AGREEMENT AND PLAN OF MERGER

 

 

 

EXHIBIT 10.1

 

AGREEMENT AND PLAN OF MERGER

BY AND AMONG

GOLF TRUST OF AMERICA, INC.

GTA ACQUISITION, LLC

AND

PERNIX THERAPEUTICS, INC.

 

 

 

 

Table of Contents

 

 

 

 

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AGREEMENT AND PLAN OF MERGER

THIS AGREEMENT AND PLAN OF MERGER (this “Agreement ”), dated as of October 6, 2009, is by and among Golf Trust of America, Inc., a Maryland corporation (“Public Company ”), GTA Acquisition, LLC, a Louisiana limited liability company and a wholly owned subsidiary of Public Company (the “Transitory Subsidiary ”), and Pernix Therapeutics, Inc., a Louisiana corporation (“ Merger Partner”).

WHEREAS, the Board of Directors of Public Company (the “ Public Company Board”) and the Board of Directors of Merger Partner (the “Merger Partner Board ”) each deem it advisable and in the best interests of their respective corporation and its stockholders that Public Company and Merger Partner combine in order to advance the long-term business interests of the corporations;

WHEREAS, the combination of Public Company and Merger Partner shall be effected through a merger (the “ Merger”) of Merger Partner into Transitory Subsidiary in accordance with the terms of this Agreement and the Louisiana Limited Liability Company Law (the “LLLCL”) and Louisiana Business Corporation Law (the “ LBCL”), with Transitory Subsidiary as the surviving entity and a wholly owned subsidiary of Public Company (“Surviving Entity”);

WHEREAS, the sole manager of Transitory Subsidiary and Merger Partner Board have each approved this Agreement and the transactions contemplated hereby as in the best interests of their respective entities and their stockholders or members (as applicable) and have recommended that their respective stockholders or members approve this Agreement;

WHEREAS, the Public Company Board has (i) approved this Agreement and the transactions contemplated hereby as in the best interests of Public Company and its stockholders, has recommended that its stockholders approve this Agreement, and has directed that this Agreement be submitted to its stockholders for their approval, (ii) expressly ratified, confirmed and approved, pursuant to Section 3-601(j)(3) of the Maryland General Corporation Law (the “ MGCL”), that neither James E. Smith, Jr. nor Cooper C. Collins is nor will be an “interested stockholder” as defined in Section 3-601(j) of the MGCL by virtue of the transactions contemplated by this Agreement and (iii) by irrevocable resolution, exempted from the provisions of Section 3-602 of the MGCL any “business combination” (as such term is defined in Section 3-601(e) of the MGCL) arising at any time following the execution of this Agreement involving Public Company and any current stockholder of Merger Partner, any beneficiary or transferee of such stockholder pursuant to will, intestacy or other testamentary document or applicable laws of descent in the event of the death of such stockholder or any of their present or future Affiliates to the fullest extent permitted by Section 3-603(c) of the MGCL;

WHEREAS, Public Company has approved this Agreement as the sole member of Transitory Subsidiary, and the stockholders of Merger Partner have approved this Agreement by unanimous written consent;

WHEREAS, concurrently with the execution and delivery of this Agreement and as a condition and inducement to Public Company’s willingness to enter into this Agreement, all of the stockholders of Merger Partner, which are listed on  Schedule A to this Agreement, have

 

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entered into Stockholder Agreements, dated as of the date of this Agreement, in the form attached hereto as Exhibit A (the “ Merger Partner Stockholder Agreements”), pursuant to which each such stockholder has, among other things and subject to the provisions of the applicable Merger Partner Stockholder Agreement, agreed (i) not to transfer or otherwise dispose of his shares of capital stock of Merger Partner prior to the Effective Time (ii) not to transfer or otherwise dispose of any Public Company Common Stock received in exchange for his shares of capital stock of Merger Partner pursuant to the Merger for a period beginning as of the Effective Time and ending on the first anniversary of the filing of the Post-Merger 8-K with the U.S. Securities and Exchange Commission (the “SEC”) and (iii) subject to the provisions of the applicable Merger Partner Stockholder Agreement, during the three-year period beginning on the first anniversary of the filing of the Post-Merger 8-K with the SEC, not to transfer or otherwise dispose of more than one-third of the Public Company Common Stock received in exchange for his shares of capital stock of Merger Partner pursuant to the Merger during any one year period;

WHEREAS, concurrently with the execution and delivery of this Agreement and as a condition and inducement to Merger Partner’s willingness to enter into this Agreement, the executive officers of Public Company listed on Schedule B to this Agreement have entered into stockholder agreements, dated as of the date of this Agreement, in the form attached hereto as Exhibit B (the “ Executive Officer Stockholder Agreements”), pursuant to which each executive officer has, among other things, agreed, subject to the terms of the applicable Executive Officer Stockholder Agreement, not to transfer or otherwise dispose of the shares of Public Company Common Stock that such executive officer owns or may acquire for a period beginning as of the date of this Agreement and ending on the first anniversary of the filing of the Post-Merger 8-K with the SEC; and

WHEREAS, concurrently with the execution and delivery of this Agreement and as a condition and inducement to Merger Partner’s willingness to enter into this Agreement, the directors of Public Company listed on Schedule C to this Agreement have entered into stockholder agreements, dated as of the date of this Agreement, in the form attached hereto as Exhibit C (the “ Director Stockholder Agreements”), pursuant to which each such director has, among other things, agreed (i) to give Merger Partner an irrevocable proxy to vote all of the shares of Public Company Common Stock that such director owns or may acquire in favor of the Public Company Voting Proposals, (ii) with respect to all of the shares of Public Company Stock acquired by such director through purchases on the open market from any party other than Public Company or an Affiliate of Public Company, (A) not to transfer or otherwise dispose of such shares of Public Company Common Stock prior to the Effective Time and for ninety (90) days after the Effective Time and (B) from and after the ninety-first day following the Effective Time until the first anniversary of the Effective Time, not to transfer or otherwise dispose of any such  shares of Public Company Common Stock during any single calendar week in excess of the product of (1) the total number of shares of Public Company Common Stock beneficially owned by such director as of the date of this Agreement divided by the total number of shares of Public Company Common Stock beneficially owned by all of the current members of the Public Company Board other than the Chief Executive Officer and Jonathan M. Couchman as of the date of this Agreement, multiplied by (2) 29% of the trading volume of Public Company Common Stock during the prior calendar week as reported on New York Stock Exchange AMEX Equities (the “ NYSE AMEX”) and (iii) with respect to all shares of Public Company Common Stock acquired by such director from Public Company or an Affiliate of Public

 

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Company and subject to the provisions of the applicable Director Stockholder Agreement, not to transfer or otherwise dispose of such shares of Public Company Common Stock for a period beginning as of the date of this Agreement and ending on the first anniversary of the filing of the Post-Merger 8-K with the SEC; and

WHEREAS, concurrently with the execution and delivery of their Agreement and as a condition and inducement to Merger Partner’s willingness to enter into this Agreement, Jonathan M. Couchman, a director of Public Company, has entered into a stockholder agreement, dated as of the date of this Agreement, in the form attached hereto as Exhibit D (the “ Couchman Stockholder Agreement” and together with the Executive Officer Stockholder Agreements and Director Stockholder Agreements, the “Public Company Stockholder Agreements”) pursuant to which such director has, among other things, agreed to give Merger Partner an irrevocable proxy to vote all of the shares of Public Company Common Stock that such director owns or may acquire in favor of the Public Company Voting Proposals.

NOW, THEREFORE, in consideration of the foregoing and the respective representations, warranties, covenants and agreements set forth below, Public Company, the Transitory Subsidiary and Merger Partner agree as follows:

ARTICLE I.
THE MERGER

1.1

Effective Time of the Merger . Subject to the provisions of this Agreement, prior to the Closing, the Surviving Entity shall prepare, and on the Closing Date or as soon as practicable thereafter Public Company and the Surviving Entity shall cause to be filed (i) a certificate of merger with the Secretary of State of the State of Louisiana (the “Louisiana Certificate of Merger ”) in such form as is required by, and executed by the Surviving Entity in accordance with, the relevant provisions of the LLLCL and LBCL and (ii) all other related filings or recordings required under the LLLCL and LBCL. The Merger shall become effective upon the filing of the Louisiana Certificate of Merger with the Secretary of State of the State of Louisiana or at such later time as Public Company and Merger Partner may agree in writing (the “Effective Time ”). The Louisiana Certificate of Merger shall provide that the name of the Surviving Entity as of and after the Effective Time shall be Pernix Therapeutics, LLC.

