EXHIBIT 99.1
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AGREEMENT AND PLAN OF MERGER
AMONG
PACTIV CORPORATION,
MEADOW ACQUISITION CORP.,
PRAIRIE PACKAGING, INC.
===============================================================================
AND
EARL W. SHAPIRO AND BENJAMIN M. SHAPIRO
AS REPRESENTATIVES OF THE COMPANY STOCKHOLDERS
APRIL 10, 2007
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ARTICLE I
DEFINITIONS.................................................................................1
1.1
Definitions.........................................................................................1
1.2
Interpretation.....................................................................................10
ARTICLE II
THE
MERGER.................................................................................10
2.1
The
Merger.........................................................................................10
2.2
Effective
Time.....................................................................................10
2.3
Effect of
the
Merger...............................................................................11
2.4
Certificate of Incorporation;
Bylaws...............................................................11
2.5
Directors
and
Officers.............................................................................11
ARTICLE III
MERGER CONSIDERATION; CONVERSION OF SECURITIES; EXCHANGE OF
CERTIFICATES...................11
3.1
Calculation and Payment of the Merger
Consideration................................................11
3.2
Effect of
Merger on the Capital Stock of the
Company...............................................14
3.3
Post-Closing
Adjustment............................................................................16
3.4
Lost,
Stolen and Destroyed
Certificates............................................................17
3.5
Effect of
Merger on Capital Stock of Surviving
Corporation.........................................17
3.6
Appraisal
Rights...................................................................................18
3.7
Withholding
Rights.................................................................................18
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE
COMPANY..............................................19
4.1
Organization, Qualification, Power and
Authority...................................................19
4.2
Authorization;
Enforceability......................................................................19
4.3
Capitalization.....................................................................................19
4.4
Noncontravention...................................................................................20
4.5
Brokers'
Fees......................................................................................20
4.6
Financial
Statements...............................................................................20
4.7
Internal
Controls; Undisclosed
Liabilities.........................................................20
4.8
Events
Subsequent to Most Recent Financial
Statements..............................................21
4.9
Legal
Compliance...................................................................................22
4.10
Tax
Matters........................................................................................22
4.11
Real
Property......................................................................................23
4.12
Personal
Property..................................................................................23
4.13 Intellectual
Property..............................................................................23
4.14
Contracts..........................................................................................24
4.15
Litigation.........................................................................................25
4.16
Employee
Benefits..................................................................................26
4.17
Environmental
Matters..............................................................................26
4.18
Indebtedness.......................................................................................27
4.19
Bank
Accounts; Directors and
Officers..............................................................27
4.20
Licenses and
Permits...............................................................................27
4.21
Labor
Matters......................................................................................27
4.22
Insurance
Policies.................................................................................27
4.23
Customers and
Suppliers............................................................................28
4.24
Title and Sufficiency of
Assets....................................................................28
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ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER
SUB....................................28
5.1
Organization of Parent and Merger
Sub..............................................................28
5.2
Ownership
of Merger Sub; No Prior
Activities.......................................................28
5.3
Authorization;
Enforceability......................................................................28
5.4
Noncontravention...................................................................................29
5.5
Brokers'
Fees......................................................................................29
5.6
Litigation.........................................................................................29
5.7
Financing..........................................................................................29
5.8
Investment
Representation..........................................................................29
ARTICLE VI
PRE-CLOSING COVENANTS OF THE
COMPANY.......................................................30
6.1
Conduct of
Business................................................................................30
6.2
Filings;
Consents;
Etc.............................................................................31
6.3
Exclusivity........................................................................................32
6.4
Publicity..........................................................................................32
6.5
Access.............................................................................................33
6.6
Financial
Statements...............................................................................33
6.7
Environmental
Matters..............................................................................33
6.8
Lease
Obligations; UCC
Filings.....................................................................33
6.9
Deferred
Compensation
Plan.........................................................................33
ARTICLE VII
COVENANTS OF
PARENT........................................................................34
7.1
Filings;
Consents;
Etc.............................................................................34
7.2
Publicity..........................................................................................34
7.3
IRB Letter
of
Credit...............................................................................35
ARTICLE VIII
CONDITIONS PRECEDENT TO THE
CLOSING........................................................35
8.1
Conditions
Precedent to Each Party's
Obligations...................................................35
8.2
Conditions
Precedent to Obligations of Parent and Merger
Sub.......................................35
8.3
Conditions
Precedent to Obligations of the
Company.................................................36
ARTICLE IX
CLOSING....................................................................................37
9.1
Deliveries
by the
Company..........................................................................37
9.2
Deliveries
by Parent and Merger
Sub................................................................38
ARTICLE X
POST CLOSING
COVENANTS.....................................................................38
10.1
Tax
Covenants......................................................................................38
10.2
Section 338(h)(10)
Election........................................................................41
10.3
Further
Assurances.................................................................................42
10.4
Director and Officer Liability and
Indemnification.................................................42
10.5
Employee
Matters...................................................................................43
10.6
Litigation
Support.................................................................................44
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ARTICLE XI
INDEMNIFICATION............................................................................44
11.1
Survival of the Company's Representations and
Warranties...........................................44
11.2
Survival of Parent's and Merger Subs' Representations and
Warranties...............................44
11.3
Indemnification by the Company Stockholders Relating to the
Company................................44
11.4
Indemnification by
Parent..........................................................................45
11.5
Indemnification Procedure for Third Party
Claims...................................................46
11.6
Calculation of
Losses..............................................................................47
11.7
Limitation on
Indemnities..........................................................................48
11.8
Escrow.............................................................................................49
11.9
Exclusion of Other
Remedies........................................................................49
11.10
Environmental
Matters..............................................................................49
ARTICLE XII
TERMINATION................................................................................50
12.1
Termination of
Agreement...........................................................................50
12.2
Effect of
Termination..............................................................................51
ARTICLE XIII
MISCELLANEOUS..............................................................................51
13.1
Expenses...........................................................................................51
13.2
No
Third-Party
Beneficiaries.......................................................................51
13.3
Entire
Agreement...................................................................................51
13.4
Succession and
Assignment..........................................................................52
13.5
Counterparts.......................................................................................52
13.6
Headings...........................................................................................52
13.7
Notices............................................................................................52
13.8
Governing
Law......................................................................................53
13.9
Arbitration........................................................................................54
13.10
Amendments and
Waivers.............................................................................54
13.11
Severability.......................................................................................54
13.12
Construction.......................................................................................54
13.13
Acknowledgements by Parent and Merger
Sub..........................................................54
13.14
Incorporation of Exhibits and
Schedules............................................................55
13.15
Specific
Performance...............................................................................55
13.16
Company Stockholder
Representatives................................................................55
13.17
Representation.....................................................................................55
Exhibit A.........Form of Representative Agreement
Exhibit B.........Form of Escrow Agreement
Exhibit C.........Form of Closing Note
Exhibit D.........Form of Non-Competition Agreement
Exhibit 1.1.......Illustrative Calculation of Closing Working
Capital
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AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER (this "AGREEMENT") is made
and entered
into as of April
10, 2007 by and among Pactiv Corporation, a
Delaware
corporation
("PARENT"),
Meadow
Acquisition Corp.,
a Delaware
corporation and a
wholly-owned
subsidiary of Parent
("MERGER SUB"),
Prairie
Packaging, Inc., a Delaware corporation (the "COMPANY"), and Earl
W. Shapiro and
Benjamin M. Shapiro (each individually, a "REPRESENTATIVE" and
collectively, the
"REPRESENTATIVES"), on behalf of the Company Stockholders.
