Exhibit 10(aq)
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
▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇; ALPHA HOSPITALITY CORPORATION
("AHC"), the parent of APT, which is a Delaware corporation whose principal
office is located at ▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇; ▇▇▇▇▇▇▇
▇. ▇▇▇▇▇ ("▇▇▇▇▇"), ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ ("▇▇▇▇▇▇").
▇▇▇▇▇▇▇ ▇. ▇▇▇▇ ("▇▇▇▇"), ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ ("▇▇▇▇▇▇") and ▇▇▇▇ ▇▇▇▇▇▇▇▇
("▇▇▇▇▇▇▇▇" and,collectively with Sentz, Knight, ▇▇▇▇ and ▇▇▇▇▇▇, the
"Sunstate Shareholders") and SUNSTATE
MANUFACTURED HOMES OF GEORGIA, INC. d/b/a PEACH STATE HOMES, a Georgia
corporation whose principal address is ▇.▇. ▇▇▇ ▇▇▇, ▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
("Sunstate").
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. Sunstate is in the business of manufacturing and selling single family
mobile homes ("Sunstate's Business"), directly and through its two majority-
owned subsidiaries, Georgia Housing
Connection, Inc. ("GHC") and South Georgia Housing Connection, Inc. ("SGHC", and
with GHC, collectively, "Sunstate's Subsidiaries").
C. The respective Boards of Directors of Sunstate and APT deem it
desirable and in the best interests of their respective corporations, and of
their respective stockholders, that Sunstate
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 Sunstate 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 South Georgia Frames, Inc. ("SGF"), an affiliate of Sunstate,
have agreed to merge (the "SGF Merger") into APT as set forth in a separate
Merger Agreement and Plan of
Reorganization (the "SGF Merger Agreement"). The simultaneous consummation of
the mergers of Sunstate and SGF, 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 SUNSTATE 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), Sunstate 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 Sunstate 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 Sunstate, (b) all obligations
belonging to or due Sunstate 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 Sunstate 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 Sunstate shall be preserved
unimpaired, and (e) Surviving Corporation shall be liable for all of the
obligations of Sunstate and any claim existing, or action or proceeding pending,
by or against Sunstate 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
$8,560,625. The Sunstate Shareholders hereby represent and warrant that such
value represents five times the twelve month cash flow set forth in the
September 26, 1998 audited consolidated cash flow adjusted for
fraudulent overpayments resulting from the actions of a former employee and for
executive compensation, 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 $4,280,312, 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 S
tock").
1.4 Conversion of the Sunstate Stock; Registration of AHC Merger Stock.
The manner and basis of converting the shares of Sunstate Stock (as defined
below) into shares of AHC Common Stock shall be as follows:
1.4.1 Conversion Ratio.
(i) Sunstate has issued and outstanding 400,000 shares of common
stock (the "Sunstate Stock"). Each share of Sunstate 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 .00025% 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 Sunstate 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 multiplied 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 Sunstate 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 Sunstate 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
Sunstate Shareholder sells any of his or her Alpha Merger Stock in an open
market brokered transaction for less than 80% of the Alpha
Merger Stock Valuation, APT shall pay such Sunstate 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) and (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 Sunstate 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
Sunstate Shareholders. The Sunstate 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 Sunstate
Shareholders:
(i) certificates for the AHC Merger Stock and the Preferred
Stock;
(ii) bank checks or wire transfers for the Cash Consideration.
(b) The Sunstate Shareholders shall deliver to AHC and APT
certificates evidencing the Sunstate 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 ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇, 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 Agreement.
1.6 Effect of Merger. As of the Effective Date, all of the following
shall occur:
(a) The separate existence and corporate organization of Sunstate
(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, Sunstate 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) Sunstate and the Sunstate Shareholders shall deliver a schedule
relating to Sunstate (including Sunstate's Subsidiaries) and the Sunstate
Shareholders (the "Sunstate Disclosure Schedule"), and
(b) AHC shall deliver a schedule relating to AHC and APT (the "Alpha Disclosure
Schedule" and, collectively, with the Sunstate 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
Sunstate (which for purposes of this Article 2 shall include Sunstate's
Subsidiaries and the Sunstate Shareholders) and AHC (which for purposes of
this Article II 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
Merger and the SGF Merger.
