Exhibit 2
AGREEMENT AND PLAN OF MERGER
AMONG
TIGER REAL ESTATE FUND, L.P.
TIGER REAL ESTATE ACQUISITION CORP.
AND
KAHLER REALTY CORPORATION
DATED AS OF MAY 6, 1996
TABLE OF CONTENTS
PAGE
ARTICLE I
THE MERGER
SECTION 1.1 The Merger . . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 1.2 Closing. . . . . . . . . . . . . . . . . . . . . . . . . . 3
SECTION 1.3 Effective Time of the Merger . . . . . . . . . . . . . . . 3
SECTION 1.4 Effects of the Merger. . . . . . . . . . . . . . . . . . . 3
SECTION 1.5 Articles of Incorporation; By-Laws . . . . . . . . . . . . 3
SECTION 1.6 Directors and Officers . . . . . . . . . . . . . . . . . . 3
SECTION 1.7 Stockholders' Meeting. . . . . . . . . . . . . . . . . . . 3
ARTICLE II
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE
CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES
SECTION 2.1 Effect on Capital Stock. . . . . . . . . . . . . . . . . . 4
(a) Common Stock of the Purchaser. . . . . . . . . . . . . . . . . . 4
(b) Cancellation of Subsidiary or Parent-Owned
Company Common Stock . . . . . . . . . . . . . . . . . . . . . 4
(c) Conversion of Company Common Stock . . . . . . . . . . . . . . . 4
(d) Shares of Dissenting Holders . . . . . . . . . . . . . . . . . . 5
SECTION 2.2 Exchange of Certificates . . . . . . . . . . . . . . . . . 5
(a) Paying Agent . . . . . . . . . . . . . . . . . . . . . . . . . . 5
(b) Exchange Procedures. . . . . . . . . . . . . . . . . . . . . . . 5
(c) Letter of Transmittal. . . . . . . . . . . . . . . . . . . . . . 6
(d) No Further Ownership Rights in Company Common Stock. . . . . . . 6
(e) Termination of Payment Fund. . . . . . . . . . . . . . . . . . . 7
(f) No Liability . . . . . . . . . . . . . . . . . . . . . . . . . . 7
(g) Investment of Payment Fun. . . . . . . . . . . . . . . . . . . . 7
SECTION 2.3 Treatment of Employee Options. . . . . . . . . . . . . . . 7
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.1 Representations and Warranties of the Company. . . . . . . 8
(a) Organization and Qualification; Subsidiaries . . . . . . . . . . 8
(b) Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . 9
(c) Company Action . . . . . . . . . . . . . . . . . . . . . . . . .10
(d) Authority Relative to Agreement. . . . . . . . . . . . . . . . .11
(e) Regulatory Approvals . . . . . . . . . . . . . . . . . . . . . .11
(f) SEC Filings; Financial Statements. . . . . . . . . . . . . . .. 11
(g) Proxy Statement. . . . . . . . . . . . . . . . . . . . . . . . .12
(h) Transactions with Affiliates . . . . . . . . . . . . . . . . . .12
(i) Opinion of Financial Advisor . . . . . . . . . . . . . . . . . .12
(j) Brokers. . . . . . . . . . . . . . . . . . . . . . . . . . . . .12
(k) Mayo . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13
(l) No Conflicts . . . . . . . . . . . . . . . . . . . . . . . . . .13
(m) Undisclosed Liabilities. . . . . . . . . . . . . . . . . . . . .13
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(n) Absence of Certain Changes or Events . . . . . . . . . . . . . .14
(o) Compliance with Laws . . . . . . . . . . . . . . . . . . . . . .15
(p) Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . .16
(q) Permitted Liens. . . . . . . . . . . . . . . . . . . . . . . . .18
(r) Absence of Litigation. . . . . . . . . . . . . . . . . . . . . .18
(s) Employee Matters . . . . . . . . . . . . . . . . . . . . . . . .18
(t) Tax Matters. . . . . . . . . . . . . . . . . . . . . . . . . . .21
(u) Environmental Matters. . . . . . . . . . . . . . . . . . . . . .22
(v) Properties . . . . . . . . . . . . . . . . . . . . . . . . . . .23
(w) Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . .25
SECTION 3.2 Representations and Warranties of the Parent
and the Purchaser. . . . . . . . . . . . . . . . . . . .25
(a) Corporate Organization . . . . . . . . . . . . . . . . . . . . .25
(b) Authority Relative to Agreements . . . . . . . . . . . . . . . .26
(c) No Conflict; Required Filings and Consents . . . . . . . . . . .26
(d) Information Supplied . . . . . . . . . . . . . . . . . . . . . .26
(e) Financing. . . . . . . . . . . . . . . . . . . . . . . . . . . .27
(f) Brokers. . . . . . . . . . . . . . . . . . . . . . . . . . . . .27
ARTICLE IV
CONDUCT OF BUSINESS PENDING THE MERGER; OTHER COVENANTS
SECTION 4.1 Conduct of Business of the Company Pending
the Merger . . . . . . . . . . . . . . . . . . . . . . .27
SECTION 4.2 Conduct of Business of the Purchaser . . . . . . . . . .30
SECTION 4.3 Preparation of Proxy Statement . . . . . . . . . . . . .30
SECTION 4.4 Access to Information; Confidentiality . . . . . . . . .31
SECTION 4.5 No Solicitation. . . . . . . . . . . . . . . . . . . . .32
SECTION 4.6 Employee Benefits Matters. . . . . . . . . . . . . . . .34
SECTION 4.7 Directors' and Officers' Indemnification
and Insurance. . . . . . . . . . . . . . . . . . . . .36
SECTION 4.8 Further Action; Best Efforts . . . . . . . . . . . . . .36
SECTION 4.9 Public Announcements . . . . . . . . . . . . . . . . . .37
SECTION 4.10 Taxes. . . . . . . . . . . . . . . . . . . . . . . . . .37
SECTION 4.11 Conveyance Taxes . . . . . . . . . . . . . . . . . . . .37
ARTICLE V
CONDITIONS OF MERGER
SECTION 5.1 Conditions of Obligation of Each Party to Effect
the Merger . . . . . . . . . . . . . . . . . . . . . . .37
(a) Stockholder Approval . . . . . . . . . . . . . . . . . . . . . .37
(b) Other Approvals. . . . . . . . . . . . . . . . . . . . . . . . .37
(c) No Injunctions or Restraints; Illegality . . . . . . . . . . . .37
(d) Opinion of Financial Advisor . . . . . . . . . . . . . . . . . .38
SECTION 5.2 Conditions to Obligations of Parent and Purchaser. . . . .38
(a) Representations and Warranties . . . . . . . . . . . . . . . . .38
(b) Performance of Obligations of the Company. . . . . . . . . . . .38
(c) Required Consent; Governmental Approvals . . . . . . . . . . . .38
(d) No Material Adverse Change . . . . . . . . . . . . . . . . . . .38
SECTION 5.3 Conditions to Obligations of the Company . . . . . . . . .39
(a) Representations and Warranties . . . . . . . . . . . . . . . . .39
(b) Performance of Obligations of the Parent and the Purchaser . . .39
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ARTICLE VI
TERMINATION, AMENDMENT AND WAIVER
SECTION 6.1 Termination. . . . . . . . . . . . . . . . . . . . . . . .39
SECTION 6.2 Effect of Termination. . . . . . . . . . . . . . . . . . .40
SECTION 6.3 Fees and Expenses. . . . . . . . . . . . . . . . . . . . .40
SECTION 6.4 Amendment. . . . . . . . . . . . . . . . . . . . . . . . .41
SECTION 6.5 Waiver . . . . . . . . . . . . . . . . . . . . . . . . . .41
SECTION 6.6 Procedure for Termination, Amendment, Extension
or Waiver. . . . . . . . . . . . . . . . . . . . . . . .41
ARTICLE VII
GENERAL PROVISION
SECTION 7.1 Non-Survival of Representations, Warranties
and Agreements . . . . . . . . . . . . . . . . . . . . . .42
SECTION 7.2 Notices. . . . . . . . . . . . . . . . . . . . . . . . . .42
SECTION 7.3 Certain Definitions. . . . . . . . . . . . . . . . . . . .43
SECTION 7.4 Severability . . . . . . . . . . . . . . . . . . . . . . .50
SECTION 7.5 Entire Agreement; Assignment . . . . . . . . . . . . . . .50
SECTION 7.6 Parties in Interest. . . . . . . . . . . . . . . . . . . .50
SECTION 7.7 Governing Law. . . . . . . . . . . . . . . . . . . . . . .50
SECTION 7.8 Interpretation . . . . . . . . . . . . . . . . . . . . . .50
SECTION 7.9 Counterparts . . . . . . . . . . . . . . . . . . . . . . .50
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of May 6, 1996 (this
"Agreement"), among Tiger Real Estate Fund, L.P., a Delaware limited
partnership (the "Parent"), Tiger Real Estate Acquisition Corp., a
Minnesota corporation and a subsidiary of the Parent (the "Purchaser"), and
KAHLER REALTY CORPORATION, a Minnesota corporation (the "Company").
WHEREAS, the Boards of Directors of the Company and the Purchaser
have approved, and deem it advisable and in the best interests of their
respective stockholders to consummate, the business combination transaction
provided for herein in which the Purchaser will merge with and into the
Company (the "Merger");
WHEREAS, the Parent, the Purchaser and the Company desire to make
certain representations, warranties, covenants and agreements in connection
with the Merger and also to prescribe various conditions to the Merger;
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, mutual covenants and agreements herein
contained, and intending to be legally bound hereby, the Parent, the
Purchaser and the Company agree as follows:
ARTICLE I
THE MERGER
SECTION 1.1 The Merger. Upon the terms and subject to the
conditions set forth in this Agreement, and in accordance with the Business
Corporation Act of the State of Minnesota (the "MBCA"), at the Effective
Time (as defined in Section 1.3 below), the Purchaser shall be merged with
and into the Company. At the Effective Time, the separate corporate
existence of the Purchaser shall cease, and the Company shall continue as
the surviving corporation of the Merger (the "Surviving Corporation") and
shall continue under the name "Kahler Realty Corporation."
SECTION 1.2 Closing. Unless this Agreement shall have been
terminated and the transactions herein contemplated shall have been
abandoned pursuant to Section 6.1, and subject to the satisfaction or
waiver of the conditions set forth in Article V, the closing of the Merger
(the "Closing") will take place as promptly as practicable (and in any
event within two business days) following satisfaction or waiver of the
conditions set forth in Article V (the "Closing Date"), at the offices of
Schulte Roth & Zabel, 900 Third Avenue, New York, New York, unless another
date, time or place is agreed to in writing by the parties hereto.
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SECTION 1.3 Effective Time of the Merger. As soon as practicable
after the satisfaction or waiver of the conditions set forth in Article V,
provided that this Agreement shall not have been terminated as provided in
Section 6.1, the parties hereto shall cause the Merger to be consummated by
filing articles of merger (the "Articles of Merger") with the Secretary of
State of the State of Minnesota, in such form as required by, and executed
in accordance with the relevant provisions of, the MBCA (the date and time
of the filing of the Articles of Merger with the Secretary of State of the
State of Minnesota (or such later time as is specified in the Articles of
Merger) being the "Effective Time").
SECTION 1.4 Effects of the Merger. The Merger shall have the
effects set forth in Section 302A.641 of the MBCA. Without limiting the
generality of the foregoing, and subject thereto, at the Effective Time all
the rights, privileges, immunities, and franchises of the Company and the
Purchaser shall vest in the Surviving Corporation, and all the duties and
liabilities of the Company and the Purchaser shall become the duties and
liabilities of the Surviving Corporation. The Surviving Corporation may,
at any time after the Effective Time, take any action (including, without
limitation, executing and delivering any document) in the name and on
behalf of the Company or the Purchaser in order to carry out and effectuate
the transactions contemplated in this Agreement.
SECTION 1.5 Articles of Incorporation; By-Laws.
(a) The Articles of Incorporation of the Purchaser shall be the
Articles of Incorporation of the Surviving Corporation immediately after
the Effective Time, except that Article I of the Articles of Incorporation
of the Surviving Corporation shall read in its entirety as follows: "The
name of this corporation is Kahler Realty Corporation." A form of the
Articles of Incorporation of the Surviving Corporation is attached hereto
as Exhibit A.
(b) Immediately after the Effective Time and without any further
action on the part of the Company and the Purchaser, the By-Laws of the
Purchaser shall be the By-Laws of the Surviving Corporation and thereafter
may be amended or repealed in accordance with their terms or the Articles
of Incorporation of the Surviving Corporation and as provided by law.
SECTION 1.6 Directors and Officers. Immediately after the
Effective Time, and without any action on the part of the Company and the
Purchaser, the directors of the Purchaser immediately prior to the
Effective Time shall be the initial directors of the Surviving Corporation,
each to hold office in accordance with the Articles of Incorporation and
By-Laws of the Surviving Corporation and applicable law, and the officers
of the Company immediately prior to the Effective Time shall be the initial
officers of the Surviving Corporation, in each case until their respective
successors are duly elected or appointed, as the case may be, and qualified
in accordance with the Articles of Incorporation and By-Laws of the
Surviving Corporation and applicable law.
SECTION 1.7 Stockholders' Meeting. The Company will take all
action necessary in accordance with and subject to applicable law and its
Articles of Incorporation and By-Laws to convene a meeting of its
stockholders (the "Stockholders' Meeting") as soon as practicable after the
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date of this Agreement to consider and vote upon the adoption and
authorization of this Agreement and the approval of the Merger. Subject to
the fiduciary duties of the Board of Directors of the Company, the Company
shall (a) prepare, file with the SEC and send to its stockholders a Proxy
Statement (as hereinafter defined), which shall include the recommendation
of its Board of Directors that holders of Company Common Stock (as
hereinafter defined) adopt and authorize this Agreement and the Merger and
(b) use their reasonable best efforts to obtain the adoption and
authorization of this Agreement and the Merger by the stockholders of the
Company, including without limitation, timely mailing a notice complying
with the MBCA and describing the Merger and the other transactions
contemplated hereby and containing a recommendation of the Board of
Directors of the Company that the holders of Company Common Stock entitled
to vote thereon approve this Agreement and the Merger.
ARTICLE II
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE
CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES
SECTION 2.1 Effect on Capital Stock. At the Effective Time, by
virtue of the Merger and without any action on the part of the holders of
any shares of common stock, par value $.10 per share, of the Company (the
"Company Common Stock"), or holders of any shares of capital stock of the
Purchaser:
(a) Common Stock of the Purchaser. Each share of Common Stock, par
value $1.00 per share, of the Purchaser issued and outstanding immediately
prior to the Effective Time shall be converted into one validly issued,
fully paid and nonassessable share of Common Stock, par value $.10 per
share, of the Surviving Corporation, which shall be all of the issued and
outstanding capital stock of the Surviving Corporation.
(b) Cancellation of Subsidiary or Parent-Owned Company Common
Stock. Each share of Company Common Stock that is owned by any Subsidiary
of the Company, each share of Company Common Stock that is held by the
Company as treasury stock and each share of Company Common Stock that is
owned by the Parent, the Purchaser or any other Subsidiary of the Parent
shall automatically be canceled and retired and shall cease to exist, and
no stock of the Parent or other consideration shall be delivered or
deliverable in exchange therefor.
(c) Conversion of Company Common Stock. Except as otherwise
provided herein and subject to Section 2.1(d) , each share of Company
Common Stock issued and outstanding immediately prior to the Effective Time
(other than shares to be canceled in accordance with Section 2.1(b)) shall
be converted into the right to receive $17.00, payable to the holder
thereof, without interest (the "Merger Consideration"), upon surrender of
the certificate formerly representing such share of Company Common Stock in
the manner provided in Section 2.2; provided, that if, after the date of
this Agreement, the issued and outstanding shares of Company Common Stock
shall have been changed into a different number of shares or a different
class by reason of any stock dividend, subdivision, reclassification,
recapitalization, split, combination or exchange of shares, the Merger
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Consideration shall be correspondingly adjusted to reflect such change.
All such shares of Company Common Stock, when so converted, shall no longer
be outstanding and shall automatically be canceled and retired and shall
cease to exist, and each holder of a certificate previously representing
any such shares shall cease to have any rights with respect thereto, except
the right to receive the Merger Consideration therefor upon the surrender
of such certificates in accordance with Section 2.2, without interest.
(d) Shares of Dissenting Holders. Notwithstanding anything in this
Agreement to the contrary, shares of Company Common Stock issued and
outstanding immediately prior to the Effective Time held by holders (if
any) who have not voted in favor of the Merger, who have filed (or given a
consent to another beneficial owner of Company Common Stock to file) a
written notice of intent to demand the fair value of their shares of
Company Common Stock and who have demanded (or given a consent to another
beneficial owner of Company Common Stock to demand) payment with respect
thereto in accordance with Section 302A.473 of the MBCA and who shall not
have withdrawn such demand or otherwise have forfeited appraisal rights
(the "Dissenting Shares") shall not be converted as described in Section 2.
1(c) , but holders of such shares shall be entitled to receive payment of
the fair value of such shares in accordance with the provisions of such
Section 302A.473, except that all Dissenting Shares held by stockholders
who shall have failed to perfect or who effectively shall have withdrawn or
lost their right to appraisal of Company Common Stock under such Section
302A.473 shall thereupon be deemed to have converted into and to represent
the right to receive, without any interest thereon, Merger Consideration
upon surrender, in the manner provided in Section 2.1 of the certificate or
certificates that formerly evidenced such Dissenting Shares. The Company
shall give the Parent (i) prompt notice of any written notice of intent to
demand fair value of any shares, any demands for payment and any other
instruments served pursuant to the MBCA and received by the Company
relating to stockholders' dissenters' rights and any withdrawals of such
notices and other instruments received by the Company and (ii) the
opportunity to direct all negotiations and proceedings with respect to
demands for payment under the MBCA. Except as required by Section 302A.473
of the MBCA, the Company shall not, except with the prior written consent
of the Parent, voluntarily make any payment with respect to any demands for
payment with respect to Dissenting Shares, offer to settle or settle any
such demands.
SECTION 2.2 Exchange of Certificates
(a) Paying Agent. As of the Effective Time, the Parent shall
deposit, or shall cause to be deposited, with or for the account of a bank
or trust company (the "Paying Agent"), designated by the Parent and
reasonably satisfactory to the Company, for the benefit of the holders of
shares of Company Common Stock, cash in an aggregate amount (such amount
being hereinafter referred to as the "Payment Fund") equal to the product
of (A) the number of shares of Company Common Stock outstanding immediately
prior to the Effective Time (other than shares held by Parent, Purchaser or
the Company, or any Subsidiary thereof, and shares known at the Effective
Time to be Dissenting Shares) and (B) the per share Merger Consideration.