1.2

Closing .  The closing of the Merger (the “Closing ”) will take place at 10:00 a.m., Eastern time, on a date to be specified by Public Company and Merger Partner (the “ Closing Date”), which shall be no later than the second business day after satisfaction or waiver of the conditions set forth in Article VIII (other than delivery of items to be delivered at the Closing and other than satisfaction of those conditions that by their nature are to be satisfied at the Closing, it being understood that the occurrence of the Closing shall remain subject to the delivery of such items and the satisfaction or waiver of such conditions at the Closing), at the offices of Jones, Walker, Waechter, Poitevent, Carrère & Denègre L.L.P., 201 St. Charles Avenue, New Orleans, Louisiana 70170, unless another date, place or time is agreed to in writing by Public Company and Merger Partner. It is the intention of the parties that the Closing shall occur as soon as practicable after the Public Company Meeting.  

 

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1.3

Effects of the Merger .  At the Effective Time, the separate existence of Merger Partner shall cease and Merger Partner shall be merged with and into Transitory Subsidiary, with Transitory Subsidiary being the Surviving Entity, and the Merger shall have the effects set forth in the LLLCL and LBCL.  Notwithstanding anything contained in this Agreement to the contrary, Merger Partner may at any time prior to the fifth business day before the Closing Date, in its sole and absolute discretion, elect to change the direction of the Merger so that the separate existence of Transitory Subsidiary shall cease and Transitory Subsidiary shall be merged with and into Merger Partner, with Merger Partner being the Surviving Entity (the “Merger Direction Election”).  In the event a Merger Direction Election is made, Merger Partner shall notify Public Company within two (2) business days of the occurrence of such Merger Direction Election.  The parties shall use commercially reasonable efforts to take, or cause to be taken, all actions, and do, or cause to be done, and to assist and cooperate with the other parties in doing, all things necessary, proper or advisable to make the Merger Direction Election effective, including, without limitation, any amendments to this Agreement necessary to reflect the Merger Direction Election.

1.4

Articles of Organization; Operating Agreement .  The Articles of Organization and Operating Agreement of Transitory Subsidiary at the Effective Time, copies of which are attached hereto as Exhibits E and F, respectively, shall be the Articles of Organization and Operating Agreement of the Surviving Entity.  At the Effective Time, Public Company shall file the Certificate of Merger and any amendments to the Articles of Organization of the Surviving Entity necessary to reflect the change in name of the Surviving Entity to Pernix Therapeutics, LLC.

1.5

Manager and Officers of the Surviving Entity .

(a)

The sole manager of the Surviving Entity at the Effective Time shall be Public Company, until changed in accordance with applicable law.

(b)

The officers of the Surviving Entity at the Effective Time shall be the officers of Merger Partner at the Effective Time, until changed in accordance with applicable law.

ARTICLE II.
REVERSE SPLIT; CONVERSION OF SECURITIES

2.1

Potential Reverse Split of Public Company Common Stock .

(a)

If required by NYSE AMEX in order to approve the initial listing application to be filed by Public Company in accordance with NYSE AMEX Company Guide Section 341 in connection with this Agreement or in order to maintain the listing of Public Company Common Stock on the NYSE AMEX at and after the Closing, Public Company shall submit to its stockholders for approval and, if approved, immediately prior to the Effective Time, Public Company shall cause to be filed, Articles of Amendment to its Articles of Incorporation (the “Public Company Charter Amendment ”), whereby, upon the effectiveness of filing of the Public Company Charter Amendment, without any further action on the part of Public Company, Merger Partner or any stockholder of Public Company:

 

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(i)

Each such whole number of shares of common stock, $0.01 par value per share, of Public Company (“Public Company Common Stock ”) as may be reasonably requested by Merger Partner issued and outstanding immediately prior to the effective time specified in the Public Company Charter Amendment shall be reclassified and combined into and become one fully paid and nonassessable share of Public Company Common Stock (the “ Reverse Stock Split”); and

(ii)

Any shares of Public Company Common Stock held as treasury stock or owned by Public Company immediately prior to the filing of the Public Company Charter Amendment shall each be reclassified in the manner determined pursuant to Section 2.1(a)(i).

(b)

No certificates or scrip representing fractional shares of Public Company Common Stock shall be issued in connection with the Reverse Stock Split. With respect to each holder of shares of Public Company Common Stock who would otherwise have been entitled to receive a fraction of a share of Public Company Common Stock (after taking into account all fractional shares of Public Company Common Stock otherwise issuable to such holder), Public Company shall round the number of shares of Public Company Stock deliverable to such holder up to the nearest whole number, entitling such holder to receive, in lieu of such fractional share, one share of Public Company Common Stock.  

(c)

To give effect to, and as of the effective time of, the Reverse Stock Split, Public Company shall adjust and proportionately decrease the number of shares of Public Company Common Stock reserved for issuance upon exercise of, and adjust and proportionately increase the exercise price of, all options and other rights to acquire Public Company Common Stock.

(d)

The Exchange Ratio shall be appropriately adjusted at the Effective Time to reflect fully the effect of the Reverse Stock Split.

2.2

Conversion of Capital Stock .  As of the Effective Time, by virtue of the Merger and without any action on the part of the holder of any shares of the capital stock of Merger Partner or the holder of any units of the Transitory Subsidiary:

(a)

Units of Transitory Subsidiary . Each unit of membership interest of Transitory Subsidiary issued and outstanding immediately prior to the Effective Time shall be unaffected by virtue of the Merger, and shall continue to remain issued and outstanding at the Effective Time.

(b)

Cancellation of Treasury Stock .  All shares of the common stock of Merger Partner, no par value per share (the “ Merger Partner Common Stock”) that are owned by Merger Partner as treasury stock or by any wholly owned Subsidiary of Merger Partner immediately prior to the Effective Time shall be cancelled and no stock of Public Company or other consideration shall be delivered in exchange therefor.

(c)

Exchange Ratio for Merger Partner Common Stock .  Each share of Merger Partner Common Stock (other than shares to be cancelled in accordance with Section

 

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2.2(b)) shall be converted into the right to receive 209,000 shares of Public Company Common Stock (representing, in the aggregate, 41,800,000 shares of Public Company stock issuable to the stockholders of Merger Partner in connection with the Merger), subject to adjustment as provided in Section 2.1(d) (the “Exchange Ratio ”).  Schedule D to this Agreement sets forth a list of all stockholders of Merger Partner, the number of shares of Merger Partner Common Stock owned by each stockholder as of the date of this Agreement and the number of shares of Public Company Common Stock issuable to each stockholder in connection with the Merger (subject to adjustment as provided in Section 2.1(d)).

2.3

Exchange of Certificates .  The procedures for exchanging outstanding shares of Merger Partner Common Stock for Public Company Common Stock pursuant to the Merger are as follows:

(a)

Each share of Merger Partner Common Stock converted pursuant to Section 2.2(c), when so converted, shall no longer be outstanding and shall automatically be cancelled and cease to exist.  Each holder of a certificate or certificates that as of immediately prior to the Effective Time represented shares of Merger Partner Common Stock (the “ Certificates”) shall cease to have any rights with respect thereto except the right to receive, upon surrender of such certificate or certificates to Public Company at the Closing, certificates representing the Public Company Common Stock into which the shares of Merger Partner Common Stock have been so converted.

(b)

No Fractional Shares .  No certificate or scrip representing fractional shares of Public Company Common Stock shall be issued upon the surrender for exchange of Certificates, and such fractional share interests shall not entitle the owner thereof to vote or to any other rights of a stockholder of Public Company. With respect to each holder of shares of Merger Partner Common Stock converted pursuant to the Merger who would otherwise have been entitled to receive a fraction of a share of Public Company Common Stock (after taking into account the Certificates delivered by such holder representing all of the shares of Merger Partner Common Stock owned by such holder) Public Company shall round the number of shares of Public Company Common Stock deliverable to such holder up to the nearest whole number, entitling such holder to receive, in lieu of such fractional share, one share of Public Company Common Stock.  