RECITALS
WHEREAS, the Board of Directors of each of Parent, Merger Sub
and the Company has
approved and declared
advisable the merger of Merger Sub
with and into the Company (the "MERGER"), pursuant to which the Company
shall
continue as the
surviving corporation and as a wholly-owned subsidiary of
Parent, upon the terms
and subject to the
conditions of this
Agreement and in
accordance with the
General Corporation Law of the State of Delaware (the
"DGCL");
WHEREAS, the Board of
Directors of each of Parent and the
Company has determined
that the Merger is in furtherance of and consistent with
their respective
business strategies and is in the best interest of their
respective
stockholders, and
Parent has approved this Agreement and the Merger
as the sole
stockholder of
Merger Sub, and the Company has received the
Requisite Stockholder Approval;
WHEREAS, pursuant to
the Merger, among
other things, all
of
the issued and
outstanding
shares of capital
stock of the
Company shall be
converted into the
right to receive the
Merger Consideration (as hereafter
defined) as provided herein;
WHEREAS, as a
condition to, and in connection with the
execution of this Agreement, certain of the Company
Stockholders
have entered
into a Stockholders'
Representative Agreement (the "REPRESENTATIVE AGREEMENT"),
with the Representatives in the form attached hereto as EXHIBIT A;
and
WHEREAS, the parties
to this Agreement desire to make certain
representations,
warranties, covenants
and other agreements in connection with
the Merger.
NOW, THEREFORE,
in consideration of the foregoing and the
respective
representations,
warranties, covenants
and agreements set forth in
this Agreement,
and other good and
valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto,
intending to be
legally bound hereby, agree as follows:
ARTICLE I
DEFINITIONS
1.1
DEFINITIONS. As
used herein, the following terms
shall have the meanings ascribed to them in this SECTION 1.1
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"1995 BONDS"
means those certain Industrial Development
Revenue Bonds, Series 1995 (Prairie Project) issued by the Illinois
Development
Finance Authority on December 14, 1995 in an original aggregate
principal amount
equal to $5,000,000.
"1995 BONDS AMOUNT" means the aggregate amount of outstanding
Indebtedness of the
Acquired Companies relating to the 1995 Bonds as of the
Closing Date.
"ACCOUNTING
ARBITRATOR" has the
meaning set forth in SECTION
3.4(B) below.
"ACQUIRED COMPANIES" means, collectively, the Company and each
of the Prairie Subsidiaries.
"AFFILIATE" has the
meaning set forth in Rule 12b-2 of the
regulations promulgated under the Exchange Act.
"AGREEMENT" has the
meaning set forth in the introductory
paragraph above.
"AUDITED FINANCIAL
STATEMENTS"
has the meaning set
forth in
SECTION 4.6 below.
"BEST EFFORTS"
means the good faith
efforts that a prudent
business Person
desirous
of achieving a result would use in similar
circumstances to
ensure that such result is achieved as expeditiously as
possible; PROVIDED,
HOWEVER, such efforts shall not require or include the
payment of money by such Person to ensure any such result.
"BOLINGBROOK FACILITY"
has the meaning set forth in SECTION
6.7 below.
"BUSINESS" means the business of manufacturing, marketing and
selling certain disposable plastic products and packaging materials
as conducted
by the Acquired Companies.
"BUSINESS DAY" means
any day other than a Saturday or Sunday,
or a day on which
banking institutions in New York, New York or Chicago,
Illinois are authorized or obligated by Law to close.
"CAP AMOUNT"
has the meaning set forth in SECTION 11.7(C)
below.
"CASH ON HAND" means
all cash and cash equivalents of the
Acquired Companies, as of the close of business on the day
immediately preceding
the Closing Date,
determined
in accordance with GAAP. For the avoidance of
doubt, Cash on Hand
shall be calculated net of issued but uncleared checks and
drafts and shall include checks, ACH transactions and other wire
transfers and
drafts deposited
or available for deposit for the account of the Acquired
Companies.
"CERTIFICATE OF
MERGER" has the
meaning set forth in SECTION
2.2 below.
"CERTIFICATES" has the
meaning set forth in SECTION 3.2(D)
below.
"CLAUSE (IV)
PAYMENT" has the meaning set forth in SECTION
3.1(A)(IV) below.
"CLOSING" has the meaning set forth in SECTION 2.2 below.
"CLOSING DATE" has the meaning set forth in SECTION 2.2 below.
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"CLOSING NOTE" has the
meaning set forth in SECTION 3.1(C)
below.
"CLOSING STATEMENT"
has the meaning set forth in SECTION
3.3(A) below.
"CLOSING WORKING
CAPITAL" shall mean as of the close of
business on the
Closing Date (but without giving effect to any changes,
including, without limitation, any purchase accounting adjustments,
which arise
solely as a result of the Merger), the total current assets of the Acquired
Companies minus the total current liabilities of the Acquired
Companies. For the
avoidance of doubt,
Closing Working
Capital for the
purposes of
determining
"Estimated Closing
Working Capital" and "Closing Working Capital" shall be
calculated (i) in accordance with GAAP, and (ii) in the same
manner, using the
same accounting
principles, methods,
practices and
categories as were used by
the Acquired Companies
in determining
the Acquired
Company's total current
assets and total
current liabilities in the Audited Financial Statements;
PROVIDED, HOWEVER,
cash and cash equivalents included in the definition of Cash
on Hand and any amounts relating to the 1995 Bonds, Senior Bank Debt, Senior
Notes, amounts constituting Company Stockholder Transaction
Expenses relating to
payments under
the Deferred Compensation Plan and the capital leases and
operating leases
identified
on SCHEDULE
1.1(B) shall be excluded from any
calculation of Closing Working Capital, any Transfer Taxes, any Taxes
resulting
from the Section 338(h)(10) Election and any North Carolina
Composite Income Tax
shall be treated as accruing after the Closing Date and shall
be excluded from
the computation of the Closing Working Capital. An illustrative calculation of
the Closing Working
Capital as of December
31, 2006 and
February 28, 2007
is
shown on EXHIBIT 1.1.
"CODE" means the Internal Revenue Code of 1986.
"COMMON PER SHARE MERGER CONSIDERATION" means an amount
equal
to the quotient
of (x) (i) the Merger
Consideration
DIVIDED BY (y) the
total
number of Common Shares outstanding.
"COMMON SHARE"
means each
share of Common Stock that is
issued and outstanding
immediately
prior to the Effective
Time.
"COMMON STOCK" means,
collectively,
the Voting Common
Stock
and Non-Voting Common Stock.
"COMPANY" has
the meaning set forth in the introductory
paragraph above.
"COMPANY STOCKHOLDER
INDEMNIFIED
PARTY" has the meaning
set
forth in SECTION 11.4 below.
"COMPANY STOCKHOLDER
TRANSACTION EXPENSES" means the fees and
expenses payable
by the Company Stockholders (and the Acquired Companies)
arising from, incurred
in connection with or incident to this Agreement and the
transactions
contemplated hereby
specified on SCHEDULE
3.1(F) as delivered to
Parent in accordance with the provisions of SECTION 3.1(F) and
SECTION 13.1.
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"COMPANY STOCKHOLDERS"
means the holders of
all issued and
outstanding Common
Shares at or prior to the Effective Time.
"COMPANY'S KNOWLEDGE"
means the actual knowledge of the
individuals listed on SCHEDULE 1.1(A).
"CONFIDENTIALITY AGREEMENT" means that certain Confidentiality
Agreement dated
January 25,
2007 by and
between the Company and Parent,
as
amended and supplemented after the date thereof.
"CONTRACT" has the meaning set forth in SECTION 4.14 below.
"COVERED EMPLOYEES"
has the meaning set forth in SECTION
10.5(A) below.
"CPR" has the meaning set forth in SECTION 13.9 below.
"CUSTOMER CORRESPONDENCE" has the meaning set forth in SECTION
4.23 below.
"DEFENSE NOTICE" has
the meaning
set forth in SECTION
11.5
below.
"DEFERRED COMPENSATION
PLAN" has the meaning set forth in
SECTION 6.9 below.
"DGCL" has the meaning set forth in the Recitals above.
"DISSENTING SHARES"
has the meaning set
forth in SECTION 3.6
below.
"DISSENTING STOCKHOLDERS" has the meaning set forth in SECTION
3.6 below.
"EFFECTIVE TIME" has
the meaning
set forth in
SECTION 2.2
below.
