United States
Securities and Exchange Commission
Washington, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 OR 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported)_______December 29, 2000________
PIF/Cornerstone Ministries Investments, Inc.
--------------------------------------------
(Exact name of registrant as specified in its charter)
Georgia 333-93475 58-2232313
- ------- --------- ----------
(State or other jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification No.)
6035 Atlantic Boulevard, Suite C, Norcross, GA 30071
- ---------------------------------------------- -----
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 404-320-3311
------------
Item 2. Acquisition or Disposition of Assets.
On December 29, 2000 Presbyterian Investors Fund, Inc., a Georgia not for profit
corporation, merged into Cornerstone Ministries Investments, Inc., a Georgia for
profit corporation. The name of the merged entity became PIF/Cornerstone
Ministries Investments, Inc. The Georgia Secretary of State approved the Plan of
Merger on December 29, 2000.
The $23,256,849 in assets transferred by Presbyterian Investors Fund, Inc.,
consist primarily of performing church loans and cash held in money market
accounts awaiting distribution according to outstanding loan commitments. Its
$23,256,849 in liabilities assumed by the merged entity are primarily
Certificates of Participation in three loan funds. These are fixed term, fixed
rate securities that are either unsecured, or collateralized by specific loan
assets.
The $758,832 net worth of Presbyterian Investors Fund, Inc., in compliance with
Georgia regulations, has been distributed to the Church Growth Foundation, a
Georgia not for profit-corporation. This amount was determined by a third party
evaluation, was submitted to an independent review committee of the Board of
Trustees of Presbyterian Investors Fund, Inc. and approved by the independent
board members of both corporations.
Item 7. Financial Statements and Exhibits.
Listed below are the financial statements, pro forma financial information and
exhibit filed as a part of this report.
(a) Financial statements of businesses acquired.
Balance Sheets of Presbyterian Investors Fund, Inc., audited at
December 31, 1998 and December 31, 1999 and unaudited at September 30,
2000.
Income Statements and Statements of Cash Flows for Presbyterian
Investors Fund, Inc., audited for the years ended December 31, 1998 and
December 31, 1999 and unaudited for the nine months ended September 30,
1999 and December 31, 2000.
(b) Pro forma financial information.
Pro forma statements of income reflecting the combined operations of
the entities for the year ended December 31, 1999 and the nine months
ended September 30, 2000. These statements are condensed, in columnar
form showing pro forma adjustments and results.
(c) Exhibits.
Plan of Merger
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
PIF/Cornerstone Ministries Investments, Inc.
--------------------------------------------
(Registrant)
S/JOHN T. OTTINGER
------------------
John T. Ottinger, Vice President, CFO
Date: January 12, 2001
T. JACKSON McDANIEL III
Certified Public Accountant
1439 McLendon Drive
Suite C
Decatur, GA 30033
(770) 491-0609
INDEPENDENT AUDITOR'S REPORT
To The Board of Trustees
Presbyterian Investors Fund, Inc.
Norcross, Ga 30071
I have audited the accompanying balance sheet of Presbyterian Investors Fund,
Inc. (a non-profit organization) as of December 31, 1999, 1998, and 1997 and the
related statements of support, revenue, expenses, and changes in fund balance
and cash flows for the years then ended. These financial statements are the
responsibility of the Fund's management. My responsibility is to express an
opinion on these financial statements based on my audits.
I conducted my audit in accordance with generally accepted auditing standards.
Those standards require that I plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
I believe that my audit provides a reasonable basis for my opinion.
In my opinion, the financial statements referred to above present fairly, in all
material respects the financial position of Presbyterian Investors Fund, Inc. as
of December 31, 1999, 1998, and 1997 and results of its operations and changes
in cash flows for the years then ended in conformity with generally accepted
accounting principles.
[SIGNATURE GRAPHIC OMITTED]
August 1, 2000
PRESBYERTIAN INVESTORS FUND, INC.
STATEMENT OF FINANCIAL POSITION
at
SEPTEMBER, 30, DECEMBER, 31, DECEMBER, 31,
(Unaudited) 2000 1999 1998
------------ ------------ ------------
Assets:
Cash and Cash Equivalents $ 1,098,240 $ 5,010,772 $ 3,781,800
Cash - Board Designated 609,470 486,543 447,174
Church Bond Investment 296,000 412,250 853,500
Investment Securities 450,000 450,000 450,000
Interest Receivable 733,252 543,081 270,594
Accounts Receivable 19,316 63,955 110,075
Notes Receivable 700,000 250,000 344,571
Development Loans Receivable 20,315,682 16,218,116 14,905,804
Real Estate Held 449,703
Furniture and Equipment Net
of Accumulated Depreciation 7,934 8,638 7,304
Prepaid Expenses 8,218 3,900 3,705
Other Assets 1,031 1,031 --
------------ ------------ ------------
TOTAL ASSETS $ 24,239,143 $ 23,448,286 $ 21,624,230
============ ============ ============
Liabilities:
Investor's Certificates $ 21,400,130 $ 20,411,189 $ 18,326,151
Bond Fund Certificates 474,145 556,813 1,123,574
Accrued Interest Payable 2,062,672 2,060,010 1,885,945
Accounts Payable 10,917 10,179 57,895
Other Liabilities -- 139,531 --
Loan Payable RBF 4,000 4,000 4,000
------------ ------------ ------------
TOTAL LIABILITIES 23,951,864 23,181,722 21,397,566
------------ ------------ ------------
Net Assets:
Designated Investment 386,538 386,538 386,538
Designated for Contingency 609,470 486,543 447,174
Undesignated (716,663) (615,155) (614,352)
Investment In Equipment 7,934 8,638 7,304
------------ ------------ ------------
TOTAL NET ASSETS 287,279 266,564 226,664
------------ ------------ ------------
TOTAL LIABILITIES
AND NET ASSETS $ 24,239,143 $ 23,448,286 $ 21,624,230
============ ============ ============
PRESBYTERIAN INVESTORS FUND, INC.
STATEMENT OF ACTIVITIES
for the PERIODS ENDED SEPTEMBER 30, 2000, DECEMBER 31, 1999, AND 1998
Nine months ended Year ended Year ended
SEPTEMBER 30, DECEMBER 31, DECEMBER 31,
2000 (unaudited) 1999 1998
---------------- ------------ ------------
Support and Revenue
Contributions $ -- $ -- $ --
Interest earned 1,540,725 1,889,967 1,524,208
Fees and Services 461,800 429,018 420,129
Gain on sale of real estate 135,867 311,823
Dividends 26,999 45,000 33,750
Other Income (loss) 12,000 -- --
---------- ---------- ----------
TOTAL SUPPORT AND REVENUE 2,041,524 2,499,852 2,289,910
---------- ---------- ----------
Expenses
Interest Expense 1,487,870 1,867,486 1,547,861
Service Fees 55,062 67,036 58,261
Personnel Expense 195,586 112,210 153,739
Operational Expense 202,247 399,695 410,963
Legal Fees 6,515 7,600 39,209
Depreciation 4,069 5,925 25,304
---------- ---------- ----------
TOTAL EXPENSES 1,951,349 2,459,952 2,235,336
---------- ---------- ----------
EXCESS (DEFICIT) OF SUPPORT AND
REVENUE OVER EXPENSES
FROM CONTINUING OPERATIONS 90,175 39,900 54,574
Fund Balance,
Beginning 266,564 226,664 180,214
Prior Period Adjustments (8,124)
Fund Balance,
---------- ---------- ----------
Ending $ 356,739 $ 266,564 $ 226,664
========== ========== ==========
PRESBYTERIAN INVESTORS FUND, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 1999
NOTE "1" - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(A) Organizational Information
The Presbyterian Investors Fund, Inc. is organized exclusively for
religious, educational, and charitable purposes within the meaning of
Section 501(c)(3) of the Internal Revenue Code.
The purpose of the Fund is to promote and support the mission of the
Presbyterian Church in America by establishment, maintenance, and
utilization of an investment fund for the purpose of making mortgage
loans to PCA churches and Presbyters, including loans for land
acquisition and the construction and major improvements of churches,
manses, and mission buildings.
The Fund was created at the direction of the General Assembly of the
Presbyterian Church in America (PCA) pursuant to a resolution adopted
in June of 1985 and was an integrated auxiliary of the PCA. It was
originally named Investor's Fund for Building and Development of
Presbyterian Church in America, Inc.
In November of 1993 the trustees of the Fund adopted a resolution
authorizing the Fund's management to begin the process of reorganizing
the Fund such that it is no longer an integrated organization of the
Presbyterian Church in America, Inc. On August 8, 1994 the
reorganization was completed. The Fund's name was changed to
Presbyterian Investors Fund, Inc. and the articles of incorporation
were amended.
(B) Accounting Method
The accompanying financial statements are prepared on the
accrual basis of accounting.
PRESBYTERIAN INVESTORS FUND, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 1999
NOTE "1" - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(continued)
(C) Management of the Fund
The management of the affairs of the Fund is vested in an independent,
self perpetuating Board of Trustees. During 1995 and all prior years
the Fund had entered into a management contract with Reliance Trust
Company of Atlanta to serve as Fund Manager under the supervision of
the Trustees of the Fund. Reliance Trust Company also observed as
Paying Agent, Escrow Agent, and Registrar.
During 1996, the contract with Reliance Trust Company is being
terminated in two phases. As of March 7, 1996 the loan servicing
functions are being administered in-house by the Fund's staff.
Effective April 1, 1996 Colonial Trust Company, in Phoenix, Arizona,
became the Paying Agent and Registrar.
(D) Fund Accounting
To ensure observance of limitations and restrictions placed on the use
of resources available to the Fund, the accounts of the Fund are
maintained in accordance with the principles of fund accounting.
(E) Cash and Cash Equivalents
Cash and cash equivalents include checking accounts and short term
certificates with original maturities of 90 days or less.
(F) Investment Securities
Investment Securities at December 31, 1999 consist solely of an
investment in Cornerstone Ministries Investments, Inc.(CMI). The Fund
owns approximately 37.78% of the outstanding common stock of CMI at
December 31, 1999. CMI is a newly formed corporation whose primary
mission will be to invest in church mortgages or real estate related
to church activities.
PRESBYTERIAN INVESTORS FUND, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 1999
NOTE "1" - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(continued)
(G) Accrued Interest Income
Interest income is accrued monthly on the outstanding balance of
development loans receivable.
(H) Accrued Interest Expense
Interest for fixed rate and matched rate certificates is accrued
semiannually from the date of issuance, and may be paid semiannually.
Investors holding five year certificates in multiples of $10,000 may
receive interest monthly.
(I) Provision for Loan Losses
Management is of the opinion that losses arising from the default of
development loans are not probable or reasonably estimated. Therefore,
no allowance for loan losses is reflected in the accompanying
statements.
(J) Furniture and Equipment
Furniture and equipment is recorded at cost. Depreciation is provided
over the estimated useful lives of the respective assets on a
straight-line basis. Accumulated depreciation was $68,387, $62,462 and
$37,158 at December 31, 1999, December 31, 1998 and December 31, 1997
respectively.
(K) Accounting For Loan Fee and Costs
Management's policy is to charge fees that approximate the cost of
loan originations. Fees and costs are recognized when loans are
closed.
(L) Comparative Data
The Balance Sheet information for the years ended December 31, 1998
and December 31, 1997 are presented for comparative purposes and are
not intended to be complete financial statement presentations.
PRESBYTERIAN INVESTORS FUND, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 1999
NOTE "2" - CASH - BOARD DESIGNATED
The Fund's Board of Trustees has established a cash balance equal to
3% of outstanding loans to provide liquidity should a contingency
develop. The balance in the account was $486,543 at December 31, 1999,
$447,174 at December 31, 1998 and $397,963 at December 31, 1997.
NOTE "3" -LOAN PAYABLE RBF
Unsecured loans payable in the amounts of $4,000 at December 31, 1999,
and at December 31, 1998 and $5,600 at December 31, 1997, represent
revolving building fund (RBF) indebtedness to various individuals and
organizations. The Fund assumed these notes as part of a restructuring
of its debt to the MNA Committee in April 1988. The indebtedness
consists of demand notes bearing interest at 5 to 6 percent.
NOTE "4" - PRIOR PERIOD ADJUSTMENT
As stated in Note 1(C) the Fund had transferred the servicing of the
Investor Certificates to Colonial Trust Company in 1996. Due to the
inherent complexities in the transfer process 2 certificates were not
accounted for as part of the transfer. This error was identified in
1997 and accordingly, a prior period adjustment is necessary to
reflect the correct certificate and accrued interest balances with
respect to these certificates at December, 31, 1997.
In April 1998, the Fund became aware that property taxes on the Ft
Pierce property (See Note 9) had not been paid or accrued for 1995.
These taxes were paid on or about April 15, 1998.
NOTE "5" - OFFERING TO SELL CERTIFICATES OF INDEBTEDNESS
The Fund is the issuer of an offering of up to $30,000,000 in
unsecured fixed rate and matched rate certificates of indebtedness.
Fixed rate and matched rate certificates require a $500 minimum
investment ($250 minimum through qualified retirement plans) with
terms ranging from two to five years with fixed rate interest from
6.75% to 9% and matched rate interest from 3.0% to 5.0%. These
certificates may be redeemed by the investor at maturity.