(b) Exchange Procedures. As soon as practicable after the
Effective Time, each holder of an outstanding certificate or certificates
which prior thereto represented shares of Company Common Stock shall, upon
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surrender of such certificate or certificates to the Paying Agent and
acceptance thereof by the Paying Agent, be entitled to the amount of cash
which the aggregate number of shares of Company Common Stock previously
represented by such certificate or certificates so surrendered shall have
been converted into the right to receive pursuant to Section 2.1(c) of this
Agreement, and such shares of Company Common Stock represented by the
certificate so surrendered shall forthwith be canceled. The Paying Agent
shall accept such certificates upon compliance with such reasonable terms
and conditions as the Paying Agent may impose to effect an orderly exchange
thereof in accordance with normal exchange practices. If the consideration
(or any portion thereof) to be paid in the Merger is to be delivered to any
Person other than the Person in whose name the certificate representing
shares of Company Common Stock surrendered in exchange therefor is
registered, it shall be a condition to such exchange that the certificate
so surrendered shall be properly endorsed or otherwise be in proper form
for transfer and that the Person requesting such exchange shall pay to the
Paying Agent any transfer or other taxes required by reason of the payment
of such consideration to a Person other than the registered holder of the
certificate surrendered, or shall establish to the satisfaction of the
Paying Agent that such tax has been paid or is not applicable. After the
Effective Time, there shall be no further transfer on the records of the
Company or its transfer agent of certificates representing shares of
Company Common Stock, and if such certificates are presented to the
Surviving Corporation for transfer, they shall be canceled against delivery
of cash as hereinabove provided. Until surrendered as contemplated by this
Section 2.2(b), each certificate representing shares of Company Common
Stock (other than certificates representing Dissenting Shares or shares
held by Parent, Purchaser or the Company, or any Subsidiary thereof), shall
be deemed at any time after the Effective Time to represent only the right
to receive upon such surrender the Merger Consideration in cash multiplied
by the number of shares of Company Common Stock evidenced by such
certificate, as contemplated by Section 2.1. No interest will be paid or
will accrue on any cash payable as Merger Consideration.
(c) Letter of Transmittal. Promptly after the Effective Time, but
in no event later than two business days after the Effective Time, the
Surviving Corporation shall require the Paying Agent to mail to each record
holder of certificates that immediately prior to the Effective Time
represented shares of Company Common Stock which have been converted
pursuant to Section 2.1, a form of letter of transmittal and instructions
for use in surrendering such certificates and receiving the consideration
to which such holder shall be entitled therefor pursuant to Section 2.1.
(d) No Further Ownership Rights in Company Common Stock. All cash
paid upon the surrender for exchange of certificates representing shares of
Company Common Stock in accordance with the terms of this Article II shall
be deemed to have been paid in full satisfaction of all rights pertaining
to the shares of Company Common Stock theretofore represented by such
certificates, subject, however, to the Surviving Corporation's obligation
to pay any dividends or make any other distributions with a record date
prior to the Effective Time which may have been declared by the Company on
such shares of Company Common Stock in accordance with the terms of this
Agreement or prior to the date of this Agreement and which remain unpaid at
the Effective Time.
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(e) Termination of Payment Fund. Any portion of the Payment Fund
which remains undistributed to the holders of the certificates representing
shares of Company Common Stock for one year after the Effective Time shall
be delivered to Parent, upon demand, and any holders of shares of Company
Common Stock who have not theretofore complied with this Article II shall
thereafter look only to Parent and only as general creditors thereof for
payment of their claim for any cash payable in respect of such certificates
to which such holders may be entitled.
(f) No Liability. None of Parent, Purchaser, the Surviving
Corporation or the Paying Agent shall be liable to any Person in respect of
any cash payable from the Payment Fund delivered to a public official
pursuant to any applicable abandoned property, escheat or similar law. If
any certificates representing shares of Company Common Stock shall not have
been surrendered prior to five years after the Effective Time (or
immediately prior to such earlier date on which any cash in respect of such
certificate would otherwise escheat to or become the property of any
Governmental Entity (as defined in Section 3. 1(e)), any such cash payable
in respect of such certificate shall, to the extent permitted by applicable
law, become the property of the Surviving Corporation, free and clear of
all claims or interest of any Person previously entitled thereto.
(g) Investment of Payment Fund. The Paying Agent shall invest the
Payment Fund, as directed by Parent, in (i) direct obligations of the
United States of America, (ii) obligations for which the full faith and
credit of the United States of America is pledged to provide for the
payment of principal and interest or (iii) commercial paper rated the
highest quality by both Moody's Investors Services, Inc. and Standard &
Poor' s Corporation, and any net earnings with respect thereto shall be
paid to Parent as and when requested by Parent; provided that any such
investment or any such payment of earnings shall not delay the receipt by
holders of shares of Company Common Stock of the Merger Consideration or
otherwise impair such holders' respective rights hereunder. In the event
the Payment Fund shall realize a loss on any such investment, Parent shall
promptly thereafter deposit in such Payment Fund on behalf of the Surviving
Corporation cash in an amount sufficient to enable such Payment Fund to
satisfy all remaining obligations originally contemplated to be paid out of
such Payment Fund.
SECTION 2.3 Treatment of Employee Options
(a) Prior to the Effective Time, the Board of Directors of the
Company (or, if appropriate, any committee thereof) shall adopt appropriate
resolutions and take all other actions necessary, including, if desirable,
obtaining Consents from the optionees, to provide for the automatic vesting
and conversion and cancellation, effective at the Effective Time, of the
outstanding stock options (the "Options") heretofore granted (whether
vested or unvested) under the Kahler Corporation Amended and Restated 1987
Stock Option Plan, the Amended and Restated Kahler Corporation Stock Option
Plan for Non-Employee Directors, the Kahler Corporation Amended and
Restated 1982 Incentive Stock Option Plan, the Kahler Realty Corporation
1994 Stock Option Plan, and the Kahler Realty Corporation 1994 Non-Employee
Directors Stock Option Plan (the "Stock Plans").
(b) The Company shall pay, as of the Effective Time, to each holder
of an outstanding Option (who consents to the cancellation of all of his or
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other Options for each share of Company Common Stock subject to an Option
an amount in cash equal to the excess, if any, of the Merger Consideration
over the per share exercise price of such Option. For purposes of this
Section 2.3, such amount, multiplied by the number of shares subject to
each Option, shall in the aggregate for all Options constitute the "Cash
Payment." The Cash Payment shall be reduced by any applicable withholding
taxes or other amounts required by law to be paid or withheld by the
Company, and each Option will be canceled. The Cash Payment shall be made
as soon as practicable, but in no event later than ten days following the
Effective Time. Notwithstanding the foregoing, with respect to any Person
subject to Section 16(a) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), any Cash Payment shall be made as soon as practicable
after the first date payment can be made without liability for such Person
under Section 16(b) of the Exchange Act. No interest will be paid or will
accrue on any Cash Payment.
(c) As provided herein, the Stock Plans and the outstanding Options
shall terminate as of the Effective Time. The Company will take all
necessary steps to ensure that none of the Parent, the Surviving
Corporation or any of their respective Subsidiaries is or will be bound by
any Options, other options, warrants, rights or agreements which would
entitle any Person, other than the Parent or its Affiliates, to own any
capital stock of the Surviving Corporation or to receive any payment in
respect thereof after the Effective Time.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.1.A. Representations and Warranties of the Company.
The Company hereby represents and warrants to the Parent and the Purchaser
as follows:
(a) Organization and Qualification; Subsidiaries. The Company,
each of its Subsidiaries and its Investment Entities (as defined below) is
a Person duly organized, validly existing and in good standing under the
laws of the jurisdiction of its formation and has the requisite corporate
or partnership power and authority to own, lease and operate its Properties
and assets and to carry on its business as it is now being conducted. The
Company, each of its Subsidiaries and its Investment Entities is duly
qualified or licensed as a foreign corporation or partnership to do
business, and is in good standing, in each jurisdiction where the character
of the Properties and assets owned, leased or operated by it or the nature
of its activities makes such qualification or licensing necessary, except
for such failures to be so duly qualified or licensed and in good standing
which would not reasonably be expected to have a Company Material Adverse
Effect. The Company has heretofore made available to the Parent a true,
correct and complete copy of the Articles of Incorporation and the By-Laws
of the Company and either the partnership or joint venture agreement or the
Articles of Incorporation and the By-Laws of each Subsidiary and of each
Investment Entity of the Company, as applicable, each as amended to date
and as currently in effect.
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(b) Capitalization. (i) The authorized capital stock of the
Company consists of 70,000,000 shares of Company Common Stock and
10,000,000 shares of Preferred Stock, $.10 par value per share ("Company
Preferred Stock"). As of May 2, 1996, (i) (A) 4,343,291 shares of Company
Common Stock were issued and outstanding, all of which were validly issued,
fully paid and nonassessable and were issued free of preemptive rights and
(B) an aggregate of 398,600 shares of Company Common Stock were reserved
for issuance and issuable upon or otherwise deliverable in connection with
the exercise of outstanding Options or other rights to acquire shares of
Company Common Stock issued pursuant to the Stock Plans. All shares of
Company Common Stock reserved for issuance as aforesaid, upon issuance on
the terms and conditions specified in the instruments pursuant to which
they are issuable, shall be duly authorized, validly issued, fully paid and
nonassessable and free of preemptive rights. As of the date hereof, no
shares of Company Preferred Stock are issued and outstanding. Schedule
3.1(b)(i) provides a list of the Subsidiaries of the Company and other
entities in which the Company holds, directly or indirectly, an equity
interest (those entities in which the Company has an equity interest but do
not constitute Subsidiaries, hereinafter, the "Investment Entities"), and,
as to each such Subsidiary which is not wholly owned by the Company and
each Investment Entity the identity and percent record ownership of third
parties as of the date hereof, the percentage of capital stock or other
equity interests owned by the Company, directly or indirectly, in such
Subsidiaries or Investment Entities and the percentage of capital stock or
other equity interests owned by Affiliates of the Company. Except as set
forth in Schedule 3.1(b)(i) hereto, each of the outstanding shares of
capital stock of each of the Company's corporate Subsidiaries and
Investment Entities directly or indirectly owned by the Company is duly
authorized, validly issued, fully paid and nonassessable. Except as set
forth in Schedule 3.1(b)(i), the Company does not own, directly or
indirectly, less than a 50% equity interest in any Person.
(ii) Except as set forth in this Section 3.1(b), as reflected
on Schedule 3.1(b)(ii) and for shares of Company Common Stock issued
pursuant to the exercise of Options outstanding on May 2, 1996 in
accordance with their terms, there are outstanding (w) no shares of capital
stock or other voting securities of the Company or any of its Subsidiaries
or Investment Entities, (x) no securities of the Company or any of its
Subsidiaries or Investment Entities convertible into or exchangeable or
exercisable for shares of capital stock or voting securities of the Company
or any of its Subsidiaries or Investment Entities, (y) no options, warrants
or other rights, agreements, arrangements or commitments pursuant to which
the Company or any of its Subsidiaries or Investment Entities is obligated
to issue, any capital stock, voting securities or securities convertible
into or exchangeable or exercisable for capital stock of or voting
securities of the Company or any of its Subsidiaries or its Investment
Entities, and (z) except pursuant to Material Contracts disclosed to Parent
on or prior to the date hereof, no equity equivalents or other similar
rights, options or warrants, or other rights, agreements, arrangements or
commitments pursuant to which the Company or any of its Subsidiaries or
Investment Entities is obligated to issue any such equity equivalents or
such interests (collectively referred to for purposes of this Section
3.1(b) as "Company Securities"). Except as set forth above, or as set
forth on Schedule 3.1(b)(ii) hereto, there are no outstanding obligations
of the Company or any of its Subsidiaries or, to the knowledge of the
-9-
Company, Investment Entities to repurchase, redeem or otherwise acquire any
Company Securities and no subscriptions, agreements or other commitments of
any character pursuant to which the Company or any of its Subsidiaries or,
to the knowledge of the Company, its Investment Entities is or may become
obligated to issue Company Securities or evidencing the right to subscribe
for Company Securities. As of the date hereof, the Board of Directors has
suspended The Kahler Realty Corporation Employee Stock Purchase Plan, and
has suspended the stock portion of the 1994 Retainer Stock Payment Plan for
Non-Employee Directors. Neither the Company nor any of its Subsidiaries or
Investment Entities has any authorized or outstanding bonds, debentures,
notes or other indebtedness the holders of which have the right to vote (or
convertible or exchangeable into or exercisable for securities having the
right to vote) with the stockholders of the Company or any of its
Subsidiaries or Investment Entities on any matter, except for debt owed by
one of the Company's Subsidiaries or Investment Entities to the Company or
a wholly owned Subsidiary thereof.
(iii) Each of the Company's Subsidiaries and its Investment
Entities which is a partnership (each a "Partnership") is and has been from
its inception (A) a "partnership" within the meaning of Sections 761 and
7701(a)(2) of the Code and (B) subject to the provisions of Subchapter K
of the Code for federal income tax purposes. Schedule 3.1(b)(iii) sets
forth a true, correct and complete list of each partnership agreement,
joint venture agreement and similar agreement (together with all
supplements, amendments and modifications thereto) with respect to each
Partnership. Except as set forth in Schedule 3.1(b)(iii) hereto, (x) each
partnership interest of the Partnerships exists in accordance with
applicable law and such Partnership's partnership agreement, and neither
the Company nor any of its Subsidiaries or, to the knowledge of the
Company, any of its Investment Entities is in default of any of its
material obligations under such partnership agreement and (y) there are no
unsatisfied capital calls applicable to the Company or any of its
Subsidiaries that in the aggregate exceed $250,000.
(c) Company Action. An independent committee of the Company's
Board of Directors, at a meeting duly called and held on May 6, 1996, has
unanimously approved (i) the entry by the Purchaser into voting agreements
with Milner Associates and the Mayo Foundation (the "Voting Agreements")
and the consummation of the transactions contemplated thereby and (ii) the
entry by the Parent and the Purchaser into this Agreement and the
consummation of the transactions contemplated hereby. Such approval
includes and constitutes approval of the Voting Agreements, this Agreement
and the consummation of the respective transactions contemplated thereby
for purposes of Section 302A.673 of the MBCA. The Company's Board of
Directors, at a meeting duly called and held on May 6, 1996, has
unanimously (i) determined that this Agreement and the transactions
contemplated hereby, including the Merger, are fair to and in the best
interests of the holders of the shares of Company Common Stock, (ii)
resolved to recommend that the holders of shares of Company Common Stock
approve and adopt this Agreement and the Merger and (iii) approved this
Agreement and the transactions contemplated hereby. The Company further
represents and warrants that in connection with the actions taken pursuant
to clauses (i) and (ii) above the Board resolved to arrange for this
Agreement and the transactions contemplated hereby, including the Merger,
to be presented for approval by the Company's stockholders.
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(d) Authority Relative to Agreement. The Company has all necessary
corporate power and authority to execute and deliver this Agreement, to
perform its obligations under this Agreement and to consummate the
transactions contemplated hereby. The execution, delivery and performance
of this Agreement by the Company and the consummation by the Company of the
transactions contemplated hereby have been duly authorized by the Board of
Directors of the Company and no other corporate proceedings on the part of
the Company are necessary to authorize this Agreement and the consummation
by the Company of such transactions, other than the approval and adoption
of the Merger and this Agreement by the holders of a majority of the
outstanding shares of Company Common Stock entitled to vote. This
Agreement has been validly executed and delivered by the Company and,
assuming the due authorization, execution and delivery hereof by the other
parties hereto, constitutes a legal, valid and binding obligation of the
Company, enforceable against the Company in accordance with its terms. The
execution, delivery and performance of this Agreement by the Company do not
and will not conflict with or violate the Articles of Incorporation or
By-Laws of the Company or any partnership or joint venture agreement or
Articles of Incorporation or By-Laws, as the case may be, of any of the
Company's Subsidiaries or any of its Investment Entities.
(e) Regulatory Approvals. The execution, delivery and performance
of this Agreement by the Company and the consummation of the transactions
contemplated hereby by the Company do not and will not require any consent,
approval, authorization or permit of, action by, filing with or
notification to, any Governmental Entity except for: (A) the filing with
the SEC of a Proxy Statement in definitive form relating to the
Stockholders' Meeting and of other reports required to be filed pursuant to
the Exchange Act; (B) applicable filings pursuant to the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the "HSR Act") and the
expiration or termination of all applicable waiting periods thereunder; (C)
the filing and recordation of appropriate merger or other documents as
required by the MBCA; (D) compliance with the statutory provisions and
regulations relating to real property transfer gains taxes and real
property transfer taxes; (E) applicable reporting and notification
requirements of the NASDAQ Stock Market; (F) such other consents,
approvals, authorizations, filings or notices as are set forth in Schedule
3.1(e) hereto and (G) such consents, approvals, authorizations, permits,
actions, filings or notifications which the failure to make or obtain would
not singly or in the aggregate reasonably be expected to have a Company
Material Adverse Effect.
(f) SEC Filings; Financial Statements. (i) The Company has filed
all forms, reports, statements and other documents required to be filed
with the Securities and Exchange Commission (the "SEC") since January 1,
1993 (collectively, the "SEC Reports"). Except as set forth on Schedule
3.1(f), the SEC Reports, including all the SEC Reports filed after the date
of this Agreement and prior to the Effective Time, were or will be in
compliance in all material respects with the applicable requirements of the
Securities Act or the Exchange Act, as applicable, each as in effect on the
date so filed. Except as set forth on Schedule 3.1(f), none of the SEC
Reports filed by the Company, including all the SEC Reports filed after the
date of this Agreement and prior to the Effective Time, contained, or will
contain when filed, any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary in order
to make the statements therein, in the light of the circumstances under
which they were made, not misleading.