2.2 Notices and Consents.
2.2.1 Sunstate 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 Sunstate and its Business, whether
disclosed or required to be disclosed in the Disclosure Schedule.
Each of Sunstate 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 Sunstate for
which any of the Sunstate Shareholders have given personal guaranties or are
otherwise personally obligated and the amounts of such obligations. The
Sunstate Shareholders shall be removed from such personal
obligations and guaranties, prior to the Closing.
2.3 Access by AHC. Sunstate 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 Sunstate and shall furnish AHC
during such period with all information concerning Sunstate that AHC may
reasonably request and (b) to the properties of Sunstate in order to conduct
inspections at AHC's expense to determine that Sunstate is operating in material
compliance with all applicable federal, state and local and foreign
statutes, rules and regulations, and that Sunstate'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 Sunstate shall be operated by Sunstate 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 Sunstate shall use its reasonable efforts to (i) keep
available the services of the present employees and agents of Sunstate; (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 Sunstate; (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 Sunstate; (v) comply in all material respects with all
applicable laws; and (vi) preserve the goodwill of, and Sunstate's business and
contractual relationship with, suppliers, customers and others having
business relations with Sunstate; and
2.4.2 Sunstate 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. Sunstate 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
Sunstate or the shares of capital stock of Sunstate, or, except in connection
with the normal operation of Sunstate's business, disclose any confidential
information concerning Sunstate to any person other than AHC and AHC's
representatives or agents. Sunstate shall notify AHC immediately if any person
makes any proposal, offer, inquiry or contact with respect to the foregoing.
2.6 SGF Merger. AHC and SGF shall in good faith use their best efforts to
consummate the SGF Merger in accordance with the terms of the SGF Merger
Agreement so that the SGF Merger may close on the Closing Date simultaneously
with the Sunstate 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 Sunstate has determined that the
Merger is advisable and in the best interests of the stockholders of Sunstate
and, subject to its fiduciary obligations as advised in writing by counsel,
shall recommend that Sunstate's stockholders vote to
approve and adopt this Agreement and the Merger. The Sunstate Shareholders
hereby irrevocably agree to the Merger and hereby covenant to provide Sunstate
with such approval and adoption either
(i) at a meeting of the Sunstate Shareholders or (ii) pursuant to the written
consent of the Sunstate 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 from 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 the 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
SHAREHOLDERS AND SUNSTATE
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 Sunstate Disclosure Schedule in each instance,
each of the Sunstate Shareholders, jointly and severally, and Sunstate,
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 Sunstate and each of Sunstate's Subsidiaries is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Georgia. Each such corporation has all requisite corporate
power to own its assets and to carry on its business as it is now being
conducted.
3.1.2 Sunstate and each of Sunstate's Subsidiaries 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 Sunstate Disclosure Schedule
and, to the knowledge of the Sunstate 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
Sunstate or Sunstate's Subsidiaries.
3.1.3 The copies of the Certificate of Incorporation, By-laws and
minute books of Sunstate and each of Sunstate's Subsidiaries, 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 Sunstate and each of
Sunstate's Subsidiaries, the number of shares of capital stock which are issued
and outstanding for each such corporation, the par value thereof and the
record and beneficial holders thereof are as set forth in Section 3.2.1
of the Sunstate Disclosure Schedule. The Sunstate Shareholders own all of the
issued and outstanding shares of common stock of Sunstate free and clear of all
liens and encumbrances of any kind. Sunstate owns the number of shares and
percentage amounts of the issued and outstanding common stock of each of its
Subsidiaries as set forth in Section 3.2.1 of the Sunstate Disclosure
Schedule, free and clear of all liens and encumbrances of any kind. All of the
shares of capital stock that are issued and outstanding of Sunstate and each of
its Subsidiaries 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 3.2.1 of
the Sunstate Disclosure Schedule, there are no subscriptions, options, warrants,
rights or calls or other commitments or agreements to which Sunstate or either
of Sunstate's Subsidiaries 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 any of Sunstate, GHC or SGHC. There are no
outstanding rights, contracts or securities convertible or
exchangeable, actually or contingently, into common stock or any other
securities of Sunstate or any of Sunstate's Subsidiaries.
