As filed with the Securities and Exchange Commission on December 23, 1999
CIK: 0001035270
Registration No. 333-
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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Cornerstone Ministries Investments, Inc.
(Name of small business issuer in its charter)
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<S> <C> <C>
Georgia 6531 58-2232313
(State or jurisdiction of incorporation or (Primary Standard Industrial (I.R.S. Employer Identification No.)
organization) Classification Code Number)
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6035 Atlantic Boulevard, Suite C
Norcross, Georgia 30071-1345
404.320.3311
(Address and telephone number of principal executive offices and
principal place of business)
Cecil A. Brooks, Chairman, President, Chief Executive Officer
Cornerstone Ministries Investments, Inc.
6035 Atlantic Boulevard, Suite C
Norcross, Georgia 30071-1345
404.320.3311
(Name, address and telephone of agent for service)
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Copies to:
Drew Field
534 Pacific Avenue
San Francisco, CA 94133
415.296.9795
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Approximate date of commencement of proposed sale to the public:
As soon as practicable after the effective date of this Registration Statement.
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CALCULATION OF REGISTRATION FEE
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Title of each Dollar Proposed maximum Proposed maximum
class of securities Amount to be offering price aggregate offering Amount of
to be registered registered per share/certificate price registration fee
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Common Stock, without par value $2,275,000 $ 6.50 $2,275,000 $ 632
Series B Certificates of Indebtedness $17,000,000 $500.00 $17,000,000 $4,726
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Total $5,358
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The registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the registrant shall
file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
If any of the securities on this Form are to be offered on a delayed or
continuous basis pursuant to Rule 415 under the Securities Act of 1933, check
the following: X
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<PAGE>
EXPLANATORY NOTE
This registration statement contains two forms of prospectus, one to be used in
connection with an offering of common stock and one to be used in a concurrent
offering of certificates of indebtedness. The common stock prospectus and the
certificate of indebtedness prospectus will be identical in all respects except
for the front cover page. The front cover page for the certificate of
indebtedness prospectus included in this registration statement is labeled
"Alternate Certificate of Indebtedness Page." The form of common stock
prospectus is included in this registration statement and the form of the front
cover page of the certificate of indebtedness prospectus follow the common stock
prospectus.
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CORNERSTONE MINISTRIES INVESTMENTS, INC.
Cross-reference Sheet Showing Location in Prospectus of:
PART I -- INFORMATION REQUIRED IN PROSPECTUS
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Form SB-2 Item Number and Caption Caption in Prospectus
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1. Front of Registration Statement and
Outside Front Cover of Prospectus......... Outside Front Cover Page of Prospectus
2. Inside Front and Outside Back Cover
Pages of Prospectus....................... Inside Front Cover Page of Prospectus
3. Summary Information and Risk Factors........ Prospectus Summary; Risk Factors
4. Use of Proceeds............................. Use of Proceeds
5. Determination of Offering Price............. Plan of Distribution -- Determination of Offering Price
6. Dilution.................................... Not applicable
7. Selling Security Holders.................... Not applicable
8. Plan of Distribution........................ Plan of Distribution
9. Legal Proceedings........................... Business -- Legal Proceedings
10. Directors, Executive Officers, Promoters
and Control Persons....................... Management
11. Security Ownership of Certain Beneficial
Owners and Management..................... Principal Shareholders
12. Description of Securities................... Description of Securities
13. Interest of Named Experts and Counsel....... Not applicable
14. Disclosure of Commission Position on Management -- Indemnification of
Indemnification for Securities Act ....... Officers and Directors
15. Organization Within Last Five Years......... Organization of the Company
16. Description of Business..................... Prospectus Summary; Risk Factors;
Business; Certain Transactions
17. Management's Discussion and Analysis
or Plan of Operation ..................... Management's Plan of Operations
18. Description of Property.................... Business - Properties/Facilities
19. Certain Relationships and Related
Transactions.............................. Certain Transactions
20. Market for Common Equity and Related
Stockholder Matters Risk Factors; Shares Eligible
for Future Resale
21. Executive Compensation...................... Management: Executive Compensation
22. Financial Statements........................ Index to Financial Statements
23. Changes In and Disagreements With
Accountants on Accounting and
Financial Disclosure...................... None
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<PAGE>
350,000 SHARES
Cornerstone
Ministries
Investments, Inc.
COMMON STOCK
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Cornerstone Ministries Investments, Inc. is offering these 350,000 shares
of common stock directly to investors and also through selected securities
broker-dealers, on a best efforts basis.
The shares have been approved for listing on the Chicago Stock Exchange
after completion of the offering.
This offering will end when all the shares have been purchased or earlier,
if we decide to close the offering.
This offering involves a high degree of risk. See "Risk Factors" beginning
on page 4.
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Neither the Securities and Exchange Commission nor any state securities
regulator has approved or disapproved the shares or determined if this
prospectus is accurate or complete. Any representation to the contrary is a
criminal offense.
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Public Broker-dealer
Offering Discounts and Proceeds to
Price Commissions CMI
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Per Share ............. $ 6.50 $ 0.455 $ 6.045
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Total ................. $ 2,275,000 $ 159,250 $ 2,115,750
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The date of this Prospectus is___________, 2000
<PAGE>
We have not authorized anyone to give you any information or make any
representation that is not in this prospectus. The information in this
prospectus is current and correct only as of the date of this prospectus,
regardless of the time of its delivery or of any sale of the shares. We are
offering to sell, and seeking offers to buy the shares only in jurisdictions
where offers and sales are permitted.
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TABLE OF CONTENTS
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Page Page
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Prospectus summary................................... 3 Certain transactions.......................... 17
Risk factors......................................... 4 Principal shareowners......................... 17
Note about forward-looking statements ............... 5 Description of securities..................... 18
Use of proceeds...................................... 6 Future resale of securities................... 19
Management's discussion and analysis of financial.... Plan of distribution...................... 20
condition and results of operations.................. 6 Experts....................................... 20
Business............................................. 9 Available Information......................... 20
Management........................................... 14 Index to financial statements................. 21
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Until ______________, 2000 (90 days after the date of this prospectus) all
dealers effecting transactions in the registered securities, whether or not
participating in this distribution, may be required to deliver a prospectus.
This is in addition to the obligation of dealers to deliver a prospectus when
acting as underwriters and with respect to their unsold allotments or
subscriptions.
<PAGE>
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Prospectus summary
This summary highlights some information from this prospectus. To understand
this offering fully, you should read the entire prospectus carefully, including
the risk factors and the financial statements.
Our business
CMI finances land and buildings for churches and related non-profit religious
schools and daycare facilities. We began operations in 1997 with $510,000
invested by our original sponsors and purchased six existing loans from our
principal shareowner, the Presbyterian Investors Fund, Inc. We raised
approximately $3,747,000, through a public offering of common stock and
certificates of indebtedness, from December 1998 through October 1999. We made
two loans for churches in 1998, which have since been repaid. Nine more loans
were made during 1999.
Our objectives
Our goal is to help churches buy or build their first facility. These groups
find it difficult to finance their projects and there is little competition in
this market. We have developed some unique approaches to providing financing for
these borrowers. In addition to mortgage loans, we will also purchase an
existing facility and make it available for lease and purchase by a growing
church or related organization. Where there is no suitable existing building, we
may develop a new facility for a qualified candidate. We are not long-term
investors or lenders in these properties. Rather, we seek to provide basically a
bridge to qualification for conventional lending and financing.
Interest and dividends
Interest is payable on the certificates at March 15 and October 15 each year, at
the annual rate of 7% for three-year certificates and 9% for five-year
certificates. We have paid all interest payments as due to existing certificate
holders, who must be paid before any dividends. For the past year, we have been
paying quarterly cash dividends on our common stock, at an annual rate of 10% on
the share purchase price. Dividend payments in the future will depend upon there
being sufficient net income and a decision by our board of directors.
How to buy certificates or shares
You can fill out the order form and return it with your check for the amount of
your investment. You can also purchase certificates or shares from any of the
securities broker-dealers who are our sales agents for this offering. The
minimum investment is $500 for certificates and $100 for shares.
How you can communicate with us
Our office is at 6035 Atlantic Boulevard, Suite C, Norcross, Georgia 30071-1345.
Our telephone number is (770) 729-1433 and our fax number is (770) 448-8452. You
are invited to call or write John T. Ottinger, our vice president and chief
financial officer. His email address is [email protected].