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(ii) Except as set forth on Schedule 3.1(f), the consolidated
financial statements of the Company for each of the three fiscal years
ended December 31, 1993, 1994 and 1995 included in SEC Reports comply, and
the financial statements included in all SEC Reports filed after the date
of this Agreement and prior to the Effective Time will comply, as to form
in all material respects with applicable accounting requirements and with
the published rules and regulations of the SEC with respect thereto, have
been or will be prepared in accordance with GAAP (except as may be
indicated in the notes thereto) and do or will fairly present the
consolidated financial position of the Company and its consolidated
Subsidiaries at the respective dates thereof and the consolidated results
of their operations and changes in cash flows for the periods indicated.
(iii) The consolidating financial statements of each of the
Company's Subsidiaries and Investment Entities previously provided to the
Parent have been prepared in good faith and were used by the Company as the
basis for the preparation of the Company's audited financial statements for
the three fiscal years ended December 31, 1995.
(iv) All elements of the Improvements (other than the elements
and systems referred to in Section 3.1(v)(vii) for which there is a
representation and warranty therein) are in good operating condition,
normal wear and tear excepted, and in a good state of repair and
maintenance except where the failure to be in such condition or state shall
not singly or in the aggregate have a Company Material Adverse Effect.
(g) Proxy Statement. The Proxy Statement (or any amendment thereof
or supplement thereto) shall comply in all material respects with
applicable federal securities laws and, at the date of mailing to
stockholders of the Company and at the time of the Stockholders' Meeting to
be held in connection with the Merger, will not contain any untrue
statement of a material fact or omit to state any material fact required to
be stated therein or necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not misleading,
except that no representation is made by the Company with respect to
statements made therein based on information supplied by the Parent or the
Purchaser in writing for inclusion in the Proxy Statement.
(h) Transactions with Affiliates. Other than matters referred to
in Schedule 3.1(h) and transactions between any of the Company and its
Subsidiaries and Investment Entities, and except as disclosed in the SEC
Reports, there are none, and for the past three years there have not been
any, material contracts, agreements or transactions between the Company,
any of its Subsidiaries or its Investment Entities, and any Affiliates,
directors or executive officers of the Company.
(i) Opinion of Financial Advisor. On the date hereof, the Company
has received the opinion of Montgomery Securities to the effect that the
Merger Consideration is fair to the stockholders of the Company from a
financial point of view.
(j) Brokers; Estimated Fees. Except as disclosed on Schedule
3.1(j), no broker, finder or investment banker is entitled to any
brokerage, finder's or other fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by
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and on behalf of the Company. A schedule setting forth the aggregate
estimated out-of-pocket fees and expenses incurred and to be incurred by
the Company in connection with this Agreement and the transactions
contemplated hereby (including the fees of the Company's legal counsel but
excluding the costs of any Required Consents) has been delivered by the
Company on the date hereof.
(k) Mayo. The Company and the Mayo Foundation have each executed
and delivered the amendment, attached hereto as Exhibit B, to the
Agreement, dated as of February 1, 1989, between the Company and the Mayo
Foundation.
Section 3.1B Additional Representations and Warranties of the
Company. The Company represents and warrants that, except for such matters
that would not singly or in the aggregate (x) materially adversely affect
the ability of the Company to perform its obligations hereunder and (y)
reasonably be expected to result in a Company Material Adverse Effect:
(l) No Conflicts. (i) Except as disclosed on Schedule 3.1(l) (i) ,
the execution, delivery and performance of this Agreement by the Company do
not and will not: (A) assuming that all consents, approvals and
authorizations contemplated by Section 3.1(e) have been obtained and all
filings described in Section 3.1(e) have been made, conflict with or
violate any Governmental Regulation applicable to the Company or any of its
Subsidiaries or Investment Entities or by which its or any of their
respective Properties or assets are bound; or (B) assuming that all
consents, approvals and authorizations contemplated by Section 3.1(e) have
been obtained and all filings described in Section 3.1(e) have been made,
result in any breach or violation of or constitute a default under, or give
rise to any right of first refusal, termination, amendment, acceleration or
cancellation of, result in a loss or reduction of rights under, or result
in the creation of a Lien on any of the Properties or assets of the Company
or any of its Subsidiaries or Investment Entities pursuant to, any note,
bond, mortgage, indenture, contract, agreement, lease, license, permit,
franchise or other instrument or obligation to which the Company or any of
its Subsidiaries or, to the knowledge of the Company, any of its Investment
Entities is a party or by which the Company or any of its Subsidiaries or,
to the knowledge of the Company, any of its Investment Entities or its or
any of their respective material Properties or assets are bound or are
subject.
(m) Undisclosed Liabilities. Except as set forth on Schedule
3.1(m) and except as and to the extent disclosed in the consolidated
balance sheet of the Company as at December 31, 1995 previously furnished
the Parent, there are no liabilities, whether absolute, accrued, contingent
or otherwise, of the Company or any of its Subsidiaries, that would be
required to be reflected on, or reserved against, in a consolidated balance
sheet of the Company in accordance with GAAP, except for (i) liabilities
which, singly or in the aggregate, are immaterial in amount or nature, and
(ii) liabilities incurred subsequent to the date of such financial
statement by the Company, its Subsidiaries or its Investment Entities in
the ordinary course of business consistent with past practice.
(n) Absence of Certain Changes or Events. Except as disclosed
prior to the date hereof in the SEC Reports or on Schedule 3.1(n), since
December 31, 1995, the Company each of its Subsidiaries and, to the
-13-
knowledge of the Company, each of its Investment Entities has conducted its
business only in the ordinary course, consistent with past practice and
except as disclosed prior to the date hereof in the SEC Reports or on
Schedule 3.1(n), since December 31, 1995, there has not been prior to the
date hereof, (x) any adverse change in the business, results of operations
or financial condition of the Company and its Subsidiaries taken as a whole
or, to the knowledge of the Company, its Investment Entities taken as a
whole with the Company and its Subsidiaries, nor has there been any
development which, taken together with all other developments in the
aggregate, would reasonably be expected to result in such an adverse
change, nor to the knowledge of the Company is any such adverse change or
development threatened, (y) any change in any accounting principle, method
or practice used by it or any change in the classification of assets,
recognition of income or expenses or the depreciation or amortization
policies or rates therefore applied (unless required by the SEC or the
Financial Accounting Standards Board ("FASB")), or (z) except in the
ordinary course of business consistent with past practice and within levels
anticipated in the 1996 Budget, any actual or, to the knowledge of the
Company, threatened, damage, destruction, loss, conversion, condemnation or
taking by eminent domain related to any material asset or Property of the
Company, its Subsidiaries or, to the knowledge of the Company, its
Investment Entities (including each of the Property Owners), nor are any
proceedings pending with respect to the same. In addition, except as
disclosed on Schedule 3.1(n) or in the SEC Reports, from December 31, 1995
to the date hereof, neither the Company nor any of its Subsidiaries or
Investment Entities has (A) issued, sold or delivered or agreed to issue,
sell or deliver any additional shares of their capital stock (except for
the issuance of Company Common Stock pursuant to the exercise of Options in
accordance with their terms or pursuant to the compensation elections of
the directors of the Company under Company Plans in effect on the date
hereof), partnership, joint venture or other equity interests
(collectively, "Ownership Interests"), or any options, warrants or rights
to acquire any Ownership Interests, or securities convertible into or
exchangeable for Ownership Interests, other than to the Company or its
wholly owned Subsidiaries, (B) acquired or disposed of any material assets
or material Properties or agreed to manage or operate any material asset or
material Property, or entered into any agreement or other arrangement for
any such acquisition, disposition, management or operation, except in each
case in the ordinary course of business consistent with past practice, (C)
declared, made, paid or set apart any sum for any dividend or other
distribution to its shareholders, partners or co-venturers (other than the
Company and its wholly owned Subsidiaries), or purchased or redeemed any of
its Ownership Interests or reclassified any of its Ownership Interests, (D)
except as required under existing Company Plans, increased or accelerated
the wages, salaries, compensation, pension or other benefits payable to any
employee, or granted any severance or termination pay, except to employees
who are not executive officers or directors in accordance with its past
business practice, or entered into any employment agreement with any
officer or salaried employee which is not terminable by the employer,
without cause and without severance or termination payments, upon notice of
30 days or less, or established, adopted, entered into or amended or
terminated any Company Plan or other Material Contract listed on Schedule
3.1(p)(i)(B), (E) relinquished, forgiven or canceled any material debts or
claims (except with respect to transient hotel guests in the ordinary
course of business consistent with past practice) or waived any rights of
-14-
material value, (F) suffered any strike or other material labor trouble,
(G) made or prepaid any material investment, loan or other extension of
credit (other than working capital borrowings) or entered into any
commitment or agreement to make or prepay any material investments, loans
or extensions of credit (other than working capital borrowings) to any
entity, other than a wholly owned Subsidiary of the Company, (H) issued any
indemnity, guaranty, "keep well" agreement or similar assurances of
performance for any other entity, other than a wholly owned Subsidiary,
with respect to which the contingent liability exceeds $100,000 per
agreement, (I) except as reflected on Schedule 3.1(b)(iii), amended its
organizational documents or altered, through merger, liquidation,
reorganization, restructuring or any other fashion the entity structure or
the Company's direct or indirect Ownership Interests in such entity, (J)
except as reflected on Schedule 3.1(p), amended, supplemented or modified
any Material Contract or entered into any material transaction, in each
case other than in the ordinary course of business consistent with past
practice; or (K) made any material Tax elections, settled or compromised
any material income Tax liabilities or deferred the payment of any material
Taxes that came due.
(o) Compliance with Laws.
(i) Except as set forth on Schedule 3.1(o)(i) the Company,
each of its Subsidiaries and, to the knowledge of the Company, each of its
Investment Entities hold all material Licenses and Permits necessary for
the lawful conduct of their respective businesses and the operation and
management of the Properties as currently conducted. All such Licenses and
Permits are valid and in full force and effect.
(ii) The Company, each of its Subsidiaries and, to the
knowledge of the Company, each of its Investment Entities are in compliance
in all material respects with the terms of their respective Licenses and
Permits, and each of the Properties is being operated, leased, managed and
used in accordance in all material respects with the Licenses and Permits.
(iii) The Company, each of its Subsidiaries and, to the
knowledge of the Company, each of its Investment Entities are in compliance
in all material respects with all Government Regulations, excluding the
Americans with Disabilities Act (the "ADA").
(iv) Except as set forth on Schedule 3.1(o), as of the date of
this Agreement, to the knowledge of the Company, no investigation, review,
inquiry or proceeding by any Governmental Entity is pending or threatened
with respect to any material matter as to which the Company, any of its
Subsidiaries or any of its Investment Entities is a party or subject.
(v) Except as set forth on Schedule 3.1(o)(v), as of the date
of this Agreement, neither the Company nor any Subsidiary nor, to the
Company's knowledge, any Investment Entity, has received any written notice
from any Governmental Authority with respect to compliance with the ADA.
The Company has in effect an ADA compliance program for the Company, its
Subsidiaries and the Investment Entities. The Company, its Subsidiaries
and the Investment Entities have taken all commercially reasonable actions
to comply with the ADA.
-15-
(p) Agreements.
(i) Schedule 3.1(p) and Schedules 3.1(s)(i) through
3.1(s)(xi) together set forth a true, correct and complete list of all of
the executory contracts and other agreements (together with all
supplements, amendments and modifications thereto) in each of the following
categories to which the Company or any of its Subsidiaries or, to the
knowledge of the Company, any of its Investment Entities is a party or by
or to which their respective assets, Properties or businesses are bound or
subject as of the date hereof (the "Material Contracts"):
(A) except as set forth in Partnership Agreements,
Franchise Agreements and Ground Leases previously disclosed to
Parent, (x) any agreement, preferential rights or options or rights
of first refusal in each case relating to the acquisition by the
Company, any of its Subsidiaries or, to the knowledge of the Company,
its Investment Entities, of any operating business, material amount
of assets, properties or the capital stock of any other Person or
relating to the disposition of the capital stock of the Company, any
of its Subsidiaries or, to the knowledge of the Company, its
Investment Entities, or a material amount of its or their assets or
Properties (including grants of any preferential rights or options or
right of first refusal with respect thereto) and (y) any agreement
for the sale or exchange of assets that provides for payments in
excess of $100,000 per annum or $250,000 in the aggregate per
agreement;
(B) all Company Plans (as defined in Section 3.1(s))
for the benefit of, or relating to, any employee, director, former
employee, former director or retiree of the Company, any of the
Company's Subsidiaries or any of its Investment Entities;
(C) all employment, consulting, severance, or any
similar agreement, arrangement or contract related to employment or
personal services with Persons who are not officers, directors or
employees of the Company or ERISA Affiliates having a remaining term
of one year or more, not terminable by the Company or any Subsidiary
without penalty on 90 days or less notice and involving payments in
excess of $50,000.
(D) all collective bargaining or similar agreements
with any labor union;
(E) all contracts or agreements to indemnify any
officers or directors of the Company, its Subsidiaries or, to the
knowledge of the Company, its Investment Entities;
(F) except for Partnership Agreements and agreements
listed on Schedule 3.1(p)(E), all agreements of surety, guarantee,
reimbursement, indemnity, "keep well" or agreements to advance funds,
letters of credit, bid bond, temporary performance bond or
indemnification or similar assurances of performance with respect to
which the Company or any of its Subsidiaries or, to the knowledge of
the Company, any of its Investment Entities, is the obligor or
beneficiary, with respect to which the contingent liability exceeds
$100,000 (excluding any such arrangement between the Company and its
wholly owned Subsidiaries);
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(G) except for documents relating to indebtedness not
exceeding $200,000 in any single instrument and $1,000,000 for all
such instruments, all indentures, loan agreements, promissory notes,
agreements pledging, mortgaging or otherwise granting a security
interest in collateral or guarantees under which the Company or any
of its Subsidiaries or, to the knowledge of the Company, its
Investment Entities has outstanding indebtedness (including Existing
Indebtedness), obligations or liabilities, contingent or otherwise,
for borrowed money or under which any Person (including the Company,
any of its Subsidiaries or, to the knowledge of the Company, any of
its Investment Entities) has outstanding indebtedness, obligations or
liabilities, contingent or otherwise, for borrowed money with the
Company, any of its Subsidiaries or, to the knowledge of the Company,
any of its Investment Entities (set forth on Schedule 3.1(p)(G) is a
list of the Existing Indebtedness, maturity date and interest rate
with respect to each Existing Loan, and specifying if such Existing
Loan is not recourse);
(H) excluding group reservations for transient hotel
guests, all material Property Contracts and, to the knowledge of the
Company, all proposed material Property Contracts being negotiated;
(I) all Ground Leases and material Space Leases
(including a schedule of the current annual rent and term for such
material Space Leases);
(J) all commitments to make capital expenditures,
capital additions or capital improvements (including, without
limitation, tenant improvements) not reflected in the Capital
Expenditure Budget, involving an expenditure in excess of $100,000
and capital expenditures exceeding $500,000 in the aggregate;
(K) other than as set forth on Scheduled 3.1(l), all
agreements providing for additional or accelerated payments or other
consideration or altering the respective rights of the parties
thereto on account of the transactions contemplated hereby;
(L) all agreements (other than Franchise Agreements,
Partnership Agreements, REAs and Ground Leases) which limit in any
material respect the right of the Company or any of its Subsidiaries
or, to the knowledge of the Company, any of its Investment Entities
to engage in any business (including without limitation, the
ownership, operation or sale of hotels); and
(M) any agreements or contracts (of the types not
covered by clauses (A) through (L) above and except for Permitted
Liens), which are material to the business, operations, Properties,
assets or results of operations of the Company and its Subsidiaries
taken as a whole and which are not terminable by the Company without
penalty on 90 days' notice or less.
(ii) The Company has made available to the Parent true,
correct and complete copies of the Material Contracts. Except for
modifications as set forth on Schedule 3.1(p)(i), each of the Material
Contracts is valid and binding, in full force and effect and unmodified.
Except as set forth on Schedule 3.1(p)(ii), neither the Company nor any of
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its Subsidiaries or, to the knowledge of the Company, its Investment
Entities: (x) is in material breach or default under any Material Contract;
(y) has received any written notice of default, acceleration, cancellation
or termination (or any other written notice with like or similar effect)
under any Material Contract; or (z) has any knowledge of any default or
fact which would, to the knowledge of the Company, with the giving of
notice or passage of time or both, constitute a material default by the
Company, its Subsidiaries or its Investment Entities under any Material
Contract, and the Company has no knowledge that any other party to any
Material Contract is in material breach or default thereof. Neither the
consummation of the transactions contemplated by this Agreement nor any
subsequent sale or transfer of any Property may give rise to, or result in
the exercise of, any right of first refusal or option exercisable by any
Person (other than the Company or its Subsidiaries) with respect to all or
any portion of any Property pursuant to the terms of any of the Permitted
Liens or Material Contracts listed on Schedule 3.1(p)(i)(A) hereof.
(q) Permitted Liens. The Company, the Subsidiaries and, to the
knowledge of the Company, each of its Investment Entities and each Property
is in compliance in all material respects with the terms of Permitted Liens
applicable to it. Except as set forth on Schedule 3.1(v)(iii), none of the
Permitted Liens (excluding any of the Ground Leases and any mortgages or
deeds of trust) requires the Company, its Subsidiaries or any of its
Investment Entities to make any material special or non-recurring payment
so long as there is no default under such Permitted Lien.
(r) Absence of Litigation. Except as disclosed on Schedule 3.1(r),
in the SEC Reports or the financial statements or the notes thereto
delivered to the Parent pursuant to Sections 3.1(f)(iii), as of the date
hereof, there are no suits, claims, actions, proceedings or investigations
pending or, to the knowledge of the Company, threatened against the Company
or any of its Subsidiaries or, to the knowledge of the Company, any of its
Investment Entities or any Properties or rights of the Company or any of
its Subsidiaries or, to the knowledge of the Company, any of its Investment
Entities, before any court, arbitrator or administrative, governmental or
regulatory authority or body, domestic or foreign, other than ordinary
course claims of the type insured against (subject to self-insured
retentions and deductibles) by the Company, its Subsidiaries and, to the
knowledge of the Company, its Investment Entities. Except as set forth on
Schedule 3.1(r), neither the Company nor any of its Subsidiaries or, to the
knowledge of the Company, any of its Investment Entities nor any of their
respective Properties is or are subject to any material order, writ,
judgment, injunction, decree, determination or award that remains
unsatisfied or in effect.