"EMPLOYEE BENEFIT
PLAN" means any "employee benefit plan" (as
such term is defined in ERISA ss.3(3)) and any other material
employee benefit
plan, program or
arrangement
that provides
benefits or
compensation
to any
employee of any
Acquired Company and
that is maintained
or sponsored by any
Acquired Company.
"EMPLOYEE PENSION
BENEFIT PLAN" has the
meaning set forth in
ERISA ss.3(2).
"EMPLOYEE WELFARE
BENEFIT PLAN" has the
meaning set forth in
ERISA ss.3(1).
"ENVIRONMENTAL CLAIMS"
has the meaning set forth in SECTION
4.17(B) below.
"ENVIRONMENTAL
PERMITS" has the
meaning set forth in SECTION
4.17(C) below.
"ENVIRONMENTAL
REQUIREMENTS"
means all applicable Laws
concerning pollution
or protection of human health or the environment, as such
requirements are enacted and in effect on or prior to the Closing
Date.
"ERISA" means the Employee Retirement Income Security Act of
1974.
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"ERISA AFFILIATE"
means each entity that is treated as a
single employer with the Company for purposes of Code Section
414.
"ESCROW AGENT" has the meaning set forth in SECTION 3.1(C)(I)
below.
"ESCROW AGREEMENT"
has the meaning set forth in SECTION
3.1(C)(I) below.
"ESCROW AMOUNT" means an amount equal to the Cap Amount.
"ESCROW FUNDS" has the meaning set forth in SECTION 3.1(C)(I)
below.
"ESTIMATED CLAUSE (IV)
PAYMENT" has the
meaning set forth in
SECTION 3.1(B) below.
"ESTIMATED CLOSING
WORKING CAPITAL" has the meaning set forth
in SECTION 3.1(B) below.
"EXCHANGE ACT" means the Securities Exchange Act of 1934.
"FINANCIAL STATEMENTS"
has the meaning set forth in SECTION
4.6 below.
"GAAP" means
United States generally accepted accounting
principles as in effect from time to time.
"GOVERNMENTAL AUTHORITY" means any governmental, regulatory or
administrative body, agency or authority, any court or judicial authority,
any
arbitrator or any other public authority, whether foreign, federal, state or
local.
"HAZARDOUS MATERIAL"
means any substance which is (i) defined
as a hazardous
substance, hazardous
material, hazardous waste, pollutant or
contaminant under any Environmental Requirement, (ii) a petroleum hydrocarbon,
including crude
oil or any fraction thereof, (iii) asbestos or asbestos
containing
material, or
(iv) regulated pursuant to any Environmental
Requirement.
"HSR ACT" means the Hart-Scott-Rodino Antitrust Improvements
Act of 1976.
"HSR REQUEST" has the meaning set forth in SECTION 12.1 below.
"ILLINOIS PERSONAL
PROPERTY REPLACEMENT
TAXES" means
those
Income Taxes imposed under Section 201(c) of the Illinois Income
Tax Act.
"IMPLIED PURCHASE
PRICE" for an operating lease identified on
SCHEDULE 1.1(B) shall mean an amount equal to (i) the aggregate
amount of unpaid
lease payments
on such lease until scheduled termination, MINUS (ii) the
aggregate imputed
interest charge
contained in such lease payments (as derived
from the original
purchase price quoted on the leased assets) PLUS (iii)
twenty-two percent
(22%) of the original
purchase price quoted on the leased
assets.
"INCOME TAXES" means any Taxes imposed on, or measured by, net
income and any Taxes in the form of interest or penalties related
thereto.
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"INDEBTEDNESS" means any liability, whether or not contingent,
(i) in respect of borrowed money or evidenced by bonds, monies,
debentures,
or
similar instruments,
(ii) representing the deferred and
unpaid balance of the
purchase price of any property (including pursuant to capital leases listed
on
SCHEDULE 1.1(B)) but
excluding trade payables, if and to the extent any of
the
foregoing indebtedness would appear as a liability upon a balance
sheet prepared
on a consolidated basis in accordance with GAAP, and (iii)
guaranties, direct or
indirect, in any manner, of all or any part of any Indebtedness of
any Person.
"INDEMNIFIED PARTY"
has the meaning set forth in SECTION 11.5
below.
"INDEMNIFYING PARTY" has the meaning set forth in SECTION 11.5
below.
"INSURANCE POLICIES" has the meaning set forth in SECTION 4.22
below.
"INTELLECTUAL
PROPERTY" means,
on a worldwide basis, all
patents,
trademarks,
tradenames and
service marks, copyrights, and any
application therefor, along with all confidential business
information including
inventions, know
how, trade secrets, manufacturing processes, formulae,
technical information, specifications, data, technology, plans and
drawings, and
other intellectual property owned, or used by any of the Acquired
Companies.
"LAW" means any law, statute, regulation, rule, ordinance or
other binding action or requirement of a Governmental
Authority.
"LEASED REAL
PROPERTY" means the real property leased or
subleased to the Acquired Companies and used in the Business.
"LEASES" means
all leases and subleases, including all
amendments,
extensions, renewals
and guaranties
or side letters with
respect
thereto, pursuant to
which any of the Acquired Companies holds any Leased
Real
Property.
"LIEN" means any mortgage, pledge, lien, encumbrance, charge,
or other security interest.
"LOSS" or "LOSSES" has
the meaning set forth in SECTION 11.3
below.
"MATERIAL ADVERSE
EFFECT" or "MATERIAL
ADVERSE CHANGE" means
any effect or change that would be materially adverse to the assets,
financial
condition or results of operations of the Acquired Companies taken as a whole;
PROVIDED that none of the following shall be deemed to constitute,
and none of
the following shall be taken into account in determining whether
there has been,
a Material Adverse
Effect or Material
Adverse Change: (a)
any adverse change,
event, development or effect arising from or relating to (1)
general business or
economic conditions,
including such
conditions related to
the Business of the
Acquired Companies (provided such change, event, development or effect does not
disproportionately affect the Acquired Companies vis-a-vis other
Persons engaged
in the same industry as the Acquired Companies), (2) national or international
political or social conditions, including the engagement by the
United States in
hostilities, whether
or not pursuant to the declaration of a national emergency
or war, or the
occurrence of any
military or terrorist
attack upon the United
States, or any of its
territories,
possessions,
or diplomatic or consular
offices or upon any military installation, equipment or personnel of the
United
States, (3) financial,
banking, or securities markets (including any disruption
thereof and any decline in the price of any security or any market
index), (4)
changes in GAAP, (5) changes in Law or other binding directives or
orders issued
by any Governmental
Authority,
or (6) the
announcement or performance of this
Agreement or the
transactions
contemplated by this
Agreement,
including any
reaction of customers of the Acquired Companies; and (b) any adverse change in
or effect on the
Business of the Acquired Companies that is cured to Parent's
reasonable
satisfaction before
the earlier of (1) the Closing Date and (2) the
date on which this Agreement is terminated pursuant to SECTION 12.1
hereof.
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"MATERIAL CONTRACT"
has the meaning set forth in SECTION 4.14
below.
"MERGER" has the meaning set forth in the Recitals above.
"MERGER CONSIDERATION"
has the meaning set forth in SECTION
3.1(A) below.
"MERGER SUB" has the
meaning set forth in the introductory
paragraph above.
"MINOR CLAIM" has the
meaning set forth in SECTION 11.7(A)
below.
"MOST RECENT FINANCIAL
STATEMENTS" has the
meaning set forth
in SECTION 4.6 below.
"MULTIEMPLOYER PLAN"
has the meaning set forth in ERISA
ss.3(37).
"NON-VOTING COMMON
STOCK" means the non-voting common stock,
par value $0.01 per share of the Company.
"NORTH CAROLINA COMPOSITE INCOME TAX" means the Tax payable by
the Company with respect to Income Taxes payable by the Company
Stockholders in
the State of North Carolina as a result of owning shares of capital
stock of the
Company at any time during the period beginning on January 1, 2007
and ending on
the Closing Date,
including North
Carolina Income Taxes imposed as a result of
the Section 338(h)(10) Election.
