10

 

3.2 Organization and Capitalization of ABS

 

 

10

 

3.3 Organization and Capitalization of the ABS Subsidiaries

 

 

10

 

3.4 Authorization

 

 

11

 

3.5 No Conflicting Agreements; Consents

 

 

12

 

3.6 Financial Statements

 

 

12

 

3.7 Absence of Undisclosed Liabilities

 

 

13

 

3.8 Absence of Certain Changes

 

 

13

 

3.9 Legal Proceedings, etc.

 

 

14

 

3.10 Contracts; No Defaults

 

 

14

 

3.11 Title to Property

 

 

14

 

3.12 Employees; Labor Matters; Employee Benefit Plans; ERISA

 

 

16

 

3.13 Bank Accounts

 

 

17

 

3.14 Taxes

 

 

18

 

3.15 Insurance

 

 

20

 

3.16 Intellectual Property

 

 

20

 

3.17 Compliance with Laws

 

 

20

 

3.18 Environmental Matters

 

 

20

 

3.19 Books and Records

 

 

21

 

3.20 No Material Adverse Change

 

 

21

 

3.21 Brokers

 

 

21

 

3.22 HIPAA Matters

 

 

21

 

3.23 Medical Waste

 

 

22

 

3.24 Certificates of Need

 

 

22

 

3.25 Medicare Participation; Accreditation

 

 

22

 

3.26 Compliance Program

 

 

23

 

3.27 Regulatory Compliance

 

 

23

 

3.28 Medical Staff Matters

 

 

24

 

3.29 Third Party Payor Cost Reports

 

 

24

 

3.30 Reimbursement

 

 

25

 

3.31 Statutory Funds

 

 

25

 

3.32 Controlled Substances

 

 

25

 

3.33 Indebtedness

 

 

25

 

3.34 Texas Assets and Operations

 

 

25

 

ARTICLE IV            REPRESENTATIONS AND WARRANTIES OF PURCHASER

 

 

25

 

4.1 Organization

 

 

25

 

4.2 Corporate Authorization

 

 

25

 

4.3 No Conflicting Agreements; Consents

 

 

26

 

4.4 Legal Proceedings, etc.

 

 

26

 

4.5 Financial Capability

 

 

26

 



i

 

 

 

 

 

 

 

 

 

 

Page

 

4.6 Brokers

 

 

26

 

4.7 Investment Representations

 

 

26

 

ARTICLE V COVENANTS OF SELLER

 

 

27

 

5.1 Regulatory Approvals; Consents

 

 

27

 

5.2 Conduct Prior to the Closing

 

 

27

 

5.3 Employee Matters

 

 

28

 

5.4 Access by Purchaser

 

 

29

 

5.5 Financial Statements and Reports

 

 

29

 

5.6 Closing Conditions

 

 

29

 

5.7 Transfer of Assets

 

 

29

 

5.8 Encumbrances

 

 

29

 

5.9 Condition of Assets

 

 

29

 

5.10 Inter-company Accounts

 

 

29

 

5.11 Exclusivity

 

 

30

 

5.12 Resignations

 

 

30

 

5.13 Company Plans

 

 

30

 

5.14 Restrictive Covenants Agreement

 

 

30

 

5.15 Standstill

 

 

30

 

5.16 Third Party Payor Cost Reports

 

 

30

 

5.17 Qualifacts Agreement

 

 

30

 

ARTICLE VI COVENANTS OF PURCHASER; CERTAIN ADDITIONAL COVENANTS OF THE PARTIES

 

 

31

 

6.1 Notice of Certain Occurrences

 

 

31

 

6.2 Regulatory Approvals

 

 

31

 

6.3 Public Announcements

 

 

31

 

6.4 Closing Conditions

 

 

32

 

6.5 Employee Matters

 

 

32

 

6.6 WARN Act Compliance; COBRA

 

 

32

 

6.7 Tax Matters

 

 

32

 

6.8 Tax Indemnification

 

 

35

 

6.9 Consents Not Obtained by Closing

 

 

35

 

6.10 Consultative Process

 

 

35

 

6.11 Confidentiality

 

 

35

 

6.12 Books and Records

 

 

35

 

6.13 Section 338 Election

 

 

36

 

6.14 Seller Minimum Net Worth; Restrictions on Seller Transfers

 

 

36

 

6.15 Shared Services Agreement; Agreements between Acquired Entities and RX Innovations

 

 

36

 

6.16 Corporate Office Lease

 

 

37

 

6.17 Cash Management

 

 

37

 

6.18 Severance Payments

 

 

37

 

6.19 Adverse Changes

 

 

37

 

6.20 Third Party Consents

 

 

38

 

6.21 Title Policies, Surveys, and Environmental Site Assessments

 

 

38

 

6.22 Absence of Liens

 

 

38

 

6.23 Transition Services Agreement

 

 

38

 

6.24 Competing Transactions

 

 

38

 

6.25 Financing

 

 

39

 

6.26 Dismissal of Pending Lawsuit

 

 

39

 

6.27 Withdrawal of Termination Notice

 

 

39

 

12.17 Financial Review

 

 

39

 

ARTICLE VII CONDITIONS TO OBLIGATIONS OF PURCHASER

 

 

39

 

7.1 Representations and Warranties

 

 

39

 

7.2 Compliance with Agreement

 

 

39

 

7.3 Closing Certificates

 

 

39

 

7.5 Opinion of Counsel

 

 

40

 



ii

 

 

 

 

 

 

 

 

 

 

Page

 

7.6 Consents, Authorizations, Etc

 

 

40

 

7.7 No Action or Proceeding

 

 

40

 

7.8 Constituent Documents

 

 

40

 

7.9 Resignation of Boards of Directors and Officers

 

 

40

 

7.10 Good Standing Certificates

 

 

40

 

7.11 Intentionally Omitted

 

 

40

 

7.12 Termination of Guarantees

 

 

40

 

7.13 Restrictive Covenants Agreements

 

 

41

 

7.14 FIRPTA

 

 

41

 

7.15 Joinder

 

 

41

 

7.16 Shared Services Agreement

 

 

41

 

7.17 Intentionally Omitted

 

 

41

 

7.18 No Material Adverse Change

 

 

41

 

7.19 Absence of Liens

 

 

41

 

7.20 Intentionally Omitted

 

 

41

 

7.21 Waiver of Conditions

 

 

41

 

ARTICLE VIII CONDITIONS TO OBLIGATIONS OF SELLER

 

 

42

 

8.1 Representations and Warranties

 

 

42

 

8.2 Compliance with Agreement

 

 

42

 

8.3 Closing Certificates

 

 

42

 

8.4 Secretary’s Certificate

 

 

42

 

8.5 Opinion of Counsel

 

 

42

 

8.6 Consents, Authorizations, Etc

 

 

42

 

8.7 No Action or Proceeding

 

 

42

 

8.8 Good Standing Certificate

 

 

43

 

8.9 Restrictive Covenants Agreements

 

 

43

 

8.10 Waiver of Conditions

 

 

43

 

ARTICLE IX INDEMNIFICATION

 

 

43

 

9.1 Indemnification by Seller

 

 

44

 

9.2 Indemnification by Purchaser

 

 

43

 

9.3 Claims Procedures

 

 

43

 

9.4 Limitations on Claims

 

 

44

 

9.5 Miscellaneous

 

 

44

 

ARTICLE X TERMINATION

 

 

45

 

10.1 Termination

 

 

45

 

10.2 Effect of Termination

 

 

45

 

ARTICLE XI NOTICES

 

 

46

 

11.1 Notices

 

 

46

 

ARTICLE XII MISCELLANEOUS

 

 

47

 

12.1 Fees and Expenses

 

 

47

 

12.2 Entire Agreement

 

 

47

 

12.3 Waiver

 

 

48

 

12.4 Amendment

 

 

48

 

12.5 Counterparts; Facsimile Signatures

 

 

48

 

12.6 No Third Party Beneficiary

 

 

48

 

12.7 GOVERNING LAW, CONSTRUCTION; WAIVER OF JURY TRIAL

 

 

48

 

12.8 Binding Effect

 

 

48

 

12.9 No Assignment

 

 

48

 

12.10 Headings; Gender, Etc

 

 

48

 

12.11 Access to Information

 

 

48

 

12.12 Severability; Invalid Provisions

 

 

49

 

12.13 Cooperation

 

 

49

 

12.14 Further Assurance Clause

 

 

49

 

12.15 Documents to be Provided to Purchaser

 

 

49

 



iii

 

 

AMENDED AND RESTATED STOCK PURCHASE AGREEMENT

     THIS AMENDED AND RESTATED STOCK PURCHASE AGREEMENT (as amended and restated, this " Agreement " or this " Amended and Restated Stock Purchase Agreement ") is made and entered into as of October 27, 2006, by and between FHC Health Systems, Inc., a Virginia corporation (" Seller "), and Psychiatric Solutions, Inc., a Delaware corporation (" Purchaser ").

R E C I T A L S:

     WHEREAS, Seller owns 100% of the ABS Shares (as defined below);

     WHEREAS, ABS (as defined below) owns, directly or indirectly, 100% of the issued and outstanding equity securities of each of the ABS Subsidiaries (as defined below);

     WHEREAS, Seller wishes to sell the ABS Shares to Purchaser, and Purchaser wishes to purchase the ABS Shares from Seller, on the terms, subject to the conditions and for the consideration set forth in this Agreement;

     WHEREAS, the parties hereto desire to amend and restate in its entirety the Stock Purchase Agreement, dated as of May 26, 2006, entered into by and between the parties hereto; and

     WHEREAS, the parties hereto acknowledge and agree that this Agreement has continued in full force and effect (as amended hereby) since its execution on May 26, 2006, notwithstanding any purported termination by either party hereto prior to the date hereof.

