MERGER AGREEMENT AND
PLAN OF REORGANIZATION
This MERGER AGREEMENT and PLAN OF REORGANIZATION (the
"Agreement") dated as of March 26, 1999 is by and among ALPHA PEACH TREE
CORPORATION ("APT"), a Delaware corporation whose principal office is located at
12 East 49th Street, New York, New York 10017; ALPHA HOSPITALITY CORPORATION
("AHC"), the parent of APT, which is a Delaware corporation whose principal
office is located at 12 East 49th Street, New York, New York 10017; Forrest
Caldwell ("Caldwell"), William H. Shaw ("Shaw"),Roger D. Watson ("Watson")
and John Scarboro ("Scarboro" and, collectively with Caldwell, Shaw and
Watson, the "SGF Shareholders") and SOUTH GEORGIA FRAMES UNLIMITED, INC.,a
Georgia corporation whose principal address is 501 S. Elm Street, Adel, Georgia
31620 ("SGF")
R E C I T A L S:
A. APT is a wholly-owned subsidiary of AHC and is authorized to issue 200
shares of Common Stock, no par value (the "APT Shares") of which 200 shares are
issued and outstanding.
B. SGF is in the business of manufacturing and selling single family
mobile homes ("SGF's Business").
C. The respective Boards of Directors of SGF and APT deem it desirable
and in the best interests of their respective corporations, and of their
respective stockholders, that SGF merge with and into APT in accordance with
the Delaware General Corporation Law ("DGCL") and the Georgia Business
Corporation Code ("GBCC"), as a result of which APT, the surviving corporation,
and the holders of the outstanding capital stock of SGF will receive the
consideration hereinafter set forth.
D. The parties intend, by executing this Agreement, to adopt a plan of
reorganization within the meaning of Section 368 of the Internal Revenue Code of
1986, as amended (the "Code").
E. AHC and Sunstate Manufactured Homes of Georgia, Inc. d/b/a Peachstate
Homes, an affiliate of SGF, have agreed to merge (the "Sunstate Merger") into
APT as set forth in a separate Merger Agreement and Plan of Reorganization (the
"Sunstate Merger Agreement"). The simultaneous consummation of the mergers
of SGF and Sunstate, respectively, into APT is a condition to the consummation
of both the SGF Merger and the Sunstate Merger.
NOW, THEREFORE, in consideration of the terms, conditions, agreements and
covenants contained herein, and in reliance upon the representations and
warranties contained in this Agreement, the parties hereto agree as follows:
1.
MERGER OF SGF WITH AND INTO APT
1.1 The Merger; Survival of APT. Upon the terms and subject to the
conditions of this Agreement, at the Effective Time (as defined in Section 1.2
below), SGF shall be merged with and into APT in accordance with the provisions
of Section 252 of the DGCL and Section 14-2-1107 of the GBCC and with the
effect provided in Sections 259 and 261 of the DGCL and 14-2-1106 of the
GBCC, and the separate existence of SGF shall thereupon cease. APT shall be the
surviving corporation in the Merger (hereinafter sometimes referred to as
"Surviving Corporation") and shall continue to be governed by the laws of the
State of Delaware. Without limiting the generality of the foregoing, and
subject thereto, at the Effective Time of the Merger, (a) Surviving Corporation
shall possess all assets and property of every description, and every interest
therein, wherever located, and the rights, privileges, immunities, powers,
franchises and authority, of a public as well as of a private nature, of SGF,
(b) all obligations belonging to or due SGF shall be vested in, and become the
obligations of, Surviving Corporation without further act or deed, (c) title to
any real estate or any interest therein vested in SGF shall not revert or in
any way be impaired by reason of the Merger,(d) all rights of creditors and
all liens upon any property of SGF shall be preserved unimpaired, and
(e) Surviving Corporation shall be liable for all of the obligations of SGF and
any claim existing, or action or proceeding pending, by or against SGF may be
prosecuted to judgment with right of appeal, as if the Merger had not taken
place.
1.2 Effective Time of the Merger. The Merger shall become effective at
such time (the"Effective Time") as a Certificate of Merger, in the form set
forth as Exhibit 1.2 hereto, is filed with the Secretaries of State of the
State of Delaware and the State of Georgia (the "Merger Filings") or such
later date and time as may be specified in the Certificate of Merger, such
filing shall be made simultaneously with or as soon as practicable after the
closing of the transactions contemplated by this Agreement (the "Effective
Date").
1.3 Consideration for the Merger.
1.3.1 Merger Value. As used herein, "Merger Value" shall be
$1,248,145. The SGF Shareholders hereby represent and warrant that such value
represents five times the twelve month cash flow of Sunstate and SGF for the
period ended December 31, 1998, as set forth in the December 31, 1998 unaudited
statement of cash flow, as calculated in accordance with Schedule 1.3.1 hereof,
that the data on Schedule 1.3.1 is true and accurate in all material aspects,
and that Schedule 1.3.1 hereof is a true, complete and correct calculation,
accurate in all material respects, of the Merger Value.
1.3.2 Merger Consideration. As used herein the "Merger
Consideration" shall consist of:
(i) Cash equal to $624,073, representing 50% of the Merger Value
("Cash Consideration"); plus
(ii) A number of shares of AHC common stock having a market value
equal to 25% of the Merger Value (the "Alpha Merger Stock"). The aggregate
value, and number of shares, of the Alpha Merger Stock shall be based on a per
share valuation equal to the fourteen (14) day average of the closing price of
AHC Common Stock as reported on the Nasdaq Small Cap Market, for the fourteen
(14) successive trading day period terminating two (2) days prior to the
Closing Date (the "Alpha Merger Stock Valuation"); plus
(iii) A number of shares of AHC Series D Preferred Stock having
an aggregate liquidation value of 25% of the Merger Value (the "Preferred
Stock").
1.4 Conversion of the SGF Stock; Registration of AHC Merger Stock. The
manner and basis of converting the shares of SGF Stock (as defined below) into
shares of AHC Common Stock shall be as follows:
1.4.1 Conversion Ratio.
(i) SGF has issued and outstanding 9,000 shares of Common Stock
(the "SGF Shares"). Each share of SGF Stock shall, by virtue of the Merger and
without any action on the part of the holder thereof, or any other action
whatsoever, be converted into .0111% of the Merger Consideration.
(ii) Each issued share of APT common stock shall remain
unchanged.
1.4.2 No Fractional Shares. No rights to receive fractional
shares of or interests in fractional Alpha Merger Stock shall arise under this
Agreement, and no certificates or scrip representing fractional Alpha Merger
Stock shall be issued hereunder. Upon surrender of a certificate or
certificates previously evidencing SGF Stock, any fractional share interest or
interests in Alpha Merger Stock that the holder of such certificate or
certificates would otherwise be entitled to receive shall be paid by AHC to such
holder by check in an amount based upon the Alpha Merger Stock Valuation m
ultiplied by the fractional number of shares to which such holder would be
entitled.
1.4.3 Unregistered Stock. Certificates evidencing the Alpha
Merger Stock shall bear an appropriate legend to the effect that they have not
been registered with the Securities and Exchange Commission or any other state
securities authority.
1.4.4 Registration Rights. The SGF Shareholders shall
collectively have certain "piggy back" rights with regard to the Alpha Merger
Stock and also shall have the right to make one request that AHC register all or
a portion of the Alpha Merger Stock with the Securities and Exchange
Commission ("SEC") pursuant to the requirements of the Securities Act of 1933,
as amended, and all Rules and Regulations promulgated thereunder (the "Act"),
during the twelve (12) month period following the Closing Date, subject to the
terms and conditions of that certain Registration Rights Agreement of even date
herewith between AHC and the SGF Shareholders, a copy of which is appended
hereto as Exhibit 1.4.4.
1.4.5 Valuation Protection. For a period of eighteen months after
the effective date of the registration of the Alpha Merger Stock, if any SGF
Shareholder sells any of his Alpha Merger Stock in an open market brokered
transaction for less than 80% of the Alpha Merger Stock Valuation, APT shall pay
such SGF Shareholder the negative difference, if any, between (x) the sales
price on such Stock sale, (making no deduction or adjustment for fees or
commissions paid in connection with such sale) (the "Gross Sales Price"), minus
(y) 80% of the Alpha Merger Stock Valuation. The result of the application of
the foregoing formula is referred to as the "Shortfall". APT shall have the
option to pay any Shortfall by (i) making a cash payment in the amount of the
Shortfall; or (ii) causing AHC to issue additional unregistered shares of AHC
Common Stock having a value equal to the Shortfall; or (iii) a combination of
(i) or (ii). For purposes of valuing Alpha Common Stock used to pay all or a
portion of a Shortfall, Alpha Common Stock shall be deemed to have a value equal
to the average closing bid price for AHC common stock as reported by the
Nasdaq Small Cap Market, or any other such national exchange, public market or
over-the-counter market on which the AHC Common Stock is then trading (the
"Primary Exchange"), for each of the ten (10) trading days preceding the SGF
Shareholder's sale triggering this obligation, and the ten (10) days
succeeding such sale. If, however, at any time during the eighteen month period
following the effective date of the registration of the Alpha Merger Stock,
AHC's Common Stock's average closing price, as reported by the Primary Exchange,
for fourteen (14) consecutive days is at least 120% of the Alpha Merger Stock
Valuation, the provisions of this Section 1.4.5 will expire and terminate.
1.4.6 Preferred Stock Designations. The rights and designations
of the Preferred Stock shall be as set forth in the Series D Preferred Stock
Certificate of Designation in the form attached hereto as Exhibit 1.4.6. Such
rights and designations shall include, without limitation, the following
provisions:
(i) Each share of Series D Preferred Stock to be entitled to an
annual dividend of an amount equal to nine percent (9%) of the liquidation value
of such share, which shall be payable, at AHC's election, in either cash or
shares of AHC Common Stock. For purposes of valuing Alpha Common Stock used to
pay all or a portion of a dividend, Alpha Common Stock shall be deemed to have a
value equal to the average closing bid price as reported by the Primary
Exchange for AHC common stock for each of the ten (10) days preceding such
event of liquidation and for each of the ten (10) days succeeding such event.
The aggregate liquidation value of the Preferred Stock shall be equal to twenty-
five percent (25%) of the Merger Value.
(ii) Each share of Series D Preferred Stock shall be convertible
into shares of AHC Common Stock at a per-share price for such common stock
equal to two times the Alpha Merger Stock Valuation. AHC shall have the right,
at any time during the five year period immediately succeeding the Closing Date
to redeem the Preferred Stock for a payment in cash equal to the liquidation
value of the Preferred Stock, plus any accrued and unpaid dividends, upon
fourteen (14) days' notice to the SGF Shareholders. The SGF Shareholders
shall have the option to accept the cash redemption or to exercise their
conversion option during such fourteen (14) day period. On the fifth
anniversary of the Closing Date the Preferred Stock shall automatically
convert into AHC Common Stock at a price equal to two times the Alpha Merger
Stock Valuation.