3.2.2 None of the issued and outstanding shares of common stock of
Sunstate or the Sunstate Subsidiaries 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 Sunstate
Disclosure Schedule. Any such restrictions in effect as of the date hereof
shall be cancelled and be of no further force and effect as of the Closing Date.
3.2.3 Neither Sunstate nor any Sunstate Subsidiary is a party to
any management agreement or an agreement which in effect places a restriction
upon the management of such an entity.
3.3 Subsidiaries. Except as set forth in Section 3.3 of the Sunstate
Disclosure Schedule, GHC and SGHC are the only subsidiaries of Sunstate and
Sunstate does not own or have an interest in any other corporation,
partnership, joint venture or other entity. None of Sunstate's Subsidiaries
owns any interest in any other corporation, partnership, joint venture or
entity.
3.4 Authority.
3.4.1 Sunstate's Board of Directors has determined that the Merger
is fair to, and in the best interests of, Sunstate'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
Sunstate's stockholders. The Sunstate Shareholders, being the holders of all of
the issued and outstanding shares of Sunstate's common stock, irrevocably
consent to the merger and shall deliver evidence of such approval and resolution
adoption at Closing. Assuming the delivery of Sunstate Shareholder consent,
this Agreement constitutes, and all other agreements contemplated hereby will
constitute, when executed and delivered by Sunstate and the Sunstate
Shareholders in accordance herewith, the valid and binding obligations of
Sunstate and the Sunstate Shareholders, enforceable in accordance with their
respective terms.
3.4.2 The execution and delivery of this Agreement by Sunstate and
the Sunstate Shareholders does not, and the consummation by Sunstate and the
Sunstate 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 Sunstate or either
of Sunstate's Subsidiaries under any of the terms, conditions or provisions
of (i) the Certificate of Incorporation or By-laws of Sunstate, (ii) any
statute, law, ordinance, rule, regulation, judgment, decree, order, injunction,
writ, permit or license of any court or governmental authority applicable to
Sunstate or any of its properties or assets, or (iii) except as set forth in
Section 3.4.2 of the Sunstate 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 Sunstate or either of Sunstate's Subsidiaries is now a party or by which
Sunstate or any of Sunstate's Subsidiaries 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 Sunstate.
3.5 Assets. Sunstate and each of Sunstate's Subsidiaries have 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 Sunstate Financial Statements (as defined below), or
thereafter acquired. Sunstate and each of Sunstate's Subsidiaries 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 Sunstate and each of
Sunstate's Subsidiaries, as applicable, and, to the knowledge of the
Sunstate Shareholders, the other parties thereto in accordance with its terms.
Sunstate and each of Sunstate's Subsidiaries is not, nor, to the knowledge of
the Sunstate Shareholders, is any other party, in default in the performance
of any material provision thereunder. No material portion of the assets
of Sunstate, or either of Sunstate's Subsidiaries, 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 Sunstate, or either of
Sunstate's Subsidiaries, 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 Sunstate 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 Sunstate
or a Sunstate Subsidiary is a party that (i) involve a receipt or an
expenditure by Sunstate or require the performance of services or delivery of
goods to, by, through, on behalf of or for the benefit of Sunstate, 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 Sunstate on notice of thirty (30) days or less without
penalty or Sunstate being liable for damages, or (ii) involve an obligation for
the performance of services or delivery of goods by Sunstate 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 Sunstate, or any of its
Subsidiaries, as applicable, and, to the knowledge of the Sunstate
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 neither Sunstate, Sunstate's Subsidiaries, nor to the knowledge of
the Sunstate Shareholders, any other party to any such contract, agreement,
commitment or other instrument has breached any provision of, and, to
the knowledge of the Sunstate 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 Sunstate, or its Subsidiaries in excess of $50,000, and,
there are no existing facts or circumstances which would prevent Sunstate's, or
its Subsidiaries' 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 Sunstate's Disclosure Schedule,
neither Sunstate, any of Sunstate's Subsidiaries nor any Sunstate
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 Sunstate, GHC or SGHC consistent with amounts historically
charged for such service.