"ORDINARY
COURSE OF BUSINESS"
means the Ordinary Course of
Business consistent
with past custom and
practice (including
with respect to
quantity and frequency).
"ORGANIZATIONAL
DOCUMENTS" means
(a) the certificate of
incorporation; (b)
articles of incorporation; (c) articles of organization; (d)
any charter
or similar document adopted or filed in connection with the
creation, formation or organization of a Person; and (e) any
amendment to any of
the foregoing.
"PARENT" has
the meaning set forth in the introductory
paragraph above.
"PARENT INDEMNIFIED
PARTY" has the meaning set forth in
SECTION 11.3 below.
"PARENT PLAN" has the
meaning set forth in SECTION 10.5(B)
below.
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"PARENT SHARING
AMOUNT" has the
meaning set forth in SECTION
11.10(B) below.
"PARTY" or "PARTIES" means the Company, the Representatives,
Merger Sub and Parent.
"PAYMENT FUND" has the
meaning set forth in SECTION 3.1(C)
below.
"PERMITTED LIENS" means (a) Liens for Taxes not yet delinquent
or that are
being contested by appropriate proceedings and for which an
appropriate reserve or
accrual is
reflected on the Closing Statement, (b)
statutory Liens of
landlords for amounts not yet delinquent, (c) Liens of
carriers,
warehousemen,
mechanics and
materialmen
incurred in the
Ordinary
Course of Business for
amounts not yet delinquent, (d) Liens attaching to
inventory held by
consignees in the
Ordinary Course of
Business, (e)
zoning,
building codes and
other land use Laws
that are imposed
by any Governmental
Authority having
jurisdiction
over such Real
Property, (f) Liens granted or
created by the
Company in favor of
lessors in connection with the lease of
personal property or equipment in the Ordinary Course of Business,
and (g) Liens
created by any act of Parent or Merger Sub.
"PERSON" means
an individual, a sole proprietorship, a
partnership, a corporation, a limited liability company, an
association, a joint
stock company, a
trust, a joint venture, an unincorporated organization, any
other business entity or any Governmental Authority.
"POST CLOSING INCOME TAX REPRESENTATION TERMINATION DATE" has
the meaning set forth in SECTION 11.1 below.
"PRAIRIE SUBSIDIARIES"
means, collectively, (i) Prairie UK
Limited, a private
limited company organized under the laws of the United
Kingdom and (ii) Prairiebration LLC, a Delaware limited liability
company.
"PRIME RATE"
has the meaning set forth in SECTION 3.4(C)
below.
"PURCHASE PRICE ALLOCATION SCHEDULE" has the meaning set forth
in SECTION 10.2(C) below. "REPRESENTATIVE" has the meaning set
forth in the introductory paragraph above.
"REPRESENTATIVE
AGREEMENT" has the
meaning set forth in
the
Recitals above.
"REQUISITE STOCKHOLDER APPROVAL" means the affirmative vote or
consent of a majority
of the issued and
outstanding
shares of Voting
Common
Stock.
"S CORPORATION
RETURNS" has the
meaning set forth in SECTION
10.1(A) below.
"SECTION 338(H)(10)
ELECTION" has the meaning set forth in
SECTION 10.2(A) below.
"SENIOR BANK DEBT"
shall mean all
Indebtedness
owed by the
Company and
pursuant to that certain Fourth Amended and Restated Credit
Agreement, dated as of
March 31, 2006, among the Company, LaSalle National Bank
Association and the other financial institutions parties thereto, as
amended or
supplemented from time to time.
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"SENIOR BANK DEBT PAYOFF AMOUNT" means the amount indicated in
the payoff letter
delivered pursuant to
SECTION 8.2(c), which
is equal to the
aggregate principal of, and accrued but unpaid interest on, the
Senior Bank Debt
up to and including the Closing Date, and all other costs payable in
connection
with the repayment in full of the Senior Bank Debt.
"SENIOR NOTES
AGREEMENT"
means that certain
Note Purchase
Agreement, dated as of
September 24, 2004,
between the Company and the holders
of Senior Notes parties thereto, as amended or supplemented from
time to time.
"SENIOR NOTES"
means the Company's 4.87% Series A Senior
Secured Notes due September 24, 2009, 5.35% Series B Senior Secured Notes due
September 24, 2011,
5.62% Series C Senior Secured Notes due September 24, 2012,
5.75% Series D Senior
Secured Notes due
September 24, 2013 and
5.90% Series E
Senior Secured Notes
due September 24, 2014 having a face value of $50,000,000
and issued pursuant to the Note Agreement.
"SENIOR NOTES
AMOUNT" means the amount indicated in the
redemption agreement
relating to the Senior Notes delivered pursuant to SECTION
8.2(D)(I), which is
equal to the aggregate principal of, and accrued but unpaid
interest on, the
Senior Notes up to and
including the Closing Date PLUS an
amount equal to the
applicable
"Make-Whole
Amount" (as defined under, and
calculated in accordance with the terms of, the Senior Notes
Agreement) and all
other costs
payable in
connection
with the repayment in full of the Senior
Notes.
"STANDBY LETTER OF CREDIT has the meaning set forth in SECTION
9.2(F) below.
"STRADDLE PERIOD"
means any Tax period that begins before and
ends after the Closing Date.
"SURVIVING
CORPORATION" has the
meaning set forth in SECTION
2.1 below.
"TARGET CLOSING WORKING CAPITAL" means $57,000,000.
"TAX" or "TAXES" means
any federal, state,
local or foreign
income, gross receipts, license, payroll, employment, excise, severance, stamp,
occupation, premium,
windfall profits,
environmental, customs
duties, capital
stock,
franchise,
profits,
withholding,
social security
(or similar),
unemployment,
disability, real
property, personal property, sales, use,
transfer,
registration, value
added, alternative or add-on minimum, estimated,
or other tax of any kind whatsoever, including any interest,
penalty or addition
thereto, whether disputed or not.
"TAX CLAIM"
has the meaning set forth in SECTION 10.1(D)
below.
"TAX CONTEST" has the meaning set forth in SECTION 10.1(D)
below.
"TAX RETURN" means any return, declaration, report, claim for
refund, or
information
return or statement
relating to Taxes.
including any
schedule or attachment thereto and including any amendment
thereof.
"TERMINATION DATE"
has the meaning set forth in SECTION
12.1(C) below.
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"THIRD PARTY CLAIM"
has the meaning set forth in SECTION 11.5
below.
"TRANSFER TAXES" has
the meaning set forth in SECTION 10.1(G)
below.
"VOTING COMMON STOCK" means the voting common stock, par value
$0.01 per share of the Company.
INTERPRETATION. Unless
otherwise expressly provided or unless
the context
requires otherwise: (i) all references in this Agreement to
Articles, Sections,
Schedules and Exhibits shall mean and refer to
Articles,
Sections, Schedules
and Exhibits of this
Agreement;
(ii) all references to
statutes and related
regulations shall
include all amendments
of the same and
any successor or replacement statutes and regulations in each case
as so amended
or replaced on or prior to the Closing; (iii) words using the
singular or plural
number also shall
include the plural and singular number, respectively; (iv)
references to "hereof", "herein", "hereby" and similar terms shall
refer to this
entire Agreement
(including the Schedules and Exhibits hereto); (v) references
to any Person shall be deemed to mean and include the successors and permitted
assigns of such Person
(or, in the case of a
Governmental
Authority, Persons
succeeding to the relevant functions of such Person); (vi) the term "including"
shall be deemed to mean "including, without limitation"; (vii) words of any
gender include each other gender; and (viii) whenever this
Agreement refers to a
number of days, such number shall refer to calendar days,
unless such
reference
is specifically to "Business Days."
ARTICLE II
THE MERGER
2.1 THE MERGER. Upon
the terms and subject to the conditions
set forth in this
Agreement, and in
accordance with the DGCL, at the Effective
Time, Merger Sub shall
be merged with and into the Company. As a result of the
Merger, the separate
corporate existence of Merger Sub shall cease,
and the
Company shall
continue as the surviving corporation and as a wholly-owned
subsidiary of Parent (the "SURVIVING CORPORATION").