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<PAGE>
Risk factors
You should carefully consider the following risks and the rest of this
prospectus before deciding whether and how much to invest. If these or other
risks occur, you may lose all or part of your investment.
Properties we own or finance may cause losses that could reduce or eliminate
your interest payments or dividends and cause you to lose part or all of the
amount you invested. These risks include:
o Properties we might have to take over for nonpayment could be sold at a
loss. In the event a borrower is unable to pay its loan or lease and CMI
must take over the property, we may find it difficult to find a buyer for
the property at a price that will not result in CMI losing money. Many of
the properties in which we will invest, or which will serve as the
collateral for our loans will be church buildings. Designed specifically to
meet the needs of a church, they will be of limited use to other non-church
buyers.
o There may not be insurance coverage for a loss. We could lose income from a
loan or lease, or suffer loss on resale of a property, if an uninsured
event happened. CMI will normally maintain comprehensive liability, fire,
flood and extended insurance coverages on all properties in which it
invests. We also require the same types of insurance coverage on all
buildings that secure our loans. However, we cannot insure against certain
types of losses, such as riots, acts of war or earthquakes.
o We may incur liability under environmental laws. Various Federal, state and
local laws make property owners and lenders pay the costs of removal or
remediation of certain hazardous substances released on a property. They
often impose a penalty without regard to whether an owner, operator, or
lender knew of, or was responsible for, the release of hazardous
substances. The presence of, or failure to properly remediate, hazardous
substances may adversely affect occupancy of any facility, the ability to
operate it as intended, and the ability to sell or borrow against a
contaminated property. The presence of hazardous wastes on a property could
also result in personal injury or similar claims by private plaintiffs.
We require a transaction screen, appraisal or on-site inspection on every
property we purchase or for which we make a loan. If we then decide it is
necessary, we have a Phase I environmental site assessment performed, to
identify potential contamination for which a buyer or lender may be
responsible and to assess the status of regulatory compliance.
o There may be unexpected regulatory compliance costs. The properties which
we purchase, or which others purchase and for which we provide financing,
are subject to various other regulations from Federal, state, and local
authorities. If we or a borrower fail to comply with these regulations, it
could result in a fine and the award of damages to private plaintiffs. If a
borrower or lessee had to spend a significant amount of money to bring a
property into compliance, they could be unable to make their loan payments.
If payments to us are delayed or uncollectible, we may not be able to pay you
interest or dividends. In addition to risks that all real estate lenders and
owners face, we have these particular issues:
o We are highly leveraged. That is, we have about three times more in
certificate debt than we have in shareholders' equity. Payments of interest
and principal on the debt are required, whether or not we are current in
collecting from our loans or investments.
o It is our practice to have limited personal guarantees in which each
individual guarantor pledges a maximum of $5000. We may have difficulty
suing an individual to force their compliance with the guarantee agreement
and may have to take a loss on the loan or property.
o The ability of any borrower or tenant to make the loan or lease payments is
dependent on the continuing strength of its contributions and income. To
the extent that a church or project suffers a decline in contributions or
income from ministries, it may be unable to meet its lease or loan
obligations.
<PAGE>
o If we must foreclose on a loan or evict a tenant, it may take longer and
cost more than with other types of real estate to achieve the foreclosure
or eviction, to repair the building, to find a buyer or tenant, or to
maintain and protect the property.
o We can only pay dividends to the extent we have net income. Our interest
expense and most other expenses of operation are fixed and will be incurred
without regard to our revenues from interest and fees.
We may not have enough cash to repay our debt when due. We receive cash from our
financing operations and from sale of common stock and certificates of
indebtedness. We use cash in making loans and buying properties, and to repay
our certificates. Approximately $3,000,000 of certificates sold in the last year
will come due in April 2003. Up to $3,000,000 million of certificates now being
offered will also be due in 2003 and up to $14,000,000 will become due in 2005.
We do not maintain a sinking fund to build up a cash reserve to repay
certificates. As a result, we must balance the amount of cash we have at any
moment with the amount that we need. This task is difficult because, if we keep
too much cash in reserve, we will not earn sufficient income to pay interest on
our debts or earn income for our shareowners. If we keep too little cash
available, we might default on our obligations. We believe that most certificate
owners will purchase new certificates to replace matured ones, so we will not
have to send them cash. This may not be what happens and we may be unable to
repay all of the maturing principal when due. If we cannot pay the certificates,
we would have to try finding other financing or selling some of our assets.
If we fail to pay the certificates, a trustee may sell our assets. That could
result in a loss on the certificates and the shares could become worthless. A
portion of our assets, equal to the principal of the outstanding Series A
certificates, is pledged to a trustee as collateral for payment of interest and
principal on those certificates. Payments on the Series B certificates could not
be made from those pledged assets. Any return on shares of common stock comes
behind full payment of principal and interest on both series of certificates.
Only a part of the shares and certificates offered may be sold, which could
lower our future income. Both our certificates and our shares are being sold on
a best efforts basis. That means that we, and selected broker- dealers, will use
our best efforts to locate investors. No individual or company is guaranteeing
to invest any specific amount of money. There is no way for us to predict how
much will be purchased. To the degree that we and the brokers are unsuccessful,
our fixed expenses will be a larger part of our income and will lower the
potential income to pay interest and dividends.
The board of directors will determine payment of dividends. CMI has paid
dividends during 1999, but it may not necessarily continue to do so. Our board
of directors will evaluate the timing and amount of any dividends, based on
factors including the cash available for distribution, economic conditions,
applicable laws and other facts and circumstances that they think are important
to a dividends decision.
CMI was formed in 1996 and has not had to deal with many of the risks of its
business. There are cycles in the national and local economies which will affect
our ability to collect payments and the market value of our properties. CMI has
no record to show how it has handled past cycles.
If we lose the services of our officers, or if we cannot recruit and train
additional skilled people, our business may suffer. Both our chief executive
officer, Cecil A. Brooks, and our chief financial officer, John T. Ottinger,
have over 14 years managing church property financing. We do not have an
employment agreement with them and we are not beneficiaries of any key person
life insurance covering them. We are seeking additional people to train, so that
we can continue to grow and to decrease our dependence upon our two officers.
Our business is specialized and it is difficult to find, train and keep good
people.
Note about forward-looking statements
Some of the statements made in this prospectus, including those relating to
expectations for the sale of securities in this offering and the performance of
our lending and investing operations, are forward looking and are accompanied by
cautionary statements identifying important factors that could cause actual
results to differ.
<PAGE>
Use of proceeds
All of the net proceeds from the sale of shares in this offering, after payment
of commissions and other offering expenses, will be used to finance buying and
building churches and their related properties.
Management's discussion and analysis of
financial condition and results of operations
Overview
Since our inception we have been focused on serving only non-profit religious
institutions. We offer specialized financing programs for churches and related
ministries to obtain facilities that will enhance their ministry or services.
CMI generates income from:
o interest on loans
o lease payments
o origination and renewal fees on loans and leases
o gains on the sale of property and
o investments in other securities.
We charge a 10% interest rate on loans. In making these loans, we earn income
from loan fees, which are either 5% for each year the loan is renewed or a
one-time fee of 10% for a three-year loan. Our policy is to receive lease income
of no less than 15% of our investment in any property we purchase and lease. In
addition, we expect a 15% return on sale of properties. We acquired our first
lease/purchase properties in December 1999.
Comparison of years ending December 31, 1997 and December 31, 1998
General
Net income was $5,966 for the year ending December 31, 1997 and $45,913 for
1998, on total revenues of $9,465 and $85,238. This represents an increase of
770% in net income and 900% in total revenues. This large increase in net income
and total revenues is primarily a result of receiving a full years' income in
1998. CMI's founders invested $510,000 and began operations in October 1997 by
purchasing existing loans from one of the founders, Presbyterian Investors Fund,
Inc., at an average interest rate of 10.25%. Before then, funds invested in CMI
were deposited in a money market account earning the then current rate. During
the course of 1997 and 1998, CMI's officers were engaged principally in
preparations for the first public offering of certificates and common stock.
In November 1998, we began offering common stock and certificates for sale. By
December 31 of 1998, we had received additional investments of $608,500 in
certificates and $219,870 in shares.