3.7 Litigation. Except as described on Section 3.7 of the Sunstate
Disclosure Schedule, there is no claim, suit, action, proceeding, or
investigation (a "Litigation") pending or, to the knowledge of the Sunstate
Shareholders, threatened against or affecting Sunstate or any of Sunstate's
Subsidiaries 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 Sunstate or any of Sunstate's
Subsidiaries. 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 Sunstate's or any of
Sunstate's Subsidiaries' employees which, in the judgment of the Sunstate
Shareholders, could have a material adverse effect on the business or
prospects of Sunstate or any of Sunstate's Subsidiaries. There are no decrees,
injunctions or orders of any court, governmental department, agency or
arbitration outstanding against Sunstate or any of Sunstate's Subsidiaries.
3.8 Taxes. Except as described on Section 3.8 of the Sunstate Disclosure
Schedule:
3.8.1 Sunstate, and each of Sunstate's Subsidiaries, respectively,
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
Sunstate or, as applicable, either of Sunstate's Subsidiaries, 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 Sunstate, or, as applicable, either of
Sunstate's Subsidiaries. Sunstate or, as applicable, either of Sunstate's
Subsidiaries has not agreed to any extension of time with respect to
any Tax deficiency. The Liabilities and reserves for Taxes reflected in
Sunstate's Consolidated Balance Sheet as of September 26, 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 Sunstate or, as applicable, either
of Sunstate's Subsidiaries 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 Sunstate, or, as applicable, either of Sunstate's Subsidiaries.
Neither Sunstate nor any of Sunstate's Subsidiaries, is a party to any agreement
providing for the allocation or sharing of Taxes with any entity. Sunstate
and each of Sunstate's Subsidiaries 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"). Sunstate and each of Sunstate's Subsidiaries have, as applicable
respectively 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, Sunstate 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
Sunstate's Disclosure Schedule, neither Sunstate nor either of Sunstate's
Subsidiaries maintains or contributes to any 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 Sunstate's Disclosure Schedule lists all
Multiemployer Plans and Multiple Employer Plans which Sunstate maintains or to
which it makes contributions. Neither Sunstate nor either of Sunstate's
Subsidiaries has any 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 Sunstate
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
Sunstate or either of Sunstate's Subsidiaries, (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, neither Sunstate nor either of
Sunstate's Subsidiaries has 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 Sunstate
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 Sunstate Shareholders, threatened or anticipated claims
involving any of the Company Plans other than claims for benefits in the
ordinary course, and (ix) Sunstate 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 Sunstate nor either
of Sunstate's Subsidiaries 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 Sunstate 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 Sunstate in excess of $50,000 whether measured alone or in the
aggregate.
3.10 Compliance with Laws and Regulations.
3.10.1 Sunstate and each of Sunstate's Subsidiaries 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 Sunstate, civil rights and equal opportunity employment
laws and regulations, HUD regulations and all federal, antitrust, antimonopolies
and fair trade practice laws ("Laws") and the Sunstate Shareholders know of
no pending or anticipated changes to such Laws that could cause Sunstate's
current business practices to fall out of compliance with
such Laws. The Sunstate Shareholders do not know of any assertion by any party
that Sunstate or any of Sunstate's Subsidiaries 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 Sunstate or any of Sunstate's Subsidiaries.
Sunstate and the Sunstate Subsidiaries have complied and currently comply
with all applicable laws (including rules and regulations thereunder)
relating to employment of labor, employee civil rights and equal
employment opportunities.
3.10.2 Sunstate and each of Sunstate's Subsidiaries, has not:
(i) violated in any respect or received a notice or charge asserting
any violation of the ▇▇▇▇▇▇▇ Act, the ▇▇▇▇▇▇▇ Act, the ▇▇▇▇▇▇▇▇-▇▇▇▇▇▇ 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 Sunstate
Disclosure Schedule, As of the date hereof, neither Sunstate nor either of
Sunstate's Subsidiaries is 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 Sunstate
Disclosure Schedule, neither Sunstate nor either of Sunstate's Subsidiaries
is 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 Sunstate'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, each of
Sunstate, Sunstate's Subsidiaries and, to the knowledge of the Sunstate
Shareholders, Sunstate'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 Sunstate, Sunstate's Subsidiaries and the Sunstate
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 Sunstate or Sunstate's
Subsidiaries and, to the knowledge of the Sunstate Shareholders, the
predecessors of such entities, for any present or future charge, complaint,
action, suit, proceeding, hearing, investigation, claim or demand against
Sunstate or Sunstate's Subsidiaries 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 Sunstate and Sunstate's Subsidiaries have no Liability (and,
to the knowledge of the Sunstate Shareholders, no predecessors of such
entities 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 Sunstate or
either of Sunstate's Subsidiaries 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 Sunstate and Sunstate's Subsidiaries have each 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 Sunstate's Business and
the business of Sunstate's Subsidiaries 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 Sunstate or Sunstate's
Subsidiaries has ever owned, leases or has leased.