2.2 EFFECTIVE
TIME.
Unless
this Agreement is earlier
terminated pursuant to
SECTION 12.1, the closing of the Merger (the "CLOSING")
will take place on the
later of June 8, 2007 or three (3) Business Days after
the satisfaction
or, if permissible, waiver of the conditions set forth in
ARTICLE VIII,
at the offices of
Winston & Strawn
LLP, 35 West Wacker
Drive,
Chicago, Illinois 60601, at 10:00 a.m. (Chicago time), provided
that such place,
date and time may be changed to another place, date and/or time as agreed to
in
writing by Parent and the Company. The date upon which the Closing actually
occurs is herein
referred to as the "CLOSING DATE." On the Closing Date, the
Parties shall cause
the Merger to be
consummated by filing
a certificate
of
merger (the "CERTIFICATE OF MERGER") with the Secretary of State of
the State of
Delaware, in such form
as required by, and
executed in accordance
with, the
relevant provisions
of the DGCL (the date and time of acceptance by the
Secretary of State of Delaware of such filing, or, if another date and time
is
specified in such filing, such specified date and time, being the "EFFECTIVE
TIME").
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2.3 EFFECT OF THE MERGER. At the Effective Time, the effect of
the Merger
shall be as
provided in the applicable provisions of the DGCL.
Without limiting the generality of the foregoing, and subject thereto, at the
Effective Time, except as otherwise provided herein, all the property, assets,
rights, privileges,
powers and
franchises of the
Company and Merger Sub shall
vest in the Surviving
Corporation,
and all debts, liabilities, duties and
obligations of the
Company and Merger Sub shall become the debts, liabilities,
duties and obligations of the Surviving Corporation.
2.4 CERTIFICATE OF
INCORPORATION;
BYLAWS. At the Effective
Time, the Organizational Documents of the Surviving Corporation
shall be amended
in their entirety to
contain the
provisions
set forth in the
Organizational
Documents of Merger Sub, as in effect immediately prior to the
Effective Time.
2.5 DIRECTORS
AND OFFICERS. The directors of Merger Sub
immediately prior to
the Effective Time
shall be the initial
directors of the
Surviving Corporation,
each to serve
in accordance with the Organizational
Documents of the Surviving Corporation. The officers of Merger Sub
immediately
prior to the Effective
Time shall be the
initial officers of the Surviving
Corporation, each to hold office in accordance with the
Organizational Documents
of the Surviving Corporation.
ARTICLE III
MERGER
CONSIDERATION; CONVERSION OF SECURITIES; EXCHANGE OF
CERTIFICATES
3.1
CALCULATION AND PAYMENT OF THE MERGER CONSIDERATION.
---------------------------------------------------
(a) CALCULATION
OF MERGER CONSIDERATION. The
aggregate amount to be paid by Parent with respect to the Common
Shares
shall equal the sum of the following:
(i)
One
Billion Dollars ($1,000,000,000);
(ii) PLUS
the total amount of Cash on
Hand;
(iii) (1) PLUS the amount, if any, by
which the Closing Working Capital is
greater than Target Closing Working
Capital, or
(2) MINUS the
amount, if any, by
which Target Closing Working Capital
is greater than the Closing Working
Capital,
as determined and
adjusted in
accordance with SECTION 3.1(B) and
SECTION 3.3, below;
(iv) PLUS an amount equal to the sum of:
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(1) the greater of (A) $5,000,000 or
(B) twenty-five (25%) percent of the
amount, if
any, by which the
aggregate dollar amount of Net Fixed
Assets of the Company
(as such term
is used in the Financial Statements)
as of the beginning
of business on
the earlier of the
Closing Date or
May 31, 2007, exceeds
the aggregate
dollar amount of Net Fixed Assets as
reflected on the
Audited Financial
Statements;
PROVIDED, HOWEVER,
that
additions to Net Fixed
Assets as a
result of
capital
expenditures
identified in
subparagraph
(2)
below, if any, shall be not be
included in the
calculation of Net
Fixed Assets for
purposes of this
subparagraph (1)(B); PLUS
(2) one hundred
percent (100%) of
the aggregate dollar
amount of cash
expenditures for fixed
assets made
by the Company prior
to the earlier
of the Closing Date or May 31, 2007,
if any, for
capital projects not
included in the
list of projects
identified on SCHEDULE 6.1(G) to the
extent such
expenditures have
been
specifically approved
in advance by
Parent; PLUS
(3) subject to the
provisos at the
end hereof, if the
Closing Date is
after May 31, 2007, one hundred
(100%) percent
of the aggregate
dollar amount of cash
expenditures
for fixed assets by the Company
during the period
commencing on the
beginning of
business of June 1,
2007 and ending on the end of
business of
the Closing Date;
PROVIDED, HOWEVER,
if the Closing
Date is after May 31, 2007 solely as
a result of an act (or
inaction) by
or on the part of a Company
Stockholder, then the amount in this
subparagraph (3)
shall
be one
hundred (100%) percent
of Net Fixed
Assets increase
during the period
referred
to above;
PROVIDED,
FURTHER, if
the Closing Date is
after May 31, 2007 solely as a
result of an HSR
Request, then the
amount in this subparagraph (3)
shall be (x) one hundred (100%)
percent of Net Fixed Assets increase
during the period
commencing on the
beginning of
business of June 1,
2007 and ending on the end of
business of June 30,
2007 PLUS (y)
one hundred
(100%) percent of the
aggregate dollar
amount of cash
expenditures for fixed assets by the
Company during the period commencing
on the beginning of business of July
1, 2007 and ending on the end of
business of the Closing Date,
(such sum,
as determined and
adjusted in accordance
with SECTION
3.1(B) and
SECTION 3.3 below (the
"CLAUSE (IV) PAYMENT"));
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(v)
MINUS, the Senior Bank
Debt Payoff
Amount required to be
paid by Parent under
SECTION 3.1(D);
(vi) MINUS, the Senior Notes Amount required
to be paid by Parent under SECTION 3.1(E);
(vii) MINUS, the 1995 Bonds Amount;
(viii) MINUS, to the extent such obligations
have not been satisfied as of the Effective Time by the
Company in accordance
with its covenant set
forth in SECTION
6.8, the deferred and unpaid balance of the purchase
price
pursuant to the capital leases listed on SCHEDULE
1.1(B) and
the Implied Purchase
Price of the operating
leases listed on
SCHEDULE 1.1(B);
(ix) MINUS, the Company Stockholder
Transaction Expenses
paid under SECTION
3.1(F).
The aggregate
amount of items (i)
through (ix)
immediately
above is referred to herein as the "MERGER Consideration." After the Effective
Time, the Merger
Consideration shall be subject to the adjustments set forth in
SECTION 3.3.
(b) ESTIMATED MERGER CONSIDERATION. Two (2) Business
Days prior to the Closing Date, the Company shall deliver to
Parent a
statement of the
Closing Working Capital (the "ESTIMATED CLOSING
WORKING CAPITAL")
and an estimate of the Clause
(iv) Payment (the
"ESTIMATED CLAUSE (IV)
PAYMENT").
The Merger
Consideration
will be
determined for the
Closing based on such
estimates, subject to
later
post-closing
adjustment as is
contemplated by
SECTION 3.3 below.
In
connection with
the calculation of the Estimated Closing Working
Capital and the Final
Working Capital,
the Company and Parent
shall
follow the
procedures
set forth in SCHEDULE 3.1(B) for the
determination of the value of the inventory of the Company.
(c) PAYMENT AND
ALLOCATION OF MERGER
CONSIDERATION.
At and upon the Effective Time, Parent shall remit the Merger
Consideration as follows:
(i) ARTICLE
a portion of the Merger
Consideration in the
amount of the
Escrow Amount shall be
deposited by Parent with the escrow agent (the "ESCROW AGENT")
designated in the escrow agreement (the "ESCROW
AGREEMENT"),
substantially in the
form of EXHIBIT B hereto, to be entered
into at the Closing by
Parent, the
Representatives
and the
Escrow Agent.