Income
Interest income: Interest income in 1998 increased to $47,958 from $9,465 in
1997. Interest on mortgage loans was only earned in 1997 for the two months
after the October 28th purchase from Presbyterian Investors Fund, Inc. CMI
earned interest on these loans for the full period in 1998 and also made two new
loans, of $183,000 in April and $525,000 in June, 1998.
Fee income: CMI earned no fee income in 1997 as it had not begun originating new
loans. Fees earned in 1998 were $37,280 from loan closings and loan application
fees
Expenses
Interest expense: Interest expense went from zero in 1997 to $6,297 in 1998 with
the initial issuance of certificates. Interest was payable beginning with the
sale of the first certificate. The certificates were sold over a period of time
and interest expense increased as the amount of certificates outstanding
increased.
Operating and administrative expenses: We had no marketing or selling expenses
in 1997 or 1998. We had no operating expenses in 1997, because we were not
charged for any administrative services and all professionals
<PAGE>
involved in the development of the offering worked on a deferred compensation
basis. In 1998, we paid $5,000 in audit fees and reimbursed Presbyterian
Investors Fund approximately $15,213 for administrative services.
Taxes: CMI had taxable income of $5,966 in 1997 and $45,913 in 1998, for which
it incurred tax liabilities of $1,181 and $10,038
Dividends
We paid no dividends in 1997, and paid a total of $38,250 dividends to investors
in 1998.
Comparison of 10 months ending October 31, 1998 and October 31, 1999
General
CMI began its first offering of common stock and certificates in October 1998
and received $194,000 that month. This had not yet been invested in any loans by
the end of the month. On October 31, 1998 we had loan balances of $456,671, cash
of $274,022 and equity of $601,346. During the 10-month period ending October
31, 1999, we received additional common stock investments of $461,160 and
certificate investments of $2,447,775. At the end of the 1999 period, we had
loan balances of $2,680,902 cash of $1,311,204 and equity of $1,209,448.
We closed one loan, of $183,000, during the 10 months ending October 31, 1998
and six loans, totaling $3,144,000 in the 10 months ending October 31, 1999. We
sold $750,000 in loan principal to Presbyterian Investors Fund in January 1999
and split the loan fees on a pro-rated basis. Approximately $1,788,000 was
disbursed on loans for the acquisition of land or existing buildings. The
balance is committed to construction loans which are in various stages of
completion.
CMI's total revenues were $50,449 in the 10 months ended October 31, 1998 and
$296,570 during the same period in 1999. The increase was primarily due to loan
fees and interest arising from the increase in available capital.
At October 31, 1999, we had loan commitments outstanding of $650,000 and
approved loans of an additional $650,000. We also had contracted to purchase,
but had not yet closed two church properties, for which we will pay $260,000
each. These properties are located in suburban Chattanooga, TN. We have
lease/purchase commitments for each of these properties, contingent on the
satisfaction of our review. On one of these properties we will also make a
renovation loan of $125,000 to the purchaser. We expect to realize, in December
1999, fee income as well as capital gain income on the sale of the properties.
Income
Interest Income: Interest income was $38,354 for the 10 months ended October 31,
1998 and $99,720 for the 1999 period. This increase in interest income is
attributable to the increase in the loan balance from $456,671 to $2,680,902.
The interest income amount is low in 1999 relative to the loan balance, because
most of the loans were closed during the last two months of the period. We
accrue interest fully on all loans, though the borrower may have some or all of
its interest payments deferred for some period of the loan.
Fee Income: Fee income increased $128,220 ($37,280 as compared to $165,500) in
the 10-month period in 1998 from the 1997 period. This fee income is from loan
applications and originations.
Other income: During the 10 month period ending October 31, 1999, CMI received
interest income on its deposits of $28,783 compared to $2,595 during the same
period in 1998. This is a result of our financing activities. We earn money
market returns on cash which is not in loans, except for that cash which is held
as collateral at the trustee for the benefit of the Series A certificate
holders. We must maintain collateralized loan amounts and cash at the trustee
equal to the amount of Series A certificates outstanding. Due to the dynamic
nature of the market in which we operate, it is not possible to be fully loaned
out at all times. Hence, from time to time we will have substantial funds on
deposit with the certificate trustee that are not earning interest, which lowers
our income from these funds to less than their cost. At times during the 1999
period, the balance held by the trustee without interest to CMI has exceeded
$1,000,000. We have instituted a more rigorous cash management plan to avoid a
reoccurrence of this.
<PAGE>
Expenses
Interest Expense: Interest expense rose from $1,950 for the ten months ending
October 31, 1998 to $169, 826 in the 1999 period, due to the increase in
outstanding certificates. These are the amounts of certificates outstanding at
October 31, 1999, their interest rates and maturities:
Amount Interest rate Maturity
------ ------------- --------
$ 55,000 7.25% April 15, 2000
176,324 8.00 April 15, 2001
32,773 8.75 April 15, 2002
2,799,237 9.00 April 15, 2003
The weighted average interest cost for the certificates at October 31, 1999 was
8.9136%.
Marketing and Selling Expenses: We have not had to commit significant resources
to marketing and selling expenses as we currently have a backlog of churches
seeking loans. We have been able to develop this backlog simply by notifying
churches by limited direct mail and by contacting real estate brokers in target
areas who have solicited clients. These brokers are paid by those selling
property and CMI has no financial obligation to them.
Operating and Administrative expenses: Our administrative services are provided
by the Presbyterian Investors Fund, for which we pay an administrative services
fee of approximately 1.5% of our invested assets. There was no fee paid in the
10 months ended October 31, 1998 and $39,500 for the similar 1999 period.
Outside of administrative services, our single largest operational expense is
our paying agent and registrar services for the certificates. In 1998, we paid
$500 for these services as an initial fee. Their ongoing fees are based on the
face value of certificates and shares outstanding. For the first ten months of
1999, these expenses had increased to $12,618,85. Accounting expense increased
from $2,455 to $4,165 as a result of our increased activity.
Taxes: Taxes accrued through October 31, 1998 were $310. Taxes for the first 10
months of 1999 are estimated to be $16,774 based upon our income to date.
Dividends: We paid no dividends during the first 10 months of 1998, having had
no significant earnings. Before the end of 1998, we did pay a $0.75 per share
dividend. As of October 31, 1999 we had declared two quarterly dividends of
$0.25 per share, for an annualized return of 10%, assuming the payment of the
same level of dividends for the last two quarters of the year. The per share
amounts are before the .5384 for one stock dividend.
Liquidity and capital resources
We had $625,179 in cash on December 31,1998 and $1,321,204 on October 31, 1999.
We currently have commitments and applications sufficient to invest the cash on
hand. Net cash used by investing activities was $201,882 during 1998 and
$2,055,723 during the first ten months of 1999.
Cash from operations : Net cash inflow from operations was $13,463 for the year
1998 and $157,245 for the 10 months ending October 31, 1999.
Cash from financings. CMI started with initial investments of $60,000 from
individuals and received a $450,000 investment from Presbyterian Investors Fund
in 1997. Since that time we have met our operating and cash requirements through
funds generated from operations, including loan repayments and the sale of a
loan, and from the sale of common stock and certificates of indebtedness.
From October 1998 through October of 1999, we raised $3,056,276 from the sale of
certificates of indebtedness and $691,030 from the sale of common stock.
Proceeds from the offering were used to pay legal expenses and sales commissions
and the balance has been invested in loans or is available to be invested in
loans or properties.
Current offering: CMI is seeking new capital of up to $19,275,000, consisting of
$2,275,000 in common stock and $17,000,000 in unsecured debt. We believe that
our cash on hand, together with cash generated by operations and the net
proceeds of this offering will be sufficient to meet our capital requirements
through the fourth quarter of
<PAGE>
2001, if all of the securities in this offering are sold. The offering is being
sold on a best efforts basis and may not raise all the capital we seek. The
amount and timing of our future capital requirements will depend on factors such
as the origination and funding of new investments, the costs of additional
marketing efforts, such as website development and direct mail, potential
acquisitions and the overall success of our marketing efforts.
Effects of inflation
Inflation, which has been limited during the course of our operating history,
has had little effect on our operations. We do not believe that it will have a
significant impact on our cost of capital or on the rates that we can charge on
our loans and leases. Inflation resulting in increased real estate prices could
increase the gains we could potentially realize on the sale of properties, while
at the same time decrease the ability of some potential client to purchase,
finance or lease properties.