1.5 Exchange at Closing.
(a) At the Closing, AHC and APT shall deliver to the SGF
Shareholders:
(i) certificates for the AHC Merger Stock and the Preferred
Stock;
(ii) bank checks or wire transfers for the Cash Consideration.
(b) The SGF Shareholders shall deliver certificates to AHC and APT
evidencing the SGF Shares.
(c) In the event the Merger cannot be consummated on the Closing
Date, the deliveries made pursuant to (a) and (b) above shall be placed in
escrow with Parker Duryee Rosoff & Haft, attorney for AHC, who, pursuant to a
written escrow agreement in form attached hereto as Exhibit 1.5, shall be
instructed to release the foregoing from escrow promptly upon notification of
the effectiveness of the Merger on the Effective Date. All documents executed in
connection herewith in anticipation of Closing, if any, shall likewise be held
pursuant to such Escrow Account.
1.6 Effect of Merger. As of the Effective Date, all of the following
shall occur:
(a) The separate existence and corporate organization of SGF (except
insofar as it may be continued by statute) shall cease and APT, as the
corporation surviving the Merger, shall possess the rights, privileges, powers
and franchises, and be subject to all the restrictions, disabilities and
duties of, SGF in the manner specified in the corporate laws of the States of
Georgia and Delaware.
(b) The Certificate of Incorporation of APT, as in effect on the
Effective Date, shall continue in effect without change or amendment.
(c) The By-laws of APT, as in effect on the Effective Date, shall
continue in effect without change or amendment.
(d) Upon the Effective Date, the Board of Directors of APT shall
continue.
1.7 Disclosure Schedules. Simultaneously with the execution of this
Agreement, (a) SGF and the SGF Shareholders shall deliver a schedule relating to
SGF and the SGF Shareholders (the "SGF Disclosure Schedule"), and (b) AHC shall
deliver a schedule relating to AHC and APT (the "Alpha Disclosure Schedule" and,
collectively, with the SGF Disclosure Schedule, the "Disclosure Schedules")
setting forth the matters required to be set forth in the Disclosure Schedules
as described elsewhere in this Agreement. The Disclosure Schedules shall be
deemed to be part of this Agreement.
2.
CONDUCT OF BUSINESS PENDING CLOSING; STOCKHOLDER APPROVAL
SGF (which for purposes of this Article 2 shall include the SGF
Shareholders) and AHC (which for purposes of this Article 2 shall include APT)
covenant that between the date hereof and the Closing Date (as hereinafter
defined):
2.1 General. Each of the parties agrees to use his, her or its best
efforts to take, or cause to be taken, all action to do, or cause to be done
all things necessary, proper or advisable to consummate and make effective the
Sunstate Merger and the SGF Merger.
2.2 Notices and Consents.
2.2.1 SGF shall give any notices to third parties, and use its
best efforts to obtain any third party consents that AHC may request in
connection with the matters pertaining to SGF and its Business, whether
disclosed or required to be disclosed in the Disclosure Schedule. Each of SGF
and AHC shall take any additional action that may be necessary, proper or
advisable in connection with any other notices to, filings with, and
authorizations, consents and approvals of, governments, governmental agencies
and third parties, that such party is required to give, make or obtain.
2.2.2 Schedule 2.2 lists all of the obligations of SGF for which
any of the SGF Shareholders have given personal guaranties or are otherwise
personally obligated and the amounts of such obligations. The SGF Shareholder
shall be removed from such personal obligations prior to the Closing.
2.3 Access by AHC. SGF shall afford to AHC and to AHC's counsel,
accountants and other representatives full access, during normal business
hours, throughout the period prior to the Closing Date, (a) to all of the books,
contracts and records of SGF and shall furnish AHC during such period with all
information concerning SGF that AHC may reasonably request and (b) to the
properties of SGF in order to conduct inspections at AHC's expense to determine
that SGF is operating in material compliance with all applicable federal, state
and local and foreign statutes, rules and regulations, and that SGF's assets are
substantially in the condition and of the capacities represented and warranted
in this Agreement. Any such investigation or inspection by AHC shall not be
deemed a waiver of, or otherwise limit, the representations, warranties and
covenants contained herein.
2.4 Conduct of Business. During the period from the date hereof to the
Closing Date, the business of SGF shall be operated by SGF in the usual and
ordinary course of such business and in material compliance with the terms of
this Agreement. Without limiting the generality of the foregoing:
2.4.1 SGF shall use its reasonable efforts to (i) keep available
the services of the present employees and agents of SGF; (ii) complete or
maintain all existing arrangements including but not limited to filings,
licensing, affiliate arrangements, transferrals, leases and other arrangements
referred to in Section 3.6.1 in full force and effect in accordance with their
existing terms; (iii) maintain the integrity of all confidential information of
SGF; (iv) maintain in full force and effect the existing insurance policies (or
policies providing substantially the same coverage, copies of which shall be
made available to AHC) insuring the business and properties of SGF; (v) comply
in all material respects with all applicable laws; and (vi) preserve the
goodwill of, and SGF's business and contractual relationship with, suppliers,
customers and others having business relations with SGF; and
2.4.2 SGF shall not (i) sell or transfer any of its assets or
property; (ii) shall not make any distribution, whether by dividend or
otherwise, to any of its stockholders or employees except for compensation to
employees and payments to associated companies for goods and services,
in the usual and ordinary course of business; (iii) not declare any dividend or
other distribution; (iv) redeem or otherwise acquire any shares of its capital
stock or other securities; (v) issue or grant rights to acquire shares of its
capital stock or other securities; or (vi) agree to do any of the foregoing.
2.5 Exclusivity to AHC. SGF and its officers, directors, representatives
and agents, from the date hereof until the Closing (unless this Agreement shall
be earlier terminated as hereinafter provided), shall not (i) solicit, initiate,
or encourage the submission of any proposal or offer from any person (including
any of them) relating to (A) liquidation, dissolution or recapitalization; (B)
merger or consolidation; (C) acquisition or purchase of securities or assets; or
(D) similar transactions, or (ii) hold discussions with any person other than
AHC, negotiate or entertain any inquiries, proposals or offers to purchase the
business of SGF or the shares of capital stock of SGF, or, except in connection
with the normal operation of SGF's business, disclose any confidential
information concerning SGF to any person other than AHC and AHC's
representatives or agents. SGF shall notify AHC immediately if any person makes
any proposal, offer, inquiry or contact with respect to the foregoing.
2.6 Sunstate Merger. AHC and Sunstate shall in good faith use their best
efforts to consummate the Sunstate Merger in accordance with the terms of the
Sunstate Merger Agreement so that the Sunstate Merger may close on the Closing
Date simultaneously with the SGF Merger.
2.7 Negotiation of Financing. The Board of Directors of AHC shall use its
reasonable efforts to locate a source of, and to negotiate appropriate financing
for the Merger in amounts, and on terms and conditions, acceptable to the
directors of AHC in the exercise of their sole discretion.
2.8 Agreement to Vote for the Merger.
2.8.1 The Board of Directors of SGF has determined that the Merger
is advisable and in the best interests of the stockholders of SGF and, subject
to its fiduciary obligations as advised in writing by counsel, shall recommend
that SGF's stockholders vote to approve and adopt this Agreement and the Merger.
The SGF Shareholders hereby irrevocably agree to the Merger and hereby covenant
to provide SGF with such approval and adoption either (i) at a meeting of the
SGF Shareholders or (ii) pursuant to the written consent of the SGF Shareholders
in lieu of a meeting as soon as practicable after the date of this Agreement.
2.8.2 Subject to the completion to its satisfaction of all due
diligence, and the securing of appropriate financing on terms it deems
acceptable, if in the determination of AHC's Board of Directors (based on
advice from AHC's counsel) it shall be necessary to obtain shareholder
approval of the Merger for the AHC shareholders, AHC shall use its reasonable
efforts to promptly prepare a Proxy Statement and file such document with the
Securities and Exchange Commission. Upon approval of such Proxy, AHC will use
its reasonable efforts to solicit and obtain shareholder approval for the
Merger.
3.
REPRESENTATIONS AND WARRANTIES OF THE
SGF SHAREHOLDERS AND SGF
As used in this Agreement, the following terms shall have the meanings
indicated below:
The term "Basis" as used in this Agreement means any past or present fact,
situation, circumstance, status, condition, activity, practice, plan,
occurrence, event, incident, action, failure to act or transaction that forms
the basis for any specified consequence.
The term "Knowledge" as used in this Agreement with respect to a party's
awareness of the presence or absence of a fact, event or condition shall mean
(a) actual knowledge plus, if different, (b) the knowledge that would be
obtained if such party conducted itself faithfully and exercised a sound
discretion in the management of his own affairs.
The term "Liability" as used herein shall mean any liability (whether known
or unknown, whether absolute or contingent, whether liquidated or unliquidated
and whether due or to become due).
Except as set forth in the SGF Disclosure Schedule in each instance, each
of the SGF Shareholders, jointly and severally, and SGF, hereby represents and
warrants to AHC and APT as follows, with the knowledge and understanding that
AHC and APT are relying upon such representations and warranties:
3.1 Organization and Standing.
3.1.1 SGF is a corporation duly organized, validly existing and in
good standing under the laws of the State of Georgia which has all requisite
corporate power to own its assets and to carry on its business as it is now
being conducted.
3.1.2 SGF is duly qualified to do business as a foreign
corporation and is in good standing in all jurisdictions set forth in Section
3.1.2 of the SGF Disclosure Schedule and, to the knowledge of the SGF
Shareholders, in each jurisdiction where such qualification is necessary under
applicable law except where the failure to qualify (individually or in the
aggregate) will not have any material adverse effect on the respective business
or prospects of SGF.
3.1.3 The copies of the Certificate of Incorporation, By-laws and
minute books of SGF, as they may be amended to date, as has been delivered to
AHC, are true and complete copies of these documents as now in effect. The
minute books of each corporation are accurate in all material respects.
3.2 Capitalization.
3.2.1 The authorized capital stock of SGF, the number of shares of
capital stock which are issued and outstanding, the par value thereof and the
record and beneficial holders thereof are as set forth in Section 3.2 of the SGF
Disclosure Schedule. The SGF Shareholders own all of the issued and outstanding
shares of common stock of SGF free and clear of all liens and encumbrances of
any kind. All of the shares of capital stock that are issued and outstanding of
SGF are duly authorized, validly issued and outstanding, fully paid and
nonassessable, and were not issued in violation of the preemptive rights of any
person. Other than as set forth in Section 3.2 of the SGF Disclosure Schedule,
there are no subscriptions, options, warrants, rights or calls or other
commitments or agreements to which SGF is a party or by which such entity is
bound, calling for any issuance, transfer, sale or other disposition of any
class of securities of SGF. There are no outstanding rights, contracts, or
securities convertible or exchangeable, actually or contingently, into common
stock or any other securities of SGF.