     NOW, THEREFORE, in consideration of the foregoing premises, the mutual covenants and other agreements set forth herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto covenant and agree as follows:

ARTICLE I

DEFINITIONS

     As used in this Agreement, the following defined terms shall have the meanings indicated below and, where appropriate, shall include the singular and plural of the term defined:

     " ABS " shall mean Alternative Behavioral Services, Inc., a Virginia corporation.

     " ABS LINCS TX " shall mean ABS LINCS TX, Inc., a Kentucky corporation.

     " ABS Shares " shall have the meaning ascribed to it in Section 3.2(b) .

     " ABS Subsidiaries " shall have the meaning ascribed to it in Section 3.3(a) .

     " ABS Subsidiary Shares " shall have the meaning ascribed to it in Section 3.3(d) .

     " Acquired Entities " shall mean ABS and the ABS Subsidiaries.

     " Acquisition Proposal " shall mean any inquiries or proposals that constitute, or are likely to result in, a proposal or offer for a merger, consolidation, business combination, sale of substantial assets, sale of shares of capital stock or other securities (including by way of a tender offer) or similar transaction involving any of the Acquired Entities.

 

 

 

     " Adverse Business Effect " shall have the meaning ascribed to it in Section 6.19 .

     " Affiliate " shall mean, as to the Person in question, any Person that directly or indirectly controls, is controlled by, or is under common control with the Person in question and any successors or assigns of such Persons; and the term " control " means possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person whether through ownership of voting securities, by contract or otherwise.

     " Affiliated Group " shall mean any affiliated group within the meaning of Code Section 1504(a).

     " Agreement " shall mean this Amended and Restated Stock Purchase Agreement, including the exhibits and schedules attached hereto, as amended from time to time.

     " Applications " shall have the meaning ascribed to it in Section 3.24 .

     " Awareness " shall have the meaning ascribed to it in Section 6.19 .

     " Balance Sheet Date " shall mean December 31, 2005.

     " Books and Records " shall mean all existing accounting, business, marketing, corporate, and other files, documents, instruments, papers, books and records, including, without limitation, financial statements, budgets, ledgers, journals, deeds, titles, policies, manuals, organizational documents, operating agreements, minute books, stock certificates and books, stock transfer ledgers, contracts, franchises, permits, supplier lists, reports, computer files and data, retrieval programs and operating data or plans.

     " Break-up Fee " shall have the meaning ascribed to it in Section 10.2(d) .

     " Business Associate Agreements " shall have the meaning ascribed to it in Section 3.22(c) .

     " Business Day " shall mean a day other than Saturday, Sunday, or any day on which the principal commercial banks located in the State of Tennessee or the Commonwealth of Virginia are authorized or obligated to close under the Laws of such states.

     " Certificate of Need " shall have the meaning ascribed to it in Section 3.24 .

     " Claim " shall have the meaning ascribed to it in Section 9.3 .

     " Closing " shall mean the consummation of the transactions contemplated by this Agreement, as provided in Article II.

     " Closing Date " shall have the meaning ascribed to it in Section 2.3 .

     " Closing Statement " shall have the meaning ascribed to it in Section 2.2 .

     " COBRA " shall have the meaning ascribed to it in Section 3.12(i) .

     " Code " shall mean the Internal Revenue Code of 1986, as amended, and the rules and regulations promulgated thereunder.

     " Company " shall mean the Acquired Entities on a consolidated basis.

     " Company Financial Statements " shall have the meaning ascribed to it in Section 3.6(a) .

     " Company Intellectual Property " shall have the meaning ascribed to it in Section 3.16 .

2

 

 

     " Company Permits " shall have the meaning ascribed to it in Section 3.17 .

     " Company Plans " shall mean each " employee benefit plan " (within the meaning of Section 3(3) of ERISA) and each stock purchase, stock option, other stock-based, severance, change-in-control, disability, vacation, holiday, sick leave, fringe benefit, bonus, incentive, deferred compensation, welfare and other employee benefit plan, program, policy or other arrangement and any employment (including severance and change of control) agreement, whether or not subject to ERISA (including any funding mechanism therefor now in effect or required in the future as a result of the transactions contemplated by this Agreement or otherwise); whether formal or informal, oral or written; under which any employee or former employee or director (or dependent or beneficiary thereof) of any Acquired Entity has any present or future right to benefits or which has been sponsored, contributed to or maintained by Seller, any Acquired Entity or any ERISA Affiliate during the past six (6) years.

     " Confidentiality Agreement " shall mean that certain Confidentiality & Nondisclosure Agreement, dated as of February 21, 2006, between Purchaser and ABS.

     " Constituent Documents " shall mean the certificate of formation, certificate of incorporation, articles of incorporation, bylaws, articles of organization, operating agreement, limited liability company agreement, partnership agreement, limited partnership agreement, minute books and such other organizational or governance documents, as amended to the relevant date, of a given entity.

     " Contract " shall mean any agreement, commitment, lease, sublease, license, sublicense, promissory note, evidence of indebtedness, or other contract to which any of the Acquired Entities is a party or by which assets of any of the Acquired Entities are bound.

     " Controlled Group Member " shall mean any entity (whether or not incorporated) other than Seller and the Acquired Entities that, together with Seller and Acquired Entities, is considered under common control and treated as one employer under Section 414(b), (c), (m) or (o) of the Code.

     " Corporate Office Lease " shall mean that certain Deed of Lease, dated as of January 1, 2006, between FHC Property Holdings, Inc., a Virginia corporation, and ABS.

     " Court Order " shall mean any judgment, order, award or decree of any federal, state, local or other court or judicial or quasi-judicial tribunal and any award in any binding arbitration proceeding.

     " Covered Entities " shall have the meaning ascribed to it in Section 3.22(a) .

     " Credit Facilities " shall mean, collectively, (a) the Loan and Guaranty Agreement, dated as of December 18, 2003, among Seller, certain subsidiaries of Seller, including ABS and certain of the ABS Subsidiaries, the Lenders party thereto from time to time, Goldman Sachs Credit Partners L.P., as Joint Lead Arranger, Joint Book Runner, Term Loan Collateral Agent and Term Loan Administrative Agent, Credit Suisse First Boston, acting through its Cayman Islands Branch, as Joint Lead Arranger, Joint Book Runner and Syndication Agent, and Merrill Lynch Capital, a division of Merrill Lynch Business Financial Services Inc., as Revolver Collateral Agent and Revolver Administrative Agent, and certain other agreements, instruments and documents related thereto, and (b) the Amended and Restated Third Lien Term Loan and Guaranty Agreement, dated as of June 28, 2006, among Seller, certain subsidiaries of Seller, including ABS and certain of the ABS Subsidiaries, the Lenders party thereto from time to time, Goldman Sachs Credit Partners L.P., as Lead Arranger, Book Runner and Syndication Agent, and The Bank of New York, as Administrative Agent and Collateral Agent and Letter of Credit Issuer, and certain other agreements, instruments and documents related thereto, as each may be further amended, restated, supplemented or otherwise modified from time to time and one or more replacement agreements or facilities existing at any time to refund, refinance, replace or renew (including any subsequent refinancings, replacements and renewals) amounts thereunder.

3

 

 

     " Damages " shall mean any and all losses, damages, claims, costs, fines, fees, Taxes, penalties, interest obligations and deficiencies (including, without limitation, reasonable attorneys’ fees and other expenses of litigation).

     " Destruction Notice " shall have the meaning ascribed to it in Section 6.12 .

     " Effective Time " shall have the meaning ascribed to it in Section 2.3 .

     " Election Forms " shall have the meaning ascribed to it in Section 6.13(b) .

     " Environmental Claim " shall mean any claim, action, cause of action, investigation or notice by any Person alleging potential liability (including potential liability for investigatory costs, cleanup costs, governmental response costs, natural resources damages, property damages, personal injuries, or penalties) arising out of, based on or resulting from: (i) the presence or release or threat of release into the environment of any Materials of Environmental Concern at any location, which is or has been owned, leased, operated or utilized by any of the Acquired Entities; or (ii) circumstances forming the basis of any violation or alleged violation of any Environmental Law by any of the Acquired Entities.

     " Environmental Laws " shall mean, as they exist on the date hereof and as of the Effective Time, all applicable United States federal, state, local and non-U.S. Laws relating to pollution or protection of human health (as relating to the environment or the workplace) and the environment (including ambient air, surface water, ground water, land surface or sub-surface strata), including laws and regulations relating to emissions, discharges, releases or threatened releases of Materials of Environmental Concern, or otherwise relating to the use, treatment, storage, disposal, transport or handling of Materials of Environmental Concern, including, without limitation, Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C. § 9601 et seq ., Resource Conservation and Recovery Act, 42 U.S.C. § 6901 et seq ., Toxic Substances Control Act, 15 U.S.C. § 2601 et seq ., OSHA, the Clean Air Act, 42 U.S.C. § 7401 et seq ., and the Clean Water Act, 33 U.S.C. § 1251 et seq ., each as may have been amended or supplemented, and any applicable environmental transfer statutes or laws.

     " ERISA " shall mean the Employee Retirement Income Security Act of 1974, as amended, and the rules and regulations promulgated thereunder.

     " ERISA Affiliate " shall mean (i) any Controlled Group Member; (ii) any other company, entity, trade or business that has adopted or has ever participated in any Company Plan; and (iii) any predecessor or successor company, entity, trade or business of Seller or Acquired Entities or any entity described in (i) and (ii).