(s) Employee Matters. (i) Schedule 3.1(s) (i) lists each "employee
benefit plan" (within the meaning of section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA")), and any
other bonus, stock option, stock purchase, stock appreciation right,
incentive, deferred compensation, supplemental retirement, severance and
other similar material fringe or employee benefit plans, programs, policies
or arrangements, any employment, consulting, indemnification or executive
compensation agreements for the benefit of, or relating to, any employee,
former employee or retiree of the Company or any trade or business under
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common control with the Company (an "ERISA Affiliate") within the meaning
of Section 414 of the Code, and written descriptions of any oral
arrangements or agreements with respect to the foregoing, currently
maintained or maintained within the last three years by the Company or any
ERISA Affiliate or under which the Company or any ERISA Affiliate has any
liability in respect of current or former employees (collectively referred
to as the "Company Plans"). True, correct and complete copies of the
following have been made available to the Parent: (A) all Company Plans
and any trust agreement related thereto; (B) the most recent annual report
(Form 5500 Series) with respect to each Company Plan; (C) the most recent
summary plan description (as described in section 102(a)(1) of ERISA); and
(D) the most recent actuarial report (based on information accurately
reported by the Company or any Subsidiary of the Company) which reflects
the funded status and contribution requirements of each Title IV Plan (as
defined in Section 3.1(s)(viii) below)). The annual reports (Form 5500
Series) with respect to each Company Plan have been properly filed,
including the payment in full of any late fees, interest and penalties, if,
and to the extent, applicable.
(ii) Each Company Plan has been administered, and is in
compliance, in all material respects with ERISA, the Code, the terms of
such Company Plan and all laws, rules and regulations applicable thereto.
(iii) No "prohibited transaction" (as such term is used in section 406 of
ERISA or section 4975 of the Code) has heretofore occurred with respect to
the assets of any Company Plan.
(iv) Neither the Company nor any ERISA Affiliate contributes
to, or was required within the preceding six years to contribute to, any
"multi employer plan" (within the meaning of section 3(37) of ERISA).
(v) Each Company Plan which is intended to be qualified
within the meaning of Section 401(a) of the Code has received a favorable
determination letter from the Internal Revenue Service ("IRS") as to its
qualification and since the date of such favorable determination letter, to
the Company's knowledge, neither it nor any ERISA Affiliate has taken or
failed to take any action which would be reasonably likely to disqualify
such Company Plan.
(vi) There are no pending actions which have been asserted in
writing or instituted (other than in respect of benefits due in the
ordinary course) against the assets of any of the Company Plans or against
the Company or any ERISA Affiliate or any fiduciary of the Company Plans
with respect to the Company Plans.
(vii) Except as required by section 4980B of the Code or as set
forth on Schedule 3.1(s)(vii), no Company Plan or other arrangement
provides medical or death benefits (whether or not insured) with respect to
current or former employees of the Company or any ERISA Affiliate beyond
their retirement or other termination of employment. Any continuation
coverage provided under any Company Plans which are welfare benefit plans
(within the meaning of section 3(1) of ERISA) complies with section 4980B
of the Code and is at the expense of the participant or beneficiary.
(viii) Schedule 3.1(s)(viii) sets forth each Company Plan
(other than a multi employer plan) that is subject to Title IV of ERISA (a
"Title IV Plan"). Except as set forth on Schedule 3.1(s)(viii), no
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accumulated funding deficiency or unpaid required installments within the
meaning of section 412 of the Code exists, nor has there been issued a
waiver or variance of the minimum funding standards imposed by the Code
with respect to any Title IV Plan, nor has any lien been created under
section 302(f) of ERISA or security been required under section 307 of
ERISA, nor are any excise taxes due or hereafter to become due under
section 4971 or 4972 of the Code with respect to the funding of any such
plan for any plan year or other fiscal period ending on or before the
Effective Time. With respect to each Title IV Plan, (a) there has not
occurred any reportable event within the meaning of section 4043(c) of
ERISA or the regulations thereunder (other than events as to which the
30-day notice requirement has been waived), and (b) there exists no ground
upon which the Pension Benefit Guaranty Corporation ("PBGC") would
reasonably be expected to demand termination of any Title IV Plan or
appoint itself or its nominee as trustee thereunder. The PBGC has not
instituted or threatened in writing a proceeding to terminate any Title IV
Plan. All PBGC premiums due on or before the date hereof with respect to
any Title IV Plan have been paid in full, including late fees, interest and
penalties, if and to the extent applicable. There has been no material
adverse change in the assets, liabilities or financial position of each
Title IV Plan since the date of the most recent actuarial report. The
Company does not intend that a principal purpose for engaging in the
transactions contemplated hereby is for the evasion of liability under
Title IV of ERISA.
(ix) Except as set forth on Schedule 3.1(s)(ix) (which sets
forth the respective amounts of money, property or other consideration
which would reasonably be expected to be paid or transferred), no Company
Plan or agreement, program, policy or other arrangement by or to which the
Company or any ERISA Affiliate is a party, is bound or is otherwise liable,
by its terms or in effect would reasonably be expected to require any
payment or transfer of money, property or other consideration on account of
or in connection with the sale, lease, exchange or transfer of either any
shares of stock or any of the assets of the Company or any ERISA Affiliate
(whether or not any such payment would constitute a "parachute payment" or
"excess parachute payment" within the meaning of Section 280G of the Code).
(x) As of the date hereof, the Company and its Subsidiaries
have approximately 3,750 employees in the aggregate, and no demand for
recognition made by any labor organization is pending with respect to any
such employees. Schedule 3.1(s)(xi) sets forth a list of all collective
bargaining agreements to which the Company is a party as of the date hereof
and any pending grievances thereunder. The Company and its Subsidiaries
have not at any time during the last two years (a) had, nor is there now
threatened, a material strike, picketing, work stoppage, work slowdown,
lockout or other labor trouble or dispute or grievance under any collective
bargaining agreement or (b)engaged in any unfair labor practice or
discriminated on the basis of age or other discrimination prohibited by
applicable law in their employment conditions or practices. There are no
representation petitions, unfair labor practice or age discrimination
charges or complaints, or other charges or complaints alleging illegal
discriminatory practices by the Company or its Subsidiaries, pending or
threatened before the National Labor Relations Board or any other
governmental body. The Company and its Subsidiaries have not incurred any
liability or obligation under the Worker Adjustment and Retraining
Notification Act or similar state laws, which remains unpaid or
unsatisfied.
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(xi) All insurance premiums required to be paid with respect
to Company Plans as of the Effective Time have been or will be paid prior
thereto and adequate reserves have been provided for on the Company's
balance sheet for any premiums (or portions thereof) attributable to
service on or prior to the Effective Time.
(t) Tax Matters. (i) Except as disclosed in Schedule 3.1(t) , the
Company and each of its Subsidiaries and, to the knowledge of the Company,
each of its Investment Entities, and any consolidated, combined, unitary or
aggregate group for Tax (as hereinafter defined) purposes of which the
Company or any of its Subsidiaries and Investment Entities is or has been a
member has timely filed all Tax Returns (as hereinafter defined) required
to be filed by it, has paid all Taxes required to be paid whether or not
shown to be due prior to the date any fine or penalty would be assessed
thereon or has provided adequate reserves in its financial statements for
any Taxes that have not been paid, whether or not shown as being due on any
returns.
(ii) Except as disclosed in Schedule 3.1(t), (i) no deficiency
for any Taxes has been proposed, asserted or assessed against the Company
or its Subsidiaries and, to the knowledge of the Company, its Investment
Entities that has not been resolved and paid in full, (ii) there are no
waivers or comparable consents regarding the application of the statute of
limitations with respect to any material Taxes or Tax Returns of the
Company or any of its Subsidiaries and, to the knowledge of the Company,
its Investment Entities and (iii) there are no present or proposed audits,
examinations, administrative proceedings or court proceedings with respect
to any Taxes or Tax Returns of the Company or its Subsidiaries and, to the
knowledge of the Company, its Investment Entities.
(iii) Except as disclosed in Schedule 3.1(t), none of the
Company or any of its Subsidiaries and, to the Company's knowledge,
Investment Entities is a party to or liable under any material agreement
(other than Permitted Liens) for the allocation, payment or sharing of
Taxes.
(iv) There are no material Liens for Taxes upon the Properties
or assets of the Company or any of its Subsidiaries and, and to the
Company's knowledge, Investment Entities except for liens for Taxes not yet
due and payable.
(v) The Company and its Subsidiaries had aggregate
accumulated earnings and profits for federal income tax purposes of not
more than $18,000,000 as of December 31, 1995.
(vi) Schedule 3.1(t) indicates (i) the approximate basis (net
of depreciation and other adjustments) of (x) the total assets of the
Company and its Subsidiaries and (y) each Property (including associated
Personal Property) set forth on Schedule 3.1(t), in each case as indicated
on the consolidated financial statements of the Company for the fiscal year
ended December 31, 1995 and (ii) the approximate basis (net of depreciation
and other adjustments) of (x) the total assets of the Company and its
Subsidiaries and (y) each such Property, in each case for federal income
tax purposes as of December 31, 1995.
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(vii) As of December 31, 1995, except as disclosed in Schedule
3.1(t), with respect to each hotel Property owned by the Company and its
Subsidiaries and Investment Entities, the aggregate adjusted federal income
tax basis of the personal property in or relating to each hotel was less
than 15% of the adjusted federal income tax basis of both the real and
personal property comprising such hotel determined for purposes of Code
Section 856(d)(1)(C).
(viii) None of the Company or any of its Subsidiaries or, to
the knowledge of the Company, any of its Investment Entities is party to
any agreement, contract, plan or arrangement that (i) would result, by
reason of any of the transactions contemplated herein, separately or in the
aggregate, in the payment of any excess parachute payments by the Company
or any of its Subsidiaries and Investment Entities within the meaning of
Section 280G of the Code or (ii) provides for any compensation or other
payments to any employee with respect to which a deduction would be reduced
or disallowed pursuant to Code Section 162(m).
(ix) None of the Company or any of its Subsidiaries and
Investment Entities has made any written or oral commitment to pay any tax
bonuses to any employee pursuant to any plan, agreement, contract or
arrangement with their employees.
(x) As used herein, "Taxes" shall mean any federal, state,
local or foreign taxes of any kind, including but not limited to those on
or measured by or referred to as income, gross receipts, sales, use, ad
valorem, franchise, profits, license, withholding, payroll, employment,
excise, severance, stamp, occupation, premium, value added, property or
windfall profits taxes, customs, duties or similar fees, assessments or
charges of any kind whatsoever, together with any interest and any
penalties, additions to tax or additional amounts imposed by any
governmental entity, domestic or foreign. As used herein, "Tax Return"
shall mean any return, report or statement required to be filed with any
governmental entity with respect to Taxes.
(u) Environmental Matters. Except as set forth in Schedule
3.1(u) and except for such Environmental Liabilities to the Company, its
Subsidiaries and Investment Entities as shall not reasonably be expected to
exceed $20,000 in any single instance (provided that the Environmental
Liabilities for all such instances do not exceed $150,000 in the
aggregate):
(i) The operations of the Properties, the Company, its
Subsidiaries and, to the knowledge of the Company, its Investment Entities
are in compliance with applicable Environmental Laws;
(ii) The Company, its Subsidiaries and its Investment Entities
and the Properties are in compliance with the terms of their Licenses and
Permits required under applicable Environmental Laws;
(iii) There has been no Release at any parcel of Real Property,
or to the knowledge of the Company, at any disposal or treatment facility
which received Hazardous Materials generated by the Company, its
Subsidiaries, its Investment Entities or the Properties, or any predecessor
in interest;
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(iv) (A) No Environmental Claims have been asserted or are
pending against the Company or any of its Subsidiaries or their Properties
or, to the knowledge of the Company, any Investment Entity or any of its
Properties or, to the knowledge of the Company, any predecessor in interest
of any of them, other than any Environmental Claim which is immaterial in
nature or amount, (B) neither the Company, its Subsidiaries, nor to the
knowledge of the Company, any of its Investment Entities has knowledge or
notice of any threatened Environmental Claim against the Company, its
Subsidiaries, its Investment Entities or the Properties, or any predecessor
in interest and (C) no remedial obligation has been imposed on the Company,
any of its Subsidiaries or any of their Properties and, to the knowledge of
the Company, any of its Investment Entities or any of its Properties under
any applicable Environmental Law, other than any remedial obligation which
is immaterial in nature or amount;
(v) To the knowledge of the Company, no Environmental Claims
have been asserted against any facilities that have received Hazardous
Materials generated by the Company, its Subsidiaries, its Investment
Entities or the Properties, or any predecessor in interest;
(vi) Schedule 3.1(u)(vi) hereto sets forth (a) the general
location of any underground storage tanks located at any of the Properties,
(b) to the knowledge of the Company, the general location of any asbestos
located at any of the Properties and (c) the estimated cost of any Remedial
Action required under applicable Environmental Laws with respect to any
such matters. The asbestos (other than Category II (as defined in 40 CFR
61.141) non-friable asbestos as to which no representation is made in this
sentence) that is located at the Properties and is not disclosed on
Schedule 3.1(u)(vi), (x) does not require any Remedial Action under
applicable Environmental Law and (y) does not materially adversely affect
the operations or the marketability of the relevant Property where such
asbestos is located;
(vii) None of the Properties contains any Hazardous Materials
except in substantial compliance with applicable Environmental Laws;
(viii) None of the Properties are now being or have ever been
used, nor has any property or asset previously owned by the Company or one
of its Subsidiaries or its Investment Entities ever been used for any
activities involving, directly or indirectly, the use, handling,
generation, treatment, storage, transportation, removal, remediation,
Release or disposal of any Hazardous Materials except in compliance with
applicable Environmental Laws.
(v) Properties.
(i) Each Property Owner (a true, correct and complete list of
which is set forth on Schedules 3.1(v)(i) and (ii)) has (A) good and
marketable fee simple title to the Real Property owned by such Property
Owner, free and clear of all Liens other than the Permitted Liens
applicable to it, and (B) good and marketable leasehold title to the Real
Property leased by such Property Owner, free and clear of all Liens other
than the Permitted Liens applicable to it.
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(ii) except as set forth on Schedule 3.1(v)(iii), neither the
Company nor any Property Owner has knowledge of, nor has it received any
notice of, any material non-recurring or special taxes or assessments or
any planned public improvements that may result in a material non-recurring
or special tax or assessment with respect to the Company, its Subsidiaries,
its Investment Entities or the Properties.
(iii) The Company, its Subsidiaries or its Investment Entities
has (A) good title to all of the material Personal Property owned by such
Person, free and clear of all Liens other than Permitted Liens applicable
to it and (B) a valid leasehold interest to all material Personal Property
leased by such Person, free and clear of all Liens other than Permitted
Liens applicable to it. Each parcel of Real Property which is a hotel
contains all levels of Personal Property and inventories of supplies
necessary to operate such hotel in the ordinary course of business,
consistent with past practice.
(iv) The lessee under each Ground Lease and under each Space
Lease (where the Company, or any of its Subsidiaries or its Investment
Entities is lessee) is in peaceful and quiet possession of the Property
demised thereunder.
(v) Neither the Company, nor any of its Subsidiaries or any
of its Investment Entities has knowledge of any change or proposed change
in the route, grade or width of, or otherwise affecting, any street, creek
or road adjacent to or serving any parcel of Real Property. Within the
period of eighteen (18) months prior to the date hereof, no portion of any
of the Properties has suffered any material damage or had its operation
curtailed in any material respect by fire, flood or other casualty which
has not heretofore been repaired and restored to its original or better
condition and paid or provided for, all in accordance with all applicable
Governmental Regulations.
(vi) All utilities required for the operation of each parcel
of Real Property either enter such Real Property through adjoining streets,
or they pass through adjoining land, do so in accordance with valid public
easements or irrevocable private easements, and all of said utilities are
installed and operating.
(vii) The structural elements of the Improvements, the
mechanical systems (including, without limitation, all heating,
ventilating, air conditioning, plumbing, electrical, utility and sprinkler
systems) in the Improvements, the elevators and the utility systems
servicing the Improvements and the roofs located at the Improvements
(excluding in all events decorative fixtures and furniture as to which no
representation is made in this clause (vii)) are in good condition, normal
wear and tear excepted. The condition of such elements and systems
(including the absence of any material latent defects) is such that the
cost of capital improvements (including major repairs or replacements which
would be capitalized in accordance with GAAP) required to be made with
respect to such elements and systems during the years 1996, 1997 and 1998
would reasonably be expected to not exceed the amounts set forth on
Schedule 3.1(v)(vii) hereof for such year.
(viii) The present zoning (including, by means of special
variances of record) of each parcel of Real Property permits the current
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use thereof (excluding isolated instances of non-compliance which are
immaterial in nature). Neither the Company, its Subsidiaries, nor, to the
knowledge of the Company, any of the Investment Entities, has knowledge of
any fact, proceeding or threatened action or proceeding which could
materially adversely affect the present zoning of any parcel of Real
Property.
(ix) There are no (A) unrecorded easements which are not shown
on the Surveys, (B) strips or gores with respect to or affecting any parcel
of Real Property (or portion thereof) which cause any related parcels of
Land to be non-contiguous or (C) encroachments either by the Improvements
on any property owned by others or by any improvement owned by others on
any parcel of the Real Property (other than encroachments which are
immaterial in nature). Each parcel of Real Property has a right to access
to and from such parcel of Real Property.
(x) Schedule 3.1(v)(x) is a true, correct and complete list
of all Title Insurance Policies, each of which is in full force and effect.
(w) Insurance. Schedule 3.1(w) contains an accurate and complete
list of all policies of insurance (other than Title Insurance Policies),
including the amounts thereof and all deductibles, maintained by the
Company, each of its Subsidiaries and, to the knowledge of the Company, its
Investment Entities with respect to its business, employees, Properties and
assets. To the knowledge of the Company, each such policy is in full force
and effect and, assuming consummation of the transactions contemplated
hereby, is free from any right of termination on the part of the insurance
carriers (and no notice of cancellation of any such policy has been
received by the Company or the relevant Subsidiary or Investment Entity).
Except as set forth on Schedule 3.1(w), there are no outstanding
requirements or recommendations by any insurance company that issued a
policy with respect to any of the Properties and assets of the Company, any
of its Subsidiaries or its Investment Entities or by any Board of Fire
Underwriters or other body exercising similar functions or by any
Governmental Entity requiring or recommending any material repairs or other
material work to be done on or with respect to any of the Properties and
assets of the Company, any of its Subsidiaries or, to the knowledge of the
Company, its Investment Entities or requiring or recommending any material
equipment or facilities to be installed on or in connection with any of the
Properties or assets of the Company, any of its Subsidiaries or, to the
knowledge of the Company, its Investment Entities.