3.2.2 None of the issued and outstanding shares of common stock of
SGF is subject to any buy-sell agreements, shareholder agreements, pledge
obligations or any other restrictive covenants other than as set forth in
Section 3.2.2 of the SGF Disclosure Schedule. Any such restrictions in effect
as of the date hereof shall be canceled and be of no further force and effect as
of the Closing Date.
3.2.3 SGF is not a party to any management agreement or an
agreement which in effect places a restriction upon the management of SGF.
3.3 Subsidiaries. SGF does not own or have an interest in any other
corporation, partnership, joint venture or other entity.
3.4 Authority.
3.4.1 SGF's Board of Directors has determined that the Merger is
fair to, and in the best interests of, SGF's stockholders and has approved and
adopted this Agreement and the Merger and has adopted a resolution recommending
approval and adoption of this Agreement and the Merger by SGF's stockholders.
The SGF Shareholders, being the holders of all of the issued and outstanding
shares of SGF's common stock, irrevocably consent to the merger and shall
deliver evidence of such approval and resolution adoption at Closing. Assuming
the delivery of SGF Shareholder consent, this Agreement constitutes, and all
other agreements contemplated hereby will constitute, when executed and
delivered by SGF and the SGF Shareholders in accordance herewith, the valid
and binding obligations of SGF and the SGF Shareholders, enforceable in
accordance with their respective terms.
3.4.2 The execution and delivery of this Agreement by SGF and the
SGF Shareholders does not, and the consummation by SGF and the SGF Shareholders
of the transactions contemplated hereby will not, violate, conflict with or
result in a breach of any provision of, or constitute a default (or in an event
which, with notice or lapse of time or both, would constitute a default) under,
or result in the termination of, or accelerate the performance required by, or
result in a right of termination or acceleration under, or result in the
creation of any lien, security interest, charge or encumbrance upon any of the
properties or assets of SGF under any of the terms, conditions or provisions of
(i) the Certificate of Incorporation or By-laws of SGF, (ii) any statute,
law, ordinance, rule, regulation, judgment, decree, order, injunction, writ,
permit or license of any court or governmental authority applicable to SGF or
any of its properties or assets, or (iii) except as set forth in Section 3.4.2
of the SGF Disclosure Schedule, any note, bond, mortgage, indenture, deed of
trust, license, franchise, permit, concession, contract, lease or other
instrument, obligation or agreement of any kind to which SGF is now a party or
by which SGF or any of its or their properties or assets may be bound or
affected, excluding from the foregoing clauses (ii) and (iii), such violations,
conflicts, breaches, defaults, terminations, accelerations or creations of
liens, security interests, charges or encumbrances that would not, in the
aggregate, have a material adverse effect on the business, operations,
properties, assets, condition (financial or other), results of operations or
prospects of SGF.
3.5 Assets. SGF has good and marketable title to or licenses to all of
the assets and properties which each purports to own as reflected on the most
recent balance sheet comprising a portion the SGF Financial Statements (as
defined below), or thereafter acquired. SGF has a valid leasehold interest
in all material properties of which it is the lessee and each such lease is
valid, binding and enforceable against SGF, as applicable, and, to the
knowledge of the SGF Shareholders, the other parties thereto in accordance
with its terms. SGF is not, nor, to the knowledge of the SGF Shareholders, is
any other party in default in the performance of any material provision
thereunder. No material portion of the assets of SGF is subject to any
governmental decree or order to be sold or is being condemned, expropriated or
otherwise taken by any public authority with or without payment of compensation
therefor, nor, to their knowledge, has any such condemnation, expropriation or
taking been proposed. None of the material assets of SGF is subject to any
restriction which would prevent continuation of the use currently made thereof
or materially adversely affect the value thereof.
3.6 Contracts, Etc.
3.6.1 Section 3.6.1 of the SGF Disclosure Schedule consists of a
true and complete list of all contracts, agreements, purchase orders,
commitments and other instruments (whether oral or written) to which SGF is a
party that (i) involve a receipt or an expenditure by SGF or require the
performance of services or delivery of goods to, by, through, on behalf of or
for the benefit of SGF, which in each case, relates to a contract, agreement,
commitment or instrument that either (A) requires payments or receipts in excess
of $10,000 per year or (B) is not terminable by SGF on notice of thirty (30)
days or less without penalty or SGF being liable for damages, or (ii) involve an
obligation for the performance of services or delivery of goods by SGF that
cannot, or in reasonable probability will not, be performed within thirty (30)
days from the dates as of which these representations are made.
3.6.2 All of the contracts and other instruments described on
Schedule 3.6.1 are valid and binding upon SGF and, to the knowledge of the
SGF Shareholders, the other parties thereto, and are in full force and effect
and enforceable in accordance with their terms, even after giving effect to
the Merger, and SGF has not, nor do any of the SGF Shareholders know of any
other party to any such contract, agreement, commitment or other instrument, who
has breached any provision of, and, to the knowledge of the SGF Shareholders, no
event has occurred which, with the lapse of time or action by a third party,
could result in a default under the terms thereof which, alone or in the
aggregate, would provide the Basis for a claim against SGF in excess of $50,000,
and, there are no existing facts or circumstances which would prevent SGF's
contracts and agreements, respectively, from maturing in due course into fully
collectible accounts receivable. Except for terms specifically described in
Section 3.6.1 of SGF's Disclosure Schedule, neither SGF nor any SGF Shareholder
has received any payment from any contracting party in connection with, or as an
inducement for, entering into any contract, agreement, commitment or instrument
except for payment for actual services rendered or to be rendered by SGF
consistent with amounts historically charged for such service.
3.7 Litigation. Except as described on Section 3.7 of the SGF Disclosure
Schedule, there is no claim, suit, action, proceeding, or investigation (a
"Litigation") pending or, to the knowledge of the SGF Shareholders, threatened
against or affecting SGF before or by any court, arbitrator or governmental
agency or authority which, alone or in the aggregate, could or will have a
material adverse effect on the operations or prospects of SGF. There is no
current or past policy, action, failure to act, or other omission which could
form the Basis for any such Litigation. There is no strike or unresolved labor
dispute relating to SGF's employees which, in the judgment of the SGF
Shareholders, could have a material adverse effect on the business or prospects
of SGF. There are no decrees, injunctions or orders of any court, governmental
department, agency or arbitration outstanding against SGF.
3.8 Taxes. Except as described on Section 3.8 of the SGF Disclosure
Schedule:
3.8.1 SGF has (i) duly and timely filed with the appropriate
governmental authorities all Tax returns (as defined in subsection 3 below)
required to be filed by it, and they each have not filed for an extension to
file any Tax Returns and such Tax Returns are true, correct and complete in all
material respects, and (ii) duly paid in full or made adequate provision for the
payment of all Taxes (as defined in subsection (b) below) shown to be due on
such Tax Returns, except for the payment of state and local sales taxes which,
alone or in the aggregate, would not have a material adverse effect on the
business, operations, properties, assets, condition (financial or other),
result of operations or prospects of such company. The Tax Returns referred to
in clause (i) hereinabove either have been examined by the United States
Internal Revenue Service (the "IRS") or the appropriate governmental authority,
or the period of assessment of the Taxes in respect of which such Tax Returns
were required to be filed has expired. All deficiencies asserted or
assessments made as a result of such examinations have been paid in full and no
issues that have been raised by the relevant governmental authority in
connection with the examination of any of the Tax Returns referred to in
clause (i) hereinabove are currently pending. No claim has been made by
any authority in a jurisdiction where SGF does not file a Tax Return that such
activity is or may be subject to Tax in such jurisdiction. No waiver of
statutes of limitation have been given by or requested with respect to any
Taxes of SGF. SGF has not agreed to any extension of time with respect to
any Tax deficiency. The Liabilities and reserves for Taxes reflected in SGF's
Consolidated Balance Sheet as of December 31, 1998 will be adequate to cover all
Taxes for all periods ending on or prior to such respective dates, and there are
no liens for Taxes upon any property or asset of the respective company's,
except for liens for Taxes not yet due. There are no unresolved issues of law
or fact arising out of a notice of deficiency, proposed deficiency or
assessment from the IRS or any other governmental taxing authority with respect
to Taxes of SGF which, if decided adversely, singly or in the aggregate, would
have a material adverse effect on the business, operations, properties, assets,
condition (financial or other), results of operations or prospects of SGF. SGF
is not a party to any agreement providing for the allocation or sharing of
Taxes with any entity. SGF has not, with regard to any assets or property held,
acquired or to be acquired by it, filed a consent to the application of Section
341(f) of the Internal Revenue Code of 1986, as amended (the "Code"). SGF has
withheld and paid all Taxes required to have been withheld and paid in
connection with amounts paid or owing to any employee, independent
contractor, creditor, stockholder, or other third party. No Tax is required to
be withheld pursuant to Section 1445 of the Code as a result of the transfer
contemplated by this Agreement. As a result of the Merger, SGF will not be
obligated to make a payment to an individual that would be a "parachute payment"
to a "disqualified individual" as those terms are defined in Section 280G of the
Code without regard to whether such payment is reasonable compensation for
personal services performed or to be performed in the future.
3.8.2 For purposes of this Agreement, the term "Taxes" shall mean
all taxes, charges, fees, levies or other assessments, including, without
limitation, income, gross receipts, excise, property, sales, withholdings,
social security, occupation, use, service, service use, license, payroll,
franchise, transfer and recording taxes, fees and charges, imposed by the United
States, or any state, local or foreign government or subdivision or agency
thereof whether computed on a separate, consolidated, unitary, combined or any
other basis; and such term shall include any interest, fines, penalties or
additional amounts attributable or imposed or with respect to any such taxes,
charges, fees, levies or other assessments.
3.8.3 For purposes of this Agreement, the term "Tax Return" shall
mean any return, report or other document or information required to be supplied
to a taxing authority in connection with Taxes.