Notwithstanding anything contained herein or in the Sunstate
Disclosure Schedule to the contrary, the disclosure in the Sunstate Disclosure
Schedule pursuant to, or relating in any way to, this Section 3.12 shall not
detract from or diminish in any manner or to any extent any Liability of
Sunstate and the Sunstate Shareholders, jointly and severally pursuant to
Section 8.2 hereof.
3.13 Insurance.
3.13.1 Section 3.13 of the Sunstate 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 Sunstate and/or each Sunstate Subsidiary 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 Sunstate 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) neither Sunstate nor any of its Subsidiaries nor, to the
Sunstate Shareholders' knowledge, any 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) neither Sunstate nor
its Subsidiaries nor, to the knowledge of the Sunstate Shareholders, any
other party to the policy has repudiated any provision thereof. Sunstate and
its Subsidiaries are now covered, and have 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 neither Sunstate nor any of its Subsidiaries has maintained
any self-insurance arrangements.
3.14 Title and Use of Real and Other Property.
3.14.1 Sunstate and all of its Subsidiaries 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 Sunstate's Balance Sheet as owned by Sunstate and
all Real Property and personal property acquired by Sunstate or a Sunstate
Subsidiary since September 26, 1998, in each case free and clear of liens
except (i) as set forth in Section 3.14.1 of the Sunstate Disclosure
Schedule, or (ii) for sales and other dispositions of inventory in the ordinary
course of business since September 26, 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 Sunstate and its
Subsidiaries ("Owned Real Property") and a general description of each
structure thereon. The Sunstate 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 Sunstate's or its
Subsidiaries' ownership of such Owned Real Property, as well as copies of any
survey or environmental reports relating to such Owned Real Property.
3.14.3 Section 3.14.3 of the Sunstate Disclosure Schedule contains
a list of all tangible personal property having, in the aggregate, a cost or
fair market value in excess of $3,404,440, owned by Sunstate and its
Subsidiaries.
3.14.4 Section 3.14.4 of the Sunstate Disclosure Schedule contains
a list of all Real Property leases, licenses and personal property leases
under which Sunstate or its Subsidiaries is the lessee or licensee ("Leased
Property"), together with (i) the location and nature of each of the Leased
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 licenses, pursuant to which Sunstate or its Subsidiaries
leases or licenses Leased Property from others are valid, subsisting and in full
force and effect in accordance with their respective terms, and there is not
under any Leased 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 Leased Property and
licenses 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 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 Sunstate and Sunstate's
Subsidiaries 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
Sunstate and its Subsidiaries 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 Sunstate's Business and the businesses of its
Subsidiaries.
3.14.6 Except as set forth in Section 3.14.6 of the Sunstate
Disclosure Schedule:
(i) Sunstate and its Subsidiaries are 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 Sunstate Shareholder, Sunstate or any of its Subsidiaries;
(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 Sunstate or its Subsidiaries 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
Sunstate or its Subsidiaries, as appropriate;
(iii) No condemnation proceeding is pending or, to the
knowledge of the Sunstate Shareholders, threatened which would impair the
occupancy, use or value of any Real Property;
(iv) No structure, nor the operations of Sunstate or its
Subsidiaries 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 Sunstate or its Subsidiaries in
possession of any Real Property; and
(vi) Each parcel of Owned Real Property and, as applicable Leased
Real Property (A) is fully and adequately described in the legal description
therefor contained in the deed or other applicable instrument of conveyance
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 Sunstate and each of Sunstate's Subsidiaries 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 Sunstate's and its Subsidiaries'
businesses are owned by Sunstate or its Subsidiaries, as appropriate.
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 Sunstate
Disclosure Schedule, none of the employees of Sunstate is represented by any
labor union or collective bargaining unit and Sunstate nor the Sunstate
Shareholders are not aware of any organizational efforts taking place
with respect to such representation.