SECTION 3.2 Representations and Warranties of the Parent and the
Purchaser. The Parent and the Purchaser hereby, jointly and severally,
represent and warrant to the Company as follows:
(a) Corporate Organization. The Parent is a limited partnership
duly organized and validly existing under the laws of the state of its
formation, and the Purchaser is a corporation duly organized, validly
existing and in good standing under the laws of the state of its
incorporation and each has the requisite power or authority for such entity
to own, lease and operate its properties and to carry on its business as it
is now being conducted, except where the failure to have such power and
authority would not reasonably be expected to have a Parent Material
Adverse Effect.
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(b) Authority Relative to Agreements. Each of the Parent and the
Purchaser has all necessary power and authority for such entity to execute
and deliver this Agreement, to perform its obligations hereunder and to
consummate the transactions contemplated hereby. The execution, delivery
and performance of this Agreement by each of the Parent and the Purchaser,
and the consummation by each of the Parent and the Purchaser of the
transactions contemplated hereby, have been duly authorized by all
necessary corporate or other action on the part of the Parent and the
Purchaser, and no other corporate or other proceedings on the part of the
Parent and the Purchaser are necessary to authorize this Agreement and the
consummation by the Parent and the Purchaser of such transactions. This
Agreement has been duly executed and delivered by each of the Parent and
the Purchaser and, assuming due authorization, execution and delivery by
the other parties hereto, constitutes a legal, valid and binding obligation
of each of the Parent and the Purchaser, enforceable against each of the
Parent and the Purchaser in accordance with its terms.
(c) No Conflict; Required Filings and Consents. (i) The
execution, delivery and performance of this Agreement by the Parent and the
Purchaser do not and will not: (A) conflict with or violate the
Partnership Agreement of the Parent or the Articles of Incorporation or
By-Laws of the Purchaser, (B) assuming that all consents, approvals and
authorizations contemplated by subsection (ii) below have been obtained and
all filings described in such subsection have been made, conflict with or
violate any Governmental Regulation applicable to the Parent, the Purchaser
or any of their respective Subsidiaries or by which any of them or their
respective properties are bound or (C) assuming that all consents,
approvals and authorizations contemplated by subsection (ii) below have had
been obtained and all filings described in such clause have been made,
result in any breach or violation of or constitute a default, or give rise
to any right of termination, amendment, acceleration or cancellation of, or
result in the creation of a Lien or encumbrance on any of the property or
assets of the Parent, the Purchaser or any of their respective Subsidiaries
pursuant to, any note, bond, mortgage, indenture, contract, agreement,
lease, license, permit, franchise or other instrument or obligation to
which the Parent, the Purchaser or any of their respective Subsidiaries is
a party or by which the Parent, the Purchaser or any of their respective
Subsidiaries or any of their respective properties are bound.
(ii) The execution, delivery and performance of this Agreement
by the Parent and the Purchaser and the consummation of the transactions
contemplated hereby by the Parent and the Purchaser do not and will not
require any consent, approval, authorization or permit of, action by,
filing with or notification to, any Governmental Entity, except for: (A)
applicable filings pursuant to the HSR Act and the expiration or
termination of all applicable waiting periods thereunder, (B) the filing
and recordation of appropriate merger or other documents as required by the
MBCA, (C) compliance with the statutory provisions and regulations relating
to any Real Property transfer gains tax or Real Property transfer tax, and
(D) such other consents, approvals, authorizations, permits, actions,
filings or notifications the failure of which to make or obtain would not
reasonably be expected to have a Parent Material Adverse Effect.
(d) Information Supplied. None of the information supplied or to
be supplied by the Parent or the Purchaser for inclusion or incorporation
-26-
by reference in the Proxy Statement, at the date of mailing to stockholders
and at the time of the Stockholders' Meeting, will contain any untrue
statement of a material fact or omit to state any material fact required to
be stated therein or necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not misleading.
(e) Financing. The Parent and the Purchaser have available
(through existing credit arrangements or otherwise) all funds necessary to
consummate the transactions contemplated by this Agreement.
(f) Brokers. No broker, finder or investment banker is entitled to
any brokerage, finder's or other fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by
and on behalf of the Parent or the Purchaser.
ARTICLE IV
CONDUCT OF BUSINESS PENDING THE MERGER; OTHER COVENANTS
SECTION 4.1 Conduct of Business of the Company Pending the Merger.
Except as contemplated by this Agreement, during the period from the date
of this Agreement to the Effective Time, the Company shall, and shall cause
its Subsidiaries and, to the extent within its control, its Investment
Entities to, (i) act and carry on their respective businesses in the
ordinary course of business and, to the extent consistent therewith, use
reasonable efforts, to preserve intact their current business
organizations, keep available the services of their current key officers
and employees and preserve the goodwill of those engaged in material
business relationships with them, (ii) maintain and keep their Properties
and equipment in good repair, working order and condition, consistent with
current condition, except for ordinary wear and tear, (iii) use their best
efforts to keep in full force and effect insurance comparable in amount and
scope of coverage to that now maintained by each of them, and (iv) perform
in all material respects all of its obligations under all contracts and
commitments applicable to its business or Properties (including, without
limitation, under Material Contracts), (subject to the Company's right to
enter into comparable substitute arrangements, consistent with past
practice, on terms generally no less favorable to the Company than those in
effect on the date hereof). Without limiting the generality of the
foregoing, during the period from the date of this Agreement to the
Effective Time, except as expressly contemplated by this Agreement, the
Company shall not, and shall not permit any of its Subsidiaries or, to the
extent within its control, its Investment Entities to, without the prior
consent of Parent:
(a) (i) declare, set aside or pay any dividends on, or make any
other distributions in respect of, any of its outstanding Ownership
Interests, other than (A) dividends and distributions to the Company or any
of its wholly owned Subsidiaries, (B) regular quarterly cash dividends not
in excess of $.04 per share of Company Common Stock (with usual record and
payment dates and in accordance with the Company's present dividend policy)
and distributions by non-wholly owned Subsidiaries and Investment Entities
in accordance with Schedule 4.1(a), (ii) split, combine or reclassify any
of its outstanding Ownership Interests or issue or authorize the issuance
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of any other securities in respect of, in lieu of or in substitution for
shares of its outstanding Ownership Interests or (iii) purchase, redeem or
otherwise acquire any outstanding Ownership Interests of the Company or any
of its Subsidiaries or its Investment Entities, or any rights, warrants or
options to acquire any such Ownership Interests except, in the case of
clause (iii), for (A) the acquisition by the Company of the capital stock
of its wholly owned Subsidiaries or (B) the transactions contemplated by
Section 2.3(b) hereof;
(b) except as expressly set forth on Schedule 4.1(b) and except for
the issuance of Company Common Stock pursuant to the exercise of Options
outstanding on the date hereof in accordance with their terms or pursuant
to the previously made compensation elections of the directors of the
Company under Company Plans in effect on the date hereof, authorize for
issuance, issue, deliver, sell or agree or commit to issue, sell or deliver
(whether through the issuance or granting of options, warrants,
commitments, subscriptions, rights to purchase or otherwise, including
pursuant to any debenture or note issued to the Mayo Foundation), pledge or
otherwise encumber any shares of its Ownership Interests, any other voting
securities or any securities convertible, exchangeable or exercisable into,
or any rights, warrants or options to acquire, any such Ownership
Interests, voting securities or other equity equivalents (including without
limitation stock appreciation rights) (other than (i) sales of capital
stock of any wholly owned Subsidiary of the Company to the Company or
another wholly owned Subsidiary of the Company, or (ii) upon the exercise
of Options outstanding on the date of this Agreement in accordance with
their terms) or, subject to contractual obligations, not consent to the
admission of any new partners to any Partnerships;
(c) except to the extent required under existing Company Plans as
in effect on the date of this Agreement, (i) increase or accelerate the
compensation or fringe benefits of any of its directors, officers or
employees, except for increases in salary or wages of employees of the
Company or its Subsidiaries who are not directors or officers of the
Company or its Subsidiaries in the ordinary course of business in
accordance with past practice, or (ii) grant any severance or termination
pay not currently required to be paid under any Company Plans as in effect
on the date hereof, or (iii) enter into any employment agreement with any
present or former director or officer or senior employee, or, other than in
the ordinary course of business consistent with past practice and
terminable without severance or other termination payment on 30 days'
notice or less, any other employee of the Company, any of its Subsidiaries
or its Investment Entities, or (iv) establish, adopt, enter into or amend
or terminate any Company Plan or other plan, agreement, trust, fund, policy
or arrangement for the benefit of any current or former directors, officers
or employees of the Company, its Subsidiaries or its Investment Entities,
provided that the collective bargaining agreements for employees at Copper
King Inn Hotel and the salaries and benefits provided thereunder may be
amended, modified, extended or replaced as the result of good faith
negotiations relating to the expiration of the terms of the current
agreements in June of 1996;
(d) amend its or their Articles of Incorporation, By-Laws,
partnership agreement or other comparable charter or organizational
documents or alter through merger, liquidation, reorganization,
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restructuring or in any other fashion the entity structure or ownership of
any of the Company's Subsidiaries and, to the extent within the control of
the Company, its Investment Entities;
(e) except as set forth on Schedule 4.1(e), acquire or agree to
acquire (i) by merging or consolidating with, or by purchasing a
substantial portion of the stock, assets or properties of, (including
through the exercise of any right of first refusal or the exercise of any
option to purchase or convert), or by any other manner, any business or any
corporation, partnership, joint venture, association or other business
organization or division thereof; or (ii) any material assets or properties
(except purchases of inventory and services in the ordinary course of
business consistent with past practice and capital expenditures permitted
by (h) below);
(f) sell, lease, license, mortgage or otherwise encumber or subject
to any Lien or otherwise dispose of any of its Properties or assets, except
(i) sales (A) in the ordinary course of business consistent with past
practice or (B) in connection with the replacement of capital assets made
in the ordinary course of business consistent with past practice, (ii)
leases of retail space in Properties which are hotels in the ordinary
course of business consistent with past practice and (iii) as disclosed on
Schedule 4.1(f);
(g) amend, supplement or modify any Material Contract, except in
the ordinary course of business (including as contemplated in the proviso
to clause (c) above), or relinquish, forgive or cancel any material debt or
claim or waive any rights of material value;
(h) except as set forth in Schedule 4.1(h), make any capital
expenditure or commitment to make any such expenditure (except in
accordance with the Capital Expenditures Budget) or defer making any
budgeted capital expenditure, in each case in excess of $100,000 and
$500,000 in the aggregate; provided that following notice to, and to the
extent circumstances permit, consultation with Parent, the Company shall be
permitted to make capital expenditures not contemplated by the Capital
Expenditure Budget to make emergency repairs;
(i) (i) except as set forth on Schedule 4.1(i) hereto, incur or
prepay any indebtedness for borrowed money or guarantee any such
indebtedness of another Person (other than guarantees by the Company in
favor of any of its wholly owned Subsidiaries or by any of its Subsidiaries
in favor of the Company), issue or sell any debt securities or warrants or
other rights to acquire any debt securities of the Company or any of its
Subsidiaries or its Investment Entities, guarantee any debt securities of
another Person, enter into any "keep well" or other agreement to maintain
any financial condition of another Person or enter into any arrangement
having the economic effect of any of the foregoing, except for short-term
borrowings incurred in the ordinary course of business consistent with past
practice, which borrowings shall not in the aggregate exceed $7,000,000
outstanding at any particular time, (provided that the foregoing shall not
restrict the Company or any of its Subsidiaries or Investment Entities from
renewing or replacing existing working capital lines provided that no such
lines shall provide for any penalties for the prepayment or termination of
the same (other than customary LIBOR breakage costs) or (ii), except
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pursuant to partnership agreements previously disclosed to Parent and
except pursuant to capital calls of Investment Entities not controlled by
the Company or its Subsidiaries, make any loans, advances or capital
contributions to, or investments in, any other Person, other than to the
Company or any wholly owned Subsidiary of the Company, and other routine
advances to employees (which advances shall not exceed $10,000 in the
aggregate at any one time outstanding);
(j) change any accounting principle, method or practice used by it
or any change in the classification of assets, recognition of income or
expenses or the depreciation or amortization policies or rates theretofore
applied, unless required by the SEC or the FASB;
(k) make any material Tax election or settle or compromise any
income Tax liability in excess of $500,000, in the aggregate or defer the
payment of any material Taxes that come due;
(l) enter into any contract, including but not limited to mortgages
and security agreements, which would require the consent (including the
waiver of any right of first refusal or similar right) of the third party
to the consummation of the transactions contemplated hereby other than
renewals or replacements of existing working capital lines of credit on
terms no less favorable to the Company than the terms of such existing
lines of credit;
(m) authorize any of, or commit or agree to take any of, the
foregoing actions.
To the extent any of the Company, its Subsidiaries or its Investment
Entities has done anything in contravention of the acts required or
proscribed, as applicable, in this Section 4.1 without the prior written
consent of the Parent, the Company will promptly inform the Parent, by
telephone (with confirmation of details in writing) of such action in
contravention.
SECTION 4.2 Conduct of Business of the Purchaser. The Purchaser
has not engaged, and during the period from the date of this Agreement to
the Effective Time, the Purchaser shall not engage, in any activities of
any nature except as provided in, or in connection with the transactions
contemplated by, this Agreement.
SECTION 4.3 Preparation of Proxy Statement
(a) The Company shall promptly (and in any event within 30 days of
the date hereof) file or cause to be filed with the SEC a preliminary Proxy
Statement relating to the Merger and this Agreement. In connection
therewith, the Parent and the Purchaser will fully cooperate with the
Company and its counsel in the preparation by the Company of the Proxy
Statement and in obtaining the stockholder approvals sought thereunder.
The Company shall respond as promptly as practicable to any comments of the
SEC on the preliminary Proxy Statement, and cause the Proxy Statement, and
any amendment or supplement thereto, to be mailed to the Company's
stockholders at the earliest practicable time. The Company will notify
Parent as promptly as practicable of the receipt of any comments from the
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SEC or its staff and of any request by the SEC or its staff for amendments
or supplements to the Proxy Statement or for additional information and
will supply Parent with copies of all correspondence between the Company or
any of its representatives, on the one hand, and the SEC or its staff, on
the other hand, with respect to the Proxy Statement or the Merger. If at
any time prior to the Effective Time any event shall occur which should be
set forth in an amendment of, or a supplement to, the Proxy Statement, the
Company will promptly advise Parent and Purchaser, such an amendment or
supplement to be mailed to the Company's stockholders within five business
days after the same is cleared by the SEC (or as promptly as practicable
thereafter). The Company, Parent and Purchaser each agree to correct any
information provided by such party for use in the Proxy Statement which
shall have become false or misleading. Prior to the filing or distribution
of the Proxy Statement and any amendments or supplements thereto, Parent
and its counsel shall be given an opportunity to review and comment upon
such documents.
(b) As used in this Agreement, "Proxy Statement" shall mean a
collective reference to the letter to stockholders, notice of meeting,
proxy statement and form of proxy (including any amendments or supplements
thereto and any schedules required to be filed with the SEC in connection
therewith) to be distributed to stockholders of the Company in connection
with the Merger.
SECTION 4.4 Access to Information; Confidentiality.
(a) From the date hereof to the Effective Time, the Company shall,
and shall cause its Subsidiaries and, to the extent within its control or
possession, its Investment Entities to, afford the officers, employees,
auditors and other agents (including engineers and environmental
consultants) of the Parent, full and free access at all reasonable times to
its officers, employees, Properties, offices, plants and other facilities
and to its contracts, commitments, books and records, and shall furnish the
Parent and such other Persons all such documents and such financial,
operating and other data and information regarding the Company, its
Subsidiaries and, to the extent within its control or possession, its
Investment Entities as the Parent, through its officers, employees or
agents may from time to time reasonably request in order to conduct such
due diligence review of the Company, its Subsidiaries and its Investment
Entities and their business, assets or Properties as Parent and Purchaser
shall determine to be necessary or appropriate. Without limiting the
foregoing, (i) from time to time, at the request of Parent, the Company
will cause the officers of the Company, its Subsidiaries and its Investment
Entities to keep the officers of the Parent informed as to the affairs of
such entities and to arrange for meetings with the management of each such
entity from time to time upon the Parent's request, and (ii) the Parent
shall have the right to conduct, at its own cost and expense, environmental
site assessments of each of the Properties by one or more independent
engineering or environmental site assessment firms (which assessments may
include the taking and testing of samples). Such due diligence and
assessments shall be conducted with a view to their completion as promptly
as practicable. The Company shall fully cooperate and shall cause its
Subsidiaries and, to the extent within its control, its Investment Entities
to fully cooperate, with such due diligence review. Within ten days
following the date hereof, the Company shall deliver to the Parent true,
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correct and complete copies of all material environmental reports, studies,
investigations or correspondence regarding any Environmental Liabilities of
the Company, its Subsidiaries, its Investment Entities and their respective
Properties or any environmental conditions at any of the Properties which
are in possession of the Company, its Subsidiaries or Investment Entities,
their agents, representatives or consultants. Any environmental or
engineering assessments by the Parent will be conducted in a manner that
does not cause any meaningful interruption to the business or operations of
any of the Properties and by a licensed engineering firm with not less than
$3,000,000 of errors and omission insurance coverage (subject to customary
deductibles). Parent shall indemnify and hold the Company, its
Subsidiaries and its Investment Entities harmless against, and agrees to
promptly reimburse such Persons for, any losses, costs, penalties, injuries
or damages to any of their respective assets or to any third parties
resulting from the conduct (but not the results) of the environmental and
engineering assessments. Nothing in this Section 4.4 shall obligate the
Company to disclose any information relating to (i) other bids to the
Company submitted prior to the date hereof, (ii) the sales process
conducted by the Company or (iii) any strategic alternatives considered by
the Company.
(b) Each of the Parent and the Purchaser will hold, and will cause
their Affiliates and the directors, officers, employees, agents, advisors
(including attorneys, accountants and financial advisors of Parent, the
Purchaser and their Affiliates), prospective bank or institutional lenders
or representatives of such agents, advisors, prospective bank or
institutional lenders, to hold in confidence, all documents and information
concerning the Company, its Subsidiaries, its Investment Entities and any
other Person in which any of the Company's Subsidiaries or Investment
Entities has an ownership interest furnished to any such Person in
connection with the transactions contemplated in this Agreement, to the
extent required by, and in accordance with, the provisions of the letter
dated January 8, 1996 between Parent and Montgomery Securities on behalf of
the Company (the "Confidentiality Agreement"). Parent and Purchaser
acknowledge that they are Affiliates of Tiger Real Estate Partners, LLC.