(c)

No Further Ownership Rights in Merger Partner Common Stock .  All shares of Public Company Common Stock issued upon the surrender for exchange of Certificates in accordance with the terms hereof shall be deemed to have been issued (and paid) in full satisfaction of all rights pertaining to such shares of Merger Partner Common Stock, and from and after the Effective Time there shall be no further registration of transfers on the stock transfer books of the Surviving Entity of the shares of Merger Partner Common Stock that were outstanding immediately prior to the Effective Time.

ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF MERGER PARTNER

Merger Partner represents and warrants to Public Company and the Transitory Subsidiary that the statements contained in this Article III are true and correct, except as expressly set forth

 

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herein or in the disclosure schedules attached hereto on the date of this Agreement (the “Merger Partner Disclosure Schedule”). The Merger Partner Disclosure Schedule shall be arranged in sections corresponding to the numbered and lettered sections contained in this Article III and the disclosure in any section shall qualify (1) the corresponding section in this Article III and (2) the other sections in this Article III only to the extent that it is reasonably apparent from a reading of such disclosure that it also qualifies or applies to such other sections. For purposes hereof, “to the knowledge of Merger Partner ” and similar expressions mean the knowledge of the persons identified on the Merger Partner Disclosure Schedule for this purpose, as well as any other knowledge which such persons would have possessed had they made reasonable inquiry with respect to the matter in question.

3.1

Organization, Standing and Power .

(a)

Merger Partner is a corporation duly organized, validly existing and in good standing under the laws of the State of Louisiana, has all requisite corporate power and authority to own, lease and operate its properties and assets and to carry on its business as currently conducted and as currently proposed to be conducted, and is duly qualified to do business and is in good standing as a foreign corporation in each jurisdiction listed on Section 3.1 of the Merger Partner Disclosure Schedule, which jurisdictions constitute the only jurisdictions in which the character of the properties it owns, operates or leases or the nature of its activities makes such qualification necessary, except for such failures to be so organized, qualified or in good standing, individually or in the aggregate, that have not had, and are not reasonably likely to have, a Merger Partner Material Adverse Effect.  

(b)

For purposes of this Agreement, the term “Merger Partner Material Adverse Effect ” means any material adverse change, event, circumstance or development with respect to, or material adverse effect on, (i) the business, assets, liabilities, condition (financial or other), or results of operations of Merger Partner and its Subsidiaries, taken as a whole, or (ii) the ability of Merger Partner and its Subsidiaries to consummate the transactions contemplated by this Agreement; provided, however, that the following shall not be deemed to be a Merger Partner Material Adverse Effect: any change or event caused by or resulting from (A) changes in prevailing economic or market conditions in the United States or any other jurisdiction in which such entity has substantial business operations, (B) changes or events, after the date hereof, affecting the industries in which they operate generally, (C) changes, after the date hereof, in generally accepted accounting principles or requirements applicable to Merger Partner and its Subsidiaries, (D) changes, after the date hereof, in laws, rules or regulations of general applicability or interpretations thereof by any Governmental Entity, (E) the execution, delivery and performance of this Agreement or the consummation of the transactions contemplated hereby or thereby or the announcement thereof, or (F) any outbreak of major hostilities in which the United States is involved or any act of terrorism within the United States or directed against its facilities or citizens wherever located; except, in the case of clauses (A), (B), (C) and (D), to the extent those changes have a materially disproportionate effect on Merger Partner and its Subsidiaries as compared to other similarly situated participants in the industries or markets in which Merger Partner and its Subsidiaries operate. For the avoidance of doubt, the parties agree that the terms “material,” “materially ” and “materiality ” as used in this Agreement with an initial lower case “m” shall have their respective customary and ordinary meanings, without regard to

 

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the meanings ascribed to Merger Partner Material Adverse Effect in the prior sentence of this paragraph or Public Company Material Adverse Effect in Section 4.1.

(c)

Merger Partner has provided or made available to Public Company complete and accurate copies of its Articles of Incorporation and Bylaws and is not in default under or in violation of any provision of either such document.

3.2

Capitalization .

(a)

The authorized capital stock of Merger Partner consists of 300 shares of Merger Partner Common Stock.  As of the date of this Agreement, (i) 200 shares of Merger Partner Common Stock were issued and outstanding and (ii) no shares of Merger Partner Common Stock were held in the treasury of Merger Partner or by Subsidiaries of Merger Partner.

(b)

Section 3.2(b) of the Merger Partner Disclosure Schedule sets forth a complete and accurate list of the holders of Merger Partner Common Stock, showing the number of shares held by each stockholder.

(c)

There are no equity securities of any class of Merger Partner, or any security exchangeable into or exercisable for such equity securities, issued, reserved for issuance or outstanding and (ii) there are no options, warrants, equity securities, calls, rights, commitments or agreements of any character to which Merger Partner or any of its Subsidiaries is a party or by which Merger Partner or any of its Subsidiaries is bound obligating Merger Partner or any of its Subsidiaries to issue, exchange, transfer, deliver or sell, or cause to be issued, exchanged, transferred, delivered or sold, additional shares of capital stock or other equity interests of Merger Partner or any of its Subsidiaries or any security or rights convertible into or exchangeable or exercisable for any such shares or other equity interests, or obligating Merger Partner or any of its Subsidiaries to grant, extend, accelerate the vesting of, otherwise modify or amend or enter into any such option, warrant, equity security, call, right, commitment or agreement. Merger Partner does not have any outstanding stock appreciation rights, phantom stock, performance based rights or similar rights or obligations. Except with respect to the Merger Partner Stockholder Agreements, neither Merger Partner nor any of its Affiliates is a party to or is bound by any, and to the knowledge of Merger Partner, there are no, agreements or understandings with respect to the voting (including voting trusts and proxies) or sale or transfer (including agreements imposing transfer restrictions) of any shares of capital stock or other equity interests of Merger Partner. For purposes of this Agreement, the term “Affiliate ” when used with respect to any party shall mean any person who is an “affiliate” of that party within the meaning of Rule 405 promulgated under the Securities Act of 1933, as amended (the “Securities Act”). There are no registration rights, and there is no rights agreement, “ poison pill” anti-takeover plan or other agreement or understanding to which Merger Partner or any of its Subsidiaries is a party or by which it or they are bound with respect to any equity security of any class of Merger Partner.

(d)

All outstanding shares of Merger Partner Common Stock are duly authorized, validly issued, fully paid and nonassessable and not subject to or issued in violation of any purchase option, call option, right of first refusal, preemptive right, subscription right or any similar right under any provision of the LCBL, Merger Partner’s Articles of Incorporation or

 

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Bylaws or any agreement to which Merger Partner is a party or is otherwise bound. There are no obligations, contingent or otherwise, of Merger Partner or any of its Subsidiaries to repurchase, redeem or otherwise acquire any shares of Merger Partner Common Stock.

3.3

Subsidiaries .

(a)

Section 3.3(a) of the Merger Partner Disclosure Schedule sets forth each Subsidiary of Merger Partner and indicates (i) its name, (ii) the number and type of outstanding equity securities and a list of the holders thereof and (iii) the jurisdiction of formation. For purposes of this Agreement, the term “Subsidiary ” means, with respect to any party, any corporation, partnership, trust, limited liability company or other non-corporate business enterprise in which such party (or another Subsidiary of such party) holds stock or other ownership interests representing (A) 50% or more of the voting power of all outstanding stock or ownership interests of such entity or (B) the right to receive 50% or more of the net assets of such entity available for distribution to the holders of outstanding stock or ownership interests upon a liquidation or dissolution of such entity.