     " Excluded Assets " shall have the meaning ascribed to it in Section 2.1 .

     " Excluded Liabilities " shall have the meaning ascribed to it in Section 2.1 .

     " Excluded Subsidiaries " shall mean NetCare of Virginia, Inc., a Virginia corporation; RX Innovations, LLC, a Virginia limited liability company (" RX Innovations "); and WorldWide, Inc., a Virginia corporation.

     " Exemption Certificate " shall have the meaning ascribed to it in Section 3.24 .

     " Federal Privacy Regulations " shall have the meaning ascribed to it in Section 3.22(a) .

     " Federal Transaction Regulations " shall have the meaning ascribed to it in Section 3.22(a) .

     " FTC " shall have the meaning ascribed to it in Section 7.7 .

     " Funds " shall have the meaning ascribed to it in Section 4.5 .

4

 

 

     " GAAP " shall mean generally accepted accounting principles in the United States of America, consistently applied during the periods involved.

     " Governmental Authority " shall mean any foreign, national, state or local government, any political subdivision thereof or any other governmental, quasi-governmental (including fiscal intermediaries and carriers), judicial, public or statutory instrumentality, authority, body, agency, department, bureau, commission or entity, or any arbitrator with authority to bind a party at law.

     " Hazardous Substances " shall mean any toxic or hazardous waste, pollutants or substances, including, without limitation, friable asbestos, polychlorinated biphenyls, petroleum products, byproducts, or other hydrocarbon substances, substances defined or listed as a " hazardous substance ," " toxic substance ," " toxic pollutant " or a similarly identified substance or mixture, in or pursuant to any Environmental Law.

     " HIPAA " shall have the meaning ascribed to it in Section 3.22(a) .

     " HSR Act " shall mean the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules and regulations promulgated thereunder.

     " Indebtedness " shall mean any long-term indebtedness (including the current portion thereof), any indebtedness for borrowed money, including from a bank or similar financial institution, any inter-company or related party indebtedness, and letters of credit, specifically excluding capital lease obligations.

     " Indemnifying Party " shall have the meaning ascribed to it in Section 9.3 .

     " Indemnitee " shall have the meaning ascribed to it in Section 9.3 .

     " Intellectual Property " shall have the meaning ascribed to it in Section 3.16 .

     " IRS " shall mean the United States Internal Revenue Service.

     " JCAHO " shall have the meaning ascribed to it in Section 3.25 .

     " Knowledge " shall mean (a) with respect to a natural Person, if (i) the Person is actually aware of the fact or matter; or (ii) a prudent Person could be expected to discover or otherwise become aware of the fact or matter in the course of conducting a reasonable investigation regarding the accuracy of the representations and warranties made herein, (b) with respect to Seller, if any of the Persons identified on Schedule 1.1 has, or at any time had, Knowledge of that fact or other matter (as set forth in (a) above), and any such Person will be deemed to have conducted a reasonable investigation regarding the accuracy of the representations and warranties made herein, and (c) with respect to Purchaser, if any of the Persons identified on Schedule 1.2 has, or at any time had, Knowledge of that fact or other matter (as set forth in (a) above), and any such Person will be deemed to have conducted a reasonable investigation regarding the accuracy of the representations and warranties made herein.

     " Laws " shall mean all statutes, laws, ordinances, rules, regulations and other pronouncements of any Governmental Authority having the effect of law in the United States, any state or commonwealth of the United States, or any city, county, municipality, department, commission, board, bureau, agency or instrumentality thereof.

     " Leases " shall have the meaning ascribed to it in Section 3.11(c) .

     " Liability Threshold " shall have the meaning ascribed to it in Section 9.4(a) .

     " Lien " shall mean any mortgage, pledge, assessment, security interest, lease, sublease, lien, adverse claim, levy, charge or other encumbrance of any kind, or any conditional sale contract, title retention contract, or other contract to give or to refrain from giving any of the foregoing.

5

 

 

     " Liquidated Damages " shall mean $ 3,000,000.00.

     " Material Adverse Effect " shall mean any circumstance involving change in or effect on the Acquired Entities (a) that is, individually or in the aggregate, materially adverse to the business, results of operations or financial condition of the Acquired Entities taken as a whole; or (b) that would reasonably be expected to prevent or materially delay or impair the ability of Seller to consummate the transactions contemplated by this Agreement, other than changes or effects, alone or in combination, that (i) are generally applicable in the behavioral health care industry of the United States (provided that such circumstances, changes, or effects do not adversely affect the Acquired Entities, taken as a whole, in a disproportionate manner relative to the other participants in such industry), or (ii) are excluded pursuant to Section 6.19 .

     " Material Contracts " shall have the meaning ascribed to it in Section 3.10 .

     " Materials of Environmental Concern " shall mean chemicals, pollutants, contaminants, hazardous materials, Hazardous Substances and hazardous wastes, Medical Waste, toxic substances, petroleum and petroleum products and by-products, asbestos-containing materials, PCBs, and any other chemicals, pollutants, substances or wastes, in each case so defined, identified, or regulated under any Environmental Law.

     " Medical Waste " includes, but is not limited to, (a) pathological waste, (b) blood, (c) sharps, (d) wastes from surgery or autopsy, (e) dialysis waste, including contaminated disposable equipment and supplies, (f) cultures and stocks of infectious agents and associated biological agents, (g) contaminated animals, (h) isolation wastes, (i) contaminated equipment, (j) laboratory waste and (k) various other biological waste and discarded materials contaminated with or exposed to blood, excretion, or secretions from human beings or animals. " Medical Waste " also includes any substance, pollutant, material, or contaminant listed or regulated under MWTA and applicable state Law.

     " Medical Waste Law " shall mean the following, including regulations promulgated and orders issued thereunder, all as may be amended from time to time: the MWTA, the U.S. Public Vessel Medical Waste Anti-Dumping Act of 1988, 33 U.S.C. § 2501 et seq ., the Marine Protection, Research, and Sanctuaries Act of 1972, 33 U.S.C. § 1401 et seq ., OSHA, the United States Department of Health and Human Services, National Institute for Occupations Self-Safety and Health Infectious Waste Disposal Guidelines, Publication No. 88-119, and any other federal, state, regional, county, municipal, or other local Laws insofar as they purport to regulate Medical Waste, or impose requirements relating to Medical Waste.

     " Multiemployer Plan " shall mean any " multiemployer plan " within the meaning of Section 3(37) or Section 4001(a)(3) of ERISA.

     " MWTA " shall mean the Medical Waste Tracking Act of 1988, 42 U.S.C. § 6992, et seq .

     " OSHA " shall mean the Occupational Safety and Health Act, 29 U.S.C. § 651 et seq .

     " PCBs " shall have the meaning ascribed to it in Section 3.18(f) .

     " Permits " shall mean all licenses, permits, franchises, rights, registrations, approvals, authorizations, consents, certifications, waivers, exemptions, clearances, releases, variances or orders of, or filings with, or otherwise issued by, any Governmental Authority.

     " Permitted Liens " shall mean (i) Liens for Taxes not yet due and payable as of the Closing Date, (ii) landlords’, carriers, warehousemen’s, mechanics’, materialmen’s, repairmen’s or other like Liens arising in the ordinary course of business consistent with past practice, none of which is overdue, (iii) pledges or deposits in connection with worker’s compensation, unemployment insurance and other social security legislation, (iv) such minor defects, irregularities, encumbrances, easements, rights-of-way, restrictions, encroachments and other similar encumbrances incurred in the ordinary course of business consistent with past practice and which, individually or in the aggregate, are not substantial in amount, and which do not in any case materially detract from the value of the

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property subject thereto or materially interfere with the ordinary conduct of any Acquired Entity’s business on such property and which do not materially interfere with or impair the present use and operation of such property subject thereto, (v) any Lien approved in writing by Purchaser, and (vi) any other Lien incurred or arising in the ordinary course of business consistent with past practice and which, individually or in the aggregate, is not substantial in amount, and which does not materially interfere with the ordinary conduct of any Acquired Entity’s business.

     " Person " shall mean any natural person, corporation, general partnership, limited partnership, limited liability company, union, association, court, trust, Governmental Authority or other entity or authority.

     " Pre-Closing Period " shall have the meaning ascribed to it in Section 6.7(a)(i) .

     " Pre-Closing Period Tax Returns " shall have the meaning ascribed to it in Section 6.7(a)(i) .

     " Programs " shall have the meaning ascribed to it in Section 3.25 .

     " Provider Agreements " shall have the meaning ascribed to it in Section 3.25 .

     " Provider Numbers " shall have the meaning ascribed to it in Section 3.25 .

     " Purchase Price " shall have the meaning ascribed to it in Section 2.2 .

     " Purchaser " shall mean Psychiatric Solutions, Inc., a Delaware corporation.

     " Purchaser Indemnitee " shall have the meaning ascribed to it in Section 9.1 .

     " Purchaser Material Breach " shall have the meaning ascribed to it in Section 10.1(e) .

     " PWC " shall have the meaning ascribed to it in Section 6.28 .

     " Qualifacts Agreement " shall mean that certain Qualifacts Application Services Agreement, dated October 8, 2004, between Qualifacts Systems, Inc., a Delaware corporation, and ABS.

     " Real Property " shall have the meaning ascribed to it in Section 3.11(b) .

     " Restrictive Covenants Agreements " shall have the meaning ascribed to it in Section 5.14 .

     " SAS 100 Review " shall have the meaning ascribed to it in Section 6.28 .