Year 2000 issues
We have upgraded all of our internal computer and software systems as well as
communications equipment to Y2K compliant standards. Since a large part of our
accounting and recording keeping is done by outside sub-contractors, we have
sought and received assurances in writing from the major service providers of
their compliance with Y2K requirements. Our costs for preparations for Year 2000
have been minimal.
Business
CMI was formed as a Georgia corporation on March 18, 1996. Our primary objective
is to maximize value and income for our shareowners, by financing the
acquisition and development of facilities for use by churches, their related
ministries and non-profit organizations. The financing may be either through
CMI's loan programs or through its lease/purchase programs.
CMI offers development loans, construction, bridge and interim loans, usually
due within one to three years. We will also purchase existing facilities, as
well as develop facilities we can lease and sell to one or more non-profit
organizations. Leases are for one to three years and may include a purchase
provision in which the lessee agrees to purchase the facility for a
pre-determined price. Leases are usually set at the local commercial market
lease rates. CMI expects to receive capital gains income from the sale of its
acquired properties, which it may also finance for the buyer.
Our policy is to make loans or purchases primarily for income, although we
anticipate capital gain on property we purchase for resale. The typical maximum
investment amount in a church property or loan is $1,000,000. We do not have any
limits on the percentage of CMI's assets that may be in any one investment or in
any geographic area of the United States. We have not established any maximum
ratio of our total debt to our total shareowners' equity. These policies would
be made by our board of directors and could be changed, without the vote of
share or certificate owners. A description of our loan and lease programs
follows.
Types of loans we make
Development Loans: CMI will provide financing to young growing churches that we
judge to possess excellent growth potential and show a strong plan to repay the
loan through their own growth or income received from related ministries or
activities. The borrowers may lack the history, size, equity or income required
by conventional lenders or church bond financial advisors. Development loans are
made on an annually renewable basis and carry renewal fees of 5% of the
outstanding balance or 10% for a three-year loan. They carry a high interest
rate, in the current market no less than 10% per year. The maximum term of a
development loan is three years, at which time the loan must be refinanced by an
outside lender. They are often made with an initial period of interest only or
deferred interest payments, followed by principal and interest payments on an
amortization schedule of up to 30 years. Development loans are used to acquire
property, portions of which may be resold to pay down the loan, for which CMI
will receive a participation in any profit.
Construction Loans: Construction loans are typically made to finance the
construction of new facilities, or to renovate existing facilities. They
normally have a maturity of six months to one year. Borrowers typically pay
interest only on the outstanding balance drawn for construction. CMI focuses
primarily on loans of less than
<PAGE>
$1,000,000. We require the customary documentation for construction loans
including lien subordinations and waivers, builders risk insurance, budgets and
assignment of relevant contracts to CMI. We make weekly disbursements on
finished invoices and require interim lien waivers on all disbursements.
Semi-permanent Loans: These are often called mini-perms or bridge loans. They
are for as long as three years and may be linked to a construction loan. They
are often used by churches and other borrowers who expect to receive pledges,
grants, leases or other anticipated income but who are in need of immediate
funds. CMI makes these loans on an annual renewal basis with an annual renewal
fee equal to 1% to 5% of the outstanding balance. The loans are usually repaid
by other forms of financing, such as church bonds or conventional loans. CMI
will assist the borrower to find long term financing through some of the lenders
with which it has established relationships, or we will sell the loan to one of
these lenders.
Our loan policies
Borrowers: CMI is in the business of providing facilities primarily for use by
religious non- profit organizations, such as churches and related ministries. We
also lend to non-profit entities that extend religious ministries through
facilities for assisted living, day care, camps, group homes, etc. Primary
borrowers will be the organizations that will own and occupy the facility.
A special class of borrowers will include some for profit entities that are
developing facilities to be occupied or leased by a non-profit as the primary
occupant. For profit borrowers must submit signed development and lease
agreements with the non-profit entity or organization that will be the primary
occupant, as well as refinancing plans that will give the non-profit ownership
within the term of the loan. We screen these for profit developers for
experience in developing for non-profit owners or occupants.
Loan Terms and Conditions: We make loans for acquiring and developing property,
construction of new facilities, renovation of existing facilities, financing of
anticipated income from pledges, bridge financing, refinancing existing loans,
working capital, and other purposes as our board of directors may find
acceptable. Each loan is secured by first or second mortgage lien, a pledge of
revenue, and, where we determine necessary, limited personal guarantees made by
members or principals of the borrowers.
CMI may provide a fixed or variable rate loan. Our loans may include a
participation feature where there is the possibility of additional gain upon the
sale of excess property acquired by a borrower and resold during the term of
CMI's loan. The terms and conditions offered to borrowers, including interest
rates, fees, maturities, guarantees, will be based upon current market
conditions and factors like CMI's operating expenses and the loan's origination
expenses.
CMI charges each borrower an application fee to offset the cost of loan
origination and approval, legal fees and out-of-pocket expenses. We charge a
commitment and closing fee and may also charge a loan renewal fee. These fees
may be paid in cash by the borrower or added to the loan principal, at our
discretion.
We generally require the normal protections afforded commercial lenders,
including title insurance, real estate surveys, appropriate resolutions of the
borrower, appraisals of the property, and the issuance of fire and extended
insurance coverages. We use mortgage loan documents in the form currently in use
in the state where the mortgaged property is located.
Loan underwriting requirements
Mortgage loan applications submitted to our underwriting staff will normally
include (i) a completed application on CMI's form, (ii) corporate organizational
documents, (iii) financial statements including pro forma financial statements,
(iv) certified real estate appraisal, (v) a real estate survey certified to CMI,
(vi) preliminary title report, (vii) market and feasibility reports, if
applicable, (viii) copies of relevant insurance coverages, (ix) copies of all
material contracts and leases and (x) environmental report or affidavit.
<PAGE>
Completed applications and supporting material are submitted to the loan
committee of CMI's Board of Directors, which has authority to approve loans of
$500,000 or less. Loans or investments over this amount must be submitted to the
full board for approval. The loan committee consists of at least three
directors, not including any directors who are also officers or staff of CMI.
The loan committee determines the creditworthiness of the borrower and oversees
the rates, terms and conditions of the loan. Upon approval of a loan application
CMI's loan staff will work with its officers and legal counsel to supervise the
loan closing, including the preparation of loan documents and forwarding of
funds. It is the policy of CMI to require borrowers to pay all expenses of the
loan including CMI's legal expenses. These expenses are usually deducted from
the loan proceeds.
Loan origination services, participations and sales
CMI may be asked to close loans for other lenders, because we are active in the
non-profit loan market. We receive a fee for each loan closed on behalf of
another lender. After closing, these loans will be sold to these lenders at par
or at a small premium to CMI.
CMI may grant participations in its own loans, or enter into partnerships so
that other investors can participate directly in loans or leases we developed.
These participations extend our available funds for investment and generate
additional revenue.
We may also sell loans to other lenders and investors, to increase funds for our
lending and investing. However, the nature of the loans that CMI originates will
limit the number of potential purchasers. We may hold loans for two to three
years before they qualify for purchase by a third party lender or investor.
Loan investments we have made
Presbyterian Investors Fund, our principal shareholder, sold us six loans from
its investment portfolio in October 1997, so we could begin receiving interest
income. The price was equal to the unpaid principal balance on the loans and the
weighted average interest rate was 10.25%. Each of the loans was in a different
state and they ranged in approximate amount from $38,000 to $133,000. Two of the
loans have since been repaid in full and we sold one, for the amount of the
unpaid principal. The other three continue to make regular payments of principal
and interest.
We originated our first two loans in 1998, for $183,000 to acquire a church
building and $525,000 to build a church school. They have both been repaid in
full, including all interest and fees. We sold to Presbyterian Investors Fund a
$750,000 participation in an $800,000 building acquisition loan we made in
January 1999. We made six loans March through November 1999, to acquire
buildings or to acquire land and construct buildings. They are located in
Georgia, Texas and Wisconsin and the loan amounts were from $300,000 to
$650,000.
Property acquisition, lease and lease purchase financing
In December 1999, we purchased one church property in Chattanooga, Tennessee and
also completed the sale of that property. The purchase of another property in
Chattanooga is pending completion of our review. We do not plan to have mortgage
loans on properties we purchase. We plan to use the straight-line, 39-year
depreciation method of accounting for properties we own.