PRESBYTERIAN INVESTORS FUND, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 1999
NOTE "5" - OFFERING TO SELL CERTIFICATES OF INDEBTEDNESS (continued)
At December 31, 1999, December 31, 1998 and December 31, 1997 the Fund
had issued fixed and matched rate certificates aggregating
$20,411,189, $18,326,151, and $14,591,927 respectively. At December
31, 1999 certificates are expected to mature as follows:
2000 5,959,219
2001 2,506,653
2002 9,341,841
2003
and beyond 2,603,276
-----------
$20,411,189
NOTE "6" - CHURCH BOND FUND
In August, 1996, the trustees of the Fund authorized the issuance of
Church Bond Fund Certificates to be collateralized by bonds purchased
from the proceeds raised by proceeds of Church Bond issues. The 1996
offering, capped at $4,500,000 requires a minimum investment of $500
and consists of certificates with either a 2 1/2 or 5 year maturity.
The 2 1/2 year maturity certificates carry a stated simple interest
rate of 7% per annum, while the 5 year maturity certificates carry a
stated simple interest rate of 9% per annum. Interest on both maturity
term certificates accrues semi-annually.
PRESBYTERIAN INVESTORS FUND, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 1999
NOTE "6" - CHURCH BOND FUND (continued)
At December 31, 1999, the Fund had issued Church Bond Fund
Certificates totaling $556,813. At December 31, 1999, Church Bond Fund
Certificates were expected to mature as follows:
2000 60,339
2001 47,500
2002 448,974
---------
$ 566,813
NOTE "7" - LOANS TO CHURCHES AND PRESBYTERIES
At December 31, 1999, December 31, 1998 and December 31, 1997, the Fund
had made loans of $16,218,116, $14,905,804 and $13,265,433
respectively, to churches for construction and permanent financing.
Interest rates range from 7.0% to 11.25% per annum. Loans are amortized
over a fifteen year period with payments due monthly. The fund retains
the right to call the outstanding principal balance of permanent loans
every third to fifth year period during the term of the loan. It is
management's intent to call these loans at the call dates. At December
31, 1999 the balances of the development loans receivable at the
anticipated call dates were as follows:
2000 3,636,394
2001 2,215,950
2002 2,382,911
2003
and beyond 7,982,861
------------
$ 16,218,116
PRESBYTERIAN INVESTORS FUND, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 1999
NOTE "8" - PENSION PLAN
Prior to 1992 the Fund participated in a defined contribution and
tax-sheltered annuity plans administered by the Insurance, Annuities
and Relief Fund of the PCA that covers all qualified employees. During
1992 the Fund terminated its involvement in the PCA sponsored fund and
established a separate plan covering its employees. The Fund's
contributions to the plan are based on a percentage of each eligible
employees' compensation. Contributions totaling $12,200, $10,603, and
$10,916 were made for the years ended December 31, 1999, 1998 and
1997, respectively.
NOTE "9" - REAL ESTATE HELD FOR MINISTRY DEVELOPMENT
In June of 1990 the Fund acquired a 50% interest in real estate in Ft
Pierce, Florida (the Ft Pierce property). The Fund expected to develop
the property as a church and senior adult facility in conjunction with
the MNA Committee. The Fund's interest was recorded at $425,000 which
represented 50% of the estimated fair market value at the date of
donation. In connection with the gift of this property the Fund
recognized a contribution of $252,000, paid cash of $150,000, and
recorded a payable to the MNA Committee of $23,000. In 1992, the Fund
acquired an additional 17.65% interest in the property for $150,000 in
cash with a contribution in the amount of $17,675. Development costs
were capitalized as part of the land costs. These costs totaled
$28,952.
An appraisal was made of the property and the actual Fair Market Value
of the property at the date of donation was determined to be $950,000.
The Fund's interest was adjusted to reflect the correct value at the
date of acquisition.
On October 26, 1995 the Fund sold approximately 3.1 acres of the Ft.
Pierce property. The total sales price was $107,000 including the
32.35% share allocable to MNA. The Fund's gain on the sale of its
interest in the 3.1 acre tract was $ 13,313.
In December 1995, the Fund acquired Man's remaining interest in the
Ft. Pierce property for $ 241,120. Simultaneous with this transaction
MNA reimbursed the
PRESBYTERIAN INVESTORS FUND, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 1999
NOTE "9" - REAL ESTATE HELD FOR MINISTRY DEVELOPMENT (continued)
Fund for management expenses, fees associated with the sale of the 3.1
acre tract in October and estimated expenses required for repairs
needed on the property. The reimbursement received was $ 40,335 which
included an amount computed to compensate the Fund for the loss of the
use of the purchase price funds for lending purposes.
On December 31, 1998 the Fund sold approximately 11.99 acres of the
Ft. Pierce property. The Fund realized a gain on the sale of
approximately $193,000. The remainder of this property was sold in the
year ended December 31, 1999. The Fund realized a gain of
approximately $136,000 on this transaction.
Also in December 1995 the Fund acquired approximately 6.8 acres of
land in Harris County, Texas (the Kingwood Property) for $ 282,365. At
or about the same time the Fund sold approximately 2.25 acres,
representing two tracts in the Kingwood Property, to The Kingwood
Forest Church for $ 193,582 and gave the Kingwood Forest Church an
option to purchase the remaining tracts. The option price is $188,779.
The Fund took back a one year note bearing interest at 10.5% as
consideration for the sale. The Fund realized a gain on the sale
transaction of $99,642.
In 1997, the remaining interest in the Kingwood property was sold in 2
separate parcels for $276,700. On these sales the Fund realized a gain
of $52,378.
In September 1997, the Fund acquired 35 acres of land in McKinney, TX
as an accommodation to Redeemer Presbyterian Church (Redeemer).
Simultaneous with the acquisition, the Fund entered into a sale
agreement with Redeemer for 15 of the acquired acres and a development
agreement with Redeemer for the balance whereby the Fund would prepare
the remaining land for development and effect a sale of it, splitting
the profits with Redeemer.
The development agreement called for the Fund to be paid a non
refundable development fee of $88,750 at the time of execution of such
agreement. Under the terms of the development agreement the fee was
deemed earned at time of payment. Accordingly, the Fund has recorded
the entire fee as income in the year of receipt.
PRESBYTERIAN INVESTORS FUND, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 1999
NOTE "9" - REAL ESTATE HELD FOR MINISTRY DEVELOPMENT (continued)
On December 29, 1998 the Fund sold the remaining acreage in McKinney,
Texas realizing a gain of approximately $118,000.
NOTE "10" - RELATED PARTY TRANSACTIONS
Material related party transactions for the year ended December 31,
1998 include the following:
Loans made to PCA
Churches $16,318,116
Advance to company owned
by officer of the Fund 90,000
NOTE "11"-LEASE COMMITMENT
The Fund had entered into a lease for office space that required lease
payments of $854 a month through May 14, 1998. This lease was
terminated in June 1996 and a new lease was entered into for office
space requiring lease payments of $1,077 per month through May 14,
1998. There was no penalty associated with the termination of the
original lease.
Subsequent to May 14, 1998, the Fund subleased its current office
space on a month to month basis. On March 1, 1999, the Fund signed a
permanent lease with a 2 year term and a lease rate of $1031.25 for
the first year and $1062.18 for the second year. There are no renewal
or purchase options in this lease. The Fund's lease obligation for
under the lease is as follow
2000 $12,653.37
2001 $ 3,196.54
TOTAL $15,839.91
PRESBYTERIAN INVESTORS FUND, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 1999
NOTE "14"-OFF-BALANCE SHEET RISK
The company maintains cash balances in more than one financial
institution located in Atlanta, Georgia. Some of the balances are
insured. At December 31, 1999, the company's uninsured cash balance
was approximately $5,397,315.
PIF / CORNERSTONE
PRO FORMA
STATEMENT OF ACTIVITIES
for the
PERIOD ENDED DECEMBER 31, 1999
PIF & CDF CORNERSTONE INTERCOMPANY COMBINED
12/31/99 12/31/99 ADJUSTMENTS 12/31/99
---------- ---------- ---------- ----------
Support and Revenue
Contributions $ -- $ -- -- --
Interest earned 1,889,967 183,211 -- 2,073,178
Fees and Services 429,018 263,162 692,180
Gain on sale of real estate 135,867 86,513 222,380
Dividends 45,000 -- -- 45,000
Other Income (loss) -- 1,452 1,452
---------- ---------- ---------- ----------
TOTAL SUPPORT AND REVENUE 2,499,852 534,338 -- 3,034,190
---------- ---------- ---------- ----------
Expenses
Interest Expense 1,867,486 209,541 -- 2,077,027
Service Fees 67,036 15,256 82,292
Personnel Expense 112,210 -- 112,210
Operational Expense 399,695 123,939 523,634
Legal Fees 7,600 12,897 20,497
Depreciation 5,925 -- 5,925
---------- ---------- ---------- ----------
TOTAL EXPENSES 2,459,952 361,633 -- 2,821,585
---------- ---------- ---------- ----------
EXCESS (DEFICIT) OF SUPPORT AND
REVENUE OVER EXPENSES
FROM CONTINUING OPERATIONS 39,900 172,705 -- 212,605
BEFORE TAXES
PIF / CORNERSTONE
PRO FORMA
STATEMENT OF ACTIVITIES
for the
PERIOD ENDED SEPTEMBER 30, 2000
PIF & CDF CORNERSTONE INTERCOMPANY COMBINED
9/30/00 9/30/00 ADJUSTMENTS 9/30/00
---------- ---------- ---------- ----------
Support and Revenue
Contributions $ -- $ -- -- --
Interest earned 1,540,725 313,321 (49,359) 1,804,687
Fees and Services 461,800 136,000 597,800
Gain on sale of real estate --
Dividends 26,999 -- -- 26,999
Other Income (loss) 12,000 1,000 13,000
---------- ---------- ---------- ----------
TOTAL SUPPORT AND REVENUE 2,041,524 450,321 (49,359) 2,442,486
---------- ---------- ---------- ----------
Expenses
Interest Expense 1,487,870 267,241 (49,359) 1,705,752
Service Fees 55,061 12,311 67,372
Personnel Expense 195,587 -- 195,587
Operational Expense 202,246 125,801 328,047
Legal Fees 7,557 12,897 20,454
Depreciation 4,069 -- 4,069
---------- ---------- ---------- ----------
TOTAL EXPENSES 1,952,390 418,250 (49,359) 2,321,281
---------- ---------- ---------- ----------
EXCESS (DEFICIT) OF SUPPORT AND
REVENUE OVER EXPENSES
FROM CONTINUING OPERATIONS 89,134 32,071 -- 121,205
AGREEMENT AND PLAN OF MERGER
by and among
CORNERSTONE MINISTRIES INVESTMENTS, INC.
AND
PRESBYTERIAN INVESTORS FUND, INC.
Dated as of November 16, 2000
Exhibit to Form 8-K, December 29, 2000
TABLE OF CONTENTS
PAGE
----
ARTICLE I MERGER; MERGER CONSIDERATION; CLOSING; AGREEMENTS..................1
1.1 THE MERGER..........................................................1
1.2 CONSUMMATION OF MERGER..............................................1
1.3 EFFECT OF THE MERGER................................................2
1.4 ARTICLES OF INCORPORATION; BYLAWS...................................2
1.5 DIRECTORS AND OFFICERS..............................................2
1.6 NAME OF SURVIVING CORPORATION.......................................2
1.7 MERGER CONSIDERATION................................................2
1.8 DISTRIBUTION OF SURPLUS ASSETS......................................2
1.9 CLOSING.............................................................3
1.10 CLOSING OBLIGATIONS................................................3
ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE FUND........................4
2.1 ORGANIZATION, QUALIFICATION, ETC....................................4
2.2 SUBSIDIARIES........................................................5
2.3 NO MEMBERS..........................................................5
2.4 COMPANY RECORD BOOKS................................................5
2.5 OPTIONS AND RIGHTS..................................................5
2.6 AUTHORIZATION, ETC..................................................5
2.7 NO VIOLATION; CONSENTS AND APPROVALS................................5
2.8 FINANCIAL STATEMENTS; UNDISCLOSED LIABILITIES.......................6
2.9 TRUSTEE PROPERTY....................................................6
2.10 EMPLOYEES..........................................................6
2.11 ABSENCE OF CHANGES.................................................7
2.12 CONTRACTS..........................................................8
2.13 REAL ESTATE AND PERSONAL PROPERTY MATTERS.........................10
2.15 TAX MATTERS.......................................................11
2.16 COMPLIANCE WITH REGULATIONS AND ORDERS; PERMITS; AFFILIATIONS.....12
2.17 ERISA AND RELATED MATTERS.........................................13
2.18 INTELLECTUAL PROPERTY.............................................14
2.19 ENVIRONMENTAL MATTERS.............................................15
2.20 BANKING ARRANGEMENTS..............................................16
2.21 INSURANCE.........................................................16
2.22 OUTSTANDING LOANS.................................................16
2.23 BROKERAGE.........................................................16
2.24 IMPROPER AND OTHER PAYMENTS.......................................16
2.25 FINANCIAL CONDITION AS OF EFFECTIVE DATE AND CLOSING DATE.........17
2.26 DISCLOSURE........................................................17
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE BUYER.....................17
3.1 CORPORATE ORGANIZATION, ETC........................................17
3.2 AUTHORIZATION, ETC.................................................17
3.3 NO VIOLATION.......................................................18
3.4 GOVERNMENTAL AUTHORITIES...........................................18
3.5 DISCLOSURE.........................................................18
(i)
ARTICLE IV COVENANTS OF THE FUND............................................18
4.1 ORDINARY COURSE OF BUSINESS........................................19
4.2 CERTAIN RESTRICTIONS...............................................19
4.3 CASH AND CASH EQUIVALENTS..........................................19
4.4 INTERIM FINANCIAL INFORMATION......................................19
4.5 FULL ACCESS AND DISCLOSURE.........................................19
4.6 FULFILLMENT OF CONDITIONS PRECEDENT................................20
4.7 TAX RETURNS........................................................20
4.8 FAIRNESS OPINION...................................................20
ARTICLE V COVENANTS OF THE BUYER............................................20
5.1 FULL ACCESS AND DISCLOSURE.........................................20
5.2 RELEASE AND ASSUMPTION OF GUARANTEES...............................21
ARTICLE VI OTHER AGREEMENTS.................................................21
6.1 FURTHER ASSURANCES.................................................21
6.2 CONSENTS...........................................................21
ARTICLE VII CONDITIONS TO THE OBLIGATIONS OF THE BUYER......................21
7.1 REPRESENTATIONS AND WARRANTIES; COVENANTS AND AGREEMENTS...........22
7.2 NO INJUNCTION......................................................22
7.3 THIRD PARTY CONSENTS...............................................22
7.4 REGULATORY APPROVALS...............................................22
7.5 NO MATERIAL ADVERSE CHANGE.........................................22
7.6 DIRECTORS AND OFFICERS.............................................22
7.7 INDEBTEDNESS.......................................................23
7.8 DUE DILIGENCE......................................................23
7.9 FUND'S CLOSING DOCUMENTS...........................................23
7.10 BOARD APPROVAL....................................................23
7.11 NOTICE TO ATTORNEY GENERAL........................................23
7.12 RETURN OF REQUIRED ASSETS.........................................23
ARTICLE VIII CONDITIONS TO THE OBLIGATIONS OF THE SELLER....................23
8.1 REPRESENTATIONS AND WARRANTIES; PERFORMANCE........................23
8.2 NO INJUNCTION......................................................24
8.3 BUYER'S CLOSING DOCUMENTS..........................................24
8.4 FAIRNESS OPINION...................................................24
ARTICLE IX TERMINATION AND ABANDONMENT......................................24
9.1 METHODS OF TERMINATION.............................................24
9.2 PROCEDURE UPON TERMINATION.........................................25
ARTICLE X MISCELLANEOUS PROVISIONS..........................................25
10.1 AMENDMENT AND MODIFICATION........................................25
10.2 ENTIRE AGREEMENT..................................................25
10.3 CERTAIN DEFINITIONS...............................................26
10.4 NOTICES...........................................................30
10.5 EXHIBITS AND SCHEDULES............................................31
10.6 WAIVER OF COMPLIANCE; CONSENTS....................................31
10.7 ASSIGNMENT........................................................31
10.8 GOVERNING LAW.....................................................31
10.9 CONSENT TO JURISDICTION; SERVICE OF PROCESS.......................32
10.10 INJUNCTIVE RELIEF................................................32
10.11 HEADINGS.........................................................32
10.12 PRONOUNS AND PLURALS.............................................32
10.13 CONSTRUCTION.....................................................32
10.14 DEALINGS IN GOOD FAITH; BEST EFFORTS.............................32
10.15 BINDING EFFECT...................................................32
10.16 DELAYS OR OMISSIONS..............................................33
10.17 SEVERABILITY.....................................................33
10.18 EXPENSES.........................................................33
10.19 ATTORNEYS' FEES..................................................33
10.20 COUNTERPARTS.....................................................33
(ii)
SCHEDULES
Schedule 2.1 Organization, Qualification, etc.