Such amounts
delivered to the Escrow Agent,
together with any investment proceeds thereon, are referred to
collectively herein as
the "ESCROW FUNDS" and will secure the
Company Stockholders' indemnification obligation under ARTICLE
XI;
and
(ii) the remaining amount of the Merger
Consideration,
after subtraction
of the amount paid in
accordance with
SECTION 3.1(C)(I) and subtraction of the
portion thereof otherwise allocable in accordance with SECTION
3.6 below to
Dissenting
Shares, shall be remitted to the
Representatives for the benefit to Company Stockholders in the
form of a promissory
note payable to the
Representatives in
the form attached as
EXHIBIT C hereto (the
"CLOSING NOTE").
The Closing Note shall
have an aggregate
original principal
amount equal to such remaining amount of Merger Consideration
and shall provide for
interest at the
short-term
applicable
Federal rate as defined in Section 1274(d) of the Code for the
month including the Closing Date.
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<PAGE>
The aggregate
of the payment set forth in SECTION
3.1(C)(I) above,
together with
any subsequent remittances to the Representatives or their
designee pursuant to
the Closing
Note, the Standby Letter of Credit or as a
consequence of
the post-Closing adjustments to the Merger Consideration
described in SECTION 3.3, is referred to herein as the "PAYMENT
FUND." Upon and
after the Closing, the
Representatives,
having been duly
empowered to act
on
behalf of the Company
Stockholders pursuant
to the terms of the Representative
Agreement, shall
make determinations as to the allocation of the Merger
Consideration among
the Common Shares. In
furtherance
of the foregoing,
the
Representatives shall
follow the directives
and procedures set forth in this
SECTION 3.1(C)
and in SECTIONS 3.2 and 3.3 to determine the payments and
deliveries to be made
from the Payment
Fund with respect to such ownership
interests in the Company. If the Representatives determine that it is necessary
to distribute the Closing Note to the Company Stockholders, Parent shall issue
individual promissory
notes to the Company Stockholders to evidence such
division of
the Closing Note and shall otherwise cooperate with the
Representatives in
good faith to divide the Closing Note and Standby Letter of
Credit in the correct
denominations and in
the individual names of the Company
Stockholders;
PROVIDED, HOWEVER, the Representatives shall reimburse Parent
for
any out of pocket
expenses incurred
by Parent to
accomplish
such division;
PROVIDED, FURTHER,
that in no event shall
Parent's aggregate obligations under
the individual promissory notes exceed its obligation under the
Closing Note.
(d) PAYMENT OF SENIOR
BANK DEBT.
At the Effective
Time, Parent shall
pay, or cause to be paid, on behalf of the Company,
the Senior Bank Debt
Payoff Amount by wire
transfer of immediately
available funds to the Persons or bank accounts specified in the
payoff
letter for the Senior Bank Debt delivered pursuant to SECTION
8.2(C).
(e) REDEMPTION
OF SENIOR NOTES. At the Effective
Time, Parent shall
pay, or cause to be paid, on behalf of the Company,
the Senior Notes Amount by wire transfer of immediately available
funds
to the Persons or bank accounts specified in the redemption
agreement
relating to the Senior Notes delivered pursuant to SECTION
8.2(D).
(f) PAYMENT
OF COMPANY STOCKHOLDER TRANSACTION
EXPENSES. At the Effective Time, Parent shall pay, or cause to be
paid,
on
behalf of the Company
and the Company Stockholders, the Company
Stockholder
Transaction Expenses
by wire transfer of immediately
available funds to the
Persons or bank
accounts and in the amounts
specified by the
Representatives on
SCHEDULE 3.1(F) to be provided to
Parent at least one (1) day prior to the Effective Time.
3.2 EFFECT OF
MERGER ON THE CAPITAL STOCK OF THE COMPANY.
(a) CONVERSION
OF COMMON SHARES. At the Effective
Time, each Common
Share shall, by virtue of the Merger and without any
14
<PAGE>
action on the part of Parent, Merger Sub, the Company or the Company
Stockholders, be cancelled and extinguished, and each such Common
Share
shall be converted
into the right to
receive the Common Per Share
Merger Consideration (subject to adjustment as provided in SECTIONS
3.3
hereof) payable
in accordance with and subject to the conditions
provided in this
Agreement,
other than with
respect to Dissenting
Shares.
Notwithstanding any
contrary provision set forth in this
Agreement, the Representatives shall not pay to any Company
Stockholder
holding Common
Shares that portion of the Merger Consideration
represented by such Company Stockholder's pro rata share of
the Escrow
Funds until such time as such amount, if any, is distributable
pursuant
to the terms and
conditions of the Escrow Agreement. The adoption of
this Agreement
and the approval of the Merger by the Company
Stockholders shall
constitute approval of
the Escrow Agreement and of
all of the arrangements relating thereto, including, without
limitation, the placement of the Escrow Funds in escrow.
(b) TREASURY STOCK.
Each share of Common
Stock held
in the treasury of the Company immediately prior to the Effective
Time
shall be cancelled and extinguished without any conversion thereof,
and
no payment shall be made with respect thereto.
(c) SURRENDER
OF CERTIFICATES. As soon as
practicable, the
Representatives or
their designee shall mail to each
holder of record
of a certificate representing outstanding Common
Shares (the "CERTIFICATES") (1) a letter of transmittal, which
shall be
in a customary form
reasonably
satisfactory to Parent
(including an
undertaking to notify
Parent of any changes in address of such Company
Stockholder during the
forty-eight (48)
months following the Closing)
and which shall
specify that delivery
shall be effected, and
risk of
loss and title to the Certificates shall pass, only upon proper
delivery by such Company Stockholder of his, her or its
Certificates to
the Representatives
or their designee,
(2) instructions for use in
effecting the surrender of the Certificates in exchange for the
Merger
Consideration
contemplated to be
paid to the Company Stockholders
pursuant to this
SECTION 3.2 and (3) a copy of the Representative
Agreement and a joinder thereto. Upon surrender of a Certificate to
the
Representatives or their designee for cancellation, the holder of such
Certificate shall be
entitled to receive in exchange therefor the
Merger Consideration
(adjusted as
contemplated in SECTION 3.3 hereof)
represented by such
Certificate
as set forth above, which Merger
Consideration shall be
payable upon such proper surrender by the
Representatives or
their designee by
delivery of a certified or bank
cashier's check or by wire transfer, and the Certificate so
surrendered
shall forthwith
be cancelled upon delivery thereof to the
Representatives or their designee. No interest will be paid or
accrued
on any portion
of the Merger Consideration payable to holders of
Certificates. In the
event of a transfer of ownership of Common Shares
that is not registered in the transfer records of the Company,
payment
may be made to a transferee if the Certificate representing such
Common
Shares is presented to Parent, accompanied by all documents
required to
evidence and effect such transfer and by evidence that any applicable
stock transfer taxes have been paid.
(d) CANCELLATION OF COMMON SHARES. From and after the
Effective Time, all
Common Shares shall no longer be outstanding and
shall automatically be
cancelled and retired and shall cease to exist,
and each holder of a
Certificate
representing any such
Common Shares
shall cease to have any rights with respect thereto, except the right
to receive the Merger
Consideration
represented by such
Certificate
(other than with respect to Dissenting Shares).
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3.3
POST-CLOSING ADJUSTMENT.
(a) Within sixty (60)
days after the Closing
Date,
Parent shall prepare and deliver to the Representatives a statement of
the Closing Working
Capital and the Clause
(iv) Payment (the "CLOSING
STATEMENT"), with all
supporting documentation. The Closing Statement
shall be based upon the books and records of the Acquired Companies
and
shall be prepared
in accordance with GAAP and the definitions of
Closing Working
Capital and the Clause (iv) Payment set forth in
ARTICLE I above.