Existing Facilities: CMI purchases existing church properties which we then
lease and eventually sell to one or more church or non-profit religious
entities. There is a market for church facilities, as congregations grow or
wither. These facilities will range greatly in size from small starter ones for
a new church to large campuses occupied by established congregations. CMI is
particularly interested in those church properties that are in the range of
$300,000 to $750,000, as this seems to meet the needs of the best lease and
lease purchase candidates.
CMI expects to purchase these facilities at or below their market price, often
because the seller is in need of the cash from a sale to complete a move to a
new building. We look especially for those properties that have a high land
value, compared to the value of the building. CMI's goal is to earn at least a
15% return on our cash investment on any property, plus any gain from the sale
of the property or other income from services. At some point in the future we
may sell the property to one of the tenants, or to a third party. CMI expects to
receive a market or above market
<PAGE>
value for the sale of the building, because we are able to provide financing to
a borrower and may have developed lease tenants for the property.
There are special risks in the acquisition of any ministry-related property,
because it is usually designed for a single use. We may be unable to find
tenants which can pay sufficient rents, or to find a purchaser. When we acquire
a property previously owned by a non-profit entity, it will probably become
subject to real estate taxes as long as we hold title. Our leases are on a
triple net lease basis, making tenants responsible for the payment of all taxes,
as well as insurance and utilities.
In addition to church related ministry buildings, CMI may from time to time
purchase existing senior adult living or daycare facilities, childcare or
Christian school properties to be leased to non-profit religious entities. These
will be leased on terms similar to those offered to churches. We may require
that there be management and developers which are experienced in the type of
facility to be acquired.
Any acquisition will be subject to the identification of potential tenants who
have successfully completed our underwriting process. We do not currently intend
to engage in speculative acquisitions.
New Property Development: CMI may develop a new facility, in conjunction with
church, ministry or non-profit organization, where there are not existing
facilities or buildings that would meet their needs. Church properties
facilities would be from 2000 to 10,000 square feet, with budgets from $300,000
to $1,000,000. Churches would select from standardized plans available to CMI
and use a developer we accept.
The typical lease purchase agreement with a congregation would extend for three
years and require a monthly lease payment. The terms of these lease payments may
vary, including using deferred lease payments, but CMI will seek to maintain its
15% target rate of return on investments. The actual lease payment will be
determined by CMI's cost of funds and its expected rate of return as well as the
lessee's ability to make the lease payments. At the end of the lease period the
lessee will be required to purchase the project at the price in the lease
purchase agreement. During the lease period the property will be held in the
name of CMI.
The church will typically have been in existence for at least a year and have a
minimum income of $75,000 per year. CMI will perform on site interviews with the
potential lessees and purchaser to determine the stability and quality of its
leadership and congregation, as well as to perform due diligence on the proposed
property for development and the demographics of the area. A deposit of one
month's rent will be required before CMI will begin development of the project.
In addition to churches, church ministry facilities, and Christian schools, CMI
anticipates that a portion of its assets will be invested to develop senior
adult housing, including independent living and assisted living facilities to be
owned or sponsored by non profit organizations. These will be based upon our
standardized plans and prototype facilities. Assisted living facilities will
range in size from 60 to 80 units and cost from $4 million to $6 million. In
addition, there are costs associated with the acquisition of property, zoning,
permitting, engineering, marketing and operating that may require additional
investment by CMI. Independent living communities will vary in size but have
budgets similar to that of the assisted living facilities. Most often these will
be developed on land held by a church or other non-profit. The completed
facilities will be leased to the non-profit entity and sold after three years or
upon stabilization of occupancy, when financing can be available from
conventional sources, such as commercial banks or investment banks.
These nonprofit organizations may have little or no assets with which they can
provide additional guarantees, collateral or equity for the project. CMI will
seek to obtain additional guarantees from the principals of the church or
organization, or from an affiliated organization that can provide the additional
security or collateral. For the return of its investment CMI will rely primarily
on the value of the property to be acquired and developed, the feasibility of
the project and the expertise and knowledge of the developer and manager. There
will be normally no guarantees from the developer or manager. CMI will not
invest in a project unless a suitable lessee/purchaser has been qualified by the
board of directors and signed a letter of inducement or intent.
<PAGE>
Possible acquisition of non-profit church loan funds
We believe it could further CMI's objectives to acquire one or more non-profit
church loan and investment funds. We have no present agreements or
understandings about acquiring any particular fund.
Church loan funds make a variety of loans to member churches. They raise money
by selling debt securities to members and friends of the particular denomination
or association. These securities usually carry a fixed interest rate and a fixed
term and are renewable upon maturity. The loans they make are structured and
documented in a manner similar to typical commercial loans, and usually have the
same protections as required by CMI's loan policies.
We believe that there are a number of church loan funds, especially smaller
ones, or those serving small constituencies of churches, that are currently
unable to make enough loans to pay for the cost of the debt securities they have
sold. These funds are seeking to make the same types of loans as the commercial
banks and other lenders, but often have a higher cost of funds than these
commercial lenders. As a result, they are unable to compete and make loans to
their member churches, which typically seek the lowest available interest rate
or fee structure.
It would be our intent in acquiring these funds to invest any cash available in
CMI's financing programs. We would also seek to maintain the investor base by
offering them similar securities. We might sell any or all of the loans acquired
to raise additional capital for investment in CMI's financing programs.
Acquisition of the loan and investment portfolios of church loan funds can be
accomplished in a number of different ways. CMI has discussed with various
church loan funds a purchase of certain loans or income properties from the fund
and the assumption of a matching amount of debt certificates. We could be
required to pay to the church loan fund a premium for the purchase and
assumption or might receive a discount after a review of the loan portfolio in
terms of quality and yield, as compared to the interest rate on certificates.
A church loan fund might also be merged into CMI. In a merger, CMI might assume
all of the assets and debts of the church loan fund, but not the fund's net
worth, if any. By law, any net of assets minus liabilities of the non-profit
must be distributed to another non-profit.
Our market
We believe, based upon our monitoring of available data, that there are
approximately 325,000 Protestant churches in the United States and that 10,000
to 15,000 net new congregations begin annually. Our experience is that these new
churches will need between $350,000 to $750,000 to acquire or build their first
facility. We have found that the most strategic time for them to set a course
for their short term and intermediate term growth is the first one to three
years of existence. Their health and growth is substantially increased when they
move into a facility designed and dedicated for their use.
We intend to reach our market through a variety of strategies, including radio
and direct mail marketing. We expect to develop our investment opportunities
primarily through a network of independent representatives in key market areas
including initially Atlanta, Dallas, and Orlando/Tampa. These representatives
are not employees of CMI, but are paid a commission to identify applicants for
CMI's programs. They may also pursue development of the projects and present
them to CMI for its review. These representatives may be involved in the project
as real estate agent, architect or contractor. We are actively seeking
additional representatives in areas of high growth in population and real estate
values.
Our competition
We have found that most national lenders focusing on churches and related
ministries are unwilling to consider loans of less than $1,000,000 or for
churches less than five years old. Local lenders will make smaller loans, but
most of them still require at least three years of full operating history. We
believe that there is very little competition in the church and ministry markets
that CMI seeks to serve.
<PAGE>
We do not know of any commercial or nonprofit entities that provide facility
lease financing for churches and other non-profit entities as an integral part
of their business, except in the case of senior adult living facilities. Many of
these lenders represent a referral source for properties that CMI may acquire
for its lease purchase programs.
CMI will face competition from other financing institutions in some areas of its
market and programs. These competitors may include banks, savings and loans,
REITs, denominational funds and broker/dealers, all or some of whom may have
greater resources or lower costs of operations. We intend to compete on the
basis of our management's experience in the church financing, real estate, and
construction market and our low cost of operations.
Employees
Our only employees are Cecil A. Brooks and John T. Ottinger, the two officers of
CMI. They currently work part-time. Their compensation is included in the
administrative services agreement with Presbyterian Investors Fund.
Facilities
Our office facilities are provided as part of the administrative services
agreement with Presbyterian Investors Fund.
Environmental laws
Under various federal, state and local laws, an owner or a mortgage lender may
be liable for the costs of removal or remediation of hazardous or toxic
substances from a property, even if they did not cause or even know about the
contamination. The costs and liability are not limited and could be more than
the value of the property. The presence of these substances may make it
difficult to sell the property. Environmental laws also govern the presence of
asbestos in buildings and may require removal or precautionary action. They may
also impose fines and allow recovery for injury from exposure to asbestos.