     " Section 338 Election " shall have the meaning ascribed to it in Section 6.13(a) .

     " Securities Act " shall mean the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

     " Seller " shall mean FHC Health Systems, Inc., a Virginia corporation.

     " Seller Indemnitee " shall have the meaning ascribed to it in Section 9.2 .

     " Seller Material Breach " shall have the meaning ascribed to it in Section 10.1(c) .

     " Shared Services Agreement " shall mean that certain Shared Services Agreement, dated as of January 1, 2006, between ValueOptions, Inc., a Virginia corporation, and ABS.

     " Straddle Period " shall have the meaning ascribed to it in Section 6.7(a)(ii) .

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     " Straddle Period Tax Returns " shall have the meaning ascribed to it in Section 6.7(a)(ii) .

     " Tax " or " Taxes " shall mean (a) any and all taxes and other governmental charges of the same or of a similar nature (including, but not limited to, taxes on or with respect to net or gross income, franchise, profits, gross receipts, capital, sales, use, ad valorem, value added, transfer, real property transfer, transfer gains, inventory, capital stock, license, payroll, employment, social security, unemployment, severance, occupation, real or personal property, estimated taxes, rent, excise, occupancy, recordation, bulk transfer, intangibles, alternative minimum, doing business, withholding and stamp), together with any interest thereon, penalties (or other governmental charges of the same or of a similar nature), additions to tax or additional amounts with respect thereto, imposed by any Governmental Authority or other applicable jurisdiction, (b) any liability for payment of amounts described in clause (a) whether as a result of transferee liability, of being a member of an affiliated, consolidated, combined or unitary group for any period, or otherwise through operation of law, and (c) any liability for the payment of amounts described in clauses (a) or (b) as a result of any tax sharing, tax indemnity or tax allocation agreement or any other express or implied agreement to indemnify any other Person.

     " Tax Indemnification Agreement " shall have the meaning ascribed to it in Section 3.14(e) .

     " Tax Proceeding " shall have the meaning ascribed to it in Section 6.7(c)(i) .

     " Tax Return " shall mean any return, declaration, report, statement, information statement and other document (including any related or supporting information) with respect to Taxes, including any claims for refunds of Taxes and any amendments or supplements of any of the foregoing.

     " Termination Expenses " shall have the meaning ascribed to it in Section 10.2(c) .

     " Transfer Taxe s" shall have the meaning ascribed to it in Section 6.7(b) .

     " WARN Act " shall mean the Workers Adjustment and Retraining Notification Act, 29 U.S.C. § 2101-2109.

ARTICLE II

PURCHASE AND SALE; CLOSING

     2.1 Sale of the ABS Shares . On and subject to the terms and conditions set forth in this Agreement, at the Closing, Seller shall sell, assign, transfer and deliver to Purchaser, free and clear of all Liens, the ABS Shares, and Purchaser shall purchase from Seller, the ABS Shares. Notwithstanding anything express or implied to the contrary contained in this Section 2.1 or elsewhere herein, the assets (the " Excluded Assets ") and liabilities (the " Excluded Liabilities ") of the Acquired Entities set forth on Schedule 2.1 are excluded from the assets and liabilities of the Acquired Entities being acquired by or transferred to Purchaser at Closing through Purchaser’s acquisition of the ABS Shares. With the exception of the Excluded Assets and the Excluded Liabilities, and without limiting any of the representations, warranties, covenants and other provisions of this Agreement, the Acquired Entities shall retain all of the assets and liabilities of the Acquired Entities, including, without limitation, their respective trade payables, operational liabilities, guarantees, accrued expenses, contingent liabilities and other obligations. On or before the Closing Date, Seller shall cause the Excluded Assets to be transferred to Seller or another Person designated by Seller by means of dividend or otherwise, and Seller shall either pay the Excluded Liabilities, obtain the release of the Acquired Entities from any obligation with respect to the Excluded Liabilities, execute and deliver an assumption agreement evidencing its assumption of the Excluded Liabilities, or indemnify and hold harmless the Purchaser Indemnitees from and after the Effective Time from and against any Damages incurred or suffered by such Purchaser Indemnitee as a result of or arising from the Excluded Liabilities (subject to the limitations and other provisions set forth in Article IX, provided that Seller’s liability for Claims for such indemnification shall not be subject to any Liability Threshold or liability cap set forth in Section 9.4(a) ).

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     2.2 Consideration . Subject to the terms and conditions hereof, in reliance upon the representations, warranties, covenants and agreements of Seller herein set forth and as consideration for the sale and purchase of the ABS Shares as herein contemplated, Purchaser shall pay to Seller a purchase price (the " Purchase Price ") equal to TWO HUNDRED TEN MILLION AND 00/100 DOLLARS ($210,000,000.00) in the manner and at the time as set forth in this Section 2.2 and Section 2.3 . At the Closing, Purchaser shall pay to Seller, by wire transfer of immediately available funds, an amount equal to the Purchase Price less those obligations of ABS to be identified on Schedule 2.2 to be delivered no later than three (3) days prior to Closing (which Purchaser shall pay directly to, or deposit with, the payee thereof identified on such Schedule 2.2 ), as such amounts and/or payees may be supplemented or amended by a " Closing Statement " signed by Purchaser and Seller and delivered to one another at Closing. The Closing Statement, if there shall be one, shall not modify, limit or expand the scope or content of any representation, warranty or covenant herein, but shall provide only for the expedient delivery of amounts to Seller and/or other Persons, as Purchaser and Seller may agree.

     2.3 Closing . The Closing will take place at the offices of Waller Lansden Dortch & Davis, LLP, 511 Union Street, Suite 2700, Nashville, Tennessee, or such other place, or in such other manner, as shall be mutually agreed to by the parties hereto on the later to occur of (a) December 1, 2006 and (b) the second Business Day following the satisfaction (or due waiver) of the conditions set forth in Articles VII and VIII other than those conditions which by their nature are to be satisfied at the Closing). Purchaser and Seller will use their respective best efforts to cause the Closing to occur on December 1, 2006, it being understood and agreed by Purchaser and Seller that time is of the essence. The date on which the Closing takes place is referred to herein as the " Closing Date ". The Closing shall be deemed to occur at 12:00:01 a.m., Eastern Time, on the Closing Date, or such other time as shall be mutually agreed upon in writing by the parties hereto (the " Effective Time ").

     2.4 Deliveries of Seller at Closing . At Closing, and unless otherwise waived in writing by Purchaser, Seller shall deliver to Purchaser the following:

          (a) one or more certificates evidencing all the ABS Shares, in each case duly endorsed in blank or accompanied by duly executed stock powers in blank with signatures guaranteed by a bank or trust company as reasonably requested by Purchaser;

          (b) the certificates and documents required to be delivered by Seller pursuant to Article VII; and

          (c) such other instruments and documents as Purchaser reasonably deems necessary to effect the transactions contemplated hereby.

     2.5 Deliveries of Purchaser at Closing . At Closing and unless otherwise waived in writing by Seller, Purchaser shall deliver to Seller the following:

          (a) the Purchase Price at the Closing pursuant to Section 2.2 , and Purchaser shall deliver funds to the other payees as contemplated by Schedule 2.2 and/or the Closing Statement;

          (b) the certificates and documents required to be delivered by Purchaser pursuant to Article VIII; and

          (c) such other instruments and documents as Seller reasonably deems necessary to effect the transactions contemplated hereby.

     2.6 Additional Acts . From time to time after Closing, Seller shall execute and deliver such other instruments of conveyance and transfer, and take such other actions as Purchaser may reasonably request, to convey and transfer more effectively full right, title and interest to, to vest in, and to place Purchaser in legal and actual possession of any and all of the ABS Shares, as contemplated by and in accordance with the terms of this Agreement.

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ARTICLE III

REPRESENTATIONS AND WARRANTIES OF SELLER

     Seller represents and warrants to Purchaser as follows:

     3.1 Organization of Seller . Seller is a corporation duly organized, validly existing and in good standing under the Laws of the Commonwealth of Virginia. Seller is duly qualified or licensed to transact business and is in good standing in all jurisdictions in which such qualification or licensure is required pursuant to the Laws of such jurisdictions.

     3.2 Organization and Capitalization of ABS .

          (a) ABS (i) is a corporation duly organized, validly existing and in good standing under the Laws of the Commonwealth of Virginia, (ii) has the corporate power and authority to own or lease and to operate its assets and to conduct its business as currently conducted, and (iii) is duly qualified to transact business as a foreign corporation and is in good standing in each of the jurisdictions listed in Schedule 3.2(a) and is not required to be so qualified by the requirement of any Laws in any other jurisdiction based on the nature of its operations or the ownership of its assets, except where failure to be so qualified would not reasonably be expected to have a Material Adverse Effect.

          (b) The authorized capital stock of ABS consists of 5,000 shares of common stock, $1.00 par value per share, of which 1,000 shares (the " ABS Shares ") are issued and outstanding. The ABS Shares have been duly authorized and validly issued and are fully paid and non-assessable.

          (c) (i) Seller has good and marketable title to, and owns, the ABS Shares, beneficially and of record, (ii) the ABS Shares are free and clear of all Liens of any nature whatsoever, except for Liens granted pursuant to the Credit Facilities, (iii) Seller has full voting power over the ABS Shares, subject to no proxy, stockholders’ agreement, voting trust or other agreement relating to the voting of any of the ABS Shares, except for restrictions under the Credit Facilities, and (iv) other than this Agreement and the Credit Facilities, there is no agreement between Seller and any other Person with respect to the disposition of the ABS Shares or otherwise relating to the ABS Shares.