(b) The Closing
Statement shall be final and binding
on the Parties unless
the Representatives
shall, within thirty (30)
days following
the delivery of such Closing Statement, deliver to
Parent written
notice of disagreement with such Closing Statement,
which notice shall
describe the nature of any such
disagreement
in
reasonable detail,
identify the specific items involved and the dollar
amount of such
disagreement. If the
Representatives
shall raise any
objections within
the aforesaid thirty (30) day period, then the
disputed matters shall be resolved by the Representatives, on
behalf of
the Company
Stockholders, and
Parent. For the avoidance of doubt,
amounts that are not
subject to a written
notice of disagreement
or
objection shall be remitted to the Representatives or Parent, as the
case may be, in accordance with SECTION 3.3(C). If the Representatives
and Parent are unable to resolve all disagreements within thirty (30)
days of receipt by Parent of a written notice of disagreement,
or such
longer period as may be agreed by Parent and the Representatives,
then,
within thirty (30)
days thereafter,
the Representatives and Parent
jointly shall
select an arbiter from a nationally recognized
independent public accounting firm that is not the independent
auditor
of any of Parent, the Company or the Surviving Corporation; if Parent
and the
Representatives are
unable to select an arbiter within such
time period,
the American Arbitration Association shall make such
selection (the Person
so selected
shall be referred to
herein as the
"ACCOUNTING
ARBITRATOR"). The
Accounting Arbitrator
so selected will
consider only
those items and amounts set forth in the Closing
Statement as to which
Parent and the
Representatives have
disagreed
within the time
periods and on the terms specified above and must
resolve the matter in accordance with the terms and provisions of
this
Agreement. Each Party
may furnish to the
Accounting Arbitrator
such
information and
documents as it deems
relevant, with copies of such
submission and all such documents and information being concurrently
given to the other
Party. Neither
Party shall have or conduct any
communication, either
written or oral, with the Accounting Arbitrator
without the other Party either being present or receiving a
concurrent
copy of any
written communication. The Accounting Arbitrator may
conduct a conference concerning the objections and disagreements
between the
Representatives and Parent, at which conference each Party
shall have the right to (i) present its documents, materials and other
evidence (previously
provided to the
Accounting
Arbitrator
and the
other Party) and (ii) have present its or their advisors,
accountants,
counsel and other
representatives. The
Accounting
Arbitrator
shall
resolve each item of disagreement based solely on the presentations
and
16
<PAGE>
supporting material
provided by the
Parties and not
pursuant to any
independent review and
may not assign a value to any particular item
greater than the
greatest value for
such item claimed by either Party
or less than the lowest value for such item claimed by either
Party, in
each case as presented to the Accounting Arbitrator. The Accounting
Arbitrator shall issue
a detailed written
report that sets forth
the
resolution of all
items in dispute and that contains a final Closing
Statement. Such report
shall be final and
binding upon Parent and the
Representatives. The
fees and expenses of
the Accounting
Arbitrator
shall be borne on a
proportionate
basis by the
Representatives,
on
behalf of the Company Stockholders, on the one hand, and Parent, on
the
other hand,
based on the inverse proportion of the respective
percentages of the dollar value of disputed issues determined in favor
of
the Representatives
and Parent. Parent and the Representatives
shall, and Parent
shall cause the Surviving Corporation to, cooperate
fully with the
Accounting Arbitrator
and respond on a timely basis to
all requests for
information or access
to documents or personnel made
by the Accounting
Arbitrator or by other Parties hereto, all with the
intent to fairly and in good faith resolve all disputes relating to
such Closing Statement as promptly as reasonably practicable.
(c) If the amounts
representing the
Closing Working
Capital and Clause (iv) Payment as reflected in the Closing
Statement
as finally determined
in accordance with this SECTION 3.3 differs from
the Estimated
Closing Working Capital and Estimated Clause (iv)
Payment, the
Merger
Consideration
shall
be adjusted on a
dollar-for-dollar basis by the amount of such difference.
The Representatives
shall hold at least
Five Million Dollars
($5,000,000) of the
Merger Consideration (in the form of a portion of the
Closing Note or in
cash if the Closing
Note has been paid) in the Payment Fund
until the Closing Statement is finally determined. If the adjustments, if any,
under this
SECTION 3.3 result in an aggregate reduction in the Merger
Consideration, the
Representatives shall
pay to Parent (by wire transfer to an
account designated
in writing by Parent) the amount of such reduction plus
interest from and
after the Closing Date
to and through the date of payment at
the prime rate charged on the Closing Date by LaSalle Bank National
Association
(the "PRIME RATE")
within five (5) Business Days after the final determination
of the adjustments.
Conversely,
if such adjustments result in an aggregate
increase in the Merger
Consideration,
Parent shall remit the amount of such
increase plus
interest from and
after the Closing Date to and through the date
of payment at the
Prime Rate
within five (5) Business Days after the final
determination of the adjustments to the Representatives.
3.4 LOST, STOLEN AND DESTROYED CERTIFICATES. If any
Certificate shall have been lost, stolen or destroyed, the Representatives will
deliver the Merger
Consideration to such Company Stockholder only upon receipt
by the Representatives
of an affidavit (in a
form reasonably
satisfactory to
Parent) by the Person claiming such Certificate to be lost, stolen
or destroyed.
No bond shall be required to be posted by any Company Stockholder in connection
with such affidavit.
3.5 EFFECT
OF MERGER ON CAPITAL STOCK OF SURVIVING
CORPORATION. At the Effective Time, each share of Merger Sub's
common stock, par
value $0.01 per share,
that is issued and outstanding immediately prior to the
Effective Time,
shall, by virtue of the Merger and
without any action on
the
part of Parent,
Merger Sub, the Company or the Company Stockholders, be
converted
automatically into and exchanged for one share of common stock of
the
Surviving Corporation.
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<PAGE>
3.6 APPRAISAL
RIGHTS. Notwithstanding anything in this
Agreement to the
contrary, Common
Shares (the
"DISSENTING
SHARES") that are
issued and outstanding
immediately prior to
the Effective Time and are held by
Company Stockholders
who have not
voted in favor of the Merger, consented
thereto in writing or otherwise contractually waived their rights to
appraisal
and who have complied
with all of the
relevant provisions of the DGCL (the
"DISSENTING
STOCKHOLDERS") shall
not be converted into or be exchangeable for
the right to receive the Merger Consideration, unless and until such
stockholders shall have failed to perfect or shall have effectively
withdrawn or
lost their rights to appraisal under the DGCL. The Company shall
give Parent (i)
prompt notice of any
written demands for appraisal of any Common Shares,
attempted withdrawals
of such demands and any other instruments served pursuant
to the DGCL and
received by the Company relating to stockholders' rights of
appraisal, and (ii)
the opportunity to direct all negotiations and proceedings
with respect to
demands for appraisal
under the DGCL.
At Closing,
an amount
equal to 150% of the Common Per Share Merger Consideration
otherwise payable
to
the Dissenting
Stockholders will be deposited with the Escrow Agent; such
funds
shall be used to make any required payments to Dissenting
Stockholders and
any
costs of Parent
or the Acquired Companies associated with such appraisal
process, with the
balance distributed
to the Payment Fund,
to be disbursed by
the Representatives
to the Company
Stockholders.
Neither the Company
nor the
Surviving Corporation
shall, except with the prior written
consent of Parent,
voluntarily make any payment with respect to, or settle or offer to
settle, any
such demand for payment. If any Dissenting Stockholder shall fail to perfect
or
shall have effectively
withdrawn or lost the
right to dissent, then
(i) as of
the occurrence of such event, such holder's Dissenting Shares shall cease to
be
Dissenting Shares and shall be converted into and represent the
right to receive
the Merger
Consideration
(adjusted as
contemplated by
SECTION 3.3 hereof) in
accordance with SECTIONS 3.1 and 3.2, and (ii) promptly following
the occurrence
of such event,
Parent shall remit to the Representatives the portion of the
Merger Consideration
(adjusted as
contemplated by SECTION 3.3 hereof) to which
such holder is entitled.
3.7 WITHHOLDING RIGHTS. Parent and the Representatives
shall
be entitled
to deduct and withhold (without duplication) from any and all
payments made under
this Agreement such amounts as may be required to be
deducted and withheld
under applicable laws. To the extent such amounts are
withheld and paid to the appropriate Governmental Authority in accordance with
applicable laws, such
withheld amount shall be treated for all purposes of this
Agreement as having
been paid to the
Person to whom such
amounts would have
otherwise been paid.