SECTION 4.5 No Solicitation. (a) The Company shall not, nor
shall the Company authorize or permit any of its Subsidiaries or, to the
extent within its control, Investment Entities to, nor shall it authorize
or permit any of their respective officers, directors or employees or any
investment banker, financial advisor, attorney, accountant or other
representative retained by them to, solicit or initiate, or encourage, or
take any other action to facilitate or encourage (including by way of
furnishing any information or having discussions concerning the business,
Properties or assets of the Company or any of its Subsidiaries or
Investment Entities), the submission of inquiries or the making of any
proposal which constitutes, or may reasonably be expected to lead to, any
Takeover Proposal (as defined below), or enter into or maintain or continue
discussions or negotiate with any Person in furtherance of such inquiries
or to obtain a Takeover Proposal; provided, however, that the foregoing
shall not prohibit the Company and its advisors, following receipt of an
unsolicited Takeover Proposal that it reasonably anticipates could lead to
a Superior Proposal to provide information to the Person making such
Takeover Proposal (subject to execution of a confidentiality agreement
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substantially on the same terms as the Confidentiality Agreement) and
participate in discussions or negotiations concerning such Takeover
Proposal following delivery of the notice required by Section 4.5(c)
regarding such Takeover Proposal, in each case to the extent the Board of
Directors shall have concluded in good faith on the basis of advice from
outside counsel that such action is required for the Board of Directors to
comply with its fiduciary duties under applicable law. Without limiting
the foregoing, it is understood that any violation of the restrictions set
forth in the preceding sentence by any executive officer of the Company or
any of its Subsidiaries or any investment banker, attorney or other advisor
or representative of the Company or any of its Subsidiaries, whether or not
such person is purporting to act on behalf of the Company or any of its
Subsidiaries or otherwise, shall be deemed to be a breach of this Section
4.5(a) by the Company. As used herein, the term "Takeover Proposal" means
(x) any acquisition or purchase of a substantial amount of the Properties
or assets of the Company or any of its Subsidiaries, or of over a 10%
equity interest in, the Company or any tender offer or exchange offer that
if consummated would result in any Person beneficially owning 10% or more
of the equity securities of the Company, or any merger, consolidation,
business combination, sale of substantially all Properties and/or assets,
recapitalization, liquidation, dissolution or similar transaction involving
the Company (other than the transactions contemplated hereby) or any other
transaction the consummation of which would reasonably be expected to
impede, interfere with, prevent or materially delay the consummation of the
Merger or materially dilute the benefits to Parent of the transactions
contemplated hereby, or any agreement to, or public announcement by the
Company or any other person of a proposal, plan or intention to do any of
the foregoing. The Company will immediately cease and cause to be
terminated any existing activities, discussions or negotiations with any
parties conducted heretofore with respect to any of the foregoing.
(b) Neither the Board of Directors of the Company nor any committee
thereof shall (i) withdraw or modify, or propose to withdraw or modify, in
a manner adverse to Parent or Purchaser, the approval or recommendation by
such Board of Directors or any such committee of this Agreement or the
Merger, (ii) approve or recommend, or propose to approve or recommend, any
Takeover Proposal or (iii) enter into any agreement with respect to any
Takeover Proposal. Notwithstanding the foregoing, in the event the Board
of Directors of the Company receives a Takeover Proposal that, in the
exercise of its fiduciary obligations (as determined in good faith by the
Board of Directors based on the advice of outside counsel), it determines
to be a Superior Proposal (as hereinafter defined), the Board of Directors
may (subject to the following sentences) withdraw or modify its approval or
recommendation of this Agreement or the Merger, approve or recommend any
such Superior Proposal, enter into an agreement with respect to such
Superior Proposal or terminate this Agreement, in each case at any time
after the fifth business day following Parent's receipt of written notice
(a "Notice of Superior Proposal") advising Parent that the Board of
Directors has received a Superior Proposal, specifying the material terms
and conditions of such Superior Proposal and identifying the person making
such Superior Proposal. The Board of Directors of the Company may also
withdraw or modify its approval or recommendation of this Agreement or the
Merger and terminate this Agreement if Montgomery Securities' fairness
opinion shall have been withdrawn. If the Company proposes to take any of
the foregoing actions with respect to any Takeover Proposal, it shall
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concurrently with entering into such agreement pay, or cause to be paid, to
Parent or Purchaser (as Parent shall designate) the Expense Reimbursement
(as hereinafter defined) and in the event that the Company shall enter into
any agreement relating to a Takeover Proposal, such agreement shall provide
for the payment to Purchaser of the Termination Fee (as hereinafter
defined), upon the consummation of the transaction contemplated by the
agreement, provided that if, prior to the receipt of a Takeover Proposal,
the Company proposes to take any of the foregoing actions as provided in
the immediately preceding sentence, it shall concurrently with taking any
of such actions pay, or cause to be paid to the Parent or Purchaser (as
Parent shall designate) the Expense Reimbursement and pay or cause to be
paid to Purchaser the Termination Fee. For purposes of this Agreement, a
"Superior Proposal" means any bona fide Takeover Proposal with fully
committed financing without material contingencies (other than customary
conditions) to acquire, directly or indirectly, for consideration
consisting of cash and/or marketable securities, more than 50% of the
shares of Company Common Stock then outstanding or all or substantially all
the Properties and/or assets of the Company, and otherwise on terms which
the Board of Directors of the Company determines in its good faith
reasonable judgment (based on the advice of a financial advisor of
nationally recognized reputation) to be more favorable to the Company's
stockholders than the Merger. This Section 4.5 shall not prohibit accurate
disclosure by the Company in any document that is required to be filed with
the SEC.
(c) In addition to the obligations of the Company set forth in
paragraph (b), the Company shall promptly advise Parent orally and in
writing of any Takeover Proposal, or any inquiry with respect to or which
could lead to any Takeover Proposal, the material terms and conditions of
such Takeover Proposal or inquiry, and the identity of the person making
any such Takeover Proposal or inquiry. The Company will keep Parent fully
informed of the status and details of any such request, Takeover Proposal
or inquiry.
(d) Notwithstanding anything contained in this Agreement to the
contrary, actions by the Board of Directors of the Company that is taken in
accordance with this Section 4.5 shall not constitute a breach of this
Agreement by the Company.
SECTION 4.6 Employee Benefits Matters.
(a) The Parent agrees that, during the period commencing at the
Effective Time and ending on the one-year anniversary of the Effective
Time, the Transferred Employees (as hereinafter defined) of the Company and
its Subsidiaries (other than those employees covered by a collective
bargaining agreement) will continue to be provided with employee benefits
which in the aggregate are substantially comparable to those currently
provided by the Company and its Subsidiaries to such employees. Subject to
the foregoing, nothing herein shall prevent the amendment or termination of
any plan, program or arrangement. Transferred Employees covered by
collective bargaining agreements shall be provided with such benefits as
shall be required under the terms of any applicable collective bargaining
agreement.
(b) The Parent shall cause the Surviving Corporation to promptly
pay or provide when due all compensation and benefits earned or accrued
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through or prior to the Effective Time as provided pursuant to the terms of
any compensation arrangements, employment agreements and employee or
director pension or welfare benefit plans, programs and policies in
existence as of the date hereof for all employees (and former employees)
and directors (and former directors) of the Company and listed on any
Schedule to this Agreement. The Parent shall cause the Surviving
Corporation to pay promptly or provide when due all compensation and
benefits required to be paid pursuant to the terms of any individual
agreement with any current or former employee or director in effect and
listed on Schedule 4.6(b)(ii) to this Agreement. Nothing in this Agreement
shall require the continued employment of any Person or prevent the Parent
and/or the Surviving Corporation from taking any action or refraining from
taking any action which the Company could take or refrain from taking prior
to the Effective Time.
(c) The Parent shall cause the Surviving Corporation to be
responsible for any medical, life insurance, disability and other welfare
plan expenses and benefits with respect to claims incurred by employees of
the Company or its Subsidiaries who continue employment with the Surviving
Corporation and its Subsidiaries ("Transferred Employees") and their
covered dependents on or after the Effective Time. For purposes of this
paragraph, a claim is deemed incurred when the event which is the subject
of the claim occurs; in the case of long-term disability benefits, when the
disability occurs; and, in the case of a hospital stay, when the employee
first enters the hospital.
(d) With respect to any welfare benefit plans (as defined in
section 3(l) of ERISA) maintained by the Parent or the Surviving
Corporation for the benefit of Transferred Employees on and after the
Effective Time, the Parent shall use its best efforts to (i) cause there to
be waived any pre-existing condition limitations and (ii) give effect, in
determining any deductible and maximum out-of-pocket limitations, to claims
incurred and amounts paid by, and amounts reimbursed to, such Transferred
Employees with respect to similar plans maintained by the Company for their
benefit immediately prior to the Effective Time.
(e) With respect to any pension benefit plans (as defined in
section 3(2) of ERISA) maintained by the Parent or the Surviving
Corporation for the benefit of Transferred Employees on and after the
Effective Time, the Parent shall provide the Transferred Employees with
past service credit solely for vesting and participation purposes for their
service prior to the Effective Time with the Company and/or its
Subsidiaries.
(f) With respect to any accrued but unused vacation time to which
any Transferred Employee is entitled pursuant to the vacation policy
applicable to such Employee immediately prior to the Effective Time (the
"Vacation Policy"), the Parent shall cause the Surviving Corporation to
allow such Employee to use such accrued vacation; provided, however, that
if the Parent deems it necessary to disallow such employee from taking such
accrued vacation, the Parent shall cause the Surviving Corporation to be
liable for and pay in cash to each such Employee an amount equal to such
vacation time in accordance with terms of the Vacation Policy.
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SECTION 4.7 Directors' and Officers' Indemnification and Insurance.
(a) The By-Laws of the Surviving Corporation shall contain
provisions no less favorable with respect to indemnification than are set
forth in the By-Laws of the Company, which provisions shall not be amended,
repealed or otherwise modified for a period of six years from the Effective
Time in any manner that would adversely affect the rights thereunder of
individuals who at the Effective Time were current or former directors,
officers, agents, or employees of the Company or otherwise entitled to
indemnification pursuant to the Company's By-Laws. The Surviving
Corporation shall cause any entity to which it shall transfer all or
substantially all of the Company's operations to assume the indemnification
obligations of the Surviving Corporation under the By-Laws for the
remainder of such six-year period.
(b) The Surviving Corporation shall cause to be maintained in
effect for six years from the Effective Time the current policies of the
directors' and officers' liability insurance maintained by the Company
(provided that the Surviving Corporation may substitute therefor policies
of at least the same coverage containing terms and conditions which are not
materially less advantageous) with respect to matters occurring prior to
the Effective Time to the extent available; provided, however, that in no
event shall the Surviving Corporation be required to expend more than an
amount per year equal to 150% of current annual premiums paid by the
Company to maintain or procure insurance coverage pursuant hereto.
SECTION 4.8 Further Action; Best Efforts. Upon the terms and
subject to the conditions hereof, each of the parties hereto shall use its
reasonable best efforts to take, or cause to be taken, all appropriate
action, and to do or cause to be done, all things necessary, proper or
advisable under applicable laws and regulations to facilitate to
satisfaction and make effective each condition to the consummation of the
transactions, including without limitation the Merger, contemplated by this
Agreement , including but not limited to (i) cooperating in the preparation
and filing of the Proxy Statement, any required filings under the HSR Act,
and any amendments to any thereof, (ii) using its reasonable best efforts
to make all required regulatory filings and applications and to obtain all
Licenses and Permits, consents, waivers of rights of first refusal and
similar rights, approvals, authorizations, qualifications and orders of
Governmental Entities and parties to contracts with the Company, its
Subsidiaries and the Investment Entities as are necessary for the
consummation of the transactions contemplated by this Agreement, or to
permit such Licenses and Permits, consents, waivers of rights of first
refusal and similar rights, approvals, authorizations, qualifications,
orders and contracts to continue in effect without modification after the
Effective Time and (iii) subject to its contractual obligations hereunder
and the other terms and conditions of this Agreement, using its reasonable
best efforts to cause each of its representations and warranties set forth
herein to be true, correct and complete in all material respects as at the
Closing Date as if made on such date. In addition, the Company shall cause
senior management of the Company and its Subsidiaries and, to the extent
within its control, of its Investment Entities to cooperate in good faith
with representatives of the Parent in identifying transition issues and
formulating plans and strategies to address any such issues.
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SECTION 4.9 Public Announcements. The Parent and the Purchaser, on
the one hand, and the Company, on the other hand, shall consult with each
other before issuing any press release or otherwise making any public
statements with respect to the Merger, shall provide each other the
opportunity to review and comment upon, any such press release or public
statement, and shall not issue any such press release or make any such
public statement prior to such consultation, except as may be required by
law or any listing agreement with any securities exchange on which its
securities are listed. The parties agree that the initial press release to
be issued with respect to the Merger shall be in the form heretofore agreed
to by the parties.
SECTION 4.10 Taxes. Any liability with respect to taxes specified
in Section 4.11 hereof that are incurred in connection with the Merger
shall be borne by the Company and expressly shall not be a liability of the
stockholders of the Company.
SECTION 4.11 Conveyance Taxes. The Parent, the Purchaser and the
Company shall cooperate in the preparation, execution and filing of all
returns, questionnaires, applications, or other documents regarding any
real property transfer gains, sales, use, transfer, value added, stock
transfer and stamp taxes, any transfer, recording, registration and other
fees, and any similar taxes that become payable in connection with the
transactions contemplated hereby that are required or permitted to be filed
on or before the Effective Time.
ARTICLE V
CONDITIONS OF MERGER
SECTION 5.1 Conditions to Obligation of Each Party to Effect the
Merger. The respective obligations of each party to effect the Merger
shall be subject to the satisfaction at or prior to the Effective Time of
the following conditions:
(a) Stockholder Approval. This Agreement shall have been approved
and adopted by the affirmative vote of the holders of a majority of the
outstanding shares of Company Common Stock entitled to vote thereon.
(b) Other Approvals. All consents, approvals, authorizations or
permits of, actions by, or filings with or notifications to, and all
expirations of waiting periods imposed by, any Governmental Entity listed
on Schedule 5.1(b) shall have been filed, occurred or been obtained and
shall be in full force and effect.
(c) No Injunctions or Restraints; Illegality. No temporary
restraining order, preliminary or permanent injunction or other order
issued by any court of competent jurisdiction or other legal restraint or
prohibition preventing the consummation of the Merger shall be in effect,
no action or proceeding shall have been commenced by any Governmental
Entity seeking any injunction, restraining order or other order which seeks
to prohibit consummation of the Merger, and no action or proceeding shall
have been commenced by any Governmental Entity seeking material damages in
connection with the Merger shall be pending; provided, however, that the
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parties invoking this condition shall use reasonable efforts to have any
such action, proceeding, order or injunction vacated. There shall not be
any action taken, or any statute, rule, regulation or order enacted,
entered, enforced or deemed applicable to. the Merger, which makes the
consummation of the Merger illegal.
(d) Opinion of Financial Advisor. The opinion of Montgomery
Securities addressed to the Board of Directors of the Company, to the
effect that the consideration to be received in the Merger is fair to the
Company's stockholders, shall not have been withdrawn.
SECTION 5.2 Conditions to Obligations of Parent and Purchaser.
The obligations of the Parent and the Purchaser to effect the Merger are
further subject to the satisfaction of the following conditions prior to
the Effective Time unless waived by the Parent and the Purchaser:
(a) Representations and Warranties. (i) The representations and
warranties of the Company set forth in Section 3.1A this Agreement shall be
true, correct and complete in all material respects as of the date of this
Agreement and as of the Closing Date as though made on and as of the
Closing Date and the representations and warranties of the Company set
forth in Section 3.1B of this Agreement shall be true, correct and complete
as of the date of this Agreement and as of the Closing Date as though made
on and as of the Closing Date, except in each case (x) that those
representations and warranties which address matters only as of a
particular date shall remain true, correct and complete as of that date and
(y) as otherwise contemplated by this Agreement, and (ii) the Parent shall
have received a certificate signed on behalf of the Company by the chief
executive officer and the chief financial officer of the Company to such
effect.
(b) Performance of Obligations of the Company. The Company shall
have performed in all material respects all material obligations, required
to be performed by it under this Agreement at or prior to the Closing Date,
and the Parent shall have received a certificate signed on behalf of the
Company by the chief executive officer and the chief financial officer of
the Company to such effect.
(c) Required Consents; Governmental Approvals. (i) All Required
Consents shall have been obtained on terms reasonably satisfactory to
Parent and shall be in full force and effect, and (ii) Parent shall have
received all consents, approvals, Licenses and Permits of Governmental
Entities so as to enable it to operate the Properties immediately following
the Effective Time substantially in the same manner as operated on the date
hereof; provided, that with respect to Licenses and Permits or other
governmental consents or approvals that can be obtained only after
consummation of the Merger, such consents, approvals, Licenses or Permits
shall not be a condition precedent if Parent shall have not received advice
from its counsel, after due inquiry of the appropriate regulatory agency or
from the appropriate regulatory agency to the effect that there is a
substantial possibility that such Licenses and Permits will not be obtained
promptly following such consummation.
(d) No Material Adverse Change. Since the date hereof, there shall
have been no material adverse change in the business, Properties, assets,
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results of operations or financial condition of the Company and its
Subsidiaries taken as a whole, nor shall there have been any development
which, taken together with all other developments in the aggregate, would
reasonably be expected to result in such a material adverse change, nor
shall any such change or development be threatened.
SECTION 5.3 Conditions to Obligations of the Company. The
obligation of the Company to effect the Merger is subject to the
satisfaction of the following unless waived by the Company:
(a) Representations and Warranties. The representations and
warranties of the Parent and the Purchaser set forth in this Agreement
shall be true, correct and complete in all material respects as of the date
of this Agreement and (except to the extent such representations and
warranties speak as of an earlier date) as of the Closing Date as though
made on and as of the Closing Date, except as otherwise contemplated by
this Agreement, and the Company shall have received a certificate signed on
behalf of the Parent by the managing member of the Parent to such effect.
(b) Performance of Obligations of the Parent and the Purchaser.