          (d) (i) No Person has any preemptive right to purchase any stock or other securities of ABS, (ii) there are no outstanding securities or other instruments of ABS that are convertible into or exchangeable for any shares of its capital stock, (iii) other than the ABS Shares, there are no outstanding securities or other instruments of ABS giving the owner or holder thereof the right to vote on any matters on which ABS’s stockholders may vote, other than as set forth in the Credit Facilities, (iv) other than the Credit Facilities, there are no contracts, arrangements, commitments or restrictions relating to the issuance, sale, transfer, purchase or obtaining of capital stock or other securities or instruments of ABS, and (v) other than the Credit Facilities, there is no existing option, warrant, right, call or commitment of any character granted or issued by ABS governing the issuance of shares of its capital stock.

     3.3 Organization and Capitalization of the ABS Subsidiaries .

          (a) Schedule 3.3(a) contains a true, complete and correct list of all subsidiaries, direct or indirect, of ABS other than the Excluded Subsidiaries (the " ABS Subsidiaries "). Except for the ABS Subsidiaries and the Excluded Subsidiaries, ABS does not directly or indirectly own, of record or beneficially, or have the right to acquire, any outstanding equity interests in any other Person.

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          (b) Each ABS Subsidiary (i) is a corporation or limited liability company, as the case may be, duly organized or formed, validly existing and in good standing under the laws of the state of its organization or formation, as identified on Schedule 3.3(b) , (ii) has the corporate or limited liability company power and authority to own or lease and to operate its assets and to conduct its business as currently conducted, and (iii) is duly qualified to transact business as a foreign corporation or limited liability company and is in good standing in each of the jurisdictions listed in Schedule 3.3(b) and is not required to be so qualified by the requirement of any Laws in any other jurisdiction based on the nature of its operations or the ownership of its assets, except where failure to be so qualified would not reasonably be expected to have a Material Adverse Effect.

          (c) Schedule 3.3(c) sets forth the authorized equity securities of each ABS Subsidiary and indicates the number of issued and outstanding equity securities of such ABS Subsidiary. The shares of capital stock of each ABS Subsidiary that is a corporation have been duly authorized and validly issued and are fully paid and non-assessable.

          (d) (i) ABS has good and marketable title to, and owns, directly or indirectly, all of the outstanding shares of capital stock or other outstanding equity securities of each ABS Subsidiary (the " ABS Subsidiary Shares "), beneficially and of record; (ii) the ABS Subsidiary Shares are free and clear of all Liens of any nature whatsoever, except for Liens granted pursuant to the Credit Facilities; (iii) ABS has full voting power over the ABS Subsidiary Shares, subject to no proxy, stockholders’ agreement, voting trust or other agreement relating to the voting of any of the ABS Subsidiary Shares, except restrictions under the Credit Facilities; and (iv) other than this Agreement and the Credit Facilities, there is no agreement between Seller and any other Person with respect to the disposition of the ABS Subsidiary Shares or otherwise relating to the ABS Subsidiary Shares.

          (e) (i) No Person has any preemptive right to purchase any stock, equity interests or other securities of any ABS Subsidiary, (ii) there are no outstanding securities or other instruments of any ABS Subsidiary that are convertible into or exchangeable for any shares of its capital stock or any other equity securities, (iii) other than the ABS Subsidiary Shares, there are no outstanding securities or other instruments of any of the ABS Subsidiaries giving the owner or holder thereof the right to vote on any matters on which ABS Subsidiary equityholders may vote, other than as set forth in the Credit Facilities, (iv) other than the Credit Facilities, there are no contracts, arrangements, commitments or restrictions relating to the issuance, sale, transfer, purchase or obtaining of capital stock or other securities or instruments of any ABS Subsidiary, and (v) other than the Credit Facilities, there is no existing option, warrant, right, call or commitment of any character granted or issued by any ABS Subsidiary governing the issuance of shares of its capital stock or other securities or instruments.

     3.4 Authorization .

          (a) The execution, delivery and performance by Seller of this Agreement and the other agreements to be entered into by it pursuant to the terms of this Agreement, and the consummation by Seller of the transactions contemplated hereby and thereby, are within Seller’s corporate powers, are not in contravention of the terms of Seller’s Constituent Documents, and have been duly authorized and approved by Seller’s board of directors and, if required by Law or Seller’s Constituent Documents, by the stockholders of Seller. No other corporate or limited liability company, as the case may be, proceedings on the part of Seller or any Acquired Entity are necessary to authorize the execution, delivery and performance by Seller or any Acquired Entity of this Agreement or the other agreements to be entered into by Seller or any Acquired Entity pursuant to the terms of this Agreement.

          (b) This Agreement has been duly and validly executed and delivered by Seller, and, as of the Closing, the other agreements to be entered into by Seller or any Acquired Entity pursuant to the terms of this Agreement will have been duly and validly executed and delivered by Seller or such Acquired Entity, as the case may be. This Agreement constitutes, and upon their execution and delivery, such other agreements will constitute, the legal, valid and binding obligations of Seller and any Acquired Entity party thereto, enforceable against Seller and any Acquired Entity party thereto in accordance with their respective terms (assuming the valid authorization, execution and delivery hereof and thereof by Purchaser and any other unaffiliated entity that is a party thereto), subject, in each case, to bankruptcy, insolvency, reorganization, moratorium and similar Laws of general application

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relating to or affecting creditors’ rights and to general principles of commercial reasonableness, good faith and fair dealing.

     3.5 No Conflicting Agreements; Consents . Except as set forth in Schedule 3.5 , neither the execution and delivery of this Agreement or any of the other agreements to be entered into by Seller or any Acquired Entity pursuant to the terms of this Agreement nor the consummation of any of the transactions contemplated hereby or thereby will:

          (a) violate, conflict with, result in a breach or termination of the terms, conditions or provisions of, constitute a default under, or entitle any party to terminate or accelerate (i) the respective Constituent Documents of Seller or any of the Acquired Entities, (ii) any Contract (other than the Credit Facilities), except such violations, conflicts, breaches, defaults, terminations or accelerations which, either individually or in the aggregate, (A) would not materially impair the ability of Seller and the Acquired Entities to perform their respective obligations hereunder or under the other agreements contemplated hereby to be entered into by any of them or would not prevent the consummation of the transactions contemplated hereby or thereby, or (B) would not reasonably be expected to have a Material Adverse Effect, (iii) any Court Order to which Seller or any of the Acquired Entities is a party or by which Seller or any of the Acquired Entities is bound, or (iv) any requirements of Law affecting Seller or any of the Acquired Entities, except such violations, conflicts, breaches or defaults of such requirements of Law which, either individually or in the aggregate, (A) would not materially impair the ability of Seller and the Acquired Entities to perform their respective obligations hereunder or under the other agreements contemplated hereby to be entered into by any of them or would not prevent the consummation of the transactions contemplated hereby or thereby or (B) would not reasonably be expected to have a Material Adverse Effect;

          (b) result in the creation or imposition of any Lien upon any of the assets or securities of any Acquired Entity (except for Permitted Liens);

          (c) require a permit from, the approval, consent or authorization of, or the making by Seller or any of the Acquired Entities of any declaration, filing or registration with, any Governmental Authority, except as provided in Section 5.1 or Section 6.2 and except for such approvals, consents, authorizations, declarations, filings or registrations, the failure of which to be obtained or made (i) would not, individually or in the aggregate, materially impair the ability of Seller and the Acquired Entities to perform their respective obligations hereunder or under the other agreements contemplated hereby to be entered into by any of them or prevent the consummation of the transactions contemplated hereby or thereby or (ii) would not reasonably be expected to have a Material Adverse Effect; or

          (d) require the approval, consent or authorization of, or notice to, any third party to any Material Contract.

     3.6 Financial Statements .

          (a) Schedule 3.6 contains copies of the audited consolidated balance sheets of the Company at December 31, 2003, 2004 and 2005 and the unaudited consolidated balance sheet of the Company at June 30, 2006, and the audited consolidated statements of income of the Company for the years ended December 31, 2003, 2004 and 2005 and the unaudited consolidated statement of income of the Company for the six months ended June 30, 2006 (collectively, the " Company Financial Statements "). The Company Financial Statements (including the notes thereto) have been prepared in accordance with GAAP applied on a consistent basis throughout the periods covered thereby (except as may be indicated in such Company Financial Statements, the notes thereto or Schedule 3.6 ), present fairly in all material respects the financial condition of the Company as of such dates and the results of operations of the Company for such periods, are correct and complete, and are consistent in all material respects with the Books and Records of the Company (which Books and Records are correct and complete).

          (b) Company has designed internal controls to ensure that material information relating to the Company Financial Statements and other financial information is made known to its executive officers by other officers and employees of Seller and the Acquired Entities. There are no significant deficiencies in the design or

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operation of internal controls that could adversely affect the Company’s ability to record, process, summarize, and report financial data.

          (c) The accounts receivable set forth on the Company Financial Statements, and all accounts receivable arising since the Balance Sheet Date, represent bona fide claims of the Acquired Entities against debtors for sales, services performed or other charges arising on or before the date hereof, and all the goods delivered and services performed that gave rise to said accounts were delivered or performed in accordance with the applicable orders, Contracts or customer requirements. Said accounts receivable are subject to no defenses, counterclaims or rights of setoff, except to the extent of the appropriate reserves for bad debts on accounts receivable as set forth on the Company Financial Statements and, in the case of accounts receivable arising since the date of the Company Financial Statements, to the extent of a reasonable reserve rate for bad debts on accounts receivable which is not greater than the rate reflected by the reserve for bad debts on the Company Financial Statements.