Schedule 2.7 No Violations; Consents and Approvals
Schedule 2.8 Financial Statements; Undisclosed Liabilities
Schedule 2.9 Customer Deposits
Schedule 2.10 Employees
Schedule 2.12 Contracts
Schedule 2.13 Real Estate and Personal Property Matters
Schedule 2.14 Litigation
Schedule 2.16 Compliance With Regulations and Orders;
Permits; Affiliations
Schedule 2.17 Employee Benefits and Related Matters
Schedule 2.18 Intellectual Property
Schedule 2.19 Environmental Matters
Schedule 2.20 Banking Arrangements
Schedule 2.21 Insurance
Schedule 2.24 Improper and Other Payments
Schedule 2.27 Significant Customers and Suppliers; Material Plans
and Commitments
Schedule 7.7(a) Indebtedness to be Paid by Closing
Schedule 7.7(b) Other Indebtedness
(iv)
EXHIBITS
EXHIBIT A FORM OF ARTICLES OF MERGER
(v)
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") is made and
entered into as of November 16, 2000, by and among CORNERSTONE MINISTRIES
INVESTMENTS, INC., a Georgia for-profit corporation (the "Buyer"), and
PRESBYTERIAN INVESTORS FUND, INC., a Georgia non-profit corporation (the
"Fund").
WHEREAS, the Fund is engaged primarily in the business of lending money
to new churches and related ministries of the Presbyterian Church of America
(the "Fund Business");
WHEREAS, the Board of Directors of the Fund are solely vested with the
authority to manage the affairs of the Fund;
WHEREAS, the respective Boards of Directors of the Buyer and the Fund
have determined that it is advisable and in the best interests of the companies
and the Buyer's stockholders that the Fund merge with and into the Buyer
pursuant to this Agreement with the Buyer being the surviving corporation (the
"Merger"); and
WHEREAS, the Buyer and the Fund desire to make certain representations,
warranties, covenants and agreements in connection with the Merger and also
prescribe certain conditions to the Merger.
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements, representations, warranties provisions and covenants herein
contained, the parties hereto hereby agree as follows:
ARTICLE I
MERGER; MERGER CONSIDERATION; CLOSING; AGREEMENTS
1.1 The Merger. At the Effective Time, upon the terms and subject to
the conditions set forth in this Agreement, the Fund shall be merged with and
into the Buyer in accordance with the Georgia Nonprofit Corporation Code (the
"GNCC") and the Georgia Business Corporation Code ("GBCC") (collectively, the
GNCC and GBCC are referred to as "Georgia Code"). As a result of the Merger, the
separate existence of the Fund shall cease and the Buyer shall continue as the
surviving corporation of the Merger (the "Surviving Corporation").
1.2 Consummation of Merger. As promptly as practicable after the
satisfaction or, if permissible, waiver in writing of the conditions set forth
in Article 7 and Article 8 hereof, the parties hereto shall cause the Merger to
be consummated by filing Articles of Merger, substantially in the form of
Exhibit A hereto (the "Articles of Merger"), with the Secretary of State of the
State of Georgia in such form as required by, and executed in accordance with,
the relevant provisions of Georgia law; provided, however, that the Merger shall
in no event be consummated until a date which is at least thirty (30) days after
delivery of notice of the Merger to the Attorney General of the State of
Georgia, in accordance with subsection (b) of Section 14-3-1102 of the GNCC.
1
1.3 Effect of the Merger. On the Effective Date, the effect of the
Merger shall be as provided in the applicable provisions of the Georgia Code.
Without limiting the generality of the foregoing, and subject thereto, on the
Effective Date, except as otherwise provided herein, the identity, all of the
property (whether real, personal or mixed), rights, privileges, powers,
immunities, franchises, debts, liabilities and duties of the Fund shall be
merged with, fully vest in and become the rights, privileges, powers,
immunities, franchises, debts, liabilities and duties of the Surviving
Corporation and the separate existence of the Fund shall cease.
1.4 Articles of Incorporation; Bylaws. On the Effective Date, the
Articles of Incorporation and the Bylaws of the Surviving Corporation shall be
the Articles of Incorporation and Bylaws of the Buyer as in effect immediately
prior to the Effective Date, in each case until duly amended in accordance with
applicable law.
1.5 Directors and Officers.
(a) On the Effective Date, the directors of the Surviving
Corporation shall be the directors of the Buyer immediately prior to
the Effective Date, to hold office in accordance with the Articles of
Incorporation and Bylaws of the Surviving Corporation, until their
successors are duly elected or appointed and qualified.
(b) On the Effective Date, the officers of the Surviving
Corporation shall be the officers of the Buyer immediately prior to the
Effective Date, in each case until their respective successors are duly
elected or appointed and qualified.
1.6 Name of Surviving Corporation. As of the Effective Date, the name
of the Surviving Corporation shall be the name of the Buyer immediately prior to
the Effective Date.
1.7 Merger Consideration. Subject to the satisfaction of the terms and
conditions of this Agreement, and by virtue of the Merger and without any
further action on the part of the Fund, any and all memberships or beneficial
interests of the Fund (collectively, the "Company Shares") shall be canceled
and, by operation of law, the Buyer shall assume, as of the Effective Date, any
and all liabilities and obligations of the Fund outstanding immediately prior to
the Effective Date. (The Fund is board managed and does not have members.)
1.8 Distribution of Surplus Assets. On or prior to the Effective Date,
the assets of the Fund having an aggregate value equal the greater of (i) the
fair market value of the net tangible and intangible assets (including goodwill)
of the Fund or (ii) the fair market value of the Fund if the Fund were to be
operated as a business concern or (iii) $500,000.00, shall be transferred,
assigned or otherwise conveyed to Church Growth Foundation, Inc., a Georgia
not-for-profit corporation, or one or more other persons who would have received
the Fund's assets under subsection (b) of Section 14-3-1403 of the GNCC had the
Fund dissolved (such assets are collectively referred to herein as the "Surplus
Assets").
1.9 Closing. Unless this Agreement is terminated in accordance with
Article IX hereof, the closing of the Merger transaction provided for in this
Agreement (the "Closing") will take place on December 29, 2000, or at such other
time and manner agreed upon by the respective parties prior to Closing (the
"Closing Date"). Subject to the provisions of Article IX hereof, failure to
consummate the transactions provided for in this Agreement on the date and time
and at the place determined pursuant to this Section 1.9 will not result in the
termination of this Agreement and will not relieve any party of any obligation
under this Agreement.
2
1.10 Closing Obligations. At the Closing:
(a) The Fund shall deliver to the Buyer the following
agreements, documents, opinion and certificates (hereinafter referred
to as the "Fund's Closing Documents"):
(i) a certificate of the Secretary of the Fund, in customary
form and reasonably acceptable to the parties ("Secretary's
Certificate");
(ii) a certificate of an officer of the Fund, in customary
form and reasonably acceptable to the parties ("Officer's
Certificate");
(iii) the Georgia Articles of Merger, duly executed by the
Fund, to be filed with the Secretary of State of the State of
Georgia;
(iv) certificates issued by the appropriate governmental
authorities evidencing the good standing, with respect to both the
conduct of business and the payment of all franchise taxes, of the
Fund as of a date not more than thirty (30) days prior to the
Closing Date, as a nonprofit corporation organized under the laws
of the State of Georgia and as a foreign nonprofit corporation
authorized to do business under the laws of the various
jurisdictions where it is so qualified;
(v) evidence satisfactory to the Buyer in its sole discretion
that the Surplus Assets have been or on the Effective Date shall
be transferred, assigned or otherwise conveyed by the Fund to
Church Growth Foundation, Inc. or one or more other persons who
would have received the Fund's assets under subsection (b) of
Section 14-3-1403 of the GNCC had the Fund dissolved, in
accordance with Section 1.8 hereof;
(vi) evidence satisfactory to the Buyer in its sole
discretion that at least thirty (30) days prior to the Closing
Date, proper notice, including a copy of this Agreement, was
delivered by the Fund to the Attorney General of the State of
Georgia, in accordance with subsection (b) of Section 14-3-1102 of
the GNCC;
(vii) such other agreements, instruments and documents as are
necessary and appropriate, in the Buyer's sole discretion, to
satisfy the closing conditions described in Article VII of this
Agreement, executed by the Fund; and
(viii) such other certificates, agreements, instruments and
documents as the Buyer may reasonably request.
(b) The Buyer will deliver to the Fund the following
agreements, documents, opinion and certificates (hereinafter referred
to as the "Buyer's Closing Documents"):
(i) a Secretary's Certificate for the Buyer, executed by the
Assistant Secretary's or Secretary's thereof;
3
(ii) an Officer's Certificate for the Buyer, executed by the
appropriate officers thereof;
(iii) the Articles of Merger duly executed by the Buyer, to
be filed with the Secretary of State of the State of Georgia; and
(iv) certificates issued by the appropriate governmental
authorities evidencing the good standing, with respect to both the
conduct of business and the payment of all franchise taxes, of the
Buyer as of a date not more than thirty (30) days prior to the
Closing Date, as a business corporation organized under the laws
of the State of Georgia.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE FUND
The Fund makes the following representations and warranties to the
Buyer, each of which shall be deemed material (and the Buyer, in executing,
delivering and consummating this Agreement, have relied and will rely upon the
correctness and completeness of each of such representations and warranties
notwithstanding independent investigation, if any):
2.1 Organization, Qualification, etc.
(a) The Fund is a nonprofit corporation duly organized,
validly existing and in good standing under the GNCC with full
corporate power and authority to carry on the Fund Business as such are
now being conducted and proposed to be conducted, and to own, operate
and lease its properties and assets.
(b) The Fund is duly qualified, licensed or admitted to do
business as a nonprofit corporation and is in good standing in the
jurisdictions set forth on Schedule 2.1 attached hereto, which are the
only jurisdictions in which the conduct of its nonprofit business, the
ownership, operation or leasing of its properties and assets, or the
transactions contemplated by this Agreement, require it to be so
qualified, licensed or admitted, except for those jurisdictions in
which such failure to be so qualified, licensed or admitted and in good
standing would not have a Material Adverse Effect. The Fund does not
conduct, transact or solicit nonprofit business in any state or
jurisdiction except those listed in Schedule 2.1 hereto.
(c) True, complete and correct copies of the Fund's articles
of incorporation and bylaws, including, without limitation, any
amendments thereto (collectively, the "Charter Documents"), as
presently in effect, are attached to Schedule 2.1.
2.2 Subsidiaries. The Fund has no Subsidiaries.
2.3 No Members. The Fund is a board-managed nonprofit corporation, and
there are no members or delegates (as such terms are respectively defined in
Section 14-3-140 of the GNCC) or other persons, other than the undersigned
directors, who are entitled to vote on the Merger pursuant to the terms and
conditions of this Agreement.