3.9 Employee Benefit Plans; ERISA.
3.9.1 At the date hereof, except as set forth in Section 3.9.1 of
SGF's Disclosure Schedule, SGF maintains or contributes to no employee benefit
plans, programs, arrangements and practices (such plans, programs, arrangements
and practices of an entity being referred to as "Company Plans"), including
employee benefit plans within the meaning set forth in Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended, and all regulations
promulgated thereunder, as in effect from time to time ("ERISA"), or any written
employment contracts providing for an annual base salary in excess of $100,000
and having a term in excess of one year, which contracts are not immediately
terminable without penalty or further ability, or other similar arrangements for
the provision of benefits (excluding any "Multiemployer Plan" within the
meaning of Section 3(37) of ERISA or a "Multiple Employer Plan" within the
meaning of Section 413(c) of the Code, and all regulations promulgated
thereunder, as in effect from time to time). Section 3.9.1 of SGF's Disclosure
Schedule lists all Multiemployer Plans and Multiple Employer Plans which SGF
maintains or to which it makes contributions. SGF has no obligation to create
any additional such plan or to amend any such plan so as to increase benefits
thereunder, except as required under the terms of the Company Plans, under
existing collective bargaining agreements or to comply with applicable law.
3.9.2 Except as set forth in Section 3.9.2 of the SGF Disclosure
Schedule, (i) there have been no prohibited transactions within the meaning of
Section 406 or 407 of ERISA or Section 4975 of the Code with respect to any
Company Plans that could result in penalties, taxes or liabilities which,
singly or in the aggregate, could have a material adverse effect on the
business, operations, properties, assets, condition (financial or other) results
of operations or prospects of SGF, (ii) except for premiums due, there is no
outstanding liability in excess of $50,000, whether measured alone or in the
aggregate, under Title IV of ERISA with respect to any of the Company Plans,
(iii) neither the Pension Benefit Guaranty Corporation nor any plan
administrator has instituted proceedings to terminate any of the Company Plans
subject to Title IV of ERISA other than in a "standard termination" described
in Section 4041(b) of ERISA, (iv) none of the Company Plans have incurred any
"accumulated funding deficiency" (as defined in Section 302 of ERISA and Section
412 of the Code), whether or not waived, as of the last day of the most recent
fiscal year of each of the Company Plans ended prior to the date of this
Agreement, (v) each of the Company Plans has been operated and administered in
all material respects in accordance with applicable laws during the period of
time covered by the applicable statute of limitations, (vi) each of the Company
Plans which is intended to be "qualified" within the meaning of Section 401(a)
of the Code has been determined by the IRS to be so qualified and such
determination has not been modified, revoked or limited by failure to satisfy
any condition thereof or by a subsequent amendment thereto or a failure to
amend, except that it may be necessary to make additional amendments
retroactively to maintain the "qualified" status of such Company Plan, and
the period for making any such necessary retroactive amendments has not expired,
(vii) with respect to Multiemployer Plans, SGF has not made or suffered a
"complete withdrawal" or a "partial withdrawal," as such terms are
respectively defined in Sections 4203, 4204 and 4205 of ERISA and, to the best
knowledge of the SGF Shareholders, no event has occurred or is expected to
occur which presents a material risk of a complete or partial withdrawal under
said Sections 4203, 4204 and 4205, (viii) there are no pending or, to the best
knowledge of the SGF Shareholders, threatened or anticipated claims involving
any of the Company Plans other than claims for benefits in the ordinary course,
and (ix) SGF has no current liability in excess of $50,000, whether measured
alone or in the aggregate, for plan termination or withdrawal (complete or
partial) under Title IV of ERISA based on any plan to which any entity that
would be deemed one employer with SGF under Section 4001 of ERISA or Section
414 of the Code contributed during the period of time covered by the applicable
statute of limitations (the "Company Controlled Group Plans"), and SGF does not
reasonably anticipate that any such liability will be asserted against the
Company, none of the Company Controlled Group Plans has an "accumulated
funding deficiency" (as defined in Section 302 of ERISA and 412 of the Code),
and no Company Controlled Group Plan has an outstanding funding waiver which
could result in the imposition of liens, excise taxes or liability at SGF in
excess of $50,000 whether measured alone or in the aggregate.
3.10 Compliance with Laws and Regulations.
3.10.1 SGF has complied and is presently complying, in all
material respects, with all laws, rules, regulations, orders and requirements
(federal, state and local and foreign) applicable to it in all jurisdictions
where the business of each such entity is conducted or to which each such
entity is subject, including, without limitation, all applicable federal and
state laws regulating the production, sale and delivery of mobile homes and
other products manufactured and marketed by SGF, civil rights and equal
opportunity employment laws and regulations, HUD regulations and all
federal, antitrust, antimonopolies and fair trade practice laws ("Laws") and the
SGF Shareholders know of no pending or anticipated changes to such Laws that
could cause SGF's current business practices to fall out of compliance with such
Laws. The SGF Shareholders do not know of any assertion by any party that SGF
is in violation in any material respect of any such laws, rules, regulations,
orders, restrictions or requirements with respect to its operations and no
notice in that regard has been received by SGF. SGF has complied and currently
complies with all applicable laws (including rules and regulations thereunder)
relating to employment of labor, employee civil rights and equal employment
opportunities.
3.10.2 SGF, has not: (i) violated in any respect or received a
notice or charge asserting any violation of the Sherman Act, the Clayton Act,
the Robinson-Patman Act or the Federal Trade Commission Act, each as amended;
(ii) made or agreed to make any contribution payment or gift of funds or
property to any governmental official, employee or agent where either the
contribution, payment or gift or the purpose thereof was illegal under the laws
of any federal, state or local jurisdiction; or (iii) established or maintained
any unrecorded fund or asset account for any purpose.
3.11 Certain Agreements.
3.11.1 Except as described on Section 3.11.1 of the SGF Disclosure
Schedule, as of the date hereof, SGF is not a party to any oral or written (i)
consulting or similar agreement with any present or former director, officer or
employee or any entity controlled by any such person not terminable on thirty
days' or less notice involving the payment of not more than $25,000 per annum;
(ii) agreement with any director, executive officer or other key employee the
benefits of which are contingent, or the terms of which are materially altered,
upon the occurrence of a transaction involving any such company of the nature
contemplated by this Agreement; (iii) agreement with respect to any director,
executive officer or other key employee providing any term of employment
or compensation guarantee extending for a period longer than one year and for
the payment in excess of $100,000 per annum; or (iv) agreement or plan,
including any stock option plan, stock appreciation right plan, restricted stock
plan or stock purchase plan, any of the benefits of which will be increased, or
the vesting of the benefits of which will be accelerated, by the occurrence of
any of the transactions contemplated by this Agreement or the value of any of
the benefits of which will be calculated on the basis of the transactions
contemplated by this Agreement, except as set forth in Section 3.11.1 of the
Disclosure Schedule.
3.11.2 Except as set forth in Section 3.11.2 of the SGF Disclosure
Schedule, SGF is not indebted for money borrowed, either directly or indirectly,
from any of its officers, directors, or any Affiliate (as defined below), in any
amount whatsoever, nor are any of its officers, directors, or Affiliates
indebted for money borrowed from such entity; nor are there any transactions of
a continuing nature between such entity and any of its officers, directors, or
Affiliates (other than by or through the regular employment thereof) not subject
to cancellation which will continue beyond the Closing Date, including, without
limitation, use of SGF's, GHC's or SGHC's, respectively, assets for personal
benefit with or without adequate compensation. For purposes of this Agreement,
the term "Affiliate" shall mean any person that, directly or indirectly, through
one or more intermediaries, controls or is controlled by, or is under common
control with, the person specified. As used in the foregoing definition, the
term (i) "control" shall mean the power through the ownership of voting
securities, contract or otherwise to direct the affairs of another person and
(ii) "person" shall mean an individual, firm, trust, association, corporation,
partnership, government (whether federal, state, local or other subdivision, or
any agency or bureau of any of them) or other entity.
3.12 Environment, Health and Safety. Prior to the Closing Date, SGF, and,
to the knowledge of the SGF Shareholders, SGF's predecessors and Affiliates, has
complied with all applicable laws (including rules and regulations thereunder)
of federal, state, and local governments (and all agencies thereof) concerning
the environment, public health and safety and employee health and safety, and no
charge, complaint, action, suit, proceeding, hearing, investigation, claim,
demand or notice has been filed or commenced against any of them alleging any
failure to comply with, or Liabilities, arising under any such law or
regulation. Without limiting the foregoing:
3.12.1 SGF and the SGF Shareholders have not either jointly or
severally received any notification of potential responsibility (and there is
no Basis related to the past or present operations, facilities or properties
of SGF and, to the knowledge of the SGF Shareholders, the predecessors of such
entities, for any present or future charge, complaint, action, suit, proceeding,
hearing, investigation, claim or demand against SGF giving rise to any
Liability) under, the Comprehensive Environmental Response, Compensation and
Liability Act of 1980; the Resource Conservation and Recovery Act of 1976; the
Federal Water Pollution Control Act of 1972; the Clean Air Act of 1970; the Safe
Drinking Water Act of 1974; the Toxic Substances Control Act of 1976;
the Refuse Act of 1988; the Emergency Planning and Community Right-to-Know
Act of 1986; the Georgia Hazardous Site Reuse and Redevelopment Act; the Georgia
Comprehensive Solid Waste and Management Act; the Georgia Hazardous Waste
Management Act; the Georgia Hazardous Site Response Act; the Southeast
Interstate Low-level Radioactive Waste Management Compact; the Georgia
Underground Storage Tank Act; the Georgia Sewage Holding Tank Act and the
Georgia Environmental Policy Act (each as amended), without limitation, or any
other law (or rule or regulation thereunder) of any federal, state or local
government (or agency thereof) concerning the release or threatened release of
hazardous substances, public health and safety or pollution or protection of the
environment;
3.12.2 SGF has no Liability (and, to the knowledge of the SGF
Shareholders, no predecessors of SGF has handled or disposed of any substance,
arranged for the disposal of any substance or owned or operated any property or
facility in any manner that could form the Basis of any present or future
charge, complaint, action, suit, proceeding, hearing, investigation, claim or
demand against SGF giving rise to any Liability) for damage to any site,
location or body of water (surface or subsurface) or for illness or personal
injury;
3.12.3 SGF has obtained and been in compliance with all of the
terms and conditions of all permits, licenses and other authorizations which are
required under, and have complied with all other limitations, restrictions,
conditions, standards, prohibitions, requirements, obligations, schedules and
timetables which are contained in all federal, state, local, and foreign laws
(including rules, regulations, codes, plans, judgments, orders, decrees
stipulations, injunctions and charges thereunder) relating to public health
and safety, worker health and safety and pollution or protection of the
environment, including laws relating to emissions, discharges, releases or
threatened releases of pollutants, contaminants or chemical, industrial,
hazardous or toxic materials or wastes into ambient air, surface water, ground
water or lands or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
pollutants, contaminants or chemical, industrial, hazardous or toxic materials
or wastes;
3.12.4 All properties and equipment used in SGF's Business have
been free of asbestos, PCB's, dioxins, dibenzofurans and Extremely Hazardous
Substances (as such term is defined in the Emergency Planning and Community
Right to Know Act of 1986, as amended);
3.12.5 All product labeling has been in conformity with applicable
laws (including regulations thereunder); and
3.12.6 No pollutant, contaminant or chemical, industrial, hazardous
or toxic material or waste ever has been buried, stored, spilled, leaked,
discharged, emitted or released on any real property that SGF has ever owned,
leases or has leased.