To the extent that Parent determines it needs to
withhold
on the payment of the Merger Consideration payable at Closing, the
amount of the
Closing Note shall be reduced by such withholding and the
Representatives
shall
make appropriate allocations under SECTION 3.1(C) to reflect such
withholding.
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<PAGE>
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents
and warrants to Parent
and Merger Sub
with respect to the matters specified in this ARTICLE IV as
follows:
4.1 ORGANIZATION,
QUALIFICATION, POWER AND AUTHORITY. Each of
the Acquired Companies
is an entity, duly
organized, validly
existing and in
good standing
under the Laws of the jurisdiction of its incorporation or
formation. Each of the
Acquired Companies is in good standing under the Laws of
each jurisdiction
where such qualification is required except where the lack of
such qualification
would not have a Material Adverse Effect. Each of the
Acquired Companies
has the requisite power and authority to carry on the
businesses in which it
is engaged and to own and use the properties owned and
used by it.
4.2 AUTHORIZATION;
ENFORCEABILITY. The
Company has requisite
corporate power and
authority to execute and deliver
this Agreement and to
perform its obligations hereunder. The execution and delivery of this
Agreement
by the Company and the
consummation by the
Company of the Merger and the other
transactions
contemplated hereby
have been duly
authorized by all
necessary
corporate action, and no other corporate proceedings on the part of the
Company
and no stockholder
votes are necessary to authorize this Agreement or to
consummate the Merger and the other transactions contemplated
hereby, other than
the filing and recordation of the Certificate of Merger. This
Agreement has been
duly executed and delivered by the Company and, assuming the due
authorization,
execution and delivery by the other Parties hereto, constitutes the valid and
legally binding
obligation of the
Company, enforceable
in accordance with its
terms and conditions,
subject to Laws of general application relating to public
policy, bankruptcy,
insolvency
and the relief of debtors and rules of Law
governing specific performance, injunctive relief and other
equitable remedies.
The Representatives
have received executed
counterpart signature
pages to the
Representative
Agreement from Company
Stockholders
holding shares of Voting
Common Stock in excess of that required for Requisite Stockholder Approval and
such Representative
Agreement authorize
the Representatives to take all of the
actions
contemplated of
the Representatives on behalf of the Company
Stockholders by this Agreement.
4.3
CAPITALIZATION.
(a) The authorized capital stock of the Company
consists
of 3,500,000 shares of Voting Common Stock, of which there are
2,891,136 shares of
Voting Common Stock issued and outstanding as of
the date hereof and
3,500,000 shares of
Non-Voting Common
Stock, of
which there are 2,891,136 shares of Non-Voting Common Stock issued and
outstanding as of the date hereof, all as set forth on SCHEDULE
4.3(A).
All of the
issued and outstanding Common Shares have been duly
authorized and are validly issued, fully paid and non-assessable.
There
are no outstanding or authorized options, warrants, purchase rights,
subscription rights,
conversion
rights, exchange rights or other
contracts or commitments that could require the Company to issue,
sell
or otherwise
cause to become
outstanding
any of its capital
stock.
There are no
outstanding or
authorized stock
appreciation,
phantom
stock, profit
participation
or similar
rights with respect to the
Company.
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<PAGE>
(b) The Company does not have any subsidiaries, other
than the Prairie Subsidiaries. Except as set forth in SCHEDULE
4.3(B),
all of the outstanding
shares of capital
stock (or equivalent
equity
interests of entities other than corporations) of each of the Prairie
Subsidiaries are
owned of record and beneficially, directly or
indirectly, by the
Company. There are no
outstanding
or authorized
options, warrants,
purchase rights,
subscription rights,
conversion
rights, exchange
rights or other
contracts or commitments that could
require any Prairie
Subsidiary to issue,
sell or otherwise
cause to
become outstanding
any of its
capital stock (or equivalent equity
interests of
entities other than corporations). There are no
outstanding or authorized stock appreciation, phantom stock, profit
participation or similar rights with respect to any Prairie
Subsidiary.
4.4 NONCONTRAVENTION.
Assuming that all consents, approvals,
authorizations and
permits described in SCHEDULE 4.4 have been obtained and all
filings and notifications described in this SECTION 4.4 have
been made, neither
the execution and delivery of this Agreement, nor the consummation
of the Merger
or the other
transactions
contemplated hereby,
will (i) violate any Laws to
which any of the
Acquired Companies is subject, or any provision of the
Organizational
Documents of any of the Acquired Companies, or (ii) conflict
with, result
in a breach of, constitute a default under, result in the
acceleration of, create in any party the right to accelerate,
terminate, modify
or cancel or require any notice under any material agreement,
contract, lease,
license, instrument or
other arrangement to which any of the Acquired Companies
is a party or by which it is bound or to which any of its assets is
subject (or
result in the imposition of any Lien upon any of its assets), and
except for the
filing of the Certificate of Merger under the DGCL, the pre-merger
notification
requirements of the
HSR Act, none of the Acquired Companies needs to give any
notice to, make any filing with or obtain any authorization,
consent or approval
of any Governmental
Authority in order for the Company to consummate the
transactions contemplated by this Agreement.
4.5 BROKERS'
FEES. Other than to Goldman,
Sachs & Co.,
none of the Acquired Companies has any liability or obligation to
pay any fees
or commissions to any broker, finder, or agent with respect to the
transactions
contemplated by this Agreement.
4.6 FINANCIAL
STATEMENTS. The
Company has made
available to
Parent the
following financial statements (collectively, the "FINANCIAL
STATEMENTS"): (i)
audited consolidated balance sheets and statements of income,
stockholders' equity
and cash flows as of and for the fiscal years ended
December 31, 2006 and December 31, 2005 for the Company (the
"AUDITED FINANCIAL
STATEMENTS"); and (ii)
unaudited consolidated
balance sheets and statements of
income and cash flows (the "MOST RECENT FINANCIAL STATEMENTS") as
of and for the
two months ended
February 28, 2007 for the Company. The Financial Statements
(including the notes thereto) have been prepared in accordance with
GAAP applied
on a consistent basis
throughout the periods covered thereby and 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; PROVIDED,
HOWEVER, that the Most
Recent Financial
Statements are subject to the year-end
adjustments described
in SCHEDULE 4.6 and lack footnotes and other presentation
items.
20
<PAGE>
4.7 INTERNAL
CONTROLS; UNDISCLOSED LIABILITIES.
(a) To the Company's Knowledge, the Acquired
Companies maintain
a system of
internal controls that (i) provide
reasonable assurance
that commitments
are made or
transactions
are
executed only in
accordance
with management's general or specific
authorizations, (ii) provide reasonable assurance that access to
assets
is permitted only in accordance with management's general or specific
authorizations,
and (iii) include timely and sufficient account
reconciliations as
well as physical inventories or an adequate
cycle-count programs
of inventories, with the recording of any
differences
appropriately to the general ledger. Parent acknowledges
and agrees that none of the Acquired Companies is currently,
or has at
any time in the past, been subject to the internal controls reporting
procedures set
forth in The
Sarbanes-Oxley
Act of 2002 and that
the
representations
contained in this
SECTION 4.7(A) shall
not be deemed
breached, nor shall
the Company
Stockholders be
subject to any claim
for indemnification
for any costs incurred by the Parent or the
Acquired Companies following the Closing in connection with
obligations
with respect to reporting internal controls procedures under
applicable
provisions of The Sarbanes-Oxley Act of 2002.
(b) Other than as set forth on the face of the
balance sheet included
in the Most Recent
Financial Statements,
the
Acquired Companies do
not have any liabilities required under GAAP to
be set forth on the
face of the balance
sheet included in the Most
Recent Financial
Statements, or to the
Company's Knowledge
any other
liabilities, except
for (i) liabilities
which have arisen
after the
date of the Most Recent Financial Statements in the Ordinary Course
of
Business, (ii) liabilities tha