4
2.4 Company Record Books. The record books of the Fund including,
without limitation, the minute books have been delivered to the Buyer for
inspection prior to the date hereof and each is true, complete and correct and
contain all of the proceedings of, and material actions taken by, the directors
of the Fund.
2.5 Options and Rights. There are no outstanding subscriptions,
options, warrants, rights, securities (including, without limitation, those
convertible or exchangeable into the capital stock or other ownership or equity
or voting interests of the Fund), contracts, agreements, commitments,
understandings or other arrangements (whether oral or written) under which the
Fund is bound or obligated to issue any additional shares of capital stock or
rights to purchase shares of capital stock (collectively, "Options").
2.6 Authorization, Etc. The Fund has full corporate power and authority
to enter into this Agreement and the other agreements, documents, instruments
and certificates contemplated herein or related hereto (collectively, the
"Ancillary Documents") to which the Fund is a party and to perform its
obligations hereunder and thereunder. The execution, delivery and performance of
this Agreement and the Ancillary Documents and the transactions contemplated
hereby and thereby have been, or by the Closing Date will have been, duly
authorized by the Board of Directors of the Fund and no other or further
proceedings or actions on the part of the Fund or its Board of Directors are
necessary to authorize this Agreement, the Ancillary Documents and the
transactions contemplated hereby and thereby. Upon execution and delivery of
this Agreement and the Ancillary Documents by the parties hereto and thereto,
this Agreement and each of the Ancillary Documents shall constitute the legal,
valid and binding obligation of the Fund, enforceable against the Fund in
accordance with their respective terms, except as enforceability may be limited
by bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting the enforcement of creditor rights generally and by general equitable
principles.
2.7 No Violation; Consents and Approvals. Except as set forth on
Schedule 2.7 hereto, the execution and delivery by the Fund of this Agreement,
the Ancillary Documents to which it is a party and the fulfillment of and
compliance with the respective terms hereof and thereof by the Fund do not and
will not: (a) conflict with or result in a breach of the terms, conditions or
provisions of; (b) constitute a default or event of default under (with due
notice, lapse of time or both); (c) result in the creation of any Lien upon the
capital stock or assets of the Fund pursuant to; (d) give any third party the
right to accelerate any obligation under; (e) result in a violation of; or (f)
require any authorization, consent, approval, exemption or other action by or
notice to any Person (including, without limitation, any creditor, customer or
supplier) pursuant to, the Charter Documents of the Fund or any Regulation,
Order or Contract to which the Fund is subject. The Fund has complied with all
applicable Regulations and Orders in connection with the execution, delivery and
performance of this Agreement, the Ancillary Documents to which it is a party
and the transactions contemplated hereby and thereby. The Fund is not required
to submit any notice, report, or other filing with any governmental authority in
connection with its execution or delivery of this Agreement, the Ancillary
Documents to which it is a party or the consummation of the transactions
contemplated hereby and thereby. No authorization, consent, approval, exemption
or notice is required to be obtained by the Fund in connection with the
execution, delivery, and performance of this Agreement, the Ancillary Documents
to which it is a party and the transactions contemplated hereby and thereby.
5
2.8 Financial Statements; Undisclosed Liabilities.
(a) Financial Statements. Attached as Schedule 2.8 hereto are the
following financial statements of the Fund: (i) audited balance
sheets as of December 31, 1997, 1998 and 1999 (each a "Balance
Sheet" and collectively, the "Balance Sheets"); (ii) audited
statements of income, changes in equity and cash flow and related
schedules thereto for the fiscal years ended December 31, 1997,
1998 and 1999 (the "Related Statements"); and (iii) an unaudited
balance sheet as of and the statement of revenues and expenses and
the related schedules thereto for the nine (9) month period ended
September 30, 2000 (the "Interim Financial Statements" and,
collectively with the Balance Sheets and the Related Statements,
the "Financial Statements"). The Financial Statements (x) were
prepared in accordance with GAAP, (y) fairly present the financial
position, condition and results of operations of the Fund at the
respective dates thereof (except as stated therein or in the notes
or schedules thereto) applied on a consistent basis, and (z) were
compiled from the books and records of the Fund regularly
maintained by management and used to prepare the financial
statements thereof.
(b) Undisclosed Liabilities. Except as set forth on Schedule 2.8
attached hereto, the Fund has no liability, whether accrued,
absolute or contingent, except as reflected on a balance sheet or
described in the notes thereto in accordance with GAAP.
2.9 Trustee Property. All money held by the Fund on behalf of trustees
or as a trustee are held by the Fund in segregated and separately identified
bank accounts as set forth on Schedule 2.9, and are not commingled with other
cash, assets or property of the Fund.
2.10 Employees.
(a) Attached as Schedule 2.10 hereto is an accurate list
showing all officers, directors and key employees of the Fund, listing
the annual rate of compensation (and the portions thereof attributable
to salary, bonus and other compensation, respectively) of each of such
persons (i) as of the end of the Fund's most recent fiscal year (the
"Balance Sheet Date") and (ii) as of the date hereof. There are no
employment agreements for persons listed on Schedule 2.10. Since the
Balance Sheet Date, there have been no increases in the compensation or
benefits payable to or to become payable to, or any special bonuses, to
any officer, director, key employee or other employee, except ordinary
salary increases implemented on a basis and in amounts consistent with
past practices and amounts.
(b) Set forth on Schedule 2.10 hereto is, as of the date
hereof, the approximate number of employees for the Fund. The Fund has
been since its date of organization, and currently is, in compliance
with all federal, state and local Regulations and Orders affecting
employment and employment practices applicable thereto, including,
without limitation, those Regulations promulgated by the Equal
Employment Opportunity Commission, and those relating to terms and
conditions of employment and wages and hours. Except as set forth on
Schedule 2.10, (i) the Fund is not bound by or subject to (and none of
its assets or properties is bound by or subject to) any arrangement
with any labor union, (ii) no employees of the Fund are represented by
any labor or trade union or covered by any collective bargaining
agreement with the Fund, (iii) no campaign to establish such
representation is in progress, and (iv) there is no pending or, to the
Knowledge of the Fund, threatened labor dispute involving the Fund and
any group of its employees, nor has the Fund experienced any labor
interruptions over the past three (3) years. The Fund believes its
relationship with employees to be good.
6
(c) Schedule 2.10 hereto sets forth an accurate list of all of
the Permits, including, without limitation, any business licenses or
permits held by any officer, director or employee of the Fund and
required for, or used in, the conduct of the businesses of the Fund.
2.11 Absence of Changes. Since the date of the most recent Balance
Sheet, the Fund has conducted its business only in the Ordinary Course of
Business and there has not been: (a) any Material Adverse Change; (b) any
damage, destruction or loss, whether covered by insurance or not, with regard to
the Fund's properties and business; (c) any payment by the Fund to, or any
notice to or acknowledgment by the Fund of any amount due or owing to, the
Fund's self-insured carrier, if any, in connection with any self-insured amounts
or liabilities under health insurance covering employees of the Fund, in each
case, in excess of a reserve therefor on the most recent Balance Sheet and in
the Interim Financial Statements; (d) any amendment or change in the Fund's
Charter Documents; (e) any payment out of the Ordinary Course of Business; (f)
any cancellation of, or agreement to cancel any indebtedness or obligation owing
to the Fund; (g) any amendment, modification or termination of any existing
Permits or Contracts, or entering into any new Contract or plan relating to any
salary, bonus, insurance, pension, health or other employee welfare or benefit
plan for or with any directors, officers, employees or consultants of the Fund;
(h) any entry into any material Contract not in the Ordinary Course of Business,
including, without limitation, relating to any borrowing, capital expenditure or
the sale or purchase of any property, rights, or assets or any options or
similar agreements with respect to the foregoing; (i) any disposition by the
Fund of any material asset; (j) any adverse change in any Contract or
relationship with any customer or supplier, the sales patterns, pricing
policies, accounts receivable or accounts payable relating to the Fund; (k) any
write-down of the value of any assets having an aggregate value in excess of
$5,000, or write-off, as uncollectible, of any notes, trade accounts or other
receivables having an aggregate value in excess of $5,000; (l) any change by the
Fund in accounting methods or principles; or (m) any material change in the cash
and cash equivalents of the Fund from the amounts shown on the balance sheet as
of the date of the Interim Financial Statements.
2.12 Contracts.
(a) Listed by the Fund on Schedule 2.12 are all written and
oral contracts, commitments and similar agreements to which the Fund is
a party or by which it or any of its properties are bound as of the
date hereof and, in each case, has delivered true, complete and correct
copies of the following such agreements, or narrative descriptions or
such oral contracts, to the Buyer including, without limitation, the
following such agreements and contracts:
(i) Contracts relating to any services provided by
the Fund including, without limitation, brokerage,
discretionary accounts, investment management, asset
management, and any other contracts relating to financial
services;
7
(ii) pension, profit sharing, bonus, retirement,
stock or similar ownership, option, purchase, appreciation or
other plan providing for deferred or other compensation to
employees or any other employee benefit plan (other than as
set forth in Schedule 2.17 hereto), or any Contract with any
labor union;
(iii) Contracts relating to brokerage, consulting,
independent contractor and other similar agreements for the
payment of compensation, not terminable on notice of thirty
(30) days' or less by the Fund without penalty or other
financial obligation (and, except as set forth on Schedule
2.10, no officer or employee of the Fund receives total
salary, bonus and other compensation from the Fund of
$25,000.00 or more per annum);
(iv) Contracts relating to any joint ventures,
strategic alliances, partnerships and investments;
(v) Contracts containing covenants or agreements
limiting the freedom of the Fund or any of its employees to
compete in any line of business presently conducted by the
Fund with any Person or to compete in any such line of
business in any area;
(vi) Contracts with any Affiliate of the Fund or with
any Affiliate or relative of any officer or director of the
Fund;
(vii) Contracts relating to or providing for loans to
officers, directors, employees or Affiliates;
(viii) Contracts under which the Fund has advanced or
loaned, or is obligated to advance or loan, funds to any
Person;
(ix) Contracts relating to the incurrence, assumption
or guarantee of any indebtedness, obligation or liability (in
respect of money or funds borrowed), including, without
limitation, any loan agreement, indemnity, bonds, mortgages,
notes or letters of credit, or otherwise pledging, granting a
security interest in or placing a Lien on any asset of the
Fund;
(x) Contracts relating to the guarantee or
endorsement of any obligation;
(xi) Contracts under which the Fund is lessee of or
holds or operates any property, real or personal, owned by any
other party;
(xii) Contracts pursuant to which the Fund is lessor
of or permits any third party to hold or operate any property,
real or personal, owned or controlled by the Fund;
(xiii) assignments, licenses, indemnifications and
Contracts with respect to any intangible property (including,
without limitation, any Intellectual Property);
8
(xiv) warranty Contracts with respect to services
rendered (or to be rendered);
(xv) Contracts for, or with, any telephone switch,
long distance or toll-free telephone providers;
(xvi) Contracts for the purchase, acquisition or
supply of inventory and other property and assets, whether for
resale or otherwise;
(xvii) Contracts with independent agents, brokers,
dealers or distributors;
(xviii) sales, commissions, advertising or marketing
Contracts;
(xix) Contracts providing for "take or pay" or
similar unconditional purchase or payment obligations;
(xx) Governmental Contracts subject to
redetermination or renegotiation; or
(xxi) any other Contract which is material to the
Fund's operations or business prospects, except those which
(A) were made in the Ordinary Course of Business, and (B) are
terminable on thirty (30) days' or less notice by the Fund
without penalty or other financial obligation.
(b) Except as set forth on Schedule 2.7, no consent of any
party to any Contract is required in connection with the execution,
delivery or performance of this Agreement, or the consummation of the
transactions contemplated hereby.
(c) Each Contract identified or required to be identified in
Schedule 2.12 hereto is in full force and effect and is valid and
enforceable in accordance with its terms. The Fund has performed in all
material respects all obligations required to be performed by it and is
not in default in any respect under or in breach of nor in receipt of
any claim of default or breach under any Contract listed on Schedule
2.12 hereto. No event has occurred which with the passage of time or
the giving of notice or both would result in a default, breach or event
of non-compliance under any material Contract to which the Fund is
subject (including without limitation all performance bonds, warranty
obligations or otherwise). The Fund does not have any present
expectation or intention of not fully performing all such obligations.
The Fund does not have any Knowledge of any breach or anticipated
breach by the other parties to any such Contract to which it is a
party.
(d) Copies of all Contracts and documents delivered and to be
delivered hereunder by the Fund are and will be true, correct and
complete copies of such agreements, contracts and documents.
2.13 Real Estate and Personal Property Matters.
(a) Schedule 2.13 hereto sets forth a description by the Fund
of all real property owned or leased by the Fund, including the
location/address of the property, the purpose for which the property is
used, whether it is income generating property, the amount of debt on
the owned property, and the lessor, term and monthly lease payments
(including percentage rent, escalation and other such contingent rental
payments) with respect to leased property.
9
(b) The Fund has good and marketable title to all of the
properties and assets reflected in the balance sheet as of the date of
the Interim Financial Statements or acquired after the date thereof,
other than properties sold or otherwise disposed of since the date
thereof in the Ordinary Course of Business, free and clear of all
Liens, except (i) statutory Liens not yet delinquent, (ii) such
imperfections or irregularities of title, Liens, easements, charges or
other encumbrances that do not detract from or interfere with the
present use of the properties or assets subject thereto or affected
thereby, otherwise impair present business operations at such
properties; or do not detract from the value of such properties and
assets, taken as a whole, or (iii) as reflected in the balance sheets
included in Financial Statements or the notes thereto.