3.18 Financial Statements. The Sunstate Disclosure Schedule contains
audited Consolidated Balance Sheets of Sunstate and Sunstate's
Subsidiaries as at September 26, 1998 and September 27, 1997 and related
unaudited consolidated statements of operations, cash flows and stockholders'
equity of Sunstate and Sunstate's Subsidiaries 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 Sunstate and Sunstate's Subsidiaries 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 Sunstate
or Sunstate's Subsidiaries, the value of which is materially overstated in
said balance sheets.
3.19 Undisclosed Liabilities. Sunstate has no Liability (and there is no
Basis for any present or future charge, complaint, action, suit, proceeding,
hearing, investigation, claim or demand against Sunstate giving raise to a
Liability) except for (i) Liabilities set forth on the face of Sunstate'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 Sunstate
Disclosure Schedule.
3.20 Absence of Certain Changes or Events. Except as set forth in the
Sunstate Disclosure Schedule, since September 26, 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 Sunstate or Sunstate's
Subsidiaries;
3.20.2 any material damage, destruction or loss of any material
properties of Sunstate or Sunstate's Subsidiaries, whether or not covered by
insurance;
3.20.3 any material adverse change in the manner in which the
business of Sunstate or Sunstate's Subsidiaries has been conducted;
3.20.4 any material adverse change in the treatment and protection
of trade secrets or other confidential information of Sunstate or Sunstate's
Subsidiaries; 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 Sunstate Shareholders have
reason to believe, might be expected to result in a material adverse change in
the business or prospects of Sunstate or Sunstate's Subsidiaries.
3.21 Government Licenses, Permits, Etc. Sunstate, and as applicable, each
of Sunstate's Subsidiaries 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 Sunstate
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 Sunstate 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. Neither Sunstate nor Sunstate's Subsidiaries owns
or leases any real or personal property in any state or country except as set
forth on the Sunstate Disclosure Schedule. Such entities have no executive
offices or places of business except as otherwise set forth on the Sunstate
Disclosure Schedule.
3.23 Intellectual Property. Section 3.23 of the Sunstate 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 Sunstate, 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 Sunstate and/or Sunstate's Subsidiaries as
applicable, free and clear of all liens, claims, security interests and
encumbrances of any nature whatsoever. Neither Sunstate nor Sunstate's
Subsidiaries is currently 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 ▇▇▇▇, 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 Sunstate Disclosure Schedule, the Sunstate 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 Sunstate or its Subsidiaries 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 Sunstate or its Subsidiaries 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 Sunstate or Sunstate's
Subsidiaries with, any governmental authority, domestic or foreign, federal,
state or local, is required in connection with Sunstate's execution, delivery
and performance of this Agreement.
3.26 Accounts Receivable. Except as set forth in Section 3.26 of the
Sunstate Disclosure Schedule, all of the accounts receivable of Sunstate or
Sunstate's Subsidiaries 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 Sunstate 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. Neither Sunstate nor any of the Sunstate Subsidiaries
have any 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 Sunstate or Sunstate's
Subsidiaries, 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 Sunstate
Disclosure Schedule, during the three (3) years immediately prior to the date
of this Agreement, neither Sunstate nor either of the Sunstate Subsidiaries
have been cited for any violations of the Occupational Safety and Health Act
of 1970, as amended, nor to the knowledge of the Sunstate 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 Sunstate 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 Sunstate or Sunstate's Subsidiaries 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. Neither Sunstate nor its Subsidiaries has any 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 Sunstate or Sunstate's
Subsidiaries 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
Sunstate Disclosure Schedule, Sunstate and each of Sunstate's Subsidiaries
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 Sunstate 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
Sunstate 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 Sunstate 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 3.32 of the Sunstate Disclosure Schedule
sets forth a list of all the reserves established by Sunstate and its
Subsidiaries 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 Sunstate, GHC, SGHC or the Stockholders to AHC and APT anywhere in
this Agreement, the Sunstate Disclosure Schedule or in any certificate of a
Sunstate 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
Sunstate Shareholders and Sunstate 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 Sunstate, 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 constitutean 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 all due diligence reviews
and investigations by AHC which are deemed to be necessary by the Board of
Directors of AHC, 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 ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇ & ▇▇▇▇, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, 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, Sunstate and the Sunstate 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 Sunstate and each of the Sunstate 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 Sunstate and the Sunstate 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 Sunstate's counsel, substantially in the form
of Exhibit 5.2.2 attached;
5.2.3 certificates representing Sunstate Stock owned by all of the
Sunstate 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 Sunstate. At the Closing, in addition to
documents referred to elsewhere, AHC shall deliver to Sunstate:
5.3.1 a cashier's check or evidence of compliance with the wiring
instructions of Sunstate 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 Sunstate Shareholders in accordance
with the instructions delivered to AHC by the Sunstate 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, ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇,
substantially in the form of Exhibit 5.3.4 attached; and
5.3.5 such other documents as Sunstate or it's counsel may
reasonably require to evidence compliance with Article 6 hereof.