     3.7 Absence of Undisclosed Liabilities . Except as disclosed in Schedule 3.7 , the Company does not have any material liabilities or obligations required by GAAP to be reflected on a consolidated balance sheet (whether accrued, absolute, asserted or unasserted, contingent or otherwise) except for (a) liabilities reflected or reserved against in the Company Financial Statements, (b) liabilities incurred in the ordinary course of the Company’s business since the Balance Sheet Date, or (c) liabilities incurred in connection with the transactions contemplated by this Agreement.

     3.8 Absence of Certain Changes . Except as disclosed in Schedule 3.8 or as contemplated elsewhere in this Agreement, since the Balance Sheet Date, the Acquired Entities have conducted their businesses only in the ordinary course of such businesses and:

          (a) no Acquired Entity has (i) declared, set aside or paid any dividend or made or agreed to make any other distribution or payment in respect of its capital stock or redeemed, purchased or otherwise acquired or agreed to redeem, purchase or otherwise acquire any shares of its capital stock or (ii) amended its Constituent Documents;

          (b) no Acquired Entity has incurred any liabilities that under GAAP would be required to be reflected on a balance sheet for the Company (other than current liabilities incurred in the ordinary course of its business consistent with past practice or other liabilities not materially adverse to the Acquired Entities taken as a whole);

          (c) no Acquired Entity has sold, assigned or transferred any of its assets or properties (other than dispositions or sales of inventory in the ordinary course of business);

          (d) no Acquired Entity has mortgaged, pledged or subjected to any Lien any of the assets or properties of such Acquired Entity other than Permitted Liens;

          (e) no Acquired Entity has suffered any damage, destruction or loss, whether or not covered by insurance, that has had or would reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect;

          (f) except as contemplated by Schedule 3.12(i) , no Acquired Entity has entered into any employment, severance or termination agreement with any of the employees of an Acquired Entity;

          (g) neither Seller nor the Company has made any change in its accounting principles, practices or methodologies in any material respect;

          (h) no Acquired Entity has (i) made any increase in the rate of compensation payable to any of its employees, other than normal and customary increases consistent with past practice or increases that otherwise were required by such Acquired Entity’s obligations pursuant to applicable Law or Contracts in effect on the Balance Sheet Date, or (ii) increased severance or termination obligations to any of its employees; and

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          (i) neither Seller nor any Acquired Entity has entered into any agreement or arrangement, or made any other commitment (whether oral or written), to do any of the foregoing.

     3.9 Legal Proceedings, etc . There are no investigations, actions, suits or proceedings pending, or, to the Knowledge of Seller, threatened against Seller or any of its subsidiaries (including the Acquired Entities) and, to the Knowledge of Seller, no event has occurred or circumstance exists that would reasonably be expected to give rise to or serve as a basis for the commencement of any action, suit or proceeding which, either individually or in the aggregate, if decided adversely, could reasonably be expected to (a) materially impair the ability of Seller or any Acquired Entity to perform its respective obligations hereunder or under the other agreements contemplated hereby to be entered into by any of them or (b) prevent the consummation of the transactions contemplated hereby or thereby. Except as set forth in Schedule 3.9 , there are no investigations, actions, suits or proceedings pending, or, to the Knowledge of Seller, threatened against Seller or any of its subsidiaries (including the Acquired Entities) and, to the Knowledge of Seller, no event has occurred or circumstance exists that would reasonably be expected to give rise to or serve as a basis for the commencement of any investigation, action, suit or proceeding which, either individually or in the aggregate, if decided adversely, could reasonably be expected to result in a liability to the Acquired Entities in excess of $100,000. Except as otherwise disclosed in Schedule 3.9 and except for investigations or proceedings conducted in the ordinary course of the Acquired Entities’ business, neither Seller nor any Acquired Entity has received written or, to the Knowledge of Seller, oral notice from any Governmental Authority that any Acquired Entity is the target of any investigation or proceeding by any Governmental Authority nor to the Knowledge of Seller is any such investigation or proceeding pending.

     3.10 Contracts; No Defaults . Schedule 3.10 sets forth a complete and accurate list of the following Contracts as of the date of this Agreement: (i) all Contracts that have an aggregate annual value or result in an aggregate annual expense of at least $50,000; (ii) any agreement that grants a right of first refusal with respect to the purchase or sale of any asset of an Acquired Entity or an equity interest in an Acquired Entity; (iii) any agreement relating to the borrowing or lending of money (other than advances to employees to cover business expenses in the ordinary course of business); (iv) any joint venture Contract, partnership Contract or similar Contract evidencing an ownership interest or a participation in or sharing of profits; (v) any guaranty, contribution agreement or other agreement that includes any material indemnification or contribution obligation; (vi) any agreement (including, without limitation, any non-competition agreement) limiting the ability of any Acquired Entity to engage in any line of business or in business with any Person or restricting the geographical area in which such Acquired Entity may engage in any business; (vii) any employment, consulting, management, severance or indemnification contract or agreement with annual obligations in excess of $50,000; and (viii) all agreements with any physician or an immediate family member of a physician, or with an entity which, to the Knowledge of Seller, is owned by a physician or an immediate family member of a physician (collectively, the " Material Contracts "). All of the Material Contracts are with respect to the Acquired Entities, and, to Seller’s Knowledge, with respect to all other parties thereto, valid and binding obligations and are in full force and effect in accordance with their terms. Except as set forth in Schedule 3.10 , there is not, under any of the Material Contracts, any existing default, event of default or other event which, with or without due notice or lapse of time or both, would constitute a default or event of default on the part of any Acquired Entity, except such defaults, events of default and other events as to which requisite waivers or consents have been obtained or would not reasonably be expected to cause a Material Adverse Effect. To Seller’s Knowledge, no party to any of the Material Contracts intends to cancel, terminate or exercise any option under any of the Material Contracts. Seller has provided to Purchaser true and complete copies of the Material Contracts.

     3.11 Title to Property .

          (a) Each of the Acquired Entities is in possession of and has good title to, or has valid leasehold interests in or valid rights under Contract to use, all of the personal property and such other assets used in or reasonably necessary for the conduct of its business; such assets and properties include all personal property reflected on the Company Financial Statements and all of the personal properties purchased or otherwise acquired by the Acquired Entities since the Balance Sheet Date, other than (i) current assets or properties disposed of since the Balance Sheet Date in the ordinary course of business consistent with past practice, and (ii) the Excluded Assets. None of such assets or properties is subject to any Liens (other than Permitted Liens).

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          (b) Each of the Acquired Entities has good and valid fee simple title to or a valid leasehold interest in all real property and other real property interests used in connection with the operation of the business of such Acquired Entity, together with all buildings, improvements and fixtures located thereupon and all construction in buildings, improvements and fixtures located thereupon and all construction in progress (such real property is referred to herein as the " Real Property "). The address and legal description for the Real Property that each Acquired Entity owns is listed in Schedule 3.11(b ).

          (c) Schedule 3.11(c) lists all leases to which an Acquired Entity is a party involving rental of real property as a lessor, lessee, sublessor or sublessee (the " Leases "). Seller has delivered to Purchaser true and correct copies of all Leases. All of the Leases are valid and binding obligations of the parties thereto, are in full force and effect, and are enforceable against the parties thereto in accordance with their terms; and no event has occurred including, but not limited to, the execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby which (whether with or without notice, lapse of time or both) would constitute a default thereunder by an Acquired Entity. To the Knowledge of Seller, none of the other parties to any of the Leases (i) is in default under any such Lease or (ii) considers an Acquired Entity to be in default thereunder. No property leased under any of the Leases is subject to any Lien or limitation that might in any respect interfere with or impair the present and continued use thereof in the usual and normal conduct of the business of the applicable Acquired Entity. With respect to the property and assets it leases, each Acquired Entity is in compliance with such Leases, except where the failure to be in compliance would not reasonably be expected to have a Material Adverse Effect.

          (d) Seller has provided to Purchaser true and correct copies of rent rolls for each building in which an Acquired Entity leases or subleases space to tenants, which rent rolls identify the space leased, and with respect to each lease or sublease, identify (i) the tenant or subtenant, (ii) the number of square feet leased, (iii) the term commencement date and expiration date, (iv) any term renewal options, (v) the annual or monthly rent, and (vi) the amount of security deposits.

          (e) Seller has provided to Purchaser a true and correct list of the most current owner’s title policies issued to Seller or an Acquired Entity with respect to any of the Real Property or any portion thereof, and copies thereof have been supplied to Purchaser.

          (f) Seller has provided Purchaser a true and correct list of the most current "as-built" surveys or boundary surveys obtained by Seller or an Acquired Entity with respect to any of the Real Property or any portion thereof, and copies thereof have been supplied to Purchaser.

          (g) Seller has provided Purchaser a true and correct copy of all environmental site assessments obtained by Seller or an Acquired Entity with respect to any of the Real Property or any portion thereof.

          (h) No Acquired Entity has received any notice of any violation of any building codes, zoning regulations, or other Law in respect of the Real Property or structures or their use by such Acquired Entity. The present use of the Real Property is permitted, and it is a conforming structure under applicable zoning and building laws and ordinances. There are no pending or, to Seller’s Knowledge, threatened requests, applications or proceedings to alter or restrict the zoning or other use restrictions applicable to the Real Property. No variance, special permit, special exceptions or other approval is required under the local zoning or planning Laws from any Governmental Authority to operate a behavioral health care business at the Real Property. No portion of the Real Property is subject to a condemnation or similar proceeding. Schedule 3.11(h) describes all construction work, if any, which any Acquired Entity has contracted for and which is presently in progress in respect of the business of such Acquired Entity and also contains a good faith estimate, as of the date of this Agreement, of the cost to complete each such project.