(b)

Each Subsidiary of Merger Partner is duly organized, validly existing and in good standing under the laws of the jurisdiction of its formation, has all requisite power and authority to own, lease and operate its properties and assets and to carry on its business as currently conducted and as currently proposed to be conducted, and is duly qualified to do business and is in good standing in each jurisdiction listed on Section 3.1 of the Merger Partner Disclosure Schedule, which jurisdictions constitute the only jurisdictions where the character of its properties owned, operated or leased or the nature of its activities makes such qualification necessary, except for such failures to be so organized, qualified or in good standing, individually or in the aggregate, that have not had, and are not reasonably likely to have, a Merger Partner Material Adverse Effect. All of the outstanding equity securities or interests of each Subsidiary of Merger Partner are duly authorized, validly issued, fully paid, nonassessable and free of preemptive rights and, except as indicated in Section 3.3(a) of the Merger Partner Disclosure Schedule, all such securities are owned, of record and beneficially, by Merger Partner.  Such securities owned by Merger Partner are owned free and clear of all security interests, liens, claims, pledges, agreements, limitations in Merger Partner’s voting rights, charges or other encumbrances of any nature. There are no outstanding or authorized options, warrants, rights, agreements or commitments to which Merger Partner or any of its Subsidiaries is a party or which are binding on any of them providing for the issuance, disposition or acquisition of any securities of any Subsidiary of Merger Partner. There are no outstanding stock appreciation, phantom stock or similar rights with respect to any Subsidiary of Merger Partner. There are no voting trusts, proxies or other agreements or understandings with respect to the voting of any equity securities of any Subsidiary of Merger Partner.

(c)

Merger Partner does not control directly or indirectly or have any direct or indirect equity participation or similar interest in any corporation, partnership, limited liability company, joint venture, trust or other business association or entity which is not a Subsidiary of Merger Partner. There are no obligations, contingent or otherwise, of Merger Partner or any of its Subsidiaries to repurchase, redeem or otherwise acquire any shares of capital stock of any Subsidiary of Merger Partner or to provide funds to or make any material investment (in the form of a loan, capital contribution or otherwise) in any Subsidiary of Merger Partner or any other entity.

 

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3.4

Authority; No Conflict; Required Filings and Consents .

(a)

Merger Partner has all requisite corporate power and authority to enter into this Agreement, and to consummate the transactions contemplated by this Agreement. Without limiting the generality of the foregoing, the Merger Partner Board, at a meeting duly called and held, by the unanimous vote of all directors (i) determined that the Merger is advisable, fair and in the best interests of Merger Partner and its stockholders, (ii) approved this Agreement and declared its advisability in accordance with the provisions of the LBCL, (iii) directed that this Agreement be submitted to the stockholders of Merger Partner for their adoption and resolved to recommend that the stockholders of Merger Partner vote in favor of the adoption of this Agreement and (iv) to the extent necessary, adopted a resolution having the effect of causing Merger Partner not to be subject to any state takeover law or similar law that might otherwise apply to the Merger and any other transactions contemplated by this Agreement. The execution and delivery of this Agreement and the consummation of the transactions contemplated by this Agreement by Merger Partner have been duly authorized by all necessary corporate action on the part of Merger Partner. This Agreement has been duly executed and delivered by Merger Partner and constitutes the valid and binding obligation of Merger Partner, enforceable in accordance with its terms.

(b)

Except as disclosed in Section 3.4(b) of the Merger Partner Disclosure Schedule, the execution and delivery of this Agreement by Merger Partner do not, and the consummation by Merger Partner of the transactions contemplated by this Agreement shall not, (i) conflict with, or result in any violation or breach of, any provision of the Articles of Incorporation or Bylaws of Merger Partner or of the charter, bylaws or other organizational document of any Subsidiary of Merger Partner, (ii) conflict with, or result in any violation or breach of, or constitute (with or without notice or lapse of time, or both) a default (or give rise to a right of termination, cancellation or acceleration of any obligation or loss of any material benefit) under, or require a consent or waiver under, constitute a change in control under, require the payment of a penalty under or result in the imposition of any Lien s on Merger Partner’s or any of its Subsidiaries’ assets under any of the terms, conditions or provisions of any note, bond, mortgage, indenture, lease, license, contract or other agreement, instrument or obligation to which Merger Partner or any of its Subsidiaries is a party or by which any of them or any of their properties or assets may be bound, or (iii) subject to compliance with the requirements specified in clauses (i) through (iii) of Section 3.4(c), conflict with or violate any permit, concession, franchise, license, judgment, injunction, order, decree, statute, law, ordinance, rule or regulation applicable to Merger Partner or any of its Subsidiaries or any of its or their properties or assets, except in the case of clauses (ii) and (iii) of this Section 3.4(b) for any such conflicts, violations, breaches, defaults, terminations, cancellations, accelerations or losses that, individually or in the aggregate, have not had, and are not reasonably likely to have, a Merger Partner Material Adverse Effect. Section 3.4(b) of the Merger Partner Disclosure Schedule lists all consents, waivers and approvals under any of Merger Partner’s or any of its Subsidiaries’ agreements, licenses or leases required to be obtained in connection with the consummation of the transactions contemplated by this Agreement, which, if individually or in the aggregate were not obtained, would result in a material loss of benefits to Merger Partner, Public Company or the Surviving Entity as a result of the Merger.

 

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(c)

Except as disclosed in Section 3.4(c) of the Merger Partner Disclosure Schedule, no consent, approval, license, permit, order or authorization of, or registration, declaration, notice or filing with, any federal, state, local or non-U.S. court, arbitrational tribunal, administrative agency or commission or other governmental or regulatory authority, agency or instrumentality (a “Governmental Entity ”) is required by or with respect to Merger Partner or any of its Subsidiaries in connection with the execution and delivery of this Agreement by Merger Partner or the consummation by Merger Partner of the transactions contemplated by this Agreement, except for (i) the filing of the Certificate of Merger with the Louisiana Secretary of State and appropriate corresponding documents with the appropriate authorities of other states in which Merger Partner is qualified as a foreign corporation to transact business, (ii) such consents, approvals, orders, authorizations, registrations, declarations and filings as may be required under applicable state securities laws and the laws of any foreign country and (iii) such other consents, authorizations, orders, filings, approvals and registrations that, individually or in the aggregate, if not obtained or made, would not be reasonably likely to have a Merger Partner Material Adverse Effect.

(d)

The affirmative vote in favor of the adoption of this Agreement (the “ Merger Partner Voting Proposal”) by the holders of a majority of the votes represented by the outstanding shares of Merger Partner Common Stock, which has been delivered pursuant to written consents of stockholders in lieu of a meeting, is the only vote of the holders of any class or series of Merger Partner’s capital stock or other securities necessary to adopt this Agreement and for consummation by Merger Partner of the other transactions contemplated by this Agreement. There are no bonds, debentures, notes or other indebtedness of Merger Partner having the right to vote (or convertible into, or exchangeable for, securities having the right to vote) on any matters on which stockholders of Merger Partner may vote.

3.5

Merger Partner Financial Statements; Information Provided .

(a)

Merger Partner has provided to Public Company a true, correct and complete copy of Merger Partner’s audited consolidated balance sheets and statements of income, changes in stockholders’ equity and cash flows of Merger Partner for the fiscal years ended December 31, 2006, 2007 and 2008, and an unaudited interim consolidated balance sheet as of June 30, 2009 and a statement of income of Merger Partner for the three and six months ended June 30, 2008 and 2009 (the “Merger Partner Financial Statements ”). The Merger Partner Financial Statements (i) comply as to form in all material respects with applicable accounting requirements, (ii) were prepared in accordance with United States generally accepted accounting principles (“GAAP ”) applied on a consistent basis throughout the periods covered thereby (except as may be indicated in the notes to such financial statements) and (iii) fairly present in all material respects the consolidated financial position of Merger Partner and its Subsidiaries as of the dates thereof and the consolidated results of its operations and cash flows for the periods indicated, consistent with the books and records of Merger Partner and its Subsidiaries, except that the unaudited interim financial statements are subject to normal and recurring year-end adjustments.

 

 

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3.6

No Undisclosed Liabilities .  Except as reflected or reserved against on the Merger Partner Financial Statements (including the notes thereto), and except for normal and recurring liabilities incurred since the date of the Merger Partner Balance Sheet in the ordinary course of business consistent with past practice (the “Ordinary Course of Business ”), Merger Partner and its Subsidiaries do not have any liabilities (whether known or unknown, whether absolute or contingent, whether liquidated or unliquidated, whether due or to become due, and whether or not required to be reflected in financial statements (including the notes thereto) in accordance with GAAP), that, individually or in the aggregate, are reasonably likely to have a Merger Partner Material Adverse Effect.  For purposes of this Agreement, “Merger Partner Balance Sheet ” means the audited consolidated balance sheet of Merger Partner as of December 31, 2008 (the “Merger Partner Balance Sheet Date ”).