We have not incurred any material costs or effects so far from compliance with
environmental laws. We require an environmental report or affidavit before we
make a mortgage loan or purchase a property. This is a changing area of law and
we could have material extra costs or liability from being mortgage lenders or
owners of real property.
Government regulations
We do not make any loans or leases to consumers, so we are not subject to the
many federal, state and local laws about lending and renting. We are not
required to be licensed in the states in which we operate. Our borrowers and
tenants will be subject to some of the laws intended to protect the public from
building hazards and to make buildings accessible. We cannot monitor compliance
with all these laws. Enforcement action against the building or our borrowers or
tenants could interrupt our receipt of payments and decrease the value of the
property. We do not believe that any material changes are currently required to
any of the properties securing our loans.
Legal proceedings
CMI is not a party to any pending legal proceeding. We are not aware that any of
the properties covered by our mortgage loans is subject to any pending legal
proceeding or that any governmental authority is contemplating any legal
proceeding involving CMI or any of those properties.
Management
CMI's board of directors is elected annually by the shareowners. The board is
responsible for CMI's policies and management. However, the board retains a
staff to manage the day-to-day affairs, subject to its supervision.
<PAGE>
Directors and officers
Name, residence address Age Responsibility
- ----------------------- --- --------------
Cecil A Brooks 67 Director, Chairman of the
9123 Shetland Trail #10206 Board, President, CEO
Jasper, GA 30143
John T. Ottinger 45 Director, Vice President, CFO,
451 Battersea Dr. Secretary and Treasurer
Lawrenceville, GA 30044
Theodore R. Fox 67 Director, Member of the
575 Big Canoe Audit Committee
Big Canoe, GA
Richard E. McLaughlin 68 Director, Member of the
2627 West Grand reserve Circle #511 Loan Committee
Clearwater, FL 33759
Jayme Sickert 52 Director, Member of the
2891 Inverloch Circle Loan Committee
Duluth GA 30096
Irving B. Wicker 74 Director
132 Eswick Drive
Prattville, AL 36067
Taylor McGown 62 Director, Member of the
74 Big Canoe Loan committee
Big Canoe, GA 30143
Henry Darden 67 Director, Member of the
614 Beverly Dr. Audit Committee
Brandon, FL 33510
William Lamberth 48 Director
203 Clematis Court
McKinney, Texas 75070
All directors are elected by the shareowners. Their present terms will conclude
at the annual meeting of shareowners in 2000. At that meeting, a third of the
directors elected will serve until the annual meeting in 2001, a third until the
2002 meeting and a third until the meeting in 2003. In the future, directors
will be elected for three-year terms, as the terms for one-third of the
directors expire each year.
Cecil A. Brooks has served in these capacities since CMI was founded.
He graduated from Mercer University in 1952. After a varied career in sales and
management, including real estate sales and development, he graduated from
Reformed Seminary in 1975. He served as pastor of Trinity Presbyterian Church in
Miami, Florida and on the staff of Mission to North America of the Presbyterian
Church of America from 1983 to 1994. He formed the Investors Fund for Building
and Development (the predecessor to the Presbyterian Investors Fund) in 1985 and
has served as President since its inception. Mr. Brooks has served on the boards
of a number of non-profit organizations concerned with foreign missions and
housing for the elderly. As President of Presbyterian Investors Fund and
Cornerstone Ministries Investments, Mr. Brooks has over 14 years experience in
all areas of the church mortgage lending and development business. Mr. Brooks
has also worked closely with church bond underwriters and broker-dealers in the
church lending market. He has been a director since 1996.
<PAGE>
John T. Ottinger, Jr. has served in these capacities since CMI was
founded. He graduated from the University of Delaware in 1976 and spent eight
years in the lodging industry. Mr. Ottinger has served as pastor of an
established church as well as organizing pastor in North Carolina. Mr. Ottinger
joined the staff of Presbyterian Investors Fund in 1985 and currently serves as
Vice President and Secretary/Treasurer. He serves in the same capacities for
CMI. Mr. Ottinger has 14 years of extensive experience in church lending. He has
been a director since 1996.
Theodore R. Fox has served as a director since 1996. He received a
Bachelor of Business Administration degree in Management from Georgia State
University. Mr. Fox has a 24-year career with Law Engineering Company, retiring
as Assistant Vice President. He joined Cole Henderson Drake, Inc. in their
finance department and has served on a part time basis since 1993. Mr. Fox is a
past Chairman of the Board of the National Association of Credit Managers.
Richard B. McLaughlin has served as a director since 1996. He has
worked in the real estate construction and land development business since 1962.
During his long career, he has developed complete subdivisions and constructed
approximately 600 homes. During the last ten years he has devoted all his
energies to the developing of church properties and the design and construction
of church properties. Mr. McLaughlin has consulted on over 300 churches during
that time. Mr. McLaughlin is the President and sole owner of Church Development
Services, Inc.
Jayme Sickert has served as a director since 1996. He graduated from
Covenant College in 1969 and Covenant Seminary in 1974. He has served a number
of churches in the Southeast as Senior Pastor, as well as working with Mission
to North America of the Presbyterian Church in America. Since 1993 he has been a
Registered Representative and lately President of Regal Investments a registered
broker dealer. He has previously served on the Board of Presbyterian Investors
Fund.
Irving B Wicker has served as a director since 1996. He graduated from
the University of Maryland in 1959 and received a Masters Degree from George
Washington University in 1963. Mr. Wicker is a retired Lieutenant Colonel from
the United States Air Force and has been a real estate broker and financial
planner for 15 years. Mr. Wicker has served on the Board of Presbyterian
Investors Fund since 1990
Taylor McGown has served as a director since 1996. He graduated from
the University of Memphis in 1976 and received a Master of Divinity degree from
Reformed Theological Seminary in 1979. Mr. McGown served a number of pastorates
in a variety of capacities as well as serving as Director of Palmer Children's
Home. He is currently a self employed registered representative and investment
advisor. He has served on the Board of Presbyterian Investors Fund since 1985.
Henry Darden has served as a director since 1906. He received a
Bachelor of Science degree from the University of Georgia in 1955 and an AA in
real estate from the City College of Chicago in 1970. Mr. Darden is a retired
Lieutenant Colonel with the United States Air Force and currently serves as a
financial and tax consultant. Mr. Darden has served as a board member of
Presbyterian Investors Fund.
William Lamberth has served as a director since 1998. He graduated from
Southern Methodist University in 1974 with a degree in Business Administration.
Mr. Lamberth spent the next 13 years in the real estate development business
before entering Gordon Conwell Seminary in 1987. He finished seminary in 1992
and was appointed assistant pastor of Park Cities Presbyterian Church in Dallas,
Texas. He started Redeemer Presbyterian Church in the northern Dallas suburb of
McKinney in 1996 and serves as senior pastor.
Committees
Audit Committee. The board has established an audit committee of three of its
members, including two independent directors. The audit committee will make
recommendations concerning the engagement of independent public accountants,
review their independence, the services they provide and the results of the
audit engagement. The audit committee will also consider the range of audit and
non-audit fees and review the adequacy of CMI's internal accounting controls.
<PAGE>
Loan and Investment Committee. The board has established a loan and investment
committee consisting of five members including the chief executive officer and
having a quorum of three members. The committee will review and may approve
loans and investments of up to $500,000 on behalf of the board, in accordance
with the loan and investment policies as adopted and amended by the board form
time to time. Any individual loans or investments in excess of the committee's
authority will be subject to approval by the entire board.
Meetings and compensation of directors
The directors meet at least annually and more often as needed. The audit
committee meets at least once annually. The loan and investment committee meets
as required. Directors receive $100 for each board and committee meeting they
attend. We reimburse them for travel expenses to attend meetings.
Executive compensation
Cecil Brooks and John Ottinger are our only executive officers. They are
compensated by Presbyterian Investors Fund and their services to CMI are
included in the administrative services agreement we have with Presbyterian
Investors Fund. The board of directors may decide to provide compensation to
them in the future, through salary or through a long-term compensation plan. CMI
has no employment agreements.