(c) The Fund owns, and will on the Closing Date and the
Effective Date own, good and marketable title to all the personal
property and assets, tangible or intangible, used in its business
except as to those assets leased, all of which leases are in good
standing and no party is in default thereunder. None of the assets
belonging to or held by the Fund is or will be on the Closing Date or
the Effective Date subject to any (i) Contracts of sale or lease, or
(ii) Liens. Except for normal breakdowns and servicing requirements,
all machinery and equipment regularly used by the Fund in the conduct
of its business is in good operating condition and repair, ordinary
wear and tear excepted.
(d) There has not been since the date of the most recent
Balance Sheet, and will not be prior to the Closing Date or the
Effective Date, any sale, lease, or any other disposition or
distribution by the Fund of any of its assets or properties and any
other assets now or hereafter owned by it, except transactions in the
Ordinary Course of Business or as otherwise consented to by the Buyer.
On and after the Effective Date, the Surviving Corporation will own, or
have the unrestricted right to use, all of the properties and assets
that are currently used by the Fund in connection with the business
thereof.
2.14 Litigation. Except as set forth on Schedule 2.14, there is no
Claim pending or, to the Knowledge of the Fund, threatened against, relating to
or affecting the Fund or any of the assets or properties of the Fund, nor is
there any Order outstanding against the Fund or any of the assets or properties
of the Fund.
10
2.15 Tax Matters.
(a) The Fund has filed all federal, state, and local tax
reports, returns, information returns and other documents
(collectively, the "Tax Returns") required to be filed with any
federal, state, local or other taxing authorities (each a "Taxing
Authority", collectively, the "Taxing Authorities") in respect of all
relevant taxes, including without limitation income, premium, gross
receipts, net proceeds, alternative or add on minimum, ad valorem,
value added, turnover, sales, use, property, personal property
(tangible and intangible), stamp, leasing, lease, user, excise, duty,
franchise, transfer, license, withholding, payroll, employment, fuel,
excess profits, occupational and interest equalization, windfall
profits, severance, and other charges (including interest and
penalties) (collectively, the "Taxes") and in accordance with all tax
sharing agreements to which the Fund may be a party. All Taxes required
or anticipated to be paid for all periods prior to and including the
Effective Date have been paid or are adequately provided for in the
Financial Statements, including any of the Fund's Taxes that may be due
or claimed to be due as a result of the consummation of the
transactions contemplated by this Agreement. All Taxes which are
required to be withheld or collected by the Fund have been duly
withheld or collected and, to the extent required, have been paid to
the proper Taxing Authority or properly segregated or deposited as
required by applicable laws. There are no Liens for Taxes upon any
property or assets of the Fund except for Liens for Taxes not yet due
and payable. The Fund has not executed any waiver of the statute of
limitations on the right of the Internal Revenue Service or any other
Taxing Authority to assess additional Taxes or to contest the income or
loss with respect to any Tax Return. The basis of any depreciable
assets, and the methods used in determining allowable depreciation
(including cost recovery), is correct and in compliance with the
Internal Revenue Code of 1986, as amended, and the regulations
thereunder (the "Code").
(b) No audit of the Fund or the Fund's Tax Returns by any
Taxing Authority is currently pending or threatened, and no issues have
been raised by any Taxing Authority in connection with any Tax Returns.
No material issues have been raised in any examination by any Taxing
Authority with respect to the Fund which reasonably could be expected
to result in a proposed deficiency for any other period not so
examined, and there are no unresolved issues or unpaid deficiencies
relating to such examinations. The items relating to the business,
properties or operations of the Fund on the Tax Returns filed by or on
behalf of the Fund for all taxable years (including the supporting
schedules filed therewith), available copies of which have been
supplied to the Buyer, state accurately the information requested with
respect to the Fund and such information was derived from the books and
records of the Fund.
(c) The Fund has not made nor has become obligated to make,
nor will as a result of any event connected with the Closing become
obligated to make, any "excess parachute payment" as defined in Section
280G of the Code (without regard to subsection (b)(4) thereof).
(d) The Fund is a nonprofit corporation and has been a
nonprofit corporation since its initial organization.
11
2.16 Compliance with Regulations and Orders; Permits; Affiliations.
(a) Compliance. The Fund is presently complying with all
applicable Regulations and Orders of Authorities in respect of its
operations, equipment, practices, real property, plants, structures and
other properties, and all other aspects of its business and operations,
including, without limitation, all Regulations and Orders relating to
the safe conduct of business, hazardous waste, environmental
protection, handicapped access, fair housing, quality and labeling,
antitrust, Taxes, consumer protection, equal opportunity,
discrimination, health, sanitation, fire, zoning, building and
occupational safety where such failure or failures would individually
or in the aggregate have a Material Adverse Effect. There are no Claims
pending, nor to the Knowledge of the Fund, are there any Claims
threatened, nor has the Fund received any written notice, regarding any
violations of, or defaults under, any Regulations and Orders enforced
by any Authority claiming jurisdiction over the Fund, including,
without limitation, any requirement of OSHA, any pollution and
environmental control agency (including air and water) or the agencies
having responsibility for the Real Estate Settlement Procedures Act,
the Fair Housing Act, Americans With Disabilities Act, or any similar
regulations.
(b) Permits. Schedule 2.16 hereto sets forth all of the Fund's
permits, licenses, provider numbers, orders, franchises, registrations
and approvals (collectively, "Permits") from all Authorities. The
Permits listed on Schedule 2.16 are the only Permits that are required
for the Fund to conduct its business as presently conducted. Each such
Permit is valid and in full force and effect and, to the Knowledge of
the Fund, no suspension or cancellation of any such Permit is
threatened and there is no basis for believing that such Permit will
not be renewable upon expiration.
(c) Affiliations. Schedule 2.16 hereto sets forth all industry
affiliations and memberships of the Fund in any business or industry
group relating to the operation of the Fund (collectively, the
"Business Groups"). The Fund is not in violation of any Regulation,
Order, rule or requirement with respect to any such Business Group.
Except as set forth on Schedule 2.16 hereto, no consent of any such
Business Group is required for the Fund to consummate the transactions
contemplated by this Agreement.
2.17 ERISA and Related Matters.
(a) Benefit Plans; Obligations to Employees. Except as set
forth in Schedule 2.17 hereto, neither the Fund, nor any ERISA
Affiliate of the Fund, is a party to or participates in or has any
liability or contingent liability with respect to:
(i) any "employee welfare benefit plan" or "employee
pension benefit plan" or "multi-employer plan" (as those terms
are respectively defined in Sections 3(1), 3(2) and 3(37) of
the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"));
(ii) any retirement or deferred compensation plan,
incentive compensation plan, stock plan, unemployment
compensation plan, option plan, vacation pay, severance pay,
bonus or benefit arrangement, insurance or hospitalization
program or any other fringe benefit arrangements for any
officer, director, employee, consultant or agent, whether
pursuant to contract, arrangement, custom or informal
understanding, which does not constitute an "employee benefit
plan" (as defined in Section 3(3) of ERISA); or
12
(iii) any employment agreement not terminable on
thirty (30) days' or less written notice, without further
liability.
Any plan, arrangement or agreement required to be
listed on Schedule 2.17 hereto for which the Fund or any ERISA
Affiliate of the Fund may have any liability or contingent liability is
sometimes hereinafter referred to as a "Benefit Plan". For purposes of
this Section 2.17, the term "ERISA Affiliate" shall mean any trade or
business, whether or not incorporated, that together with the Fund
would be deemed a "single employer" within the meaning of Section
4001(b)(i) of ERISA.
(b) Plan Documents and Reports. A true, correct and complete
copy of each of the Benefit Plans listed on Schedule 2.17 hereto, and
all contracts relating thereto, or to the funding thereof, including,
without limitation, all trust agreements, insurance contracts,
investment management agreements, subscription and participation
agreements and record keeping agreements, each as in effect on the date
hereof, is attached to Schedule 2.17 hereto. In the case of any Benefit
Plan that is not in written form, the Buyer has been supplied with an
accurate description of such Benefit Plan as in effect on the date
hereof. A true, correct and complete copy of: (i) the three (3) most
recent annual reports and accompanying schedules; (ii) the three (3)
most recent actuarial reports; (iii) the most recent summary plan
description and Internal Revenue Service determination letter with
respect to each such Benefit Plan, to the extent applicable; (iv) a
current schedule of assets (and the fair market value thereof assuming
liquidation of any asset which is not readily tradeable) held with
respect to any funded Benefit Plan; (v) all documents establishing,
creating or amending any Benefit Plan; (vi) all trust agreements,
funding agreements, insurance contracts and investment management
agreements; (vii) all financial statements and accounting statements
and reports, investment reports and actuarial reports for each of the
last seven (7) years; (viii) any and all other reports, returns,
filings and material correspondence with any Governmental Authority in
the last seven (7) years; (ix) all booklets, summaries, descriptions or
manuals prepared for or circulated to, and written communications of a
general nature to employees concerning any Benefit Plan; (x) all
professional opinions (whether or not internally prepared) with respect
to each Benefit Plan; and (xi) all material internal memoranda
concerning each Benefit Plan prepared within the last seven (7) years,
has been supplied to the Buyer by the Fund, and there have been no
material changes in the financial condition in the respective Benefit
Plans from that stated in the annual reports and actuarial reports
supplied.
(c) Compliance with Laws; Liabilities. Except as set forth on
Schedule 2.17 hereto, the Fund is in compliance in all material
respects with the terms of all of its Benefit Plans and every Benefit
Plan is in compliance with all of the requirements and provisions of
ERISA and all other Regulations and Orders applicable thereto,
including without limitation the timely filing of all annual reports or
other filings required with respect to such Benefit Plans. None of the
assets of any Benefit Plan are invested in employer securities or
employer real property, as those terms are defined in Section 407(d) of
ERISA. There have been no "prohibited transactions" (as described in
Section 406 of ERISA or Section 4975 of the Code) with respect to any
Benefit Plan and neither the Fund nor any ERISA Affiliate of the Fund
has otherwise engaged in any prohibited transaction. There has been no
"accumulated funding deficiency" as defined in Section 302 of ERISA,
nor has any reportable event as defined in Section 4043(b) of ERISA
occurred with respect to any Benefit Plan. Actuarially adequate
accruals for all obligations or contingent obligations under the
Benefit Plans are reflected in the most recent Balance Sheet provided
to the Buyer and such obligations include a pro rata amount of the
contributions which would otherwise have been made in accordance with
past practices for the plan years which include the Closing Date.
13
2.18 Intellectual Property.
(a) Except as set forth on Schedule 2.18 hereto, the Fund has
no trade name, service mark, patent, copyright, trademark or other
Intellectual Property related to its business.
(b) The Fund has the right to use the Intellectual Property
listed in Schedule 2.18 hereto, and except as otherwise set forth
therein, the Intellectual Property is, and will be on the Closing Date
and the Effective Date, free and clear of all royalty obligations and
Liens. There are no Claims pending, or to the Knowledge of the Fund,
threatened, against the Fund that the Fund's use of any of the
Intellectual Property listed on Schedule 2.18 hereto infringes the
rights of any Person. The Fund has no Knowledge of any use of any of
the Intellectual Property constituting an infringement thereof.
(c) The Fund is not a party in any capacity to any franchise,
license or royalty agreement respecting any of the Intellectual
Property and there is no conflict with the rights of others in respect
to any of the Intellectual Property now used in the conduct of its
business.
(d) The current software applications used by the Fund in the
operation of its business are set forth and described on Schedule 2.18
hereto (the "Software"). The Software, to the extent it is licensed
from any third party licensor or it constitutes "off-the-shelf"
software, is held by the Fund under valid, binding and enforceable
licenses and is fully transferable to the Buyer without any third party
consent. All of the Fund's computer hardware has validly licensed
software installed therein. The Fund has not sold, assigned, licensed,
distributed or in any other way disposed of or encumbered the Software.
2.19 Environmental Matters. Except as disclosed in Schedule 2.19
hereto: (a) neither the Fund's business nor the operation thereof violates any
applicable Environmental Law and no condition or occurrence (any accident,
happening or event which occurs or has occurred at any time prior to the Closing
Date, which results in or could result in a claim against the Fund or the Buyer
or creates or could create a liability or loss for the Fund or the Buyer) exists
or has occurred which, with notice or the passage of time or both, would
constitute a violation of any
14
Environmental Law; (b) the Fund is in possession of all Environmental Permits
required under any applicable Environmental Law for the conduct or operation of
the Fund's business (or any part thereof), and the Fund is in full compliance
with all of the requirements and limitations included in such Environmental
Permits; (c) the Fund has not stored or used any Hazardous Material on or at any
property or facility now or previously owned, leased or operated by the Fund
except for inventories of chemicals which are used or to be used in the Ordinary
Course of Business (which inventories have been sorted or used in accordance
with all applicable Environmental Permits and all Environmental Laws, including
all so called "Right to Know" laws); (d) the Fund has not received any notice
from any Authority or other Person that the Fund's business or the operation of
any of its facilities is in violation of any Environmental Law or any
Environmental Permit or that it is responsible (or potentially responsible) for
the cleanup of any Hazardous Materials at, on or beneath any property or
facility now or previously owned, leased or operated by the Fund, or at, on or
beneath any land adjacent thereto or in connection with any waste or
contamination site; (e) the Fund is not the subject of any Claim by any
Authority or other Person involving a demand for damages or other potential
liability with respect to a violation of Environmental Laws or under any common
law theories relating to operations or the condition of any facilities or
property (including underlying groundwater) owned, leased, or operated by the
Fund; (f) the Fund has not buried, dumped, disposed, spilled or released any
Hazardous Materials on, beneath or adjacent to any property or facility now or
previously owned, leased or operated by the Fund or any property adjacent
thereto; (g) no property or facility now or previously owned, leased or operated
by the Fund, is listed or proposed for listing on the National Priorities List
pursuant to CERCLA, on the CERCLIS or on any other federal or state list of
sites requiring investigation or clean-up; (h) there are no underground storage
tanks, active or abandoned, including petroleum storage tanks, on or under any
property or facility now or previously owned, leased or operated by the Fund;
(i) the Fund has not directly transported or directly arranged for the
transportation of any Hazardous Materials to any location which is listed or
proposed for listing on the National Priorities List pursuant to CERCLA, on the
CERCLIS or on any federal or state list or which is the subject of any
enforcement action or other investigation by any Authority which may lead to
material Claims against the Fund for any remedial work, damage to natural
resources or personal injury, including Claims under CERCLA; and (j) there are
no polychlorinated biphenyls, radioactive materials or friable asbestos present
at any property or facility now or previously owned or leased by the Fund. The
Fund has timely filed all reports required to be filed with respect to all of
its property and facilities and has generated and maintained all required data,
documentation and records under all applicable Environmental Laws.