3.7

Absence of Certain Changes or Events .  Since the Merger Partner Balance Sheet Date, Merger Partner and its Subsidiaries have conducted their respective businesses only in the Ordinary Course of Business and, except as disclosed in Section 3.7 of the Merger Partner Disclosure Schedule, since such date there has not been (i) any change, event, circumstance, development or effect that, individually or in the aggregate, has had, or is reasonably likely to have, a Merger Partner Material Adverse Effect or (ii) any other action or event that would have required the consent of Public Company pursuant to Section 5.1 of this Agreement had such action or event occurred after the date of this Agreement.

3.8

Taxes .

(a)

Each of Merger Partner and its Subsidiaries has properly filed on a timely basis all material federal, state, local and foreign returns, estimates, declarations, information returns or statements, claims for refund and reports (collectively, “ Tax Returns”) that it was required to file under applicable laws and regulations, and all such Tax Returns were true, correct and complete in all material respects and were prepared in substantial compliance with all applicable laws and regulations. Each of Merger Partner and its Subsidiaries has paid on a timely basis all federal, state local and foreign taxes, assessments and other governmental charges, duties, impositions and liabilities, whether disputed or not and including any obligation to indemnify or otherwise assume or succeed to Tax liability of another person, including, without limitation, taxes based upon or measured by gross receipts, income, profits, sales, use and occupation, and value added, alternative or add-on minimum, ad valorem, transfer, franchise, license, severance, stamp, windfall profits, environmental (including taxes under Section 59A of the Internal Revenue Code of 1986, as amended (the “ Code”)), customs duties, capital stock, unemployment, disability, withholding, payroll, recapture, employment, excise and property taxes as well as public imposts, fees and social security (or similar) charges, together with all interest, penalties and additions imposed with respect to such amounts (collectively, “ Tax” or “ Taxes”) that were due and payable (whether or not shown on any Tax Return). The unpaid Taxes of Merger Partner and each of its Subsidiaries (i) for Tax periods through the date of the Merger Partner Balance Sheet do not exceed the accruals and reserves for Taxes (excluding accruals and reserves for deferred Taxes established to reflect timing differences between book and Tax income) set forth on the Merger Partner Balance Sheet and (ii) all unpaid Taxes of Merger Partner and each of its Subsidiaries for all Tax periods commencing after the date of the Merger Partner Balance Sheet do not exceed that reserve as adjusted for the passage of time through the Closing Date, arose in the Ordinary Course of Business, and are of a type and

 

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amount commensurate with Taxes attributable to prior similar periods. Neither Merger Partner nor any of its Subsidiaries is or has ever been a member of a group of corporations with which it has filed (or been required to file) consolidated, combined or unitary Tax Returns, other than a group of which the common parent is Merger Partner. Neither Merger Partner nor any of its Subsidiaries (i) has any liability under Treasury Regulations Section 1.1502-6 (or any comparable or similar provision of federal, state, local or non-U.S. law), as a transferee or successor, pursuant to any contractual obligation, or otherwise for any Taxes of any person other than Merger Partner or any of its Subsidiaries, or (ii) is a party to or bound by any Tax indemnity, Tax sharing, Tax allocation or similar agreement. All material Taxes that Merger Partner or any of its Subsidiaries was required by law to withhold or collect have been duly withheld or collected and, to the extent required, have been properly paid to the appropriate Governmental Entity on a timely basis.

(b)

Merger Partner has delivered or made available to Merger Partner (i) complete and correct copies of all Tax Returns of Merger Partner and any of its Subsidiaries relating to Taxes for all taxable periods for which the applicable statute of limitations has not yet expired, and (ii) complete and correct copies of all private letter rulings, revenue agent reports, information document requests, notices of proposed deficiencies, deficiency notices, protests, petitions, closing agreements, settlement agreements, pending ruling requests and any similar documents submitted by, received by, or agreed to by or on behalf of Merger Partner or any of its Subsidiaries relating to Taxes for all Tax periods for which the statute of limitations has not yet expired. No examination, audit or administrative or judicial proceeding involving any Tax Return of Merger Partner or any of its Subsidiaries by any Governmental Entity is currently in progress or, to the knowledge of Merger Partner, threatened or contemplated. Neither Merger Partner nor any of its Subsidiaries has received from any Governmental Entity (including jurisdictions where Merger Partner or its Subsidiaries have not filed Tax Returns) any (i) notice indicating an intent to open an audit or other review, (ii) request for information related to Tax matters, (iii) notice of deficiency or proposed adjustment for any amount of Tax proposed, asserted, or assessed by any Governmental Entity against Merger Partner or any of its Subsidiaries or (iv) claim that Merger Partner or any of its Subsidiaries is or may be subject to taxation although Merger Partner or the applicable Subsidiaries did not file Tax Returns in that jurisdiction. Neither Merger Partner nor any of its Subsidiaries has been informed by any Governmental Entity that the Governmental Entity believes that Merger Partner or any of its Subsidiaries was required to file any Tax Return that was not filed. No director or officer (or employee responsible for Tax matters) of Merger Partner of any of its Subsidiaries expects any Governmental Entity to assess any additional Taxes for any period for which Tax Returns have been or should have been filed. Neither Merger Partner nor any of its Subsidiaries has (i) waived any statute of limitations with respect to Taxes or agreed to extend the period for assessment or collection of any Taxes, (ii) requested any extension of time within which to file any Tax Return, which Tax Return has not yet been filed or (iii) executed or filed any power of attorney with any taxing authority.

(c)

Neither Merger Partner nor any of its Subsidiaries has made any payment, is obligated to make any payment, or is a party to any agreement that could obligate it to make any payment of (i) any “ excess parachute payment” under Section 280G of the Code (or any corresponding provision of state, local, or non-U.S. Tax law), (ii) any amount that will not be fully deductible as a result of Section 162(m) of the Code (or any corresponding provision of

 

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state, local, or non-U.S. Tax law) or (iii) any amount that would be subject to the additional tax imposed by Section 409A of the Code.

(d)

There are no adjustments under Section 481 of the Code (or any similar adjustments under any provision of the Code or corresponding foreign, state or local Tax law) that are required to be taken into account by Merger Partner or any of its Subsidiaries in any period ending after the Closing Date by reason of a change in method of accounting in any Tax period ending on or before the Closing Date or as a result of the consummation of the transactions contemplated by this Agreement.

(e)

Neither Merger Partner nor any of its Subsidiaries 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)(l)(A)(ii) of the Code.

(f)

Neither Merger Partner nor any of its Subsidiaries has distributed to its stockholders or security holders stock or securities of another entity, nor has stock or securities of Merger Partner or any of its Subsidiaries been distributed, in a transaction to which Section 355 of the Code was intended or purported to apply in whole or in part (i) in the two years prior to the date of this Agreement or (ii) in a distribution that could otherwise constitute part of a “ plan” or “ series of related transactions” (within the meaning of Section 355(e) of the Code) that includes the transactions contemplated by this Agreement.

(g)

There are no liens, mortgages, pledges or other encumbrances, charges or security interests with respect to Taxes upon any of the assets or properties of Merger Partner or any of its Subsidiaries, other than with respect to Taxes not yet due and payable or being contested in good faith by appropriate proceedings.

(h)

Neither Merger Partner nor any of its Subsidiaries will be required to include any item of income in, or exclude any item of deduction from, taxable income for any period (or any portion thereof) ending after the Closing Date as a result of any (i) intercompany transaction or any excess loss account described in Treasury Regulations under Section 1502 of the Code (or any corresponding provision of state, local or non-U.S. Tax law), (ii) closing agreement as described in Section 7121 of the Code (or any corresponding or similar provision of state, local or non-U.S. Tax law) executed on or prior to the Closing Date, (iii) installment sale or other open transaction disposition made on or prior to the Closing Date or (iv) prepaid amount received on or prior to the Closing Date.

(i)

Neither Merger Partner nor any of its Subsidiaries has participated in any “ reportable transaction” as defined in Section 6707A(c)(1) of the Code or Section 1.6011-4(b) of the Treasury Regulations or any analogous provision of state, local or non-U.S. law.