          (i) The Real Property constitutes valid subdivided parcels in accordance with all applicable subdivision restrictions. The Acquired Entities have all easements, servitudes, and rights-of-way necessary for access to the Real Property. All utilities serving the Real Property are adequate to operate a behavioral health care business at the Real Property in the manner it is currently operating. No improvements (i) encroach onto adjacent

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property, (ii) violate setback, building or side lines or (iii) encroach onto any easements or servitudes located on the Real Property. Except as set forth on Schedule 3.11(i) , no portion of the Real Property is located within a flood plain or constitutes an area classified as a protected wetland. Neither Seller nor any Acquired Entity has received written notice of any action to alter the zoning or zoning classification or to condemn, requisition or otherwise take all or any portion of the Real Property.

     (j) To the Knowledge of Seller, there are no defects in the condition of the Real Property that will impair the condition of the Real Property or the operation of the behavioral health care facility at the Real Property. There is no defect in the Real Property, the structural elements thereof, the mechanical systems (including without limitation all heating, ventilating, air conditioning, plumbing, electrical, elevator, security, utility and sprinkler systems) therein, or the parking and loading areas, and all such systems are safe and adequate for the uses to which they are put in the operation of the behavioral health care facility at the Real Property. The Real Property is in good operating condition, ordinary wear and tear excepted. There are no defects or deficiencies in any necessary utility services and, to the Knowledge of Seller, easements for such services including, without limitation, electrical, gas, water, sewer and telephone.

     3.12 Employees; Labor Matters; Employee Benefit Plans; ERISA .

          (a) No Acquired Entity is a party to, or bound by, any collective bargaining agreement, contract or other agreement or understanding with a labor union or labor organization. There is no unfair labor practice or labor arbitration proceeding pending or, to the Knowledge of Seller, threatened against an Acquired Entity relating to its business. To the Knowledge of Seller, there are no organization efforts with respect to the formation of a collective bargaining unit presently being made or threatened involving employees of any Acquired Entity. There is no labor strike, material slowdown or material work stoppage or lockout actually pending or, to the Knowledge of Seller, threatened against or affecting any Acquired Entity, and an Acquired Entity has not experienced any strike, material slowdown or material work stoppage or lockout since January 1, 2001. No Acquired Entity is delinquent in payments to any of its employees for any wages, salaries, commissions, bonuses or other direct compensation for any services performed for it or amounts required to be reimbursed to such employees. Each Acquired Entity is in material compliance with all applicable laws respecting labor, employment, fair employment practices, terms and conditions of employment, workers’ compensation, occupational safety, plant closings, and wages and hours. Each Acquired Entity has withheld all amounts required by Law or by agreement to be withheld from the wages, salaries, and other payments to employees. No Acquired Entity is liable for any arrears of wages or any Taxes or any penalty for failure to comply with any of the foregoing.

          (b) Schedule 3.12(b) contains a list of each Company Plan. Neither the Acquired Entities nor any other Person has any express or implied commitment, whether legally enforceable or not, to modify, change or terminate any Company Plan in any material respect, other than with respect to a modification, change or termination required by ERISA or the Code.

          (c) Seller has delivered to Purchaser a current, accurate and complete copy (or, to the extent no such copy exists, an accurate description) of each Company Plan and each of the following, to the extent applicable: (i) any related trust agreement or other funding instrument; (ii) the most recent IRS determination letter, if applicable; (iii) any summary plan description, summary of material modifications, employee handbooks and other material written communications provided over the past three (3) years to participants in the Company Plans; and (iv) for the three (3) most recent years (A) the Form 5500 and attached schedules, (B) audited Company Plan financial statements, (C) actuarial valuation reports and (D) attorney’s response to an auditor’s request for information.

          (d) Except as set forth on Schedule 3.12(d) , (i) each Company Plan has been established, drafted and administered in all material respects in accordance with its terms and the applicable provisions of ERISA, the Code and other applicable Laws; (ii) each Company Plan that is intended to be qualified within the meaning of Code Section 401(a) has received a favorable IRS determination letter as to its qualification, and nothing has occurred, whether by action or failure to act, that could reasonably be expected to adversely affect the qualified status of any such Company Plan or the exempt status of any such trust; (iii) for each Company Plan with respect to

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which a Form 5500 has been filed, no material change has occurred with respect to the matters covered by the most recent Form 5500 since the date thereof; (iv) no " reportable event " (as such term is defined in ERISA Section 4043) has occurred with respect to any Company Plan; (v) neither Seller, any ERISA Affiliate, nor, to the Knowledge of Seller, any other party in interest or a disqualified person (as defined in Code Section 4975(e)(2)) has breached any fiduciary duty or engaged in a " prohibited transaction " (within the meaning of ERISA Section 406 and Code Section 4975) with respect to any Company Plan for which there is no exemption under ERISA Section 408 or Code Section 4975; (vi) except as required by COBRA, no Company Plan provides post-employment or retiree welfare benefits and no Acquired Entity has any obligations to provide any post-employment or retiree welfare benefits; (vii) contributions required to be made under the terms of any of the Company Plans as of the date of this Agreement have been timely made or, if not yet due, have been properly reflected on the Company Financial Statements; (viii) no event has occurred and, to the Knowledge of Seller, there exists no condition or set of circumstances in connection with which any Acquired Entity, ERISA Affiliate or Company Plan would reasonably be expected to be subject to any material liability (other than for routine benefit liabilities) under the terms of, or with respect to, such Company Plans, ERISA, the Code or any other applicable Law; (ix) neither the Acquired Entities nor any ERISA Affiliate has any liability under ERISA Section 502; (x) all Tax, annual reporting and other governmental filings required by ERISA and the Code have been timely filed with the appropriate governmental agency and all notices and disclosures have been timely provided to participants; (xi) no excise Tax could be imposed upon the Acquired Entities under Chapter 43 of the Code; and (xii) the Acquired Entities do not maintain, sponsor, contribute to or have any liability with respect to any employee benefit plan, program or arrangement that provides benefits to non-resident aliens with no U.S. source income outside of the United States.

          (e) None of the Company Plans is subject to, and no Acquired Entity or ERISA Affiliate has been liable at any time for contributions to, any plan or program that is, or has been at any time, subject to Section 412 of the Code, Section 302 of ERISA and/or Title IV of ERISA.

          (f) There is no Multiemployer Plan under which any employee or any former employee of any Acquired Entity has any present or future right to benefits or under which any Acquired Entity has any present or future liability. The Acquired Entities and their ERISA Affiliates have not sponsored or contributed to or been required to contribute to a Multiemployer Plan.

          (g) With respect to any Company Plan, no actions, suits or claims (other than routine claims for benefits in the ordinary course) are pending or, to the Knowledge of Seller, threatened. No Company Plan is currently subject to an audit or other investigation by the IRS, the Department of Labor or any other governmental authority.

          (h) No Company Plan or other agreement exists that could result in the payment to any present or former employee or director of any Acquired Entity of any money or other property or accelerate or provide any other rights or benefits to any present or former employee of any Acquired Entity as a result of the transactions contemplated by this Agreement, whether or not such payment would constitute a parachute payment within the meaning of Code Section 280G.

          (i) The Acquired Entities and their ERISA Affiliates have complied with the continuation coverage provisions of Title I, Part 6, of ERISA (" COBRA ") with respect to all current and former employees and their beneficiaries. Attached hereto as Schedule 3.12(i) is a complete and accurate list of all current and former employees of the Company and their beneficiaries who are eligible for and/or who have elected continuation coverage under COBRA. At the Closing, Seller shall deliver to Purchaser a revised version of such list, updated through the Closing Date.

          (j) The Acquired Entities and their ERISA Affiliates and the Company Plans have properly classified individuals providing services to the Acquired Entities and their ERISA Affiliates as independent contractors or employees, as the case may be.

     3.13 Bank Accounts . Schedule 3.13 is a list of the names and locations of all financial institutions at which any Acquired Entity maintains a checking account, deposit account, securities account, safety deposit box or

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other deposit or safekeeping arrangement, the name of the Acquired Entity that maintains each such account or arrangement and the number or other means of identification of each such account and arrangement.

     3.14 Taxes .

          (a) Except as set forth on Schedule 3.14 , (i) the Acquired Entities have duly and timely filed all Tax Returns that they are required to have filed, (ii) all Tax Returns filed by the Acquired Entities were true, correct and complete in all material respects, and (iii) the Acquired Entities have timely paid all Taxes that have become due and payable (whether or not shown on a Tax Return) and have adequately reserved in the Company Financial Statements in accordance with GAAP for all Taxes (whether or not shown on any Tax Return) that have accrued but are not yet due or payable as of the dates thereof. No federal income Tax Return that was filed by the Acquired Entities contains, or was required to contain (in order to avoid a penalty, and determined without regard to the effect of post-filing disclosure), a disclosure statement under Section 6662 of the Code. None of the Acquired Entities has entered into any " reportable transaction " as defined in Treasury Regulation Section 1.6011-4(b).

          (b) Except as set forth on Schedule 3.14 , the Acquired Entities have no present or contingent liability for Taxes, other than Taxes reflected on the Company Financial Statements or incurred in the ordinary course of business since the Balance Sheet Date in amounts consistent with prior years adjusted to reflect changes in operating results of the Acquired Entities. Except as set forth on Schedule 3.14 , Seller has no Knowledge of any basis for the assertion by a Governmental Authority of a Tax deficiency against any Acquired Entity.