Notwithstanding anything contained herein or in the SGF Disclosure
Schedule to the contrary, the disclosure in the SGF Disclosure Schedule pursuant
to, or relating in any way to, this Section 3.13 shall not detract from or
diminish in any manner or to any extent any Liability of SGF and the SGF
Shareholders, jointly and severally pursuant to Section 8.2 hereof.
3.13 Insurance.
3.13.1 Section 3.13 of the SGF Disclosure Schedule sets forth the
name of each insurer, the name and telephone number of each insurance broker,
the name of each policyholder, policy number, period of coverage, scope and
amount, and a description of any retroactive premium adjustments or other
loss-sharing arrangements for each insurance policy to which SGF has been a
party, a named insured or otherwise the beneficiary of coverage at any time
within the past five years.
3.13.2 With respect to each such insurance policy, except as
otherwise specifically identified in Section 3.13 of the SGF Disclosure
Schedule: (A) the policy is legal, valid, binding and enforceable and in
full force and effect; (B) the policy will continue to be legal, valid, binding
and enforceable and in full force and effect on identical terms following the
Closing Date; (C) SGF has not, and to the SGF Shareholders' knowledge, no other
party to the policy is in breach or default (including with respect to payment
of premiums or the giving of notices), and no event has occurred which, with
notice or the lapse of time, would constitute such a breach or default or permit
termination, modification or acceleration, under the policy; and (D) SGF has not
nor, to the knowledge of the SGF Shareholders, has any other party to the policy
repudiated any provision thereof. SGF is now covered, and has been covered
during the past five years (dating back from the date of this Agreement), by
insurance in scope and amount customary and reasonable for the business in which
it has engaged during the aforementioned period and in which it currently
engages.
During the past five years SGF has not maintained any self-insurance
arrangements.
3.14 Title and Use of Real and Other Property.
3.14.1 SGF has, and immediately prior to the Closing will have
good, valid and marketable title in fee simple to all real property and
structures ("Real Property") and all personal property reflected on SGF's
Balance Sheet as owned by SGF and all Real Property and personal property
acquired by SGF since December 31, 1998, in each case free and clear of liens
except (i) as set forth in Section 3.14.1 of the SGF Disclosure S Schedule,
(ii) for sales and other dispositions of inventory in the ordinary course of
business since December 31, 1998 which, in the aggregate, have not been
materially different from prior periods.
3.14.2 Section 3.14.2 contains a true and complete list and legal
description of each parcel of Real Property owned by SGF and a general
description of each structure thereon. The SGF Shareholders have heretofore
furnished to AHC true and complete copies of all deeds, other instruments of
title and policies of title insurance indicating and describing SGF's ownership
of such Real Property, as well as copies of any survey or environmental reports
relating to such Real Property.
3.14.3 Section 3.14.3 of the SGF Disclosure Schedule contains a
list of all tangible personal property having in the aggregate a cost or fair
market value in excess of $174,562, owned by SGF.
3.14.4 Section 3.14.4 of the SGF Disclosure Schedule contains a
list of all Real Property leases, licenses and personal property leases under
which SGF is the lessee or licensee, together with (i) the location and nature
of each of the leased or licensed properties (including a legal
description of all leased Real Property); (ii) the termination date of each such
lease or license; (iii) the name of the lessor or licensor; and (iv) all rental
and other payments made or required to be made. All leases and license,
pursuant to which SGF leases or licenses from others real or personal property
are valid, subsisting and in full force and effect in accordance with their
respective terms, and there is not under any Real Property lease, personal
property lease or license, any existing default or event of default
(or event that, with notice or passage of time, or both, would constitute
a default). True and complete copies of all real property leases, licenses and
personal property leases listed in Section 3.14.4 have been delivered to AHC
heretofore, as well as any copies of title reports, surveys or environmental
reports or audits relating to any leased Real Property. Except as set forth
in Section 3.14.4, no such lease or license will require the consent of the
lessor or licensor to or as a result of the consummation of the transactions
contemplated by this Agreement.
3.14.5 All personal property owned by SGF and all personal property
held by such entities pursuant to leases is in good operating condition and
repair, subject only to ordinary wear and tear, has been operated, serviced and
maintained properly within the recommendation and requirements of the
manufacturer thereof (if any) and is suitable and appropriate for the use
thereof made and proposed to be made by SGF in their respective businesses and
operations. The Real Property and personal property scheduled pursuant to this
Section 3.14 comprise all of the Real Property and personal property used in, or
necessary for the conduct of SGF's Business.
3.14.6 Except as set forth in Section 3.14.6 of the SGF Disclosure
Schedule:
(i) SGF is not in violation of, or default under any statute,
law, ordinance, rule, regulation, permit, order, writ, judgment, injunction,
decree or award ("Legal Requirement") pertaining to any of the Real Property.
No notice of violation of any Legal Requirement, or of any covenant, condition,
restriction or easement affecting any Real Property or with respect to the use
or occupancy thereof, has been given to any SGF Shareholder or SGF;
(ii) All structures on the Real Property are (A) in good
operating condition and repair, (B) are adequate and suitable for the purpose
for which they are currently and proposed to be used, and (C) are supplied with
utilities and other services necessary for the operation of such structures and
the business conducted by SGF therein, including gas, water, electricity,
telephone, sanitary sewer and storm sewer, all of which services are maintained
in accordance with all Legal Requirements and are provided via permanent,
irrevocable, appurtenant easements in favor of SGF;
(iii) No condemnation proceeding is pending or, to the
knowledge of the SGF Shareholders, threatened which would impair the occupancy,
use or value of any Real Property;
(iv) No structure, nor the operations of SGF therein or thereon
(A) is located outside of the boundary lines of the described parcel of land on
which it is located, (B) is in violation of applicable setback requirements,
zoning laws, or ordinances, (C) is subject to "permitted non-conforming use"
or "permitted non-conforming structure" classification, or (D) encroaches any
property owned by or easement granted in favor of a third party;
(v) There are no (i) leases, subleases, licences, concessions or
other agreements, written or oral, granting to any person the right to acquire,
use, or occupy any portion of any, Real Property, (ii) outstanding options or
rights of first refusal to purchase all or any portion of the Real Property, and
(iii) persons other than SGF in possession of any Real Property; and
(vi) Each parcel of Real Property owned by SGF (A) is fully and
adequately described in the legal description therefor contained in the deed
thereof, (B) abuts a paved public right-of-way, (C) does not serve any adjoining
property for any purpose inconsistent with the use of the land, and (D) is not
located within any flood plain or subject to any similar type restriction
for which any permits or licenses necessary to the use thereof have not been
obtained.
3.15 Condition of Assets. The equipment, real property, fixtures and
other personal property of SGF are in good operating condition and repair
(ordinary wear and tear excepted) for the conduct of their respective businesses
as presently being conducted. Title to all such assets was acquired through
arms-length transactions. All assets necessary for the conduct of SGF's
Business are owned by SGF.
3.16 Inventories. The inventories of raw materials and other consumable
items reflected in the Financial Statements do not include any items in any
material amount that are below standard quality or are damaged, obsolete, slow-
moving or of a quantity or quality not usable or suitable in the ordinary course
of business. The Financial Statements reflect adequate reserves in accordance
with GAAP, consistently applied, with respect to inventories and raw materials.
The entire inventory was acquired in the ordinary course of business, on an arms
- -length basis.
3.17 Employees. Except as set forth in Section 3.17 of the SGF
Disclosure Schedule, none of the employees of SGF is represented by any labor
union or collective bargaining unit and SGF nor the SGF Shareholders are not
aware of any organizational efforts taking place with respect to such r
epresentation.
3.18 Financial Statements. The SGF Disclosure Schedule contains unaudited
balance sheets of SGF as at December 31, 1998 and related unaudited statements
of operations, cash flows and stockholders' equity of SGF for the periods ended
at such dates (collectively the "Financial Statements"). The Financial
Statements present fairly, in all material respects, the financial position
on the dates thereof and results of operations of SGF for the periods indicated,
prepared in accordance with generally accepted accounting principles
consistently applied ("GAAP"). The Financial Statements are capable of being
audited in accordance with Regulation S-X, promulgated by the Securities and
Exchange Commission. There are no assets of SGF, the value of which is
materially overstated in said balance sheets.
3.19 Undisclosed Liabilities. SGF has no Liability (and there is no Basis
for any present or future charge, complaint, action, suit, proceeding, hearing,
investigation, claim or demand against SGF giving raise to a Liability) except
for (i) Liabilities set forth on the face of SGF's latest Balance Sheet (as
opposed to the footnotes); (ii) Liabilities which have arisen after the date of
the last balance sheet in the ordinary course of business; and (iii) Liabilities
set forth as such in the SGF Disclosure Schedule.
3.20 Absence of Certain Changes or Events. Except as set forth in the SGF
Disclosure Schedule, since December 31, 1998 (the "Balance Sheet Date"), there
has not been:
3.20.1 any material adverse change in the financial condition,
properties, assets, liabilities or business of SGF;
3.20.2 any material damage, destruction or loss of any material
properties of SGF, whether or not covered by insurance;
3.20.3 any material adverse change in the manner in which the
business of SGF has been conducted;
3.20.4 any material adverse change in the treatment and protection
of trade secrets or other confidential information of SGF; and
3.20.5 any occurrence not included in sub-paragraphs 1 through 4 of
this Section 3.20 which has resulted, or which the SGF Shareholders have reason
to believe, might be expected to result in a material adverse change in the
business or prospects of SGF.
3.21 Government Licenses, Permits, Etc. SGF has all material governmental
licenses, permits, authorizations and approvals necessary for the conduct of its
business as currently conducted ("Licenses and Permits"). Section 3.21 of the
SGF Disclosure Schedule includes a list of all Licenses and Permits. All
Licenses and Permits are in full force and effect, and no proceedings for the
suspension or cancellation of any thereof is pending or, to their knowledge,
threatened. The SGF Shareholders know of no action, omission or policy which
could form a reasonable Basis for the loss of any such licensure.
3.22 Business Locations. SGF does not own or lease any real or personal
property in any state or country except as set forth on the SGF Disclosure
Schedule. Such entities have no executive offices or places of business
except as otherwise set forth on the SGF Disclosure Schedule.