2.20 Banking Arrangements. Schedule 2.20 hereto sets forth the name of
each bank in or with which the Fund has an account, credit line or safety
deposit box, and a brief description of each such account, credit line or safety
deposit box, including the names of all Persons currently authorized to draw
thereon or having access thereto. Except as may be disclosed in the Financial
Statements or on Schedule 2.20 hereto, the Fund has no liability or obligation
relating to funds or money borrowed by or loaned to the Fund (whether under any
credit facility, line of credit, loan, indenture, advance, pledge or otherwise).
2.21 Insurance. Schedule 2.21 hereto sets forth a list and brief
description, including dollar amounts of coverage, of all policies of property,
fire, liability, business interruption, workers' compensation and other forms of
insurance held by the Fund as of the date hereof, as well as a schedule of
Claims filed with the Fund's current insurance carrier, including a history of
such Claims and a description and estimated dollar amount of any unresolved
Claims. Such policies are valid, outstanding and enforceable policies, as to
which premiums have been paid currently. Except as disclosed on Schedule 2.14
hereto, to the Knowledge of the Fund, no state of facts exist and no events have
occurred which might reasonably (a) form the basis for any claim against the
Fund not fully covered by insurance for liability on account of any express or
implied warranty or tortious omission or commission, or (b) result in material
increase in insurance premiums of the Fund.
15
2.22 Outstanding Loans. The outstanding loans reflected on the balance
sheets included in the Financial Statements, and the outstanding loans held by
the Fund on the date hereof, (a) consist of performing loans not in default,
except as reserved in the Financial Statements. Except as set forth on Schedule
2.22, to the knowledge of the Fund, no Person owing money or other constructural
commitment to the Fund is likely to default.
2.23 Brokerage. The Fund has not employed any broker, finder, advisor,
consultant or other intermediary in connection with this Agreement or the
transactions contemplated by this Agreement who is or might be entitled to any
fee, commission or other compensation from the Fund, from the Buyer or any of
their respective Affiliates, upon or as a result of the execution of this
Agreement or the consummation of the transactions contemplated hereby.
2.24 Improper and Other Payments. Except as set forth on Schedule 2.24
hereto: (a) neither the Fund, nor any director, officer, employee thereof, nor,
to the Knowledge of the Fund, any agent or representative of the Fund nor any
Person acting on behalf of any of them, (i) has made, paid or received any
contribution, gift, bribe, rebate, payoff, influence payment, kickbacks or other
similar payments to or from any Person or Authority, whether in money, property
or services (A) to obtain favorable treatment in securing business, (B) to pay
for favorable treatment for business secured, (C) to obtain special concessions
or for special concessions already obtained or (D) in violation of any
Regulation or Order, or (ii) established or maintained a fund or asset that has
not been recorded on the books and records of the Fund; (b) no contributions
have been made, directly or indirectly, to a domestic or foreign political party
or candidate; (c) no improper foreign payment (as defined in the Foreign Corrupt
Practices Act) has been made; and (d) the internal accounting controls of the
Fund are believed by the Fund's management to be adequate to detect any of the
foregoing under current circumstances.
2.25 Financial Condition as of Effective Date and Closing Date. The
Fund has, and as of the Effective Date and the Closing Date will have, as
calculated and fairly presented in accordance with GAAP: (a) positive net worth
(excluding all Deposits); (b) positive net working capital (defined as Adjusted
Current Assets minus Adjusted Current Liabilities); (c) a positive cash balance
on a book basis and bank balance basis net of any and all outstanding checks or
drafts; and (d) fully funded all Deposits in cash or cash equivalents which are
segregated in separately identified bank accounts and not commingled with any
funds of Company; provided, however, that none of the foregoing provisions shall
be construed to authorize or permit any transfer or distribution of any property
or money by the Fund which would be prohibited, conditioned or limited by
another provision of this Agreement.
16
2.26 Disclosure. Neither this Agreement nor any of the exhibits,
attachments, written statements, documents, certificates or other items prepared
for or supplied to the Buyer by or on behalf of the Fund with respect to the
transactions contemplated hereby contains any untrue statement of a material
fact or omits a material fact necessary to make each statement contained herein
or therein not misleading.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE BUYER
The Buyer represents and warrants to the Fund as follows:
3.1 Corporate Organization, Etc. The Buyer is a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation with full corporate power and authority to carry
on its business as it is now being conducted and to own, operate and lease its
properties and assets.
3.2 Authorization, Etc. The Buyer has full corporate power and
authority to enter into this Agreement and the Ancillary Documents to which it
is a party and to carry out the transactions contemplated hereby and thereby.
The Board of Directors of the Buyer or the appropriate committee thereof has or,
prior to Closing will have, duly authorized the execution, delivery and
performance of this Agreement, the Ancillary Documents to which it is a party
and the transactions contemplated hereby and thereby, and no other corporate
proceedings on its part are necessary to authorize this Agreement, such
Ancillary Documents and the transactions contemplated hereby and thereby. Upon
execution and delivery of this Agreement and the Ancillary Documents by the
parties hereto and thereto, this Agreement and the Ancillary Documents to which
the Buyer is a party shall constitute the legal, valid and binding obligation of
the Buyer, enforceable against the Buyer in accordance with their respective
terms, except as enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting the enforcement of
creditors rights generally and by general equitable principles.
3.3 No Violation. The execution, delivery and performance by the Buyer
of this Agreement and the Ancillary Documents to which each is a party, and the
fulfillment of and compliance with the respective terms hereof and thereof by
the Buyer, do not and will not: (a) conflict with or result in a breach of the
terms, conditions or provisions of; (b) constitute a default or event of default
under (with due notice, lapse of time or both); (c) result in the creation of
any Lien upon the assets or properties of the Buyer pursuant to; (d) give any
third party the right to accelerate any obligation under; (e) result in a
violation of; or (f) require any authorization, consent, approval, exemption or
other action by or notice to any Person (including, without limitation, any
creditor, customer or supplier) pursuant to, the Charter Documents of the Buyer,
or any Regulation, Contract or Order to which the Buyer or its properties are
subject. The Buyer shall comply with all applicable Regulations and Orders in
connection with its execution, delivery and performance of this Agreement, the
Ancillary Documents and the transactions contemplated hereby and thereby.
17
3.4 Governmental Authorities. The Buyer has complied in all material
respects with all applicable Regulations in connection with its execution,
delivery and performance of this Agreement, the Ancillary Documents to which it
is a party and the transactions contemplated hereby and thereby. The Buyer is
not required to submit any notice, report, or other filing with any governmental
authority in connection with its execution or delivery of this Agreement, the
Ancillary Documents to which it is a party or the consummation of the
transactions contemplated hereby and thereby. No authorization, consent,
approval, exemption or notice is required to be obtained by the Buyer in
connection with the execution, delivery, and performance of this Agreement, the
Ancillary Documents to which it is a party and the transactions contemplated
hereby and thereby.
3.5 Disclosure. Neither this Agreement or any of the Ancillary
Documents to which it is a party nor any exhibits, attachments, written
statements, documents, certificates or other items prepared for or supplied to
the Fund by the Buyer with respect to the transactions contemplated hereby
contains any untrue statement of a material fact or omits a material fact
necessary to make each statement contained herein or therein not misleading.
ARTICLE IV
COVENANTS OF THE FUND
Until the later of the Effective Date or the Closing Date, except as
otherwise consented to or approved by the Buyer in writing, the Fund shall:
4.1 Ordinary Course of Business. Operate its business diligently and in
good faith and in the Ordinary Course of Business, including, without
limitation: (a) maintaining all of its respective properties in good order and
condition; (b) maintaining (except for expiration due to lapse of time) all
Contracts in effect without change except as expressly provided herein; (c)
complying with the provisions of all Regulations and Orders applicable to the
Fund and the conduct of its respective business; (d) maintaining insurance and
reinsurance coverage as in effect on the date hereof up to the Closing Date; (e)
preserving the business of the Fund intact; (f) using its best efforts to keep
available for the Fund and the Buyer, the officers and employees of the Fund;
and (g) preserving the good will of clients, suppliers and others having
business relations with the Fund.
4.2 Certain Restrictions. Refrain from: (a) changing or amending the
Charter Documents of the Fund; (b) merging with or into or consolidating with
any other Person; (c) acquiring all or substantially all of the stock or the
assets of any Person or changing the character of its business; (d) making any
capital expenditures, or commitments with respect thereto in excess of $5,000;
(e) incurring, assuming or guaranteeing any indebtedness, obligations or
liabilities or entering into any transactions or making any commitment to do any
of the foregoing except in the Ordinary Course of Business or for purposes of
consummation of the transactions contemplated by this Agreement and in any case
only after consultation with the Buyer; (f) canceling, releasing, waiving or
compromising any debt, Claim or right in its favor; (g) altering the rate or
basis of compensation of any of its officers, directors, employees or
consultants; or (h) taking any action or failing to take any action as a result
of which any of the other changes or events listed in Section 2.12 hereof is
likely to occur.
18
4.3 Cash and Cash Equivalents. Preserve, and expend solely in the
Ordinary Course of Business, its cash and cash equivalents.
4.4 Interim Financial Information. To the extent prepared in the
Ordinary Course of Business, furnish to the Buyer unaudited financial statements
(including, without limitation, balance sheets and statements of income, changes
in cash flow) and information for each calendar month, promptly following the
conclusion of such month, and as the Buyer may otherwise reasonably request.
4.5 Full Access and Disclosure.
(a) Afford to the Buyer and its counsel, accountants and other
authorized representatives reasonable access during business hours to
the Fund's facilities, properties, books and records in order that the
Buyer may have full opportunity to make such reasonable investigations
as it shall desire to make of the affairs of the Fund, including
financial audits; and cause the Fund's officers, employees and auditors
to furnish on a timely basis such additional financial and operating
data and other information as the Buyer shall from time to time
reasonably request including, without limitation, any internal control
recommendations applicable to the Fund made by the Fund's independent
auditors in connection with any examination of the Fund's Financial
Statements and books and records.
(b) Promptly notify the Buyer in writing if the Fund becomes
aware of any fact or condition that causes or constitutes a breach of
any representation or warranty of the Fund as of the date of this
Agreement, or if the Fund becomes aware of the occurrence after the
date of this Agreement of any fact or condition that would (except as
expressly contemplated by this Agreement) cause or constitute a breach
of any such representation or warranty had such representation or
warranty been made as of the time of occurrence or discovery of such
fact or condition. Should any such fact or condition require any change
in any schedule hereto, the Fund will promptly deliver to the Buyer a
proposed amendment or supplement to such schedule specifying such
change. No such proposed amendment or supplement to a schedule shall
constitute an amendment or supplement to such schedule until the Buyer
shall have consented thereto. The Fund shall promptly notify the Buyer
of the occurrence of any breach of any covenant of the Fund in this
Article IV or Article VI hereof or of the occurrence of any event that
may make the satisfaction of the conditions in Article VII hereof
impossible or unlikely.
4.6 Fulfillment of Conditions Precedent. Refrain from taking any action
which, if taken on or prior to the Closing Date, would constitute a breach of
this Agreement. The Fund shall use its best efforts to obtain at its expense, on
or prior to the Closing Date, all such waivers, Permits, consents, approvals or
other authorizations from third parties and Authorities, and to do all things as
may be necessary or desirable in connection with the transactions contemplated
by this Agreement in order to fully and expeditiously consummate the
transactions contemplated by this Agreement.
19
4.7 Tax Returns. File all Tax Returns and reports with respect to Taxes
which are required to be filed for Tax periods ending on or before the Effective
Date (a "Pre-Closing Tax Return"), and the Fund shall pay all Taxes due in
respect of such Pre-Closing Tax Returns to the appropriate Taxing Authority; and
the Fund shall pay all costs associated with the preparation thereof.
4.8 Fairness Opinion. Arrange for the preparation and delivery of the
Fairness Opinion contemplated by Section 8.4.
ARTICLE V
COVENANTS OF THE BUYER
The Buyer hereby covenants and agrees with the Fund that prior to the
Closing or the termination of this Agreement:
5.1 Full Access and Disclosure.
(a) The Buyer shall afford to the Fund and its counsel,
accountants and other authorized representatives an opportunity to make
such reasonable investigations as they shall desire to make of the
business of the Buyer; and the Buyer shall cause its officers,
employees and auditors to furnish such additional financial and
operating data and other information as the Fund shall from time to
time reasonably request.