3.9

Properties .

(a)

By acts of transfer dated July 15, 2009 and August 10, 2009, Merger Partner distributed the real property set forth in Section 3.9(a)(i) of the Merger Partner Disclosure Schedule to its stockholders, who then contributed such real property to Zinterests, L.L.C., a Louisiana limited liability company owned by the stockholders of Merger Partner (the “Merger Partner Real Property Transfers ”).  After giving effect to the Merger Partner Real

 

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Property Transfers, neither Merger Partner nor any of its subsidiaries own any real property.  Section 3.9(a)(ii) of the Merger Partner Disclosure Schedule sets forth a complete and correct list of all real property leased or subleased by the Merger Partner or any of its Subsidiaries (“Merger Partner Leased Real Property ”).

(b)

All of the leases and subleases to which any Merger Partner Leased Real Property is subject are in full force and effect, and neither the Merger Partner nor any Subsidiary has any notice of any material claim of any sort that has been asserted by anyone adverse to the rights of the Merger Partner or any Subsidiary under any such lease or sublease or affecting or questioning the rights of Merger Partner or any Subsidiary to the continued possession of any Merger Partner Leased Real Property under any such lease or sublease.

(c)

All Merger Partner Leased Real Property and related improvements are supplied with utilities and other services necessary for the operation of the facilities currently operated on the property.

(d)

Merger Partner and its Subsidiaries have good and valid title to, or good and valid leasehold interest in, all of their respective properties and assets.  Except as disclosed in Section 3.9(d) of the Merger Partner Disclosure Schedule, all of the properties and assets of Merger Partner and its Subsidiaries are owned free and clear of all pledges, charges, liens, mortgages, deeds of trust, rights of first offer or first refusal, options, encumbrances and security interests of any kind or nature whatsoever (collectively, “ Liens”).

3.10

Intellectual Property .  Except as disclosed in Section 3.10 to the Merger Partner Disclosure Schedule, Merger Partner and its Subsidiaries exclusively own or possess all necessary licenses on an exclusive basis or other valid rights to use, without any obligation to make fixed or contingent payments, including any royalty payments, all patents, patent rights, trademarks, trademark rights, copyrights and proprietary information used or held for use in connection with their respective businesses as currently being conducted, free and clear of liens, and there are no assertions or claims challenging the validity of any of the foregoing. Except as disclosed in Section 3.10 of the Merger Partner Disclosure Schedule, neither Merger Partner nor any of its Subsidiaries has granted to any other person any license to use any of the foregoing other than in the Ordinary Course of Business. To the knowledge of Merger Partner, the conduct of Merger Partner’s and its Subsidiaries’ respective businesses as currently conducted does not conflict with any patents, patent rights, licenses, service-marks, trademarks, trademark rights, trade names, trade name rights, copyrights or other intellectual property rights of others, except as would not have or reasonably be expected to have a Merger Partner Material Adverse Effect. To Merger Partner’s knowledge, there is no infringement of any proprietary right owned by or licensed by or to Merger Partner or any of its Subsidiaries.

3.11

Agreements, Contracts and Commitments .  

(a)

Section 3.11(a) of the Merger Partner Disclosure Schedule sets forth all contracts and agreements, whether or not reduced to writing, to which Merger Partner, and any of its Subsidiaries is a party and that (i) provide for future payments or delivery of goods or services to or from the Merger Partner or any of its Subsidiaries involving more than $100,000 or (ii) are material to the business, results of operations or condition (financial or otherwise) of

 

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Merger Partner (“Merger Partner Material Contracts ”). Except as set forth in Section 3.11(a) of Merger Partner Disclosure Schedule, neither Merger Partner nor any of its Subsidiaries is in violation of or in default under (nor does there exist any condition which with the passage of time or the giving of notice or both would cause such a violation of or default under) any Merger Partner Material Contract to which it is a party or by which it or any of its properties or assets is bound. Each Merger Partner Material Contract is in full force and effect, and is a legal, valid and binding obligation of Merger Partner or one of its Subsidiaries and, to Merger Partner’s knowledge, each of the other parties thereto, enforceable in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, moratorium or other similar laws relating to creditors’ rights and general principles of equity. No condition exists or event has occurred which (whether with or without notice or lapse of time or both) would constitute a default by Merger Partner or one of its Subsidiaries or, to Merger Partner’s knowledge, any other party thereto under any Merger Partner Material Contract or result in a right of termination of any Merger Partner Material Contract.

(b)

Set forth in Section 3.11(b) of the Merger Partner Disclosure Schedule is, as of the date hereof, (i) a list of all loan or credit agreements, notes, bonds, mortgages, indentures and other agreements and instruments pursuant to which any indebtedness of Merger Partner or its Subsidiaries in an aggregate principal amount in excess of $25,000 is outstanding or may be incurred and (ii) the respective principal amounts outstanding thereunder as of the date hereof. For purposes of this Section 3.11 and Section 4.13, “indebtedness ” means, with respect to any person, without duplication, (A) all obligations of such person for borrowed money, or with respect to deposits or advances of any kind to such person, (B) all obligations of such person evidenced by bonds, debentures, notes or similar instruments, (C) all obligations of such person upon which interest charges are customarily paid, (D) all obligations of such person under conditional sale or other title retention agreements relating to property purchased by such person, (E) all obligations of such person issued or assumed as the deferred purchase price of property or services (excluding obligations of such person or creditors for raw materials, inventory, services and supplies incurred in the ordinary course of business), (F) all capitalized lease obligations of such person, (G) all obligations of others secured by any lien on property or assets owned or acquired by such person, whether or not the obligations secured thereby have been assumed, (H) all obligations of such person under interest rate or currency hedging transactions (valued at the termination value thereof), (I) all letters of credit issued for the account of such person and (J) all guarantees and arrangements having the economic effect of a guarantee by such person of any indebtedness of any other person. Except as set forth in Section 3.11(b) of the Merger Partner Disclosure Schedule, all of the outstanding indebtedness of Merger Partner and each of its Subsidiaries may be prepaid by Merger Partner or its Subsidiary at any time without the consent or approval of, or prior notice to, any other person, and without payment of any premium or penalty.

 

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3.12

Litigation .  There is no action, suit, proceeding, claim, arbitration or investigation before any Governmental Entity or before any arbitrator that is pending or, to the knowledge of Merger Partner, has been threatened in writing against Merger Partner or any of its Subsidiaries that (a) seeks either damages in excess of $50,000 or equitable relief or (b) in any manner challenges or seeks to prevent, enjoin, alter or delay the transactions contemplated by this Agreement. There are no material judgments, orders or decrees outstanding against Merger Partner or any of its Subsidiaries.

3.13

Environmental Matters .

(a)

Section 3.13 of the Merger Partner Disclosure Schedule sets forth a complete and correct list of all real property (i) currently owned, leased or operated by Merger Partner or (ii) formerly owned, leased or operated by Merger Partner. Except as disclosed in Section 3.13 of the Merger Partner Disclosure Schedule:

(i)

Merger Partner and its Subsidiaries have complied with all applicable Environmental Laws;

(ii)

the properties currently owned, leased or operated by Merger Partner and its Subsidiaries (including soils, groundwater, surface water, buildings or other structures) are not contaminated with any Hazardous Substances at levels or in a condition that would violate applicable Environmental Laws;

(iii)

 the properties formerly owned, leased or operated by Merger Partner or any of its Subsidiaries were not, during the period of ownership, use or operation by Merger Partner or any of its Subsidiaries, contaminated with Hazardous Substances at levels or in a condition that would violate applicable Environmental Laws;

(iv)

neither Merger Partner nor any of its Subsidiaries are subject to liability for any Hazardous Substance disposal or contamination on the property of any third party;

(v)

neither Merger Partner nor any of its Subsidiaries have Released any Hazardous Substance into the environment;

(vi)

neither Merger Partner nor any of its Subsidiaries has received any notice, demand, letter, claim or request for information alleging that Merger Partner or any of its Subsidiaries may be in violation of, liable under or have obligations under any Environmental Law;

(vii)

neither Merger Partner nor any of its Subsidiaries is subject to any orders, decrees, injunctions or other arrangements with any Governmental Entity or is subject to any indemnity or other agreement with any third party relating to liability under any Environmental Law or relating to Hazardous Substances;

(viii)

there are no circumstances or conditions involving Merger Partner, any of its Subsidiaries or any of their respective properties that could reasonably

 

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be expected to result in any claims, liability, obligations, investigations, costs or restrictions on the ownership, use or transfer of any property of Merger Partner or any of its Subsidiaries pursuant to any Environmental Law; and

(ix)

the properties currently or formerly owned, leased or operated by Merger Partner or any of its Subsidiaries (including soils, groundwater, surface water, natural resources, buildings or other structures) are not, and were not during the period of ownership, use, lease or operation, respectively, proposed for listing or listed on or in the U.S. EPA’s Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, National Priority List or Comprehensive Environmental Response Compensation Liability Information System or comparable state lists.