3.23 Intellectual Property. Section 3.23 of the SGF Disclosure Schedule
sets forth a complete and correct list and summary description of all
trademarks, trade names, service marks, service names, brand names, copyrights
and patents, registrations thereof and applications therefore, applicable to
or used in the business of SGF, GHC and SGHC, together with a complete list of
all licenses granted by or to such entities with respect to any of the above.
Except as otherwise set forth in Section 3.23, all such trademarks, trade names,
service marks, service names, brand names, copyrights and patents are owned by
SGF free and clear of all liens, claims, security interests and encumbrances
of any nature whatsoever. SGF is currently not in receipt of any notice of any
violation or infringements of, and such entities are not knowingly violating or
infringing, the rights of others in any trademark, trade name, service mark,
copyright, patent, trade secret, know-how or other intangible asset.
3.24 Continuity of Existing Arrangements. Except as set forth in Section
3.24 of the SGF Disclosure Schedule, the SGF Shareholders have no knowledge of,
or the Basis for a belief that, either as a result of the transactions
contemplated hereby or for any other reason (exclusive of expiration of a
contract upon the passage of time), (i) any material distributor or supplier of
SGF intends to discontinue, materially alter, or substantially diminish its
relationship with such entity, or with APT, after the Closing Date or (ii)
any key employee of SGF intends to terminate such employment.
3.25 Governmental Approvals. Except as set forth in Section 1.2 as to the
Merger Filing, no authorization, license, permit, franchise, approval, order or
consent of, and no registration, declaration or filing by SGF with, any
governmental authority, domestic or foreign, federal, state or local,
is required in connection with SGF's execution, delivery and performance of this
Agreement.
3.26 Accounts Receivable. Except as set forth in Section 3.26 of the SGF
Disclosure Schedule, all of the accounts receivable of SGF included in the
Financial Statements or otherwise reflect actual transactions, have arisen in
the ordinary course of business, will not, to the knowledge of the SGF
Shareholders, be subject to offset or deduction and, except as noted, will be
collectible at the aggregate recorded amounts thereof net of any reserves
established in a manner consistent with past practices of all as reflected in
the financial statements.
3.27 Liabilities. SGF has no material Liabilities, whether or not of a
kind required by generally accepted accounting principles to be set forth on a
financial statement, other than (i) Liabilities fully and adequately reflected
or reserved against on the Balance Sheets, (ii) Liabilities incurred since the
Balance Sheet Date in the ordinary course of the business of SGF or (iii)
Liabilities otherwise disclosed in this Agreement, including the Exhibits hereto
and Disclosure Schedule.
3.28 OSHA. Except as otherwise provided in Section 3.28 of the SGF
Disclosure Schedule, during the three (3) years immediately prior to the date of
this Agreement, SGF has not been cited for any violations of the Occupational
Safety and Health Act of 1970, as amended, nor to the knowledge of the SGF
Shareholders, are there any citations pending as a result of inspections of
the Company or for non-compliance with such Act. Except as otherwise indicated
in Section 3.28 of the SGF Disclosure Schedule, each of the conditions which
resulted in the issuance of a citation have been abated or otherwise corrected
to the satisfaction of the Occupational Safety and Health Administration as of
the Closing Date.
3.29 Product Warranties. Each product manufactured, sold, leased or
delivered by SGF has been in substantial conformity with all applicable HUD
specifications, contractual commitments and all express and implied warranties,
and, except for normal returns or allowances in the ordinary course of business,
not in excess of warranty reserves. SGF has no Liability (and there is no Basis
for any present or future charge, complaint, action, suit, proceeding, hearing,
investigation, claim or demand against it giving rise to any Liability) for
replacement or repair thereof or for other damages in connection therewith. No
product manufactured by SGF is subject to any guaranty, warranty or other
indemnity beyond the applicable standard terms and conditions of sale or lease
as set forth in purchase orders delivered pursuant to Section 3.6.1.
3.30 Immigration Matters. Except as set forth in Section 3.30 of the SGF
Disclosure Schedule, SGF has properly completed and maintained Forms I-9 on all
persons who became employed by such entity for the past three (3) years, and
each alien employee of such entity is employed pursuant to a valid temporary
work authorization. Section 3.30 of the Disclosure Schedule lists the names
of all alien employees who are required to have temporary work authorizations,
the date of their employment and their job titles and responsibilities, and
copies of each Form I-9 for each such person.
3.31 Investment Representations. The SGF Shareholders acknowledge that the
Alpha Merger Stock is not registered under the Act, or any state securities laws
and are being offered and issued in reliance upon federal and state exemptions
for transactions not involving any public offering. The SGF Shareholders are
each acquiring the Alpha Merger Stock solely for their own respective accounts
for investment purposes and not with a view to the sale or other disposition
thereof within the meaning of the Act, except as may be permitted by such Act
and the rules and regulations promulgated under the Act. Each SGF Shareholder
has experience investing in unregistered securities and is fully cognizant of
the risks inherent in the ownership thereof and each is capable of withstanding
substantial losses as a result of such ownership.
3.32 Reserves Adequate. Section 3.33 of the SGF Disclosure Schedule
sets forth a list of all the reserves established by SGF for all Liabilities,
and the amounts for each such reserve. All the reserves which have been
established are adequate to cover 100% of the costs, expenses, losses and
Liabilities that will be incurred in connection with all such matters. There
will be no material change in the amounts of such reserves prior to the
Closing Date.
3.33 No Omissions or Untrue Statements. No representation or warranty made
by SGF, GHC, SGHC or the Stockholders to AHC and APT anywhere in this Agreement,
the SGF Disclosure Schedule or in any certificate of a SGF officer required to
be delivered to AHC pursuant to the terms of this Agreement contains or will
contain any untrue statement of a material fact, or omits or will omit to state
a material fact necessary to make the statements contained herein or therein not
misleading as of the date hereof and as of the Closing Date.
4.
REPRESENTATIONS AND WARRANTIES OF AHC AND APT
Except as set forth in the Alpha Disclosure Schedule in each instance, and
AHC's Annual Report on Form 10-K for the year ended December 31, 1998, including
the Exhibits thereto (the "10-K") filed with the SEC, pursuant to the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), AHC and APT, jointly and
severally, represent and warrant to, and agree with, the SGF Shareholders and
SGF as follows, as of the date hereof and as of the Closing Date:
4.1 Organization and Standing of AHC and APT. AHC and APT are
corporations duly organized, validly existing and in good standing under the
laws of the State of Delaware, and have the corporate power to carry on their
business as now conducted and to own their assets and are duly qualified to
transact business as foreign corporations in each state where such qualification
is necessary except where the failure to qualify (individually or in the
aggregate) will not have a material adverse effect on the business or
prospects of AHC or APT on a combined basis. The copies of the Certificate of
Incorporation and By-laws of AHC and APT, as amended to date, and delivered to
SGF, are true and complete copies of those documents as now in effect.
4.2 Authority. The approval of the Merger by the respective Boards of
Directors of AHC and APT, once given, shall be binding on AHC and APT, subject
to the approval of their respective stockholders as mandated by the DGCL and,
with regard to AHC, the Securities Exchange Act of 1934, as amended, and all
Rules and Regulations promulgated thereunder, and all applicable NASDAQ
listing agreements and requirements. This Agreement will constitute, and all
other agreements contemplated hereby will constitute, when executed and
delivered by AHC and APT, the valid and binding obligations of each corporation,
enforceable in accordance with their respective terms.
4.3 No Conflict. The making and performance of this Agreement will not
(i) conflict with the Certificate of Incorporation or the By-laws of AHC or APT,
(ii) violate any laws, ordinances, rules, or regulations, or any order, writ,
injunction or decree to which AHC or APT is a party or by which AHC or APT or
any of its material assets, business, or operations may be bound or affected
or (iii) result in any breach or termination of, or constitute a default under,
or constitute an event which, with notice or lapse of time, or both, would
become a default under, or result in the creation of any encumbrance upon any
material asset of AHC or APT under, or create any rights of termination,
cancellation, or acceleration in any person under, any material agreement,
arrangement, or commitment, or violate any provisions of any laws, ordinances,
rules or regulations or any order, writ, injunction, or decree to which AHC or
APT is a party or by which AHC or APT, or any of their material assets may be
bound.
4.4 Capitalization. The Authorized capital stock of AHC consists of
25,000,000 shares of Common Stock, par value $.01 and 1,000,000 shares of
Preferred Stock, par value $.01. As of January 12, 1998, 16,788,228 shares of
Common Stock, 821,496 shares of Series B Preferred Stock and 135,162 shares of
Series C Preferred Stock were issued and outstanding. Such outstanding
shares of Common Stock are duly authorized, validly issued, fully paid, and non-
assessable. The AHC Merger Stock and the Series D Preferred Stock to be issued
pursuant to this Agreement, when issued in accordance with the terms of this
Agreement, will be duly authorized, validly issued, fully paid and non-
assessable. As of December 31, 1998 there were outstanding options, warrants or
rights of conversion or other rights, agreements, arrangements or commitments
relating to the capital stock of AHC or obligating AHC to issue or sell an
aggregate of 1,796,500 shares of Common Stock as set forth in the Disclosure
Schedule.
4.5 AHC Financial Statements. The financial statements of AHC
(collectively the "AHC Financial Statements") included in AHC's SEC Reports
(as hereinafter defined) present fairly, in all material respects, the financial
position of AHC as of the respective dates and the results of its
operations and other information for the periods covered in accordance with
GAAP and in accordance with Regulation S-X of the SEC (subject, in the case of
unaudited interim period financial statements, to normal and recurring year-end
adjustments which, individually or collectively, are not material).
5.
STOCKHOLDER APPROVALS; CLOSING DELIVERIES
5.1 Stockholder Approvals. Subject to the satisfactory completion of all
undertakings contemplated by this Agreement including, without limitation all
due diligence reviews and investigations undertaken by AHC which are deemed to
be necessary by AHC's Board of Directors. and the other provisions of this
Agreement, the parties shall hold a closing (the "Closing") on the
next business day (or such later date as the parties hereto may agree) following
the business day on which the last of the conditions set forth in Articles 6 and
7 hereof is fulfilled or waived (such later date, the "Closing Date"), at
10:00 A.M. at the offices of Parker Duryee Rosoff & Haft, 529 Fifth Avenue,
New York, New York 10017, or at such other time or place as the parties may
agree upon.
5.2 Closing Deliveries to APT and AHC. At the Closing, in addition to
documents referred elsewhere, SGF and the SGF Shareholders shall deliver, or
cause to be delivered, to AHC:
5.2.1 a certificate, dated as of the Closing Date, executed by the
Secretary of SGF and each of the SGF Shareholders, to the effect that
representations and warranties contained in this Agreement are true and correct
in all material respects at and as of the Closing Date and that SGF
and the SGF Shareholders have complied with or performed in all material
respects all terms, covenants and conditions to be complied with or performed
by them on or prior to the Closing Date;
5.2.2 an opinion of SGF's counsel, substantially in the form of
Exhibit 5.2.2 attached;
5.2.3 certificates representing SGF Stock owned by all of the SGF
Shareholders; and
5.2.4 such other documents as AHC or its counsel may reasonably
require to evidence compliance with Article 7 hereof.