The Parent and the Purchaser shall have performed in all material respects
all material obligations required to be performed by them under this
Agreement at or prior to the Closing Date, and the Company shall have
received a certificate signed on behalf of the Parent by the managing
member of the Parent to such effect.
ARTICLE VI
TERMINATION, AMENDMENT AND WAIVER
SECTION 6.1 Termination. This Agreement may be terminated and the
Merger contemplated hereby may be abandoned at any time prior to the
Effective Time, notwithstanding approval thereof by the stockholders of the
Company:
(a) by mutual written consent of the Parent, the Purchaser and the
Company; or
(b) by the Parent, upon a breach of any representation, warranty,
covenant or agreement on the part of the Company set forth in this
Agreement, or if any such representation or warranty of the Company shall
have been or become untrue, in each case such that the conditions set forth
in Section 5.2(a) or Section 5.2(b), as the case may be, would be incapable
of being satisfied (following notice and failure to cure within 20 days of
such notice);
(c) by the Company, upon a breach of any representation, warranty,
covenant or agreement on the part of the Parent set forth in this
Agreement, or if any such representation or warranty of the Parent shall
have been or become untrue, in each case such that the conditions set forth
in Section 5.3(a) or Section 5.3(b), as the case may be, would be incapable
of being satisfied (following notice and failure to cure within 20 days of
such notice);
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(d) by either the Parent or the Company, if any permanent
injunction or action by any Governmental Entity preventing the consummation
of the Merger shall have become final and nonappealable;
(e) by either the Parent or the Company if the Merger shall not
have been consummated on or prior to October 6, 1996;
(f) by either the Parent or the Company, if the approval of the
stockholders of the Company of this Agreement and the Merger required for
the consummation of the Merger shall not have been obtained by reason of
the failure to obtain the required vote at a duly held meeting of
stockholders or at any adjournment thereof;
(g) by the Parent, if (i) following the receipt of a Takeover
Proposal, the Board of Directors of the Company or any committee thereof
shall have withdrawn or modified its approval or recommendation of this
Agreement or the Merger in any manner which is adverse to the Parent or the
Purchaser or shall have resolved to do the foregoing; or (ii) the Board of
Directors of the Company shall have approved or have recommended to the
stockholders of the Company a Superior Proposal or shall have resolved to
do the foregoing; and
(h) by the Company in accordance with Section 4.5.
SECTION 6.2 Effect of Termination. In the event of the termination
of this Agreement pursuant to Section 6.1, this Agreement shall forthwith
become void and there shall be no liability on the part of any party hereto
except as set forth in Section 6.3, Section 4.4(b), Section 7.1 and the
penultimate sentence in Section 4.4(a); provided, however, that nothing
herein shall relieve any party from liability for any willful and material
breach hereof.
SECTION 6.3 Fees and Expenses.
(a) (i) Unless this Agreement is terminated by the Company and
Parent or Purchaser shall have failed to perform in any material respects
its obligations under this Agreement, (x) if this Agreement is terminated
pursuant to Section 6.1(b), Section 6.1(f) (but only if a Takeover Proposal
has been received prior to such vote or, prior to the receipt of a Takeover
Proposal, the Board of Directors has withdrawn or modified, or proposed to
withdraw or modify, in a manner adverse to Parent or Purchaser, the
approval or recommendation of this Agreement and the Merger), Section
6.1(g) or Section 6.1(h), or (y) if at any time on or after the date of
this Agreement until one year following the termination of this Agreement,
any person or group (within the meaning of Section 13(d)(3) of the Exchange
Act (other than Parent or any of its affiliates) shall have acquired,
directly or indirectly, the Company, all or substantially all its
Properties or assets or more than 50% of the shares of Company Common Stock
then outstanding or (ii) if the Company enters into any agreement with
respect to any Superior Proposal prior to the one-year anniversary of the
termination of this Agreement (each such event described in clauses (x) and
(y) of this Section 6.3(a)(i) being hereinafter referred to as a Triggering
Event, the Company shall reimburse upon demand, Parent or Purchaser (as
determined in their discretion) for all documented out-of-pocket expenses
payable to non-Affiliates (the "Expense Reimbursement") incurred by the
Parent and the Purchaser in connection with this Agreement and the
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transactions contemplated hereby to the date of the applicable Triggering
Event (collectively, the "Documented Expenses"), up to a maximum
reimbursement obligation of $1,250,000. The Documented Expenses shall be
certified in reasonable detail by a managing director of the Parent prior
to the payment to be made by the Company hereunder. The Expense
Reimbursement shall be paid in same day funds. In the event this Agreement
is terminated pursuant to Section 6.1(b), at the request of the Company,
Parent will deliver to the Company copies of all written environmental and
engineering reports and title reports and surveys prepared by Parent's or
Purchaser's consultants, other than any such reports and surveys (or
analyses) prepared by Parent's counsel.
(b) The Company shall pay, or cause to be paid, to Purchaser an
additional fee of $5,000,000 (the "Termination Fee"), in same day funds (i)
upon demand if (A) the Expense Reimbursement becomes payable pursuant to
clause (a)(i)(x) above (other than in the event of a termination of this
Agreement pursuant to Section 6.1(b)), (B) the Company shall have entered
into any agreement with respect to a Superior Proposal within one year
after such termination, and (C) the transactions contemplated by such
agreement shall have been consummated, or (ii) upon demand, in the event
the Expense Reimbursement shall have become payable pursuant to clause
(a)(i)(y) above.
(c) Except as specifically provided in this Section 6.3, each party
shall bear its own expenses in connection with this Agreement and the
transactions contemplated hereby.
SECTION 6.4 Amendment. Subject to the applicable provisions of the
MBCA, this Agreement may be amended by the parties hereto by written
agreement executed and delivered by duly authorized officers of the
respective parties at any time prior to the Effective Time; provided,
however, that, after approval of the Merger by the stockholders of the
Company, no amendment shall be made which reduces the amount or changes the
type of consideration into which each share of Company Stock shall be
converted upon consummation of the Merger or adversely affects the rights
of the Company's stockholders hereunder without approval of such
stockholders. This Agreement may not be amended except by an instrument in
writing signed by the parties hereto.
SECTION 6.5 Waiver. At any time prior to the Effective Time, any
party hereto may (a) extend the time for the performance of any of the
obligations or other acts of the other parties hereto, (b) waive any
inaccuracies in the representations and warranties contained herein or in
any document delivered pursuant hereto or (c) waive compliance with any of
the agreements or conditions contained herein. Any such extension or
waiver shall be valid only if set forth in an instrument in writing signed
by the party or parties to be bound thereby. The failure of any party to
this Agreement to assert any of its rights under this Agreement or
otherwise shall not constitute a waiver of such rights.
SECTION 6.6 Procedure for Termination, Amendment, Extension or
Waiver. A termination of this Agreement pursuant to Section 6.1, an
amendment of this Agreement pursuant to Section 6.4 or an extension or
waiver pursuant to Section 6.5 shall, in order to be effective, require in
the case of the Company, action by its Board of Directors or the duly
authorized designee of its Board of Directors.
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ARTICLE VII
GENERAL PROVISIONS
SECTION 7.1 Non-Survival of Representations, Warranties and
Agreements. The representations, warranties and pre-Closing agreements in
this Agreement shall terminate at the earlier of the Effective Time or the
termination of this Agreement pursuant to Section 6.1, except that those
set forth in Section 4.4(b), Section 6.3 and this Article VII shall survive
termination indefinitely (in accordance with the terms of such provisions).
SECTION 7.2 Notices. All notices, requests, claims, demands and
other communications hereunder shall be in writing and shall be given (and
shall be deemed to have been duly given upon receipt) by delivery in
Person, by cable, telecopy, telegram or telex or by registered or certified
mail (postage prepaid, return receipt requested) to the respective parties
at the following addresses (or at such other address for a party as shall
be specified by like notice):
if to the Parent or the Purchaser:
c/o Tiger Real Estate Partners, L.L.C.
101 Park Avenue, 47th Floor
New York, New York 10178
Attn: Jonathan H. Paul
with a copy to:
Schulte Roth & Zabel
900 Third Avenue
New York, New York 10022
Attn: Stuart D. Freedman
if to the Company:
Kahler Realty Corporation
20 Second Avenue SW
Rochester, Minnesota 55902
Attn: Harold W. Milner, Chief Executive Officer
with a copy to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017-3954
Attn: Richard I. Beattie
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SECTION 7.3 Certain Definitions.
(a) For purposes of this Agreement, the term:
"Affiliate" of a specified Person means a Person that directly, or
indirectly through one or more intermediaries, controls, is controlled by,
or is under common control with, such specified Person.
"Beneficial Owner" with respect to any shares of Company Common Stock
means a Person who shall be deemed to be the beneficial owner of such
shares of Company Common Stock (i) which such Person or any of its
Affiliates or associates beneficially owns, directly or indirectly, (ii)
which such Person or any of its Affiliates or associates (as such term is
defined in Rule 12b-2 of the Exchange Act) has, directly or indirectly, (A)
the right to acquire (whether such right is exercisable immediately or
subject only to the passage of time) , pursuant to any agreement,
arrangement or understanding or upon the exercise of consideration rights,
exchange rights, warrants or options, or otherwise, or (B) the right to
vote pursuant to any agreement, arrangement or understanding or (iii) which
are beneficially owned, directly or indirectly, by any other Persons with
whom such Person or any of its Affiliates or Person with whom such Person
or any of its Affiliates or associates has any agreement, arrangement or
understanding for the purpose of acquiring, holding, voting or disposing of
any shares.
"Capital Expenditures Budget" means the Company's capital
expenditures budget, dated May 6, 1996, delivered by the Company to Parent
on the date hereof.
"Code" means the Internal Revenue Code of 1986, as amended.
Company Material Adverse Effect means a material adverse effect on the
business, assets, results of operations or financial condition of the
Company and its Subsidiaries, taken as a whole, or on the ability of the
Company to perform its obligations hereunder, or with respect to the
representations and warranties set forth in Section 3.1B(t)(v), (vi) or
(vii), on the after-tax proceeds that would result from the sale of one or
more Properties or on the ability to elect REIT status for the Company for
a taxable year beginning on or prior to January 1, 1997.
"Construction Contract" means any construction contract, architect's
and/or engineer's agreement, construction management contract, design
contract, subcontract, and other similar type of agreement, together with
all supplements, amendments, modifications, general conditions, change
orders and addenda thereto entered into by or on behalf of any Property
Owner (as hereinafter defined) or tenant under any Space Lease (where the
Company, its Subsidiaries or its Investment Entity is such tenant under any
Space Lease), or its predecessors-in-interest, in connection with the
construction, rehabilitation or renovation of any of the Properties or any
part thereof or the installation of any Improvements on any of the
Properties or any part thereof and which in each instance provides for the
payment of $150,000 or more or provides for payment on a "cost plus" basis.
"Control" (including the terms "controlled by" and "under common
control with") means the possession, directly or indirectly or as trustee
or executor, of the power to direct or cause the direction of the
management policies of a Person, whether through the ownership of stock, as
trustee or executor, by contract or credit arrangement or otherwise.
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"Environmental Claims" refers to any complaint, summons, citation,
notice, directive, order, claim, litigation, investigation, judicial or
administrative proceeding, judgment, letter or other communication from any
Governmental Entity or any third party involving violations of
Environmental Laws or Releases of Hazardous Materials from (i) any assets,
Properties or businesses of the Company, its Subsidiaries or its Investment
Entities, or any predecessor in interest; (ii) from adjoining Properties or
businesses; or (iii) from or onto any facilities which received Hazardous
Materials generated by the Company, its Subsidiaries or its Investment
Entities, or any predecessor in interest.
"Environmental Laws" includes the Comprehensive Environmental
Response, Compensation and Liability Act ("CERCLA"), 42 U.S.C. 9601 et
seq., as amended; the Resource Conservation and Recovery Act ("RCRA"), 42
U.S.C. 6901 et seq., as amended; the Clean Air Act ("CAA"), 42 U.S.C. 7401
et seq., as amended; the Clean Water Act ("CWA"), 33 U.S.C. 1251 et seq.,
as amended; the Occupational Safety and Health Act ("OSHA"), 29 U.S.C. 655
et seq., and any other federal, state, local or municipal laws, statutes,
regulations, rules or ordinances imposing liability or establishing
standards of or requirements for conduct for protection of the environment,
which standards or requirements are now in effect or are currently
scheduled to become effective in the future.
"Environmental Liabilities" means any monetary obligations, losses,
liabilities (including strict liability), damages, punitive damages,
consequential damages, treble damages, costs and expenses (including all
reasonable out-of-pocket fees, disbursements and expenses of counsel,
out-of-pocket expert and consulting fees and out-of-pocket costs for
environmental site assessments, remedial investigation and feasibility
studies), fines, penalties, sanctions and interest incurred as a result of
any Environmental Claim filed by any Governmental Entity or any third party
which relate to any violations of Environmental Laws, Remedial Actions,
Releases or threatened Releases of Hazardous Materials from or onto (i) any
property presently or formerly owned by the Borrower or any of its
Subsidiaries or a predecessor in interest, or (ii) any facility which
received Hazardous Materials generated by the Borrower or any of its
Subsidiaries or a predecessor in interest.
"Existing Indebtedness" means, with respect to each Existing Loan,
the indebtedness borrowed thereunder (including all unpaid principal and
accrued interest and all other penalties, charges, and other amounts due
and payable under each such Existing Loan as of March 31, 1996).
"Existing Loan" means the loans set forth on Schedule 3.1(p)(i)(G).
"Expansion Property" means the Real Property designated on Schedule
3.1(v)(iii).
"Franchise Agreements" means the Franchise Agreements listed on
Schedule 3.1(p)(i)(H) under the heading "Franchise Agreements", together
with all supplements, amendments and modifications thereto.
"GAAP" shall mean the generally accepted accounting principles set
forth in the opinions and pronouncements of the Accounting Principles Board
of the American Institute of Certified Public Accountants and statements
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and pronouncements of the Financial Accounting Standards Board or in such
other statements by such other entity as may be approved by a significant
segment of the accounting profession in the United States, in each case
applied on a basis consistent with the manner in which the audited
financial statements for the fiscal year of the Company ended December 31,
1995 were prepared.
"Governmental Entity" means the United States of America, any state
or local government, any political subdivision of either, any agency,
department, commission, board, bureau or instrumentality of any of them, or
any quasi-public agency established by any of the foregoing including,
without limitation, any insurance rating organization or board of fire
underwriters which exercises jurisdiction over the Premises.
"Governmental Regulations" means any laws, orders, judgments,
decrees, ordinances, rules, requirements, resolutions, and regulations, now
or hereinafter existing, (including, without limitation, those relating to
land use, subdivision, zoning, environmental, hazardous substances,
employment practices, occupational health and safety, water and building
and fire codes) of any Governmental Entity.
"Ground Lease" means each of the leases, together with all
supplements, amendments and modifications thereto, listed on Schedule
3.1(p)(I) under the heading "Ground Lease".
"Hazardous Materials" means any chemical, material or substance
defined as or included in the definition of "hazardous substances",
"hazardous wastes", "Hazardous Materials", "regulated substances",
"extremely hazardous waste", "restricted hazardous waste", "toxic
substances", "contaminants", "pollutants", "medical waste", "biohazardous
or infectious waste", "solid waste", "special waste", or words of similar
import under any applicable Environmental Law. Without limiting the
generality of the foregoing, the term "Hazardous Materials" shall include,
to the extent such materials are regulated by any Environmental Law (a)
any oil, flammable substances, explosives, radioactive materials, hazardous
wastes, chemicals, or substances, or toxic wastes; (b) asbestos in any
form; (c) urea formaldehyde foam insulation; (d) transformers or other
equipment which contain polychlorinated biphenyls; and (e) Radon gas.
"Improvements" means all buildings, improvements, structures and fixtures
located on the Land or any part thereof.
"Intangible Personal Property" means all Intangible Personal Property
owned or possessed by any Property Owner and used in connection with the
ownership, operation, leasing, occupancy or maintenance of any of the
Properties, including, without limitation, (a) such Property Owner's right
to use any trade names, (b) the Licenses and Permits, (c) any escrow
accounts, (d) all rights, privileges and appurtenances pertaining to any of
the Properties, including, without limitation, air-rights, development
rights and utility rights, (e) general intangibles, (f) all books, plans
and records of the Company, its Subsidiaries and each Property Owner, and
(g) any unpaid award for taking by condemnation or any damage to the Land
by reason of a change of grade or location of or access to any street or
highway.
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"Knowledge" means, with respect to a Person, the actual knowledge,
after having made reasonable inquiry of (x) any of its executive officers
or directors, (y) any of the executive officers or directors of any
Subsidiary or Investment Entity, if any, of such Person and (z) in the case
of the Company, any general manager of any Property.
"Land" means, collectively, each parcel of Real Property shown on the
Survey for such parcel of Real Property and denoted thereon as being owned
or leased by the applicable Property Owner.
"Leasehold Estates" means, collectively, each Leasehold Estate
created pursuant to a Ground Lease with respect to a parcel of Land related
thereto.
"Licenses and Permits" means, collectively, all licenses (including,
without limitation, liquor licenses and casino licenses), permits,
authorizations, certificates of occupancy, approvals, dedications,
subdivision approvals and entitlements issued, approved or granted by any
Governmental Entity or otherwise in connection with any of the Properties;
and all licenses, consents, easements, rights of way and approvals required
from private parties to make use of the existing utilities and to insure
vehicular and pedestrian ingress and egress to any of the Properties.
"Liens" means any mortgage, deed of trust, pledge, security interest,
financing statement, encumbrance, lien, judgment, segregation, charge or
deposit arrangement or other arrangement having the practical effect of any
of the foregoing and shall include the interest of a vendor or lessor under
any conditional sale agreement, capitalized lease or other title retention
agreement.
"Management Contracts" means the management contracts listed on
Schedule 3.1(p)(i)(G), together with all supplements, amendments and
modifications thereto.
"1996 Budget" means the Company's budget for calendar year 1996
delivered by the Company to Parent on the date hereof.
"Parent Material Adverse Effect" means a material adverse effect on
(i) the business, properties, assets, results of operations or financial
condition of the Parent and its Subsidiaries, taken as a whole, or (ii) on
the ability of the Parent to perform its obligations hereunder.