(b)

For purposes of this Agreement, the term “ Environmental Law” means any law, regulation, order, decree, permit, authorization, opinion, common law or agency requirement of any jurisdiction relating to: (i) the protection, investigation or restoration of the environment, human health and safety or natural resources, (ii) the handling, use, storage, treatment, presence, disposal, release or threatened release of any Hazardous Substance or (iii) noise, odor, wetlands, pollution, contamination or any injury or threat of injury to persons or property.  Environmental Laws include, but are not limited to, the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended; the Federal Insecticide, Fungicide and Rodenticide Act, as amended; the Resource Conservation and Recovery Act, as amended; the Toxic Substance Control Act, as amended; the Hazardous Material Transportation and Uniform Safety Act; the Clean Air Act, as amended; the Federal Water Pollution Control Act, as amended; the Oil Pollution Act of 1990, as amended; the Fish and Wildlife Coordination Act, as amended; National Historic Preservation Act, as amended; the Endangered Species Act, as amended; the National Environmental Policy Act, as amended; the Wild & Scenic Rivers Act, as amended; the Rivers and Harbors Act of 1899, as amended; the Water Resources Research Act of 1984, as amended; the Occupational Safety and Health Act, as amended; the State Drinking Water Act, as amended; and their state and local counterparts or equivalents.

(c)

For purposes of this Agreement, the term “ Hazardous Substance” means any substance that is: (i) listed, classified, regulated or which falls within the definition of a “hazardous substance,” “ hazardous waste” or “ hazardous material” pursuant to any Environmental Law, (ii) any petroleum product or by-product, asbestos-containing material, lead-containing paint or plumbing, polychlorinated biphenyls, radioactive materials or radon or (iii) any other substance that is the subject of regulatory action by any Governmental Entity pursuant to any Environmental Law.

(d)

For purposes of this Agreement, “ Release” means any depositing, spilling, leaking, pumping, pouring, placing, emitting, discarding, abandoning, emptying, discharging, migrating, injecting, escaping, leaching, dumping or disposing into the air, surface water, ground water or onto the ground, ground surface or onto or into man made structures.

 

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3.14

ERISA Compliance .  

(a)

For purposes of this Agreement:

(i)

“ Benefit Plan” means an employee benefit plan as defined in ERISA Section 3(3).

(ii)

“ ERISA” means the Employee Retirement Income Security Act of 1974, as amended (“ERISA”).

(b)

Schedule 3.14(b) of the Merger Partner Disclosure Schedule sets forth a complete and accurate list of the Benefit Plans of Merger Partner and its Subsidiaries.  Merger Partner has made available to Public Company correct and complete copies of the plan documents and summary plan descriptions, the most recent determination or opinion letter received from the Internal Revenue Service, and all related trust agreements, insurance contracts, and other funding arrangements for each such Benefit Plan.

(c)

Each Benefit Plan that is intended to meet the requirements of a “ qualified plan” under Code §401(a) has received a favorable determination or opinion letter from the Internal Revenue Service, and nothing has occurred since the date of such determination that could reasonably be expected to adversely affect the qualified status of any such Benefit Plan.

(d)

Merger Partner and its Subsidiaries have never contributed to, had any obligation to contribute to, or had any liability with respect to, a multiemployer plan described in Section 3(37) and Section 4001(a)(3) of ERISA, or a plan subject to Title IV of ERISA or Section 412 of the Code.  

(e)

Except as would not have or reasonably be expected to have a Merger Partner Material Adverse Effect:

(i)

To the knowledge of Merger Partner, there is no litigation, disputed claim, governmental proceeding, audit, inquiry or investigation pending or threatened with respect to any such plan, its related assets or trusts, or any fiduciary, administrator or sponsor of such plan;

(ii)

Merger Partner and its Subsidiaries have established and operated the Benefit Plans in compliance with their terms and all applicable Laws; and

(iii)

None of the Benefit Plans promises or provides health, life or other welfare benefits to retirees or former employees, except as provided by Section 4980B of the Code, or comparable state statutes that provide for continuing health care coverage.  

3.15

Labor and Employee Matters .  Section 3.15 of the Merger Partner Disclosure Schedule sets fort h a true and complete list of the names, titles, annual compensation rate (but excluding bonus and commissions) of each employee of Merger Partner and its Subsidiaries. Neither Merger Partner nor any of its Subsidiaries is a party to any collective bargaining agreement or similar contract with any labor union or labor organization and (i) there are no

 

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threats of work stoppage by any employees of Merger Partner or any of its Subsidiaries, (ii) there are no pending grievances or claims by any employees of Merger Partner or any of its Subsidiaries and (iii) there are no labor disputes or proceedings pending or, to the knowledge of Merger Partner, threatened between Merger Partner or any of its Subsidiaries and any of their respective employees, except in the case of clause (ii) of this Section 3.15 for any pending grievances or claims that individually, or in the aggregate, have not had and are not reasonably likely to have, a Merger Partner Material Adverse Effect.

3.16

Compliance with Laws .  Merger Partner and each of its Subsidiaries has complied in all material respects with, is not in material violation of, and has not received any written notice alleging any material violation with respect to, any applicable provisions of any statute, law or regulation with respect to the conduct of its business, or the ownership or operation of its properties or assets.

3.17

Licenses and Permits .  Merger Partner and each Subsidiary possess and are in compliance with such permits, licenses, certificates, approvals, consents and other authorizations (collectively, “Governmental Licenses ”) issued by appropriate federal, state, local or foreign regulatory bodies necessary for the ownership of their respective assets and to conduct the business now operated by them, except where the failure to have obtained the same or be in compliance would not cause a Merger Partner Material Adverse Effect. Neither Merger Partner nor any Subsidiary has received any notice of proceedings relating to the revocation or modification of any such Governmental Licenses which, singly or in the aggregate, if the subject of an unfavorable decision, ruling or finding would result in a Merger Partner Material Adverse Effect.

3.18

Insurance .  Section 3.18 of the Merger Partner Disclosure Schedule sets forth a complete and accurate list of all insurance policies maintained by Merger Partner or any of its Subsidiaries (the “Merger Partner Insurance Policies ”). Each Merger Partner Insurance Policy is in full force and effect as of the date of this Agreement. As of the date of this Agreement, there is no material claim by Merger Partner or any of its Subsidiaries pending under any Merger Partner Insurance Policy as to which coverage has been questioned, denied or disputed by the underwriters of such policy.  All premiums due and payable under all such Merger Partner Insurance Policies have been paid, and Merger Partner and its Subsidiaries are in material compliance with the terms of such policies.

3.19

Related Party Transactions .

(a)

Section 3.19(a) of the Merger Partner Disclosure Schedule set forth a true and correct list of each transaction since December 31, 2005 involving or for the benefit of Merger Partner or its Subsidiaries, on the one hand, and any director or executive officer of Merger Partner or any of its Subsidiaries or an Affiliate or relative of any such director or executive officer, on the other hand, including without limitation, (i) any debtor or creditor relationship, (ii) any transfer or lease of real or personal property, (iii) wages, salaries, commissions, bonuses and agreements relating to employment and (iv) purchases or sales of products or services.

 

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(b)

Section 3.19(b) of the Merger Partner Disclosure Schedule sets forth a true and correct list of (i) all agreements and claims of any nature that any executive officer or director of the Merger Partner or any of its Subsidiaries or an Affiliate or relative of any such director or executive officer has with or against Merger Partner or any of its Subsidiaries as of the date hereof and (ii) all agreements and claims of any nature that Merger Partner or any of its Subsidiaries has with or against any director or executive officer of Merger Partner or any of its Subsidiaries or an Affiliate or relative of any such director or executive officer as of the date hereof.