5.3 Closing Deliveries to SGF. At the Closing, in addition to documents
referred to elsewhere, AHC shall deliver to SGF:
5.3.1 a cashier's check or evidence of compliance with the wiring
instructions of SGF with regard to the cash component of the Merger
Consideration;
5.3.2 certificates representing the AHC Merger Stock and the
Series D Preferred Stock issued to the SGF Shareholders in accordance with the
instructions delivered to AHC by the SGF Shareholders;
5.3.3 a certificate of AHC, dated as of the Closing Date, executed
by the President or an Executive Vice President of AHC to the effect that the
representations and warranties of AHC and APT contained in this Agreement are
true and correct in all material respects and that AHC and APT have each
complied with or performed in all material respects all terms, covenants, and
conditions to be complied with or performed by AHC and APT on or prior to the
Closing Date;
5.3.4 an opinion of AHC's counsel, Parker Duryee Rosoff & Haft,
substantially in the form of Exhibit 5.3.4 attached; and
5.3.5 such other documents as SGF or it's counsel may reasonably
require to evidence compliance with Article 6 hereof.
6.
CONDITIONS TO OBLIGATIONS OF
THE SGF SHAREHOLDERS AND SGF
The obligation of the SGF Shareholders and SGF to consummate the Closing is
subject to the following conditions, any of which may be waived by it in their
sole discretion:
6.1 Compliance by AHC and APT. AHC and APT shall have performed and
complied in all material respects with all agreements and conditions required by
this Agreement including without limitation the obligations set forth in Section
2.2 to be performed or complied with by AHC or APT prior to or on the Closing
Date;
6.2 Accuracy of AHC's and APT's Representations. AHC's and APT's
representations and warranties contained in this Agreement (including the AHC
Disclosure Schedule) or any schedule, certificate, or other instrument delivered
pursuant to the provisions hereof or in connection with the transactions
contemplated hereby shall be true and correct in all material respects at and
as of the Closing Date (except for such changes permitted by this Agreement) and
shall be deemed to be made again as of the Closing Date.
6.3 Documents. All documents and instruments required hereunder to be
delivered by AHC to SGF at the Closing shall be delivered in form and substance
reasonably satisfactory to SGF and its counsel, including, without limitation,
resolutions of the Board of Directors of AHC to increase the number of directors
on AHC's Board of Directors by two persons and appointing Roger D. Watson and
William H. Shaw to serve on the Board of Directors until their successors are
duly elected, and evidence of the filing of the Certificate of Designation for
the Series D Preferred Stock.
6.4 Agreements. AHC shall have entered into the following binding
agreements with:
6.4.1 Employment Agreement between APT and Shaw in the form of
Exhibit 6.4.1 hereto;
6.4.2 Employment Agreement between APT and Watson in the form of
Exhibit 6.4.2 hereto; and
6.4.3 Registration Rights Agreement in the form of Exhibit 1.4.4
hereto.
6.5 Litigation. No action, suit or proceeding shall be pending or
threatened before any court or quasi-judicial or administrative agency of any
federal, state, local or foreign jurisdiction wherein an unfavorable judgment,
order, decree, stipulation, injunction or charge would (i) prevent the
consummation of any of the transactions contemplated by this Agreement; (ii)
would cause any of the transaction contemplated by this Agreement to be
rescinded following consummation; or (iii) materially affect adversely APT's
right to operate or control the business of SGF.
6.6 Sunstate Merger. The Sunstate Merger is closed subject only to the
filing of such documents with the Secretaries of State of the States of Delaware
and Georgia as are required by the respective corporate laws of such
jurisdictions.
7.
CONDITIONS TO AHC'S AND APT'S OBLIGATIONS
AHC's and APT's obligation to consummate the Closing is subject to the
following conditions, any of which may be waived by AHC or APT it in their sole
discretion:
7.1 Compliance by SGF. SGF and the SGF Shareholders shall have performed
and complied in all material respects with all agreements and conditions
required by this Agreement to be performed or complied with by them prior to or
on the Closing Date.
7.2 Accuracy of Representations of SGF. The representations and
warranties of SGF and the SGF Shareholders contained in this Agreement
(including the exhibits hereto and the SGF Disclosure Schedule) or any schedule,
certificate, or other instrument delivered pursuant to the provisions hereof or
in connection with the transactions contemplated hereby shall be true and
correct in all material respects at and as of the Closing Date (except for
changes permitted by this Agreement) and shall be deemed to be made again as of
the Closing Date.
7.3 Third Party Consents. SGF and the SGF Shareholders shall have
procured and delivered all third party consents deemed necessary by APT and AHC.
7.4 Material Adverse Change. AHC shall be satisfied that nothing which in
its reasonable discretion constitutes a material adverse change shall have
occurred subsequent to September 26, 1998 in the financial position, results of
operations, assets, liabilities, or prospects of SGF.
7.5 Litigation. No action, suit or proceeding shall be pending or
threatened before any court or quasi-judicial or administrative agency of any
federal, state, local or foreign jurisdiction wherein an unfavorable judgment,
order, decree, stipulation, injunction or charge would (i) prevent the
consummation of any of the transactions contemplated by this Agreement, (ii)
would cause any of the transaction contemplated by this Agreement to be
rescinded following consummation, or (iii) materially affect adversely APT's
right to operate or control the business of SGF.
7.6 Collateral Agreements.
7.6.1 The Agreements referred to in paragraph 6.4 hereof shall be
executed; and
7.6.2 Caldwell, Knight, and Scarboro shall have entered into a Non
- -Competition Agreement in the form of Exhibit 7.6 hereof with APT and AHC.
7.7 Documents. All documents, instruments and actions required hereunder
to be performed or delivered by SGF and/or the SGF Shareholders or each of them
to AHC at the Closing shall be delivered in form and substance reasonably
satisfactory to AHC and its counsel.
7.8 Sunstate Merger. The Sunstate Merger is closed subject only to the
filing of such documents with the Secretaries of State of the States of Delaware
and Georgia as are required by the respective corporate laws of such
jurisdictions.
7.9 Acceptable Financing. AHC shall have secured appropriate financing on
terms and conditions acceptable to AHC's Board of Directors enabling it to
undertake the Merger.
7.10 Due Diligence. The completion, to AHC's satisfaction of all due
diligence review with respect to the business, assets, financial condition,
prospects and otherwise of SGF deemed necessary by AHC's Board of Directors,
including without limitation, all tests, studies analyses, legal and regulatory
audits or reviews that AHC's Board of Directors deems appropriate
7.11 Shareholder Approval. Approval of the Merger by the Shareholders
of AHC as determined by the vote of such shareholders at an annual meeting duly
held and organized in accordance with the terms of the Exchange Act and the DGCL
shall have been obtained by the Board of Directors of AHC.
8.
REMEDIES FOR BREACHES OF THIS AGREEMENT
8.1 Survival. All representations, warranties, covenants and agreements
contained in this Agreement, and any financial statements, deeds, certificates
(including closing certificates), instruments, schedules or other documents
delivered pursuant hereto or otherwise in connection herewith will survive
the execution and delivery of this Agreement, regardless of any investigation
made by APT, AHC, or on behalf of either, for a period of five years from the
Closing Date, except for (i) those representations and warranties contained
in Section 3.8 which shall survive until the expiration of all applicable
statutes of limitation with respect thereto and (ii) those representations
and warranties contained in Sections 3.1, 3.2, 3.4 and 3.12 which shall continue
in full force and effect forever.
8.2 Indemnification. The SGF Shareholders jointly and severally agree to
indemnify AHC and APT or their respective officers, directors, SGF Shareholders,
employees, agents or affiliates (each an "Alpha Indemnitee") and each of them,
from and against all losses, liabilities, obligations, costs, expenses, damages,
judgments of any kind or nature whatsoever (including reasonable attorneys',
accountants' and experts' fees, disbursements of counsel, and other costs and
expenses) incurred by any of them ("Losses"), from, arising out of, relating
to, in the nature of or caused by any breach of any representation or warranty
contained in Section 3 hereof and of the Sunstate Merger Agreement or in any
certificate delivered by SGF, the SGF Shareholders, or the Shareholders of
Sunstate, or any of them, in connection herewith or any breach or failure to
perform or comply with any obligation, agreement or covenant made in this
Agreement and the Sunstate Merger Agreement or in connection herewith or
therewith.
8.3 Third Party Claims.
8.3.1 If any party entitled to be indemnified pursuant to this
Article 8 receives notice of the assertion by any third party of a claim or the
commencement by such third person of any action (an "Indemnifiable Claim") with
respect to which another party hereto (an "Indemnifying Party") is or may be
obligated to provide indemnification, the Indemnified Party shall promptly
notify the Indemnifying Party in writing (the "Claim Notice") of the
Indemnifiable Claim; provided that the failure to provide such notice shall
not relieve or otherwise affect the obligation of the Indemnifying Party to
provide indemnification hereunder, except to the extent that any damages
directly resulted from, or were caused by, such failure.
8.3.2 The Indemnifying Party shall have thirty days after receipt
of the Claim Notice to undertake, conduct and control, through counsel of its
own choosing, and at its expense, the settlement or defense thereof, and the
Indemnified Party shall cooperate with the Indemnifying Party in connection
therewith; provided, that (i) the Indemnifying Party shall permit the
Indemnified Party to participate in such settlement or defense through counsel
chosen by the Indemnified Party (subject to the consent of the Indemnifying
Party, which consent shall not be unreasonably withheld), provided that the
fees and expenses of such counsel shall not be borne by the Indemnifying Party,
and (ii) the Indemnifying Party shall not settle any Indemnifiable Claim without
the Indemnified Party's consent. So long as the Indemnifying Party is
vigorously contesting any such Indemnifiable Claim in good faith, the
Indemnified Party shall not pay or settle such claim without the Indemnifying
Party's consent, which consent shall not be unreasonably withheld.
8.3.3 If the Indemnifying Party does not notify the Indemnified
Party within thirty days after receipt of the Claim Notice that it elects to
undertake the defense of the Indemnifiable Claim described therein, the
Indemnified Party shall have the right to contest, settle or compromise
the Indemnifiable Claim in the exercise of its reasonable discretion; provided
that the Indemnified Party shall notify the Indemnifying Party of any compromise
or settlement of such Indemnifiable Claim.