(b) From time to time prior to the Closing Date, the Buyer
shall promptly supplement or amend information previously delivered to
the Fund with respect to any matter hereafter arising which, if
existing or occurring at the date of this Agreement, would have been
required to be set forth herein or disclosed.
5.2 Release and Assumption of Guarantees. The Buyer shall use
commercially reasonable efforts to have any director, officer or agent of the
Fund released, after the Closing Date, from any and all guarantees on any
indebtedness personally guaranteed by any of them and from any and all pledges
of assets pledged by any of them to secure such indebtedness for the benefit of
the Fund, with all such guarantees on indebtedness being assumed by the Buyer.
The Buyer shall indemnify and hold harmless such guarantors from the payment of
any guaranties on any indebtedness or contractual obligations that such
guarantors had incurred prior to the Closing Date, provided that such
indebtedness or obligations are related to the Fund Business as being conducted
at the Closing Date.
ARTICLE VI
OTHER AGREEMENTS
6.1 Further Assurances. Subject to the terms and conditions of this
Agreement, each of the parties hereto shall use its best efforts to take, or
cause to be taken, all action, and to do, or cause to be done, all things
necessary, proper or advisable under applicable Regulations to consummate and
make effective the transactions contemplated by this Agreement. If at any time
after the Closing Date the Buyer, on the one hand, or the Fund, on the other
hand, shall consider or be advised that any further agreements, instruments,
documents, deeds, papers, assignments or assurances in law or in any other
things are necessary, desirable or proper to vest, perfect or
20
confirm, of record or otherwise, in such party, the title to any property or
rights of the other acquired or to be acquired by reason of, or as a result of,
this Agreement or any of the transactions contemplated herein, the other party
agrees that it or they shall execute and deliver all such proper agreements,
instruments, documents, deeds, papers, assignments and assurances in law and do
all things necessary, desirable or proper to vest, perfect or confirm title to
such property or rights in such party and otherwise to carry out the purpose of
this Agreement.
6.2 Consents. Without limiting the generality of Section 6.1, each of
the parties hereto shall use their best efforts to obtain all approvals,
consents and Permits of all Persons and Authorities necessary, proper or
advisable in connection with the consummation of the transactions contemplated
by this Agreement prior to the Closing Date.
ARTICLE VII
CONDITIONS TO THE OBLIGATIONS OF THE BUYER
Each and every obligation of the Buyer under this Agreement shall be
subject to the satisfaction, on or before the Closing Date, of each of the
following conditions, unless waived in writing by the Buyer:
7.1 Representations and Warranties; Covenants and Agreements. The
representations and warranties of the Fund contained in Article II hereof and
elsewhere in this Agreement and all information contained in any exhibit,
certificate, schedule or attachment hereto or in any writing delivered by, or on
behalf of, the Fund to the Buyer, shall be true and correct when made and shall
be true and correct in all material respects on the Closing Date as though then
made, except as expressly provided herein. The Fund shall have performed and
complied with all agreements, covenants and conditions and shall have made all
deliveries required by this Agreement to be performed, delivered and complied
with by them prior to the Closing Date. The chief executive officer of the Fund
shall have executed and delivered to the Buyer a certificate, dated the Closing
Date, certifying to the foregoing.
7.2 No Injunction. No preliminary or permanent injunction or other
Order, decree or ruling issued by any Authority, or any Regulation promulgated
or enacted by any Authority shall be in effect, which would prevent the
consummation of the transactions contemplated hereby.
7.3 Third Party Consents. The Buyer and the Fund shall have obtained
all consents, approvals, waivers or other authorizations listed in Schedule 2.7,
with respect to the execution, delivery and performance of this Agreement and
the consummation of the transactions contemplated hereby, such that each of the
Contracts of the Fund remains in effect (without default, acceleration,
termination, assignment, right of termination or assignment, payment, increase
in rates or compensation payable, penalty, interest or other adverse effect)
from and after the Closing Date as such Contracts operated and were in effect
before the Closing Date. With respect to the material Contracts of the Fund for
which notice of the transaction had been, or should have been, delivered to the
other party thereto pursuant to this Section 7.3, (a) all such parties to such
Contracts shall have been notified of the transactions contemplated hereby, and
(b) neither the Buyer nor the Fund shall have received any notice of
terminations or amendments of, or any indication from such party of their intent
to terminate or amend, such contract, unless such amendment shall not adversely
affect the Buyer or the Fund.
21
7.4 Regulatory Approvals. The Authorities listed in Schedule 2.7 hereto
shall have approved the applications listed in such Schedule with respect to the
change of control represented by the transactions contemplated by this
Agreement, and such approval shall not impose financial obligations on the Fund
or the Buyer that are objectionable to it.
7.5 No Material Adverse Change. There shall have been no Material
Adverse Change since the date of this Agreement. The Buyer shall have received
certificates (which shall be addressed to the Buyer), dated the Closing Date, of
the president or chief financial officer of the Fund, certifying to the
foregoing.
7.6 Directors and Officers. The Buyer shall have received the
resignations of the directors and any officers of the Fund specified by the
Buyer, which resignations shall be effective as of the Effective Date.
7.7 Indebtedness.
(a) Company shall have provided to Buyer evidence that the
Fund's indebtedness to the creditors set forth on Schedule 7.7(a)
hereto has been paid and satisfied in full, the creditors have
terminated and released (or will terminate and release) all Liens in
favor thereof and will provide to Company and Buyer, at or promptly
after the Closing, such Uniform Commercial Code termination statements,
releases of mortgages and other releases of Liens as shall be required
by Buyer and its lenders.
(b) The Buyer shall have determined to its satisfaction that
the Fund's indebtedness to the creditors set forth on Schedule 7.7(b)
hereto may be paid or prepaid in full at any time without premium or
penalty.
7.8 Due Diligence. The Buyer shall have completed its due diligence
investigation with respect to the Fund including, but not limited to, business,
financial, legal, operational, customer, worker's compensation, employee (both
internal and external) and real estate due diligence, with results satisfactory
to Buyer in its sole discretion.
7.9 Fund's Closing Documents. The Fund shall have delivered to the
Buyer executed originals of each of the Fund's Closing Documents.
7.10 Board Approval. The Fund's Board of Directors or, if applicable,
the appropriate committee thereof, shall have approved this Agreement and the
transactions contemplated herein.
7.11 Notice to Attorney General. The Fund shall have delivered to the
Buyer evidence, satisfactory to the Buyer in its sole discretion, that at least
thirty (30) days prior to the Closing Date, proper notice, including a copy of
this Agreement, was delivered by the Fund to the Attorney General of the State
of Georgia, in accordance with subsection (b) of Section 14-3-1102 of the GNCC.
7.12 Return of Required Assets. Promptly after the Effective Date, the
Buyer, on behalf of the Fund, shall return, transfer, or convey any assets held
by it upon condition requiring return, transfer, or conveyance, which condition
occurs by reason of the Merger, in accordance with such condition.
22
ARTICLE VIII
CONDITIONS TO THE OBLIGATIONS OF THE SELLER
Each and every obligation of the Fund under this Agreement shall be
subject to the satisfaction, on or before the Closing Date, of each of the
following conditions unless waived in writing by the Fund:
8.1 Representations and Warranties; Performance. The representations
and warranties of the Buyer contained in Article III hereof and elsewhere in
this Agreement and all information contained in any exhibit, schedule or
attachment hereto, or in any writing delivered by the Buyer to the Fund, shall
be true and correct in all material respects when made and shall be true and
correct in all material respects on the Closing Date as though then made, except
as expressly provided herein. The Buyer shall have performed and complied in all
material respects with all agreements, covenants and conditions required by this
Agreement to be performed and complied with by them prior to the Closing Date.
An authorized officer of the Buyer shall have delivered to the Fund a
certificate, dated the Closing Date, certifying to the foregoing.
8.2 No Injunction. No preliminary or permanent injunction or other
Order, decree or ruling issued by any Authority, or any Regulation promulgated
or enacted by any Authority shall be in effect, which would prevent the
consummation of the transactions contemplated hereby.
8.3 Buyer's Closing Documents. The Buyer shall have delivered to the
Fund executed originals of each of the other Buyer's Closing Documents.
8.4 Fairness Opinion. The receipt of a fairness opinion (the "Fairness
Opinion") from Marvin Hoeflinger, Associated Financial Services, Inc. stating
that the Surplus Assets have the value required under GNCC Section 14-3-1404 and
that the Merger is fair to the Fund from a financial point of view.
ARTICLE IX
TERMINATION AND ABANDONMENT
9.1 Methods of Termination. This Agreement may be terminated and the
transactions herein contemplated may be abandoned at any time:
(a) by mutual consent of the Buyer and the Fund;
(b) by the Buyer or the Fund if this Agreement is not
consummated on or before January 30, 2001; provided, however, that if
any party has breached or defaulted with respect to its respective
obligations under this Agreement on or before such date, such party may
not terminate this Agreement pursuant to this Section 9.1(b), and each
other party to this Agreement shall at its option enforce its rights
against such breaching or defaulting party and seek any remedies
against such party, in either case as provided hereunder and by
applicable law;
23
(c) by the Buyer if as of the Closing Date (including any
extensions) any of the conditions specified in Article VII hereof shall
not have been satisfied or if the Fund is otherwise in default under
this Agreement; or
(d) by the Fund if, as of the Closing Date (including any
extensions), any of the conditions specified in Article VIII hereof
shall not have been satisfied, or if the Buyer is in default under this
Agreement.
9.2 Procedure Upon Termination. In the event of termination and
abandonment pursuant to Section 9.1 hereof, and subject to the proviso contained
in Section 9.1(b), this Agreement shall terminate and shall be abandoned,
without further action by any of the parties hereto. If this Agreement is
terminated as provided herein:
(a) each party shall redeliver all documents and other
material of any other party relating to the transactions contemplated
hereby, whether obtained before or after the execution hereof, to the
party furnishing the same;
(b) all information received by any party hereto with respect
to the business of any other party (other than information which is a
matter of public knowledge or which has heretofore been or is hereafter
published in any publication for public distribution or filed as public
information with any governmental authority) shall not at any time be
used for the advantage of, or disclosed to third parties by, such party
to the detriment of the party furnishing such information; and
(c) no party hereto shall have any further liability or
obligation to any other party under or in connection with this
Agreement; provided, however, the non-breaching or non-defaulting party
shall not be foreclosed from bringing a Claim or cause of action or
otherwise recovering from the breaching or defaulting party.
ARTICLE X
MISCELLANEOUS PROVISIONS
10.1 Amendment and Modification. Subject to applicable law, this
Agreement may be amended, modified and supplemented only by a written agreement
signed by the Buyer and the Fund.
10.2 Entire Agreement. This Agreement, including the schedules and
exhibits hereto and the documents, annexes, attachments, certificates and
instruments referred to herein and therein, embodies the entire agreement and
understanding of the parties hereto in respect of the agreements and
transactions contemplated by this Agreement and supersedes all prior agreements,
representations, warranties, promises, covenants, arrangements, communications
and understandings, oral or written, express or implied, between the parties
with respect to such transactions. There are no agreements, representations,
warranties, promises, covenants, arrangements or understandings between the
parties with respect to such transactions, other than those expressly set forth
or referred to herein.
10.3 Certain Definitions. The following terms shall have the following
meanings when used herein:
24
"Affiliate" means, with regard to any Person, (a) any Person,
directly or indirectly, controlled by, under common control of, or controlling
such Person, (b) any Person, directly or indirectly, in which such Person holds,
of record or beneficially, five percent or more of the equity or voting
securities, (c) any Person that holds, of record or beneficially, five percent
or more of the equity or voting securities of such Person, (d) any Person that,
through Contract, relationship or otherwise, exerts a substantial influence on
the management of such Person's affairs, (e) any Person that, through Contract,
relationship or otherwise, is influenced substantially in the management of
their affairs by such Person, or (f) any director, officer, partner or
individual holding a similar position in respect of such Person.
"Agreement" shall have the meaning assigned to such term in
the Introduction hereto.
"Ancillary Documents" shall have the meaning assigned to such
term in Section 2.6 hereof.
"Articles of Merger" shall have the meaning assigned to such
term in Section 1.2 hereof.
"Authority" means any international, federal, state local or
municipal governmental, regulatory or administrative body, agency, department,
division, subdivision, office, arbitrator or other authority, any court or
judicial authority, or any public, private or industry regulatory agency or
authority.
"Balance Sheet Date" shall have the meaning assigned to such
term in Section 2.10 hereof.
"Balance Sheets" shall have the meaning assigned to such term
in Section 2.8 hereof.
"Benefit Plan" shall have the meaning assigned to such term in
Section 2.17 hereof.
"Business Groups" shall have the meaning assigned to such term
in Section 2.16(c) hereof.
"Buyer's Closing Documents" shall have the meaning assigned to
such term in Section 1.10(b) hereof.
"Charter Documents" shall have the meaning assigned to such
term in Section 2.1(c) hereof.
"Claim" means any action, claim, obligation, liability,
damage, loss, deficiency, cost, expense, commitment, lawsuit, demand, suit,
inquiry, hearing, investigation, notice of a violation, litigation, proceeding,
arbitration, or other dispute, whether civil, criminal, administrative or
otherwise, whether pursuant to contractual obligations or otherwise.
25
"Closing" shall have the meaning assigned to such term in
Section 1.9 hereof.
"Closing Date" shall have the meaning assigned to such term in
Section 1.9 hereof.
"Code" shall have the meaning assigned to such term in Section
2.15 hereof.
"Company Shares" shall have the meaning assigned to such term
in Section 1.7 hereof.
"Contract" means any agreement, contract, commitment,
instrument or other binding arrangement or understanding, whether written or
oral.