"Permitted Liens" means, subject to the terms and conditions of the
second sentence of this definition, (a) liens, levies and assessments (it
being understood that in the case of levies and assessments, such matters
are recurring and generally reflected in the Company's financial
statements) for current taxes, sewer charges, water charges or common
charges of any condominium association, in all cases, not yet due and
payable, (b) rights of (x) tenants or persons in possession as listed on
Schedule 3.1(p)(I), and (y) tenants or persons in possession pursuant to
immaterial Space Leases, (c) the matters and items listed on Schedule
3.1(v)(i) and (ii), (d) the matters and items shown on the Surveys, which
Surveys have been made available to the Parent prior to the date hereof,
(e) matters that would be disclosed by an accurate survey of the Land done
after the date of the respective Surveys, (f) as to Personal Property,
liens of carriers and warehousemen incurred in the ordinary course of
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business for sums not yet due and liens arising under the loan documents
described on Schedule 3.1(p)(F) and (G), (g) as to Personal Property liens
incurred or deposits made in the ordinary course of business in connection
with workers compensation, unemployment insurance and other types of social
security, or to secure the performance of tenders, statutory obligations,
surety and appeal bonds, bids, leases, performance and return-of-money
bonds and similar obligations (exclusive of obligations for the payment of
borrowed money), (h) easements, covenants and restrictions placed of record
subsequent to the date of the Title Reports described on Schedule 3.1(v)(i)
and (ii), (i) matters placed of record subsequent to the date of the Title
Reports described on Schedule 3.1(v)(ii) affecting the title of any owner
of the Land covered by the Ground Leases, provided that such matter is
subject and subordinate in all respects to the applicable Ground Lease.
Notwithstanding the foregoing, (I) a matter or item described above in
clauses (d), (e) or (h) or marked with a single asterisk on Schedule
3.1(v)(i) and (ii) (collectively, the "Excludable Liens") shall not be a
Permitted Lien (x) if any such Excludable Lien (A) (excluding the terms of
any of the Ground Leases and any mortgages or deeds of trust or other
collateral loan document) provides for a condition or right of reverter or
other provision for forfeiture under which the fee or leasehold title, as
the case may be, or the possessory rights of the Company, any of its
Subsidiaries or its Investment Entities can be cut off, subordinated or
otherwise disturbed as a result of (w) a presently existing default
thereunder, (x) notice or the passage of time or both (excluding in the
case of default or violation thereunder subsequent to the Effective Date),
(y) the consummation of the transactions contemplated by this Agreement or
(z) the current use of the Real Property, (B) is violated by the existence
of the existing Improvements, (C) prohibits or impairs in any material
respect the present use and enjoyment of the Real Property, (D) prohibits
or impairs in any material respect the right to construct the improvements
which are to be constructed on Expansion Property in accordance with the
plans previously disclosed to the Parent or the proposed use and enjoyment
of any Expansion Property in accordance with the plans previously disclosed
to the Parent or (E) causes the representations and warranties set forth in
Section 3.1(v)(ix) to be untrue, and (y) if a reputable national title
insurance company shall not be ready, willing and able to issue affirmative
title insurance (without additional cost or premium) insuring against the
matters described in clauses (A), (B), (C) and (D) above, as applicable,
with respect to any such Excludable Lien, and (II) a matter or item marked
with two asterisks in Schedule 3.1(v)(i) and (ii) shall not be a "Permitted
Lien" if such matter or item is violated by the existence of the Existing
Improvements or prohibits or impairs in any material respect the present
use and enjoyment of the Real Property.
"Person" means an individual, corporation, partnership, association,
trust, unincorporated organization, other entity or group (as defined in
Section 13(d)(3) of the Exchange Act) .
"Personal Property" means, collectively, the Tangible Personal
Property, the Intangible Personal Property and the Reservation System.
"Properties" or "Property" means the Real Property, any premises demised to
the Company or any of its Subsidiaries or its Investment Entities under any
Space Lease and the Personal Property.
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"Property Contracts" means, collectively, Construction Contracts,
Service Contracts, the Franchise Agreements and the Management Contracts
relating to any of the Properties.
"Property Owner" means the owners or tenants, as the case may be (as
set forth on Schedule 3.1(v)(i)) and (ii) hereto, of each parcel of Real
Property.
"Real Property" means the Land, the Expansion Property, the Leasehold
Estates and the Improvements.
"Release" means any spilling, leaking, pumping, emitting, emptying,
discharging, injecting, escaping, leaching, migrating, dumping, or
disposing of Hazardous Materials (including the abandonment or discarding
of barrels, containers or other closed receptacles containing Hazardous
Materials) into the environment.
"Remedial Action" means all actions taken to (i) clean up, remove,
remediate, contain, treat, monitor, assess, evaluate or in any other way
address Hazardous Materials in the indoor or outdoor environment; (ii)
prevent or minimize a Release or threatened Release of Hazardous Materials
so they do not migrate or endanger or threaten to endanger public health or
welfare or the indoor or outdoor environment; (iii) perform pre-remedial
studies and investigations and post-remedial operation and maintenance
activities; or (iv) any other remedial, removal or investigatory actions
authorized by 42 U.S.C. 9601 et seq.
"Required Consents" means the consents set forth on Schedule 7.3(a).
"Reservation System" means each Property Owner's reservation terminal
and reservation system equipment and software, if any.
"Service Contract" means any service agreement, brokerage commission
agreement, maintenance contract, contract for the purchase or delivery of
services, materials, goods, inventory or supplies, cleaning contracts,
equipment rental agreements, equipment leases or leases of Personal
Property (other than the Franchise Agreements and the Management
Agreements), together with all supplements, amendments and modifications
thereto, relating to any of the Properties or any part thereof; provided,
however, the term "Service Contract" shall not include any Service Contract
which (i) provides for the payment of $100,000 per annum or $250,000 in the
aggregate or less, or (ii) is terminable without penalty on 90 days or less
prior written notice.
"Space Leases" means all material leases, licenses, subleases, rental
agreements or occupancy agreements, together with all supplements,
amendments and modification thereto, entered into by the Company or its
Subsidiaries or Investment Entities.
"Subsidiary" or "Subsidiaries" of the Company, the Surviving
Corporation, the Parent or any other Person means any corporation,
partnership, joint venture or other legal entity of which the Company, the
Surviving Corporation, the Parent or such other Person, as the case may be
(either alone or through or together with any other Subsidiary), owns,
directly or indirectly, 50% or more of the stock or other equity interests
the holder of which is generally entitled to vote for the election of the
board of directors or other governing body of such corporation or other
legal entity.
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"Surveys" means the Surveys, plats, plot plans and floor plans listed
on Schedule 3.1(v)(i) and (ii) hereto.
"Tangible Personal Property" means the items of tangible personal
property consisting of all furniture, furnishings, fixtures, equipment,
machinery and other Personal Property of every kind and nature located on
or used or useful in the operation of any of the Properties, including,
without limitation, as lessee with respect to any such Tangible Personal
Property.
"Title Insurance Policies" means any title insurance policy insuring
title (either fee simple or leasehold) vested in the Company or one of its
Subsidiaries or Investment Entities, as the case may be.
"Title Reports" means the title reports, title commitments and title
opinions listed under the heading "Title Reports" on Schedule 3.1(v)(i) and
(ii).
(b) The following terms shall have the meaning specified in the
indicated Section of this Agreement:
Term . . . . . . . . . . . .Section Term. . . . . . . . . . . Section
Agreement. . . . . . . . . Recitals Merger. . . . . . . . . .Recitals
Articles of Merger . . . . . . .1.3 Merger Consideration. . . . . 2.1
Business Combination . . . . . .4.5 Notice of Superior Proposal . 4.5
Cash Payment . . . . . . . . . .2.3 Options . . . . . . . . . . . 3.1
Closing. . . . . . . . . . . . .1.2 Ownership Interests . . . . . 3.1
Closing Date . . . . . . . . . .1.2 Parent. . . . . . . . . .Recitals
Company. . . . . . . . . . Recitals Partnership . . . . . . . . . 3.1
Company Common Stock . . . . . .2.1 Paying Agent. . . . . . . . . 2.2
Company Plans. . . . . . . . . .3.1 Payment Fund. . . . . . . . . 2.2
Company Preferred Stock. . . . .3.1 PBGC. . . . . . . . . . . . . 3.1
Company Securities . . . . . . .3.1 Proxy Statement . . . . . . . 3.1
Dissenting Shares. . . . . . . .2.1 Purchaser . . . . . . . .Recitals
Documented Expenses. . . . . . .6.3 SEC . . . . . . . . . . . . . 3.1
Effective Time . . . . . . . . .1.3 SEC Reports . . . . . . . . . 3.1
ERISA. . . . . . . . . . . . . .3.1 Securities Act. . . . . . . . 3.1
ERISA Affiliate. . . . . . . . .3.1 Surviving Corporation . . . . 1.1
Exchange Act . . . . . . . . . .2.3 Stockholders' Meeting . . . . 1.7
Expense Reimbursement. . . . . .4.5 Stock Plan. . . . . . . . . . 2.3
FASB . . . . . . . . . . . . . .3.1 Superior Proposal . . . . . . 4.5
Fee Properties . . . . . . . . .3.1 Takeover Proposal . . . . . . 4.5
HSR Act. . . . . . . . . . . . .3.1 Taxes . . . . . . . . . . . . 3.1
IRS. . . . . . . . . . . . . . .3.1 Tax Return. . . . . . . . . . 3.1
Material Contracts . . . . . . .3.1 Termination Fee . . . . . . . 4.5
Leasehold Properties . . . . . .3.1 Title IV Plan . . . . . . . . 3.1
Lease. . . . . . . . . . . . . .3.1 Transferred Employees . . . . 4.6
Investment Entities. . . . . . .3.1 Triggering Event. . . . . . . 6.3
MBCA . . . . . . . . . . . . . .1.1 Vacation Policy . . . . . . . 4.6
-49-
SECTION 7.4 Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of
law, or public policy, all other conditions and provisions of this
Agreement shall nevertheless remain in full force and effect so long as the
economic or legal substance of the transactions contemplated hereby is not
affected in any manner adverse to any party. Upon such determination that
any term or other provision is invalid, illegal or incapable of being
enforced, the parties hereto shall negotiate in good faith to modify this
Agreement so as to effect the original intent of the parties as closely as
possible in an acceptable manner to the end that the transactions
contemplated hereby are fulfilled to the fullest extent possible.
SECTION 7.5 Entire Agreement; Assignment. This Agreement
constitutes the entire agreement among the parties with respect to the
subject matter hereof and supersedes all prior agreements and undertakings,
both written and oral, among the parties, or any of them, with respect to
the subject matter hereof. This Agreement shall not be assigned by
operation of law or otherwise, except that the Parent and the Purchaser may
assign all or any of their respective rights and obligations hereunder to
any direct or indirect wholly owned Subsidiary or Subsidiaries of the
Parent, provided that no such assignment shall relieve the assigning party
of it s obligations hereunder if such assignee does not perform such
obligations.
SECTION 7.6 Parties in Interest. This Agreement shall be binding
upon and inure solely to the benefit of each party hereto, and nothing in
this Agreement, express or implied, is intended to or shall confer upon any
other Person any rights, benefits or remedies of any nature whatsoever
under or by reason of this Agreement.
SECTION 7.7 Governing Law. This Agreement shall be governed by,
and construed in accordance with, the laws of the State of New York (except
to the extent specifically covered by the MBCA as provided herein),
regardless of the laws that might otherwise govern under applicable
principles of conflicts of laws thereof.
SECTION 7.8 Interpretation. When a reference is made in this
Agreement to a Section or Schedule, such reference shall be to a Section
of, or a Schedule to, this Agreement unless otherwise indicated. The table
of contents and headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation
of this Agreement.
SECTION 7.9 Counterparts. This Agreement may be executed in one or
more counterparts, and by the different parties hereto in separate
counterparts, each of which when executed shall be deemed to be an original
but all of which taken together shall constitute one and the same
agreement.
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IN WITNESS WHEREOF, the Parent, the Purchaser and the Company have caused
this Agreement, as amended and restated, to be executed by their respective
officers thereunto duly authorized, all as of the date written above.
TIGER REAL ESTATE FUND, L.P.
By: Tiger Real Estate Partners
Management, L.L.C., its general
partner
By: Tiger Real Estate Partners,
L.L.C., its managing member
By: Paul Kazilionis
Name: Paul Kazilionis
Title: Managing Principal
TIGER REAL ESTATE ACQUISITION CORP.
By: Paul Kazilionis
Name: Paul Kazilionis
Title: Managing Principal
By: Patrick Fox
Name: Patrick Fox
Title: Secretary
KAHLER REALTY CORPORATION
By: Harold W. Milner
Name: Harold W. Milner
Title: President & CEO
-51-
Exhitit A
ARTICLES OF INCORPORATION
OF
KAHLER REALTY CORPORATION
ARTICLE I: The name of the corporation is Kahler Realty Corporation,
(the "Corporation").
ARTICLE II: The street address of the initial registered office of the
Corporation in the State of Minnesota is c/o Corporation Service Company,
Multifoods Tower, 33 South Sixth Street, Minneapolis, Minnesota 55402.
Such initial registered office is located in the County of Hennepin. The
name of the initial registered agent of the Corporation at such address is
Corporation Service Company.
ARTICLE III: The Corporation shall have authority to issue One Thousand
(1,000) shares of Common Stock, par value One Dollar ($1.00) per share.
ARTICLE IV: The name and address of the incorporator are Stuart
Freedman, 900 Third Avenue, New York, New York 10022.
ARTICLE V: The purpose of the Corporation is to engage in any lawful
act or activity for which corporations may be organized under the MBCA.
ARTICLE VI: No shareholder entitled to vote in the election of
directors of the Corporation shall be entitled the right to cumulative
voting in any such election.
ARTICLE VII: No holder of the shares of any class of the Corporation
shall be entitled to preemptive rights.
ARTICLE VIII: Any action required or permitted to be taken at a meeting
of the Board of Directors of the Corporation, other than an action
requiring shareholder approval, may be taken by written action signed by
the number of directors that would be required to take the same action at a
meeting of the Board of Directors at which all directors were present.
ARTICLE IX: The Corporation shall, to the fullest extent permitted by
the MBCA, as the same may be amended and supplemented from time to time,
indemnify any and all persons whom it shall have power to indemnify under
the MBCA. The Corporation may also indemnify such persons, pursuant to
agreement or resolution of shareholders or directors, from and against any
and all of the expenses, liabilities or other matters referred to in or
covered by the MBCA. The indemnification provided for herein shall not be
deemed exclusive of any other rights to which any person may be entitled
under any Bylaw, resolution of shareholders or directors, agreement or
otherwise, as permitted by the MBCA, as to action, or as to failure to act,
in any capacity in which such person served at the request of the
Corporation.
ARTICLE X: The personal liability of the directors of the Corporation to
the Corporation and to its shareholders is eliminated to the fullest extent
permitted by Section 302A.251 of the MBCA, as the same may be amended and
supplemented from time to time.
Exhibit B
KAHLER REALTY CORPORATION
20 Second Avenue SW
Rochester, MN 55902
May 6, 19996
Mayo Foundation
200 First Street SW
Rochester MN 55905
Ladies and Gentlemen:
The purpose of this letter is to confirm our agreement to terminate that
certain Cross-Option Agreement, dated as of February 1, 1989 (the
"Agreement"), between Mayo Foundation, a Minnesota corporation (the
"Foundation"), and Kahler Realty Corporation, a Minnesota corporation
("Kahler").
Kahler intends to engage in a business combination transaction with Tiger
Real Estate Fund, L.P., a Delaware limited partnership ("Parent") and Tiger
Realty Acquisition Corp., a Minnesota corporation and a wholly owned
subsidiary of Parent ("Purchaser"), pursuant to which Purchaser will: i)
acquire all of the issued and outstanding capital stock of Kahler and ii)
merge with and into Kahler (together, the "Merger").
Pursuant to Section 3.3 of the Agreement, it is anticipated that the
Agreement will terminate retroactively upon consummation of the Merger.
The purpose of this letter is to confirm and document that termination.
Accordingly, in consideration of the foregoing and for other good and
valuable consideration, the sufficiency of which is hereby acknowledged,
Kahler and the Foundation hereby agree as follows:
1. Termination of the Agreement. The Agreement is hereby terminated,
effective as of the date of the Merger, from and after which neither Kahler
nor the Foundation shall have any rights, liabilities or obligations
thereunder.
2. Miscellaneous. This letter agreement may not be amended or modified
except by an instrument in writing signed by the parties hereto. This
letter agreement may be executed in one or more counterparts, each of which
shall be deemed an original but all of which taken together will constitute
one and the same instrument. This letter agreement will terminate in the
even that the Merger Agreement is terminated in accordance with its terms.
Mayo Foundation
May 6, 1996
Page Two
If you are in agreement with the foregoing, please execute both enclosed
copies of this letter agreement in the space provided and return one fully
executed copy to Kahler at the following address: 20 Second Avenue, SW,
Rochester, Minnesota 55902, attention: Harold W. Milner, President and
Chief Executive Officer.
Very truly yours,
Kahler Realty Corporation
By: Harold W. Milner
Harold W. Milner
President and Chief Executive Officer
ACCEPTED AND AGREED AS OF THIS 6TH DAY OF MAY, 1996
MAYO FOUNDATION
By:
Name:
Title:
Description of Schedules
Schedule 3.1(b) Capitalization
Schedule 3.1(e) Regulatory Approvals
Schedule 3.1(f) SEC Filings; Financial Statements
Schedule 3.1(h) Transactions with Affiliates
Schedule 3.1(j) Brokers
Schedule 3.1(l) No Conflicts
Schedule 3.1(m) Undisclosed Liabilities
Schedule 3.1(n) Absence of Certain Changes or Events
Schedule 3.1(o) Compliance with Laws
Schedule 3.1(p) Agreements
Schedule 3.1(r) Absence of Litigation
Schedule 3.1(s) Employee Matters
Schedule 3.1(t) Tax Matters
Schedule 3.1(u) Environmental Matters
Schedule 3.1(v) Properties
Schedule 3.1(w) Insurance
Schedule 4.1(a) Conduct of Business: Dividends and Distributions
Schedule 4.1(b) Conduct of Business: Ownership Interests
Schedule 4.1(e) Conduct of Business: Planned Acquisitions
Schedule 4.1(f) Conduct of Business: Planned Dispositions
Schedule 4.1(i) Conduct of Business: Planned Debt
Schedule 4.6(b) Employee Agreements
Schedule 5.1(b) Conditions of Merger: Governmental Approvals
Schedule 7.3(a) Required Consents