8.4 Indemnification Non-Exclusive. The foregoing indemnification
provisions are in addition to, and not in derogation of, any statutory,
equitable or common-law remedy any party may have for breach of representation,
warranty, covenant or agreement.
8.5 Pending Indemnity Claims. The proceeds from the sale of any Alpha
Merger Stock by a SGF Shareholder, in accordance with the terms of Article 1
hereof and the Registration Rights Agreement, during a period in which an
Indemnifiable Claim is outstanding or pending shall be placed into an escrow
account acceptable to AHC pending the resolution of such Indemnifiable
Claim.
9.
TERMINATION
9.1 Termination of Agreement. This Agreement and the transactions
contemplated hereby may be terminated at any time prior to the Closing as
follows:
9.1.1 by mutual consent of the parties;
9.1.2 by either SGF or AHC following the insolvency or bankruptcy
of a party hereto, or if any one or more of the conditions to Closing set forth
in Article 6 or Article 7 shall become incapable of fulfillment and such
condition or breach shall not have been waived by the party for whose benefit
the condition was established;
9.1.3 by AHC or APT if either determines the representations and
warranties made by the SGF Shareholders in this Agreement were not true and
correct at and as of the date of this Agreement; and
9.1.4 by AHC or APT if the results, determination, indications or
findings of any of the due diligence review undertaken by them prior to Closing,
regarding the business, assets, financial condition, prospects and otherwise, of
SGF (including, without limitation all tests, analyses, legal and regulatory
audits and reviews, including Phase I environmental analyses of the Real
Property) is, in the opinion of AHC's Board of Directors, unacceptable.
9.1.5 by AHC or APT if AHC fails to obtain adequate financing for
the Merger on terms and conditions acceptable to the Board of Directors of AHC.
9.2 Effect of Termination. If any party terminates this Agreement
pursuant to Section 9.1 above, all obligations of the parties hereunder shall
terminate without any liability to the other party (except for any liability of
the party then in breach); provided, however, that the confidentiality
provisions contained herein shall survive termination.
10.
ADDITIONAL COVENANTS
10.1 Mutual Cooperation. The parties hereto will cooperate with each
other, and will use all reasonable efforts to cause the fulfillment of the
conditions to the parties' obligations hereunder and to obtain as promptly as
possible all consents, authorizations, orders or approvals from each and
every third party, whether private or governmental, required in connection with
the transactions contemplated by this Agreement.
10.2 Changes in Representations and Warranties of a Party. Between the
date of this Agreement and the Closing Date, no party shall directly or
indirectly, enter into any transaction, take any action, or by inaction
permit an event to occur, which would result in any of the representations
and warranties of any party herein contained not being true and correct at and
as of (a) the time immediately following the occurrence of such transaction
or event or (b) the Closing Date. A party shall promptly give written notice
to the other parties upon becoming aware of (A) any fact which, if known on
the date hereof, would have been required to be set forth or disclosed pursuant
to this Agreement and (B) any impending or threatened breach in any material
respect of any of the representations and warranties contained in this
Agreement and with respect to the latter shall use all reasonable efforts to
remedy same.
11.
BROKERS
11.1 Brokers. AHC and APT represent to SGF and the SGF Shareholders, and
SGF and the SGF Shareholders represent to AHC and APT, that, other than as
set forth on Schedule 11.1, hereto, there is no other broker or finder entitled
to a fee or other compensation for bringing the parties together to effect
the Merger, and that the payment of such fees or other compensation as
described on Schedule 11.1 is true and accurate in all respects and such
amounts are to be paid in the manner, and by the parties, set forth thereon.
12.
MISCELLANEOUS
12.1 Expenses. Except as otherwise provided herein, each of the SGF
Shareholders and AHC shall pay their own expenses incident to the negotiation,
preparation, and carrying out of this Agreement, including all fees and
expenses of its counsel and accountants for all activities of such counsel
and accountants undertaken pursuant to this Agreement, irrespective of whether
or not the transactions contemplated hereby are consummated. It is agreed that
expenses associated with this transaction attributable to SGF shall not exceed
$25,000.
12.2 Survival of Representations, Warranties and Covenants. All statements
contained in this Agreement or in any certificate delivered by or on behalf of
SGF, the SGF Shareholders, AHC or APT pursuant hereto, or in connection with
the transactions contemplated hereby shall be deemed representations,
warranties and covenants by the SGF Shareholders, AHC or APT, as the case may
be, hereunder. All representations, warranties, and covenants made by the SGF
Shareholders, SGF, AHC or APT in this Agreement, or pursuant hereto, shall
survive the Closing in accordance with the terms of Section 8.1 hereof.
12.3 Publicity. The parties hereto shall not issue any press release or
make any other public statement, in each case, relating to, connection with
or arising out of this Agreement or the transactions contemplated hereby,
without obtaining the prior approval of the other, which shall not be
unreasonably withheld or delayed, except that prior approval shall not be
required if, in the reasonable judgment of AHC, prior approval by SGF or the
SGF Shareholders would prevent the timely dissemination of such release or
statement in violation of applicable Federal securities laws, rules or
regulations or policies of the Nasdaq Small Cap Market.
12.4 Nondisclosure. The SGF Shareholders will not at any time after the
date of this Agreement, without AHC's consent, divulge, furnish to or make
accessible to anyone any knowledge or information with respect to
confidential or secret processes, inventions, discoveries, improvements,
formulae, plans, material, devices or ideas or know-how, whether patentable or
not,with respect to any confidential or secret aspects of APT (including,
without limitation, customer lists, supplier lists and pricing arrangements
with customers or suppliers) ("Confidential Information"). AHC will not at
any time after the date of this Agreement use, divulge, furnish to or make
accessible to anyone any Confidential Information (other than to its
representatives as part of its due diligence or corporate investigation).
Any information, which (i) at or prior to the time of disclosure by either
SGF or AHC was generally available to the public through no breach of this
covenant, (ii) was available to the public on a nonconfidential basis prior to
its disclosure by either SGF, the SGF Shareholders or AHC or (iii) was made
available to the public from a third party provided that such third party did
not obtain or disseminate such information in breach of any legal
obligation of SGF or AHC, shall not be deemed Confidential Information for
purposes hereof, and the undertakings in this covenant with respect to
Confidential Information shall not apply thereto. If this Agreement is
terminated pursuant to the provisions of Article 8 or any other express right of
termination set forth in this Agreement, AHC shall return to SGF all copies of
all Confidential Information previously furnished to it by SGF.
12.5 Succession and Assignments; Third Party Beneficiaries. This Agreement
may not be assigned (either voluntarily or involuntarily) by any party hereto
without the express written consent of the other party. Any attempted
assignment in violation of this Section shall be void and ineffective for all
purposes. In the event of an assignment permitted by this Section, this
Agreement shall be binding upon the heirs, successors and assigns of the
parties hereto. There shall be no third party beneficiaries of this
Agreement.
12.6 Notices. All notices, requests, demands, or other communications with
respect to this Agreement shall be in writing and shall be (i) sent by facsimile
transmission, (ii) sent by the United States Postal Service, registered or
certified mail, return receipt requested, or (iii) personally delivered by a
nationally recognized express overnight courier service, charges prepaid, to the
following addresses (or such other addresses as the parties may specify from
time to time in accordance with this Section).
12.6.1 To AHC and APT:
Alpha Hospitality Corporation
12 East 49th Street
New York, New York 10017
Attn: Thomas W. Aro
Fax No.: (212) 750-5171
With a copy to:
Parker Duryee Rosoff & Haft
529 Fifth Avenue
New York, New York 10017
Attn: Herbert F. Kozlov, Esq.
Fax No.: (212) 972-9488
12.7 To SGF and the SGF Shareholders:
South Georgia Frames Unlimited, Inc.
501 S. Elm Street
Adel, Georgia 31620
Fax No:
Forrest Caldwell
504 East 10th Street
Adel, Georgia 31620
William H. Shaw
2808 Bud McKey
Valdosta, Georgia 31602
Roger D. Watson
4603 Ridgeview Circle
Valdosta, Georgia 31602
John Scarboro
605 Newton Drive
Adel, Georgia 31620
With a copy to:
C. George Newbern
Coleman, Talley, Newbern, Kurrie, Prescott & Holland
P.O. Box 5437
Valdosta, Georgia 31603-5437
Any such notice shall, when sent in accordance with the preceding sentence, be
deemed to have been given and received on the earliest of (i) the day
delivered to such address or sent by facsimile transmission, (ii) the fifth
business day following the date deposited with the United States Postal
Service, or (iii) 24 hours after shipment by such courier service.
12.8 Construction; Selection of Forum.
(a) This Agreement shall be construed and enforced in accordance with
the internal laws of the State of New York without giving effect to the
principles of conflicts of law thereof.
(b) The parties hereby agree that the state and federal courts
located in the State of New York, County of New York shall be the exclusive
forum for the resolution of any disputes arising hereunder. The parties
irrevocably consent to the jurisdiction and venue of such federal and
state courts for such purposes and hereby waive any defenses as to improper
venue, forum non conveniens and improper jurisdiction in connection herewith.
12.9 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which shall
together constitute one and the same Agreement.
12.10 No Implied Waiver; Remedies. No failure or delay on the part of
the parties hereto to exercise any right, power, or privilege hereunder or
under any instrument executed pursuant hereto shall operate as a waiver nor
shall any single or partial exercise of any right, power, or privilege
preclude any other or further exercise thereof or the exercise of any other
right, power, or privilege. All rights, powers, and privileges granted herein
shall be in addition to other rights and remedies to which the parties may be
entitled at law or in equity.
12.11 Entire Agreement. This Agreement, including the Exhibits and
Disclosure Schedules attached hereto, sets forth the entire understandings of
the parties with respect to the subject matter hereof, and it incorporates
and merges any and all previous communications, understandings, oral or
written as to the subject matter hereof, and cannot be amended or changed
except in writing, signed by the parties.
12.12 Headings. The headings of the Sections of this Agreement, where
employed, are for the convenience of reference only and do not form a part
hereof and in no way modify, interpret or construe the meanings of the parties.
12.13 Severability. To the extent that any provision of this Agreement
shall be invalid or unenforceable, it shall be considered deleted hereof and
the remainder of such provision and of this Agreement shall be unaffected and
shall continue in full force and effect.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement the day
and year first above written.
ATTEST: SOUTH GEORGIA FRAMES
UNLIMITED, INC.
By:
Name: Name:
Title: Title:
ATTEST: ALPHA HOSPITALITY CORP.
By:
Name: Name:
Title: Title:
ATTEST: ALPHA PEACH TREE CORPORATION
By:
Name: Name:
Title: Title:
Forrest Caldwell
William H. Shaw
Samuel B. Knight
Roger D. Watson
John Scarboro