6.
CONDITIONS TO OBLIGATIONS OF
THE SUNSTATE SHAREHOLDERS AND SUNSTATE
The obligation of the Sunstate Shareholders and Sunstate 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 Sunstate at the Closing shall be delivered in form and
substance reasonably satisfactory to Sunstate 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 ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇ 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 ▇▇▇▇ in the form of
Exhibit 6.4.1 hereto;
6.4.2 Employment Agreement between APT and ▇▇▇▇▇▇ 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 Sunstate or Sunstate's
Subsidiaries.
6.6 SGF Merger. The SGF 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 in their sole
discretion:
7.1 Compliance by Sunstate. Sunstate and the Sunstate 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 Sunstate. The representations and
warranties of Sunstate and the Sunstate Shareholders contained in this Agreement
(including the exhibits hereto and the Sunstate 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. Sunstate and the Sunstate 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 the exercise of its 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
Sunstate and/or the Sunstate Subsidiaries.
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 Sunstate or Sunstate's
Subsidiaries.
7.6 Collateral Agreements.
7.6.1 The Agreements referred to in paragraph 6.4 hereof shall be
executed; and
7.6.2 Sentz, Knight, and ▇▇▇▇▇▇▇▇ 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 Sunstate and/or the Sunstate 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 SGF Merger. The SGF 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.
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 Sunstate and its Subsidaries that is deemed necessary
by AHC's Board of Directors, including without limitation, all tests, studies
analyses, legal and regulatory audits or reviews.
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 Sunstate Shareholders jointly and severally
agree to indemnify AHC and APT or their respective officers, directors, Sunstate
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 SGF
Merger Agreement or in any certificate delivered by Sunstate, the Sunstate
Shareholders, or the Shareholders of SGF 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 SGF 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 Sunstate 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 Sunstate 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; and
9.1.3 by AHC or APT if either determines the representations and
warranties made by the Sunstate Shareholders in this Agreement were not true and
correct at and as of the date of this Agreement.
9.1.4 by AHC or APT if the results, determinations, 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 Sunstate and its Subsidiaries (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 Sunstate and the Sunstate
Shareholders, and Sunstate and the Sunstate 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 Sunstate
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
Sunstate shall not exceed $50,000.
12.2 Survival of Representations, Warranties and Covenants. All statements
contained in this Agreement or in any certificate delivered by or on behalf of
Sunstate, Sunstate's Subsidiaries, the Sunstate Shareholders, AHC or APT
pursuant hereto, or in connection with the transactions contemplated hereby
shall be deemed representations, warranties and covenants by the Sunstate
Shareholders, AHC or APT, as the case may be, hereunder. All representations,
warranties, and covenants made by the Sunstate Shareholders, Sunstate, 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 Sunstate or the Sunstate
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 Sunstate 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 Sunstate 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
Sunstate, the Sunstate 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 Sunstate 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 Sunstate all copies of all
Confidential Information previously furnished to it by Sunstate.
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
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Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
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Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
12.7 To Sunstate and the Sunstate Shareholders:
Sunstate Manufactured Homes of Georgia
d/b/a Peach State Homes
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Fax No:
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With a copy to:
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Coleman, Talley, Newbern, Kurrie, Prescott & Holland
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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: SUNSTATE MANUFACTURED HOMES
OF GEORGIA, INC. d/b/a Peachstate
Manufactured Homes of Georgia
By:
Name: Name:
Title: Title:
ATTEST: ALPHA HOSPITALITY CORP.
By:
Name: Name:
Title: Title:
ATTEST: ALPHA PEACH TREE CORPORATION
By:
Name: Name:
Title: Title:
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