"Current Assets" means, with respect to any Person, the
current assets of such Person, as defined and calculated in accordance with
GAAP.
"Effective Date" shall mean the date on which the Articles of
Merger have been filed or such later date as may be designated in the Articles
of Merger.
"Environmental Law" means any Regulation, Order, settlement
agreement or governmental requirement, which relates to or otherwise imposes
liability or standards of conduct concerning mining or reclamation of mined
land, discharges, emissions, releases or threatened releases of noises, odors or
any pollutants, contaminants or hazardous or toxic wastes, substances or
materials, whether as matter or energy, into ambient air, water, or land, or
otherwise relating to the manufacture, processing, generation, distribution,
use, treatment, storage, disposal, cleanup, transport or handling of pollutants,
contaminants, or hazardous wastes, substances or materials, including (but not
limited to) the Comprehensive Environmental Response, Compensation and Liability
Act of 1980, the Superfund Amendments and Reauthorization Act of 1986, as
amended, the Resource Conservation and Recovery Act of 1976, as amended, the
Toxic Substances Control Act of 1976, as amended, the Federal Water Pollution
Control Act Amendments of 1972, the Clean Water Act of 1977, as amended, any so
called "Superlien" law, and any other similar Federal, state or local statutes.
"Environmental Permits" shall mean Permits, certificates,
approvals, licenses and other authorizations relating to or required by
Environmental Law and necessary or desirable for the Fund's business.
"ERISA" shall have the meaning assigned to such term in
Section 2.17 hereof.
"ERISA Affiliate" shall have the meaning assigned to such term
in Section 2.17 hereof.
"Fairness Opinion" shall have the meaning assigned to such
term in Section 8.4 hereof.
26
"Financial Statements" shall have the meaning assigned to such
term in Section 2.8 hereof.
"Fund's Closing Documents" shall have the meaning assigned to
such term in Section 1.10(a) hereof.
"GAAP" means generally accepted accounting principles, applied
on a consistent basis.
"GBCC" shall have the meaning assigned to such term in Section
1.1 hereof.
"Georgia Code" shall have the meaning assigned to such term in
Section 1.1 hereof.
"GNCC" shall have the meaning assigned to such term in Section
1.1 hereof.
"Hazardous Material" means: (a) any petroleum or petroleum
products, flammable explosives, radioactive materials, asbestos in any form that
is or could become friable, urea formaldehyde foam insulation and transformers
or other equipment that contain dielectric fluid containing levels of
polychlorinated biphenyls (PCBs); (b) any chemicals or other materials or
substances which are now or hereafter become defined as or included in the
definition of "hazardous substances," "hazardous wastes," "hazardous materials,"
"extremely hazardous wastes," "restricted hazardous wastes," "toxic substances,"
"toxic pollutants" or words of similar import under any Environmental Law; and
(c) any other chemical or other material or substance, exposure to which is now
or hereafter prohibited, limited or regulated by any Authority under any
Environmental Law.
"Intellectual Property" means any patent, patent application,
copyright, trademark, trade name, service mark, service name, trade secret,
know-how, confidential information or other intellectual property or proprietary
rights owned or used by the Fund.
"Interim Financial Statements" shall have the meaning assigned
to such term in Section 2.8 hereof.
"Knowledge" means, with respect to any Person, (a) if such
Person is an individual, that (i) such Person has actual knowledge or awareness
of a particular fact or matter or (ii) with due diligence and conducting a
reasonably comprehensive investigation concerning the existence of such fact or
matter, such Person could be expected to discover or otherwise become aware of
such fact or matter, or (b) if such Person is other than an individual, that any
individual serving as director, officer, Employee (as that term is defined
herein), partner, executor, trustee or in any similar capacity of such Person,
has, or at any time had, "Knowledge" of such fact or matter as defined in clause
(a) of this definition.
27
"Lien" means any security interest, lien, mortgage, pledge,
hypothecation, encumbrance, Claim, easement, restriction, option, assessment,
levy, voting trust or agreement, proxy, marital or community property interest
or other claim, charge or interest of another Person of any nature whatsoever.
"Long-Term Liabilities" means, with respect to any Person, the
long term liabilities of such Person as defined and calculated in accordance
with GAAP.
"Material Adverse Change" means any development or change
which has, had or would have a Material Adverse Effect.
"Material Adverse Effect" means, as to any Person, any
circumstances, events, state of facts or matters which has had, or might
reasonably be expected to have, a material adverse effect on (a) such Person's
business, operations, properties, assets, condition (financial or otherwise),
results, plans, strategies or prospects, or (b) the ability of such Person to
consummate any of the transactions contemplated by this Agreement or the
Ancillary Documents, or (c) the benefits contemplated to be conferred on such
Person by this Agreement or any of the Ancillary Documents.
"Merger" shall have the meaning assigned to such term in the
Recitals hereof.
"Officer's Certificate" shall have the meaning assigned to
such term in Section 1.10(a)(iii) hereof.
"Options" shall have the meaning assigned to such term in
Section 2.5 hereof.
"Order" means any decree, consent decree, judgment, award,
order, injunction, consent of or by an Authority.
"Ordinary Course of Business" shall mean an action taken by a
Person only if:
(a) such action is consistent with the past practices of such
Person and is taken in the ordinary course of the normal day-to-day
operations of such Person;
(b) such action is not required to be authorized by the board
of directors of such Person (or by any Person or group of Persons
exercising similar authority); and
(c) such action is similar in nature and magnitude to actions
customarily taken, without any authorization by the board of directors
(or by any Person or group of Persons exercising similar authority), in
the ordinary course of the normal day-to-day operations of other
Persons that are in the same line of business as such Person.
"Permits" shall have the meaning assigned to such term in
Section 2.16(b) hereof.
28
"Person" means any individual, corporation, partnership,
limited partnership, limited liability partnership or company, joint venture,
company, syndicate, union, unincorporated organization, association, trust,
entity, Authority or natural person.
"Regulation" means any law, statute, rule, regulation,
ordinance, requirement, announcement or other binding action of or by an
Authority.
"Related Statements" shall have the meaning assigned to such
term in Section 2.8 hereof.
"Secretary's Certificate"shall have the meaning assigned to
such term in Section 1.10(a)(ii) hereof.
"Software" shall have the meaning assigned to such term in
Section 2.18(d) hereof.
"Subsidiary" means any Person which any Buyer or the Fund, as
the case may be, owns, directly or indirectly, twenty percent (20%) or more of
the outstanding stock or other ownership or equity interests thereof.
"Surplus Assets" shall have the meaning assigned to such term
in Section 1.8 hereof.
"Surviving Corporation" shall have the meaning assigned to
such term in Section 1.1 hereof.
"Tax Returns" shall have the meaning assigned to such term in
Section 2.15 hereof.
"Taxes" shall have the meaning assigned to such term in
Section 2.15 hereof.
10.4 Notices. All notices, requests, demands and other communications
required or permitted hereunder shall be in writing and shall be deemed to have
been duly given when delivered by hand or mailed, first class certified mail
with postage paid or by overnight receipted courier service:
If to the Fund, to:
Presbyterian Investors Fund, Inc.
6035 Atlantic Blvd., Suite C
Norcross, Georgia 30071
Attn: Rodney Whited
Cecil A. Brooks
Facsimile: (770) 448-8452
or to such other person or address as the Fund shall furnish by notice
to the Buyer in writing.
29
If to the Buyer to:
Cornerstone Ministries Investments, Inc.
6035 Atlantic Blvd., Suite C
Norcross, Georgia 30071
Attn: John T. Ottinger
Facsimile: (770) 448-8452
with a copy to:
Smith, Gambrell & Russell, LLP
Suite 3100, Promenade II
1230 Peachtree Street, N.E.
Atlanta, Georgia 30309
Attn.: Carl L. Sollee, Esq.
Facsimile: (404) 685-7085
or to such other person or address as the Buyer shall furnish by notice
to the Fund in writing.
10.5 Exhibits and Schedules. The Exhibits and Schedules referred to in
this Agreement are attached hereto and incorporated herein by this reference.
Disclosure of a specific item in any one Schedule shall be deemed restricted
only to the Section of this Agreement to which such disclosure relates, except
where, and to the extent that, there is an explicit cross-reference in such
Schedule to another Schedule.
10.6 Waiver of Compliance; Consents. Any failure of any party hereto to
comply with any obligation, covenant, agreement or condition herein may be
waived in writing by the other parties hereto, but such waiver or failure to
insist upon strict compliance with such obligation, covenant, agreement or
condition shall not operate as a waiver of, or estoppel with respect to, any
subsequent or other failure. Whenever this Agreement requires or permits consent
by or on behalf of any party hereto, such consent shall be given in writing.
10.7 Assignment. This Agreement and all of the provisions hereof shall
be binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns, but neither this Agreement nor any
of the rights, interests or obligations hereunder shall be assigned by any of
the parties hereto without the prior written consent of the other parties,
except that the Buyer may assign their respective rights, interests and
obligations hereunder to any wholly-owned Subsidiary, and may grant Liens or
security interests in respect of its rights and interests hereunder, without the
prior approval of the Fund.
10.8 Governing Law. The Agreement shall be governed by the internal
laws of the State of Georgia as to all matters, including but not limited to
matters of validity, construction, effect and, performance and enforcement, but
without regard to principles or rules of conflicts or choice of law thereof.
30
10.9 Consent to Jurisdiction; Service of Process. Each the Fund and the
Buyer hereby irrevocably submits to the jurisdiction of any United States
District Court in which venue is proper in connection with any suit, action or
other proceeding arising out of or relating to this Agreement and the
transactions contemplated hereby, and hereby agree not to assert, by way of
motion, as a defense, or otherwise in any such suit, action or proceeding that
the suit, action or proceeding is brought in an inconvenient forum, that the
venue of the suit, action or proceeding is improper or that this Agreement or
the subject matter hereof may not be enforced by such courts.
10.10 Injunctive Relief. The parties hereto agree that in the event of
a breach of any provision of this Agreement, the aggrieved party or parties may
be without an adequate remedy at law. The parties therefore agree that in the
event of a breach of any provision of this Agreement, the aggrieved party or
parties may elect to institute and prosecute proceedings in any court of
competent jurisdiction to enforce specific performance or to enjoin the
continuing breach of such provision, as well as to obtain damages for breach of
this Agreement. By seeking or obtaining any such relief, the aggrieved party
shall not be precluded from seeking or obtaining any other relief to which it
may be entitled.
10.11 Headings. The article, section and other headings contained in
this Agreement are for reference purposes only and do not affect in any way the
meaning or interpretation of this Agreement (or any provision hereof).
10.12 Pronouns and Plurals. Whenever the context may require, any
pronoun used in this Agreement shall include the corresponding masculine,
feminine, or neuter forms, and the singular forms of nouns, pronouns, and verbs
include the plural and vice versa.
10.13 Construction. The parties acknowledge that each party has
reviewed and revised this Agreement and that the normal rule of construction to
the effect that any ambiguities are to be resolved against the drafting party
shall not be employed in the interpretation of this Agreement.
10.14 Dealings in Good Faith; Best Efforts. Each party hereto agrees to
act in good faith with respect to the other party in exercising its rights and
discharging its obligations under this Agreement. Each party further agrees to
use its best efforts to ensure that the purposes of this Agreement are realized
and to take all further steps as are reasonably necessary to implement the
provisions of this Agreement. Each party agrees to execute, deliver and file any
document or instrument necessary or advisable to realize the purposes of this
Agreement.
10.15 Binding Effect. This Agreement shall not be construed so as to
confer any right or benefit upon any Person other than the signatories to this
Agreement and each of their respective successors and permitted assigns.
10.16 Delays or Omissions. No delay or omission to exercise any right,
power or remedy accruing to any party hereto, upon any breach or default of any
other party under this Agreement, shall impair any such right, power or remedy
of such party nor shall it be construed to be a waiver of any such breach or
default, or an acquiescence therein, or of or in any similar breach or default
thereafter occurring; nor shall any waiver of any single breach or default be
deemed a waiver of any other breach or default theretofore or thereafter
occurring. Any waiver, permit, consent or approval of any kind or character on
the part of any party hereto of any breach or default under this Agreement, or
any waiver on the part of any party of any provisions or conditions of this
Agreement must be made in writing and shall be effective only to the extent
specifically set forth in such writing. All remedies, either under this
Agreement or by law or otherwise afforded to any party, shall be cumulative and
not alternative.
31
10.17 Severability. Unless otherwise provided herein, if any provision
of this Agreement shall be invalid, illegal or unenforceable, the validity,
legality and enforceability of the remaining provisions shall not in any way be
affected or impaired thereby.
10.18 Expenses. All fees, costs and expenses (including, without
limitation, legal, auditing and accounting fees, costs and expenses) incurred in
connection with considering, pursuing, negotiating, documenting or consummating
this Agreement and the transactions contemplated hereby shall be borne and paid
solely by the party incurring such fees, costs and expenses.
10.19 Attorneys' Fees. If any party to this Agreement seeks to enforce
the terms and provisions of this Agreement, then the prevailing party in such
action shall be entitled to recover from the losing party all costs in
connection with such action, including without limitation reasonable attorneys'
fees, expenses and costs incurred with respect to trials, appeals and
collection.
10.20 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
* * * * * * * * * *
[Remainder of Page Intentionally Left Blank - Signature Page Follows]
32
IN WITNESS WHEREOF, the parties hereto have made and entered into this
Agreement the date first hereinabove set forth.
CORNERSTONE MINISTRIES INVESTMENTS, INC.
By: ________________________________________
Name: ______________________________________
Title: _____________________________________
PRESBYTERIAN INVESTORS FUND, INC.
By: ________________________________________
Name: ______________________________________
Title: _____________________________________
33