Indemnification of directors and officers and limitation of their liability
Officers or directors are not liable to CMI or its shareowners, under Georgia
law, if they acted in a manner they believed in good faith to be in or not
opposed to CMI's best interests. They are not liable in any criminal proceeding
if they had no reasonable cause to believe their conduct was unlawful. As
permitted by Georgia law, CMI will indemnify its officers and directors against
liability and their defense costs in any proceeding in which they have been
successful or where the directors who are not involved determines that the
applicable standard of conduct has been met. CMI will pay reasonable expenses,
including attorneys' fees, incurred by directors or officers in advance of the
final disposition of a proceeding, if they furnish written affirmation of good
faith belief that they have met the applicable standard of conduct, together
with a written promise to repay any advances if it is determined they are not
entitled to indemnification. We have been informed that, in the opinion of the
Securities and Exchange Commission, any indemnification for liabilities arising
under the federal Securities Act of 1933 is unenforceable, as against public
policy expressed in that Act.
We do not presently carry any insurance against the liability of CMI's officers
and directors.
Certain transactions
Presbyterian Investors Fund, Inc. is a founding investor and owned 37.8% of
CMI's common stock, before this offering began. It could elect a controlling
number of our directors. CMI purchased six existing church loans from the Fund
in October 1997. All of the loans were current in their payments and they had a
10.25% average interest rate. The $447,954 price was equivalent to the unpaid
principal balance on the loans at the date of purchase.
We sold a $700,000 participation in a $750,000 loan to the Fund in 1999, shortly
after we had originated it. The purchase price was equal to the loan principal
amount. CMI retained the loan origination fees.
Our administrative services, including officer compensation and a pro-rated
portion of office space, are supplied by the Fund, under a services agreement.
The payment is equal to 1.5 percent of our assets and amounted to $15,213 in
1998 and $39,500 for the first ten months of 1999.
Principal shareowners
The following table shows the beneficial ownership of CMI's common stock
immediately prior to this offering, giving effect to the 1.5384 for 1 stock
split to be effective January 14, 2000 and as adjusted to reflect the sale of
the shares being offered, for shares owned by:
(i) each of CMI's directors and executive officers,
(ii) each shareowner we know to own beneficially 5% or more of the outstanding
shares of our common stock and
(iii) all directors and officers as a group.
<PAGE>
<TABLE>
We believe that the beneficial owners of the common stock listed below, based on
information they furnished, have sole investment and voting power over their
shares, subject to community property laws where applicable.
<CAPTION>
Name of Beneficial Owner Number of Percentage of Total Common Stock Beneficially Owned
Shares
Beneficially
Owned Before Offering After Offering
<S> <C> <C> <C>
Cecil A. Brooks 1,538 * *
Taylor McGown 1,538 * *
Irving B. Wicker 1,538 * *
Presbyterian Investors Fund, Inc. 69,228 37.8% 12.8%
All directors and executive officers 4,614 2.5% *
as a group (3 Persons)
<FN>
* Amounts to less than one percent.
</FN>
</TABLE>
Description of securities
Our articles of incorporation and the Georgia Business Corporation Code
authorize us to issue up to 29,000,000 shares of common stock and 1,000,000
shares of preferred stock. We may also issue securities for borrowings. Before
sales in this offering, CMI had 183,228 shares of common stock outstanding, held
by 76 shareowners. This includes shares to be issued in the January 14, 2000
stock split of 1.5384 shares of common stock for each share owned on that date.
No shares of preferred stock have ever been issued. There are $3,056,276 of
Series A Certificates of Indebtedness outstanding. This is a description of
these securities:
Common stock
The owners of common stock elect all the members of CMI's board of directors.
Each share owned is entitled to one vote on all matters to be voted on by
shareowners. A majority of the shares issued is a quorum. The shareowners are
entitled to receive dividends when, as and if declared by the board of directors
out of funds legally available. In the event of liquidation, dissolution or
winding up of the corporation, the shareowners are entitled to share ratably in
all assets remaining which are available for distribution to them after payment
of liabilities. Shareowners, as such, have no conversion, preemptive or other
subscription rights, and there are no redemption provisions applicable to the
common stock. All of the outstanding shares of common stock, and the shares
issued in this offering, will be fully paid and nonassessable. The transfer
agent and registrar for our common stock is American Securities Transfer &
Trust, Inc.
Preferred stock
No shares of preferred stock have been issued and our board of directors does
not presently intend to issue any. The board has the authority to issue series
of preferred stock and to set dividend rates and various rights and terms for a
series, such as for redemption, the amount payable upon any liquidation of CMI,
conversion into other CMI securities and any voting rights. Owners of common
stock could be placed below any preferred stock owners in their rights to
dividends, liquidation distributions and voting on some matters. Preferred stock
could be issued with terms that would have the effect of discouraging a change
of control of CMI or other transactions that some common stock owners might
believe to be in their best interests.
<PAGE>
Certificates of indebtedness
We issued $3,056,276 of Series A Certificates of Indebtedness during a
public offering from October 1998 through October 1999. We are now offering up
to $17,000,000 of Series B Certificates of Indebtedness. The Series A
Certificates were secured in their payment of principal and interest by the
deposit in trust of an amount of CMI's mortgage loans and cash which was equal
to the unpaid amount of Series A certificates. There is no trust deposit or
other collateral to secure payment of the Series B certificates.
Payment dates and interest rates. We are offering up to $3,000,000 of Series B
Certificates with a March 15, 2003 maturity date and a 7.00% interest rate. We
are also offering up to $14,000,000 of Series B Certificates with a March 15,
2005 maturity date and a 9.00% interest rate. Both certificates may be purchased
in any amount, with a minimum purchase of $2,500. Interest will be paid on all
certificates each March 15 and September 15. Owners of $10,000 or more of
certificates may elect to receive monthly interest payments.
Unsecured obligations. No assets have been set aside as collateral for the
payment of the certificates. They are general obligations of CMI, with no
preference over any other debt that CMI may have. CMI is not required to deposit
into any sinking fund for the purpose of paying the certificates on maturity.
The certificates or trust indenture do not restrict CMI from issuing additional
debt or making any additional debt senior in payment priority to the
certificates. CMI is not required to maintain any particular ratios of its debt
to its assets or its stockholders' equity.
Default. American Securities Transfer & Trust, Inc. is the trustee and paying
agent for the certificates. A default would occur if CMI were more than 60 days
late in making an interest or principal payment or if it went into bankruptcy or
failed to comply with the trust indenture created for these certificates. If a
default happened, the trustee could pursue any available remedy to collect on
behalf of the certificate owners. Persons owning a majority in amount of the
certificates could direct the trustee in taking any action it considered lawful
and fair. An individual certificate owner is restricted in the ability to start
independent proceedings, without the consent of the trustee or joining with
others holding a majority in amount of the certificates.
Redemption. Certificate owners may not redeem them for cash before their
maturity date. Our current policy is to redeem certificates which have been held
at least a year, upon a request showing exceptional need or hardship. There
would be an early payment fee equal to six months' interest. CMI does have the
right to redeem some or all of the certificates upon notice, sent at least 30
and not more than 60 days before the redemption date. Holders would then
exchange their certificates for the principal amount and any unpaid interest. No
interest would be earned after the redemption date. If less than all the
certificates were redeemed, the paying agent for the certificates would select
the ones to redeem, on a basis it considered fair. There is no right to convert
the certificates into other CMI securities. We do expect, however, to be
offering a new series of certificates at the time the Series A and Series B
certificates mature. Owners could ask that all or part of the amounts due them
be reinvested in new certificates, after they had received a current prospectus
describing CMI and the new certificates.
Future resales of securities
The certificates may legally be sold. The form and instructions for transfer are
on the back of the certificate. There is not expected to be any trading market
for the certificates, so any sale would have to be arranged between the
certificate owner and a buyer.
The shares sold in this offering and the 109,386 shares sold in the first public
offering will be freely tradable, without restriction or registration under
federal securities laws. Sales of shares to residents of certain states or
jurisdictions may require registration or an applicable exemption from
registration provisions of the shares in those states or jurisdictions. The
73,842 shares of common stock issued to the founders are "restricted securities"
and may not be sold in a public distribution except in compliance with the
federal Securities Act of 1933 or an applicable exemption under the Securities
Act, including its Rule 144. Rule 144(k) provides that a person who is not an
officer, director or principal shareowner of CMI and who has owned shares for at
least a year could offer and sell those shares through any trading market, if
reporting and other requirements were met.
<PAGE>
The shares have been approved for listing on the Chicago Stock Exchange after
completion of this offering. In the event the shares are not listed, Huntleigh
Securities Corp. and Medallion Equities, Inc. have said they will provide an
order-matching service for persons wishing to sell or buy shares after this
offering is over.