          (c) Except as set forth on Schedule 3.14 , (i) there is no dispute or claim concerning any Tax liability of the Acquired Entities either (A) claimed or raised by any Governmental Authority in writing or (B) as to which Seller has Knowledge; (ii) no Tax audits or administrative or judicial Tax proceedings are pending or being conducted with respect to any Acquired Entity; (iii) no Acquired Entity has received from any Governmental Authority any notice indicating an intent to open an audit or other review or any request for information related to Taxes; (iv) no jurisdiction in which any of the Acquired Entities do not file a Tax Return has made a claim in writing that any of the Acquired Entities is required to file a Tax Return for such jurisdiction, and Seller has no Knowledge that any such jurisdiction has otherwise made any such claim; and (v) neither ABS nor any of the ABS Subsidiaries is a party to or bound by any closing or other agreement with any Governmental Authority with respect to Taxes.

          (d) The Acquired Entities have complied in all material respects with all applicable Laws relating to the payment and withholding of Taxes (including, without limitation, withholding in connection with payments to employees, independent contractors, creditors, stockholders, partners or other third parties) and have, within the time and manner prescribed by Law, withheld and paid over to the proper Governmental Authorities all material amounts required to be withheld and paid over under all applicable Laws.

          (e) Neither ABS nor any of the ABS Subsidiaries has been a member of any Affiliated Group filing a consolidated federal income Tax Return or a member of a combined, consolidated or unitary group for state, local or foreign Tax purposes, other than a group the common parent of which has at all times been Seller, or has any liability for the Taxes of any other Person (other than an entity that is a member of the consolidated group of corporations that has at all times had Seller as its common parent) under Treasury Regulation Section 1.1502-6 (or any similar provision of state, local, or foreign Law), as a transferee or successor, by contract, or otherwise. Except as set forth on Schedule 3.14 , neither ABS nor any of the ABS Subsidiaries is a party to, is bound by, or has any obligation under any Tax sharing agreement, Tax indemnification agreement or similar contract or arrangement, whether written or, to the Knowledge of Seller, unwritten (a " Tax Indemnification Agreement "), and ABS and the ABS Subsidiaries do not have any potential liability or obligation to any Person as a result of, or pursuant to, any such Tax Indemnification Agreement. Seller has filed a consolidated federal income Tax Return with ABS and the ABS Subsidiaries for the taxable year immediately preceding the current taxable year and is eligible to make a Section 338 Election.

          (f) Except as set forth on Schedule 3.14 , (i) neither ABS nor any of the ABS Subsidiaries will be required to include any item of income in, or exclude any item of deduction from, taxable income for any

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taxable period (or portion thereof) ending on or after the Closing Date as a result of any adjustment pursuant to Section 481(a) of the Code by reason of a change in accounting method, and the IRS has not proposed any such adjustment or a change in any accounting method used by ABS or any of the ABS Subsidiaries; (ii) neither ABS nor any of the ABS Subsidiaries has taken any action inconsistent with its practices in prior years that would have the effect of deferring a liability for Taxes from a period prior to the Effective Time to a period following the Effective Time; and (iii) neither ABS nor any of the ABS Subsidiaries will be required to include any item of income in, or exclude any item of deduction from, taxable income for any taxable period (or portion thereof) ending on or after the Closing Date as a result of any intercompany transaction or excess loss account described in Treasury Regulations promulgated under Section 1502 of the Code (or any corresponding or similar provision of state, local or foreign income Tax law).

          (g) Except as set forth on Schedule 3.14 , none of the Acquired Entities is subject to any waiver or extension of the statute of limitations applicable to the assessment or collection of any Tax. Except as disclosed on Schedule 3.14 , no power of attorney or similar grant of authority is in place with respect to the Tax matters of the Acquired Entities.

          (h) None of the Acquired Entities is a party to any Contract, arrangement or plan that has resulted or would result, separately or in the aggregate, in connection with this Agreement or any change of control of the Acquired Entities, in the payment of any " excess parachute payments " within the meaning of Section 280G of the Code.

          (i) None of the Acquired Entities is or has been a United States real property holding corporation within the meaning of Section 897(c)(2) of the Code during the applicable period specified in Section 897(c)(1)(A)(ii) of the Code.

          (j) There are no Liens for Taxes on any assets of the Acquired Entities, other than Liens for Taxes not yet due and payable.

          (k) No Acquired Entity has distributed stock of another Person, or has had its stock distributed by another Person, in a transaction purported or intended to be governed in whole or in part by Section 355 or 361 of the Code.

          (l) Except as set forth on Schedule 3.14 , no Acquired Entity is a party to any joint venture, partnership or other arrangement or Contract that could be treated as a partnership for federal income tax purposes. Schedule 3.14 sets forth all elections pursuant to Treasury Regulation Section 301.7701-3 that have been made by business entities in which any Acquired Entity owns an equity interest.

          (m) Each Affiliated Group has filed all income Tax Returns that it was required to file for each taxable period during which any of the Acquired Entities was a member of the group. All such Tax Returns were correct and complete in all respects. All income Taxes owed by any Affiliated Group (whether or not shown on any Tax Return) have been paid for each taxable period during which any of the Acquired Entities was a member of the group.

          (n) Except as set forth on Schedule 3.14 , (i) to the Knowledge of Seller, no Governmental Authority intends to assess any additional income Taxes against any Affiliated Group for any taxable period during which any of the Acquired Entities was a member of the group; (ii) there is no dispute or claim concerning any income Tax Liability of any Affiliated Group for any taxable period during which any of the Acquired Entities was a member of the group either (A) claimed or raised by any Governmental Authority in writing or (B) as to which Seller has Knowledge; and (iii) no Affiliated Group has waived any statute of limitations in respect of any income Taxes or agreed to any extension of time with respect to an income Tax assessment or deficiency for any taxable period during which any of the Acquired Entities was a member of the group.

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          (o) No Acquired Entity has any liability for the Taxes of any Person other than the Acquired Entities (i) under Treasury Regulation Section 1.1502-6 (or any similar provision of state, local, or foreign Law), (ii) as a transferee or successor, (iii) by Contract, or (iv) otherwise.

          (p) Seller has no Knowledge, after consultation with tax counsel, that Purchaser’s acquisition of the ABS Shares pursuant to this Agreement would not qualify as a "qualified stock purchase" within the meaning of Section 338 of the Code and Treasury Regulations thereunder, as to which a Section 338 Election properly may be made.

          (q) No Acquired Entity has entered into any transactions with Health Related Research, Incorporated, a Virginia nonstock corporation, or Foundations for Home and Community, Inc., a Virginia nonstock corporation, that have resulted or may result in the net earnings of such entities inuring to the benefit of any private person as is prohibited by Section 501(c)(3) of the Code or which has constituted or may constitute an "excess benefit transaction" within the meaning of Section 4958 of the Code and the Treasury Regulations thereunder.

     3.15 Insurance . Schedule 3.15 includes a list of all material insurance policies maintained by or for the benefit of any Acquired Entity, including fire and extended coverage and casualty, liability and other forms of insurance. Seller covenants and agrees to use commercially reasonable efforts to keep such insurance or comparable insurance in full force and effect until the Effective Time. None of the Acquired Entities has received notice from any insurance carrier that any insurance policy will be canceled or that coverage thereunder will be reduced or eliminated.

     3.16 Intellectual Property . Except as set forth in Schedule 3.16 , each Acquired Entity owns or has the right to use (and following the Closing will continue to own or have the right to use) all patents, trademarks, trade names, service marks, trade secrets, copyrights and other intellectual property rights and licenses (the " Intellectual Property ") as are material to, or necessary to conduct, its business as currently conducted (the " Company Intellectual Property "), free of all Liens except Permitted Liens. Except as set forth in Schedule 3.16 , (a) to the Knowledge of Seller, no infringement exists by any of the Acquired Entities on the Intellectual Property of any other Person that results in any way from the operations of the businesses of the Acquired Entities, and (b) there has been no notice given to any of the Acquired Entities that its operations, activities or business infringe any Intellectual Property of any other Person. Except as set forth in Schedule 3.16 , (i) no Court Orders or proceedings are pending, or, to the Knowledge of Seller, threatened, against Seller or any of the Acquired Entities that challenge the validity of, or an Acquired Entity’s ownership of or right to use, any Company Intellectual Property, and (ii) to the Knowledge of Seller, there is no infringing use of any of the Company Intellectual Property owned by any Acquired Entity by any other Person. Schedule 3.16 lists all registrations or applications therefor with regard to Company Intellectual Property. Schedule 3.16 lists all material software used by an Acquired Entity under license from a third party, except for operating system software or other commercially available "off the shelf" software that is covered by so-called shrink-wrap or click-wrap licenses.

     3.17 Compliance with Laws . The Acquired Entities hold all required Permits applicable to their respective businesses (the " Company Permits "), except where the failure to obtain such Permits would not reasonably be expected to have a Material Adverse Effect. The Acquired Entities are in compliance with the terms of the Company Permits in all material respects. Except as set forth in Schedule 3.17 , the Acquired Entities are in compliance with all Laws of any Governmental Authority in all material respects. Except as set forth in Schedule 3.17 , to the Knowledge of Seller, there is no threatened suspension, cancellation or termination of any Company Permits.

     3.18 Environmental Matters . Except as set forth in Schedule 3.18 :

          (a) The operations and properties of each of the Acquired Entities have been in compliance with the Environmental Laws in all material respects, which compliance includes but is not limited to the possession by each of the Acquired Entities of all Permits required und


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