3.20

Brokers; Fees and Expenses .  No agent, broker, investment banker, financial advisor or other firm or person is or shall be entitled, as a result of any action, agreement or commitment of Merger Partner or any of its Affiliates, to any broker’s, finder’s, financial advisor’s or other similar fee or commission in connection with any of the transactions contemplated by this Agreement.

3.21

Books and Records .  The minute books and other similar records of Merger Partner and each of its Subsidiaries contain complete and accurate records of all actions taken at any meetings of Merger Partner’s or such Subsidiary’s stockholders, Board of Directors or any committee thereof and of all written consents executed in lieu of the holding of any such meeting. The books and records of Merger Partner and each of its Subsidiaries accurately reflect in all material respects the assets, liabilities, business, financial condition and results of operations of Merger Partner or such Subsidiary and have been maintained in accordance with good business and bookkeeping practices.

3.22

Disclosure .  No representation or warranty made by Merger Partner in this Agreement, including the Schedules and Exhibits hereto, contains any misstatement of a material fact or omits to state a material fact necessary to make any of them, in light of the circumstances, not misleading.

ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF PUBLIC COMPANY AND THE TRANSITORY SUBSIDIARY

Public Company and the Transitory Subsidiary represent and warrant to Merger Partner that the statements contained in this Article IV are true and correct, except as expressly set forth herein or in the disclosure schedule delivered by Public Company and the Transitory Subsidiary to Merger Partner on the date of this Agreement (the “Public Company Disclosure Schedule ”). The Public Company Disclosure Schedule shall be arranged in sections corresponding to the numbered and lettered sections contained in this Article IV and the disclosure in any section shall qualify (1) the corresponding section in this Article IV and (2) the other sections in this Article IV only to the extent that it is reasonably apparent from a reading of such disclosure that it also qualifies or applies to such other sections. For purposes hereof, “to the knowledge of Public Company” and similar expressions mean the knowledge of the persons identified on the Public Company Disclosure Schedule for this purpose, as well as any other knowledge which such persons would have possessed had they made reasonable inquiry with respect to the matter in question.

 

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4.1

Organization, Standing and Power .

(a)

Each of Public Company and the Transitory Subsidiary is a corporation or limited liability company (as applicable) duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation or formation (as applicable), has all requisite corporate power and authority to own, lease and operate its properties and assets and to carry on its business as currently conducted and as currently proposed to be conducted, and is duly qualified to do business and is in good standing as a foreign corporation or limited liability company (as applicable) in each jurisdiction listed on Section 4.1 of the Public Company Disclosure Schedule, which jurisdictions constitute the only jurisdictions in which the character of the properties it owns, operates or leases or the nature of its activities makes such qualification necessary, except for such failures to be so organized, qualified or in good standing, individually or in the aggregate, that have not had, and are not reasonably likely to have, a Public Company Material Adverse Effect.

(b)

For purposes of this Agreement, the term “Public Company Material Adverse Effect ” means any material adverse change, event, circumstance or development with respect to, or material adverse effect on, (i) the business, assets, liabilities, condition (financial or other), or results of operations of Public Company and its Subsidiaries, taken as a whole or (ii) the ability of Public Company and its Subsidiaries to consummate the transactions contemplated by this Agreement; provided, however, that the following shall not be deemed to be a Public Company Material Adverse Effect: any change or event caused by or resulting from (A) changes in prevailing economic or market conditions in the United States or any other jurisdiction in which Public Company has substantial business operations, (B) changes or events, after the date hereof, affecting the industries in which they operate generally, (C) changes, after the date hereof, in generally accepted accounting principles or requirements applicable to Public Company and its Subsidiaries, (D) changes, after the date hereof, in laws, rules or regulations of general applicability or interpretations thereof by any Governmental Entity, (E) the execution, delivery and performance of this Agreement or the consummation of the transactions contemplated hereby or thereby or the announcement thereof or (F) any outbreak of major hostilities in which the United States is involved or any act of terrorism within the United States or directed against its facilities or citizens wherever located; except in the case of clauses (A), (B), (C) and (D), to the extent those changes have a materially disproportionate effect on Public Company and its Subsidiaries compared to other similarly situated participants in the industries or markets in which Public Company and its Subsidiaries operate. For the avoidance of doubt, the parties agree that the terms “material,” “materially” and “materiality” as used in this Agreement with an initial lower case “m” shall have their respective customary and ordinary meanings, without regard to the meanings ascribed to Public Company Material Adverse Effect in the prior sentence of this paragraph or Merger Partner Material Adverse Effect in Section 3.1.  

(c)

Public Company and Transitory Subsidiary have provided or made available to Merger Partner complete and accurate copies of their Articles of Incorporation and Bylaws or Articles of Organization and Operating Agreement (as applicable) and neither Public Company nor Transitory Subsidiary is in default or in violation of any such document.

 

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4.2

Capitalization .

(a)

The authorized capital stock of Public Company consists of 90,000,000 shares of Public Company Common Stock, $.01 par value per share and 10,000,000 shares of preferred stock of Public Company, $.01 par value per share (“ Public Company Preferred Stock”), 1,000,000 of which are designated as Series B Junior Participating Stock. As of the date of this Agreement 7,317,163 shares of Public Company Common Stock were issued and outstanding and no shares of Public Company Preferred Stock were issued and outstanding. No shares of Public Company Common Stock or Public Company Preferred Stock were held in the treasury of Public Company or by Subsidiaries of Public Company.

(b)

None of the outstanding shares of Public Company Common Stock constitute restricted stock or are otherwise subject to a repurchase or redemption right or right of first refusal in favor of Public Company.

(c)

Section 4.2(c) of the Public Company Disclosure Schedule sets forth a complete and accurate list, as of the date of this Agreement, of (i) all plans under which outstanding options to purchase shares of Public Company Common Stock (“Public Company Stock Options ”) were granted (collectively, “Public Company Stock Plans ”), indicating for each Public Company Stock Plan, as of the date of this Agreement, the number of shares of Public Company Common Stock subject to outstanding options under such Plan and the number of shares of Public Company Common Stock reserved for future issuance under such Plan and (ii) all outstanding Public Company Stock Options, indicating with respect to each such Public Company Stock Option the Public Company Stock Plan under which it was granted, the grantee, grant date, expiration date, number of shares of Public Company Common Stock subject to such Public Company Stock Option, the exercise price and vesting schedule. Public Company has provided or made available to Merger Partner complete and accurate copies of all Public Company Stock Plans and the forms of all stock option agreements evidencing Public Company Stock Options.

(d)

Except as set forth in this Section 4.2 or in Article II, (i) there are no equity securities of any class of Public Company, or any security exchangeable into or exercisable for such equity securities, issued, reserved for issuance or outstanding and (ii) there are no options, warrants, equity securities, calls, rights, commitments or agreements of any character to which Public Company or any of its Subsidiaries is a party or by which Public Company or any of its Subsidiaries is bound obligating Public Company or any of its Subsidiaries to issue, exchange, transfer, deliver or sell, or cause to be issued, exchanged, transferred, delivered or sold, additional shares of capital stock or other equity interests of Public Company or any of its Subsidiaries or any security or rights convertible into or exchangeable or exercisable for any such shares or other equity interests, or obligating Public Company or any of its Subsidiaries to grant, extend, accelerate the vesting of, otherwise modify or amend or enter into any such option, warrant, equity security, call, right, commitment or agreement. Public Company does not have any outstanding stock appreciation rights, phantom stock, performance based rights or similar rights or obligations.  Except with respect to the Public Company Stockholder Agreements, neither Public Company nor any of its Affiliates is a party to or is bound by any, and to the knowledge of Public Company, there are no, agreements or understandings with respect to the voting (including voting trusts and proxies) or sale or transfer

 

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(including agreements imposing transfer restrictions) of any shares of capital stock or other equity interests of Public Company. Stockholders of Public Company are not entitled to dissenters’ or appraisal rights under applicable state law in connection with the Merger.  Except as described in this Section 4.2(d), there is no