Plan of distribution
CMI is offering shares and certificates directly to the public through John T.
Ottinger, its Chief Financial Officer, who will not receive any commissions or
other compensation based on transactions in securities. His activities are
intended to be within Rule 3a4-1 of the federal Securities Exchange Act of 1934
and he will comply with securities regulations of the states in which the
offering is to be registered. CMI will communicate announcements of the offering
and offer copies of this prospectus, as permitted by federal and state
securities regulations. We are also offering through registered securities
broker-dealers, principally Huntleigh Securities Corp. and Medallion Equities,
Inc. They will be paid commissions for sales they make of three percent on
certificates due 2003, five percent on certificates due 2005 and seven percent
on shares of common stock. CMI has agreed to indemnify the broker-dealers and
their controlling persons against any liability arising out of any alleged
untrue or omitted statement in this prospectus. Both CMI and the broker-dealers
will be selling on a best efforts basis, without any commitment to sell the
entire offering or any minimum amount. We have applied to register this offering
in Alabama, Florida, Georgia, Maryland, Mississippi, North Carolina, South
Carolina, Pennsylvania, Tennessee, Virginia and West Virginia.
The public offering price for the shares is the same price paid by CMI's
founders and by investors in the first public offering. The price, interest rate
and other terms of the certificates were set to be competitive with other
interest-bearing securities.
There is no escrow of the offering proceeds, so all amounts paid for the
certificates and shares will be immediately available to CMI to use in its
business. We plan to continue the offering until all the shares and certificates
have been sold. We reserve the right to close the offering before then and to
reject any purchase in full or in part.
Experts
The financial statements of CMI as of and for the periods ended December 31,
1997 and December 31, 1998 have been included in this prospectus in reliance on
the report of T. Jackson McDaniel III, certified public accountant.
Available Information
This prospectus is part of a registration statement on Form SB-2 filed under the
Securities Act of 1933. This prospectus does not contain all of the information
in the registration statement and its exhibits. Statements in this prospectus
about any contract or other document are just summaries. You may be able to read
the complete document as an exhibit to the registration statement.
CMI will have to file reports under the Securities Exchange Act of 1934. You may
read and copy the registration statement and our reports at the Securities and
Exchange Commission's public reference rooms at 450 Fifth Street, N.W.,
Washington, D.C. 20549, Seven World Trade Center, 13th Floor, New York, New York
10048, and 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511.
You may telephone the Commission's Public Reference Branch at 800-SEC-0330. Our
registration statement and reports are also available on the Commission's
Internet site at http://www.sec.gov.
We intend to furnish our shareowners with annual reports containing audited
financial statements after the end of each fiscal year.
<PAGE>
Index to financial statements
Independent Auditors' Report F-1
Balance Sheets F-2
Statement of Income and Retained Earnings F-3
Statements of Cash Flows F-4
Statements of Changes in Stockholders' equity F-5
Notes to Financial Statements F-6
<PAGE>
T. JACKSON McDANIEL III
Certified Public Accountant
1439 McLendon Drive
Suite C
Decatur, GA 30033
(770) 491-0609
To The Board of Director's
Cornerstone Ministries Investments, Inc.
Norcross, Ga 30071
I have compiled the accompanying balance sheet of the Cornerstone Ministries
Fund, Inc. as of October 31, 1999 and October 31, 1998 and the related statement
of income and retained earnings (deficit), statement of cash flows and statement
of changes in stockholder's equity for the 10 months then ended, in accordance
with Statements on Standards for Accounting and Review Services issued by the
American Institute of Certified Public Accountants.
A compilation is limited to presenting in the form of financial statements
information that is the representation of management. I have not audited or
reviewed the accompanying October 31, 1999 and October 31, 1998 financial
statements and, accordingly, do not express an opinion or any other form of
assurance on them.
The financial statements for the years ended December 31, 1998 and December 31,
1997, provided for comparative purposes, were audited by me and I expressed an
unqualified opinion on them in my reports dated March 31, 1999 and March 20,
1998 but I have not performed any auditing procedures since March 31, 1999.
/s/ T. Jackson McDaniell, III, CPA
December 15, 1999
F-1
<PAGE>
<TABLE>
CORNERSTONE MINISTRIES INVESTMENTS, INC.
BALANCE SHEET
October 31, 1999 and October 31, 1998, December 31, 1998 and December 31, 1997
ASSETS
<CAPTION>
10/31/99 10/31/98 12/31/98 12/31/97
----------- ----------- ----------- -----------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
CURRENT ASSETS
CASH $ 1,321,204 $ 274,022 $ 677,576 $ 75,875
ACCOUNTS RECEIVABLE 11,800 -- -- --
ACCRUED INTEREST RECEIVABLE 33,498 5,511 1,948 2,325
----------- ----------- ----------- -----------
TOTAL CURRENT ASSETS 1,366,502 279,533 679,524 78,200
REAL ESTATE LOANS RECEIVABLE 2,680,902 456,671 625,179 423,297
INTANGIBLE ASSETS-NET OF ACCUMULATED
AMORTIZATION 182,746 15,743 199,510 14,753
OTHER ASSETS 383,501 -- --
----------- ----------- ----------- -----------
TOTAL ASSETS $ 4,613,651 $ 751,947 $ 1,504,213 $ 516,250
=========== =========== =========== ===========
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES
ACCOUNTS PAYABLE $ 309,395 $ -- $ 147,534 $ --
INTEREST PAYABLE 62,102 600 2,697 --
INCOME TAXES PAYABLE -- 6,871 5,780 1,181
----------- ----------- ----------- -----------
TOTAL CURRENT LIABILITIES 371,497 7,471 156,011 1,181
LONG TERM LIABILITIES
INVESTOR CERTIFICATES 3,056,276 150,000 608,500 --
DEFERRED INCOME TAXES 9,472 -- 3,948 --
----------- ----------- ----------- -----------
TOTAL LONG TERM LIABILITIES 3,065,748 150,000 612,448 --
----------- ----------- ----------- -----------
TOTAL LIABILITIES 3,437,245 157,471 768,459 1,181
COMMON STOCK, .01 PAR VALUE,
10,000,000 SHARES AUTHORIZED,
119,113 ISSUED AND OUTS 1,191 560 730 510
PAID IN CAPITAL 1,189,839 559,440 729,140 509,490
RETAINED EARNINGS (DEFICIT) (14,624) 34,476 5,884 5,069
----------- ----------- ----------- -----------
TOTAL STOCKHOLDER'S EQUITY 1,176,406 594,476 735,754 515,069
----------- ----------- ----------- -----------
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY $ 4,613,651 $ 751,947 $ 1,504,213 $ 516,250
=========== =========== =========== ===========
F-2
<FN>
See accompanying accountant's report and notes to financial statements
</FN>
</TABLE>
<PAGE>
<TABLE>
CORNERSTONE MINISTRIES INVESTMENTS, INC
STATEMENT OF INCOME
AND RETAINED EARNINGS (DEFICIT)
For the 10 months ended October 31, 1999, October 31, 1998 and
the years ended December 31, 1998 and December 31, 1997
<CAPTION>
10/31/99 10/31/98 12/31/98 12/31/97
--------- --------- --------- ---------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
REVENUES
Interest Income-Loans $ 99,720 38,354 $ 47,958 $ 9,465
Fees Earned 168,069 9,500 37,280 --
--------- --------- --------- ---------
TOTAL REVENUES 267,789 47,854 85,238 9,465
OPERATING EXPENSES
Interest Expense-Investor Certificates 169,826 1,950 6,297 --
Management Fees 39,500 -- -- --
Marketing Expenses 15,272 -- 12,716 --
Operating Expenses 32,286 11,911 20,313 3,499
--------- --------- --------- ---------
TOTAL OPERATING EXPENSES 256,884 13,861 39,325 3,499
NET INCOME FROM OPERATIONS 10,905 33,993 45,913 5,966
OTHER INCOME (EXPENSE)
Interest Income-Banks 28,783 2,595 3,190 --
Income Tax Expense (7,856) (7,181) (10,038) (1,181)
--------- --------- --------- ---------
TOTAL OTHER INCOME (EXPENSE) 20,927 (4,586) (6,848) (1,181)
NET INCOME $ 31,832 $ 29,407 $ 39,065 $ 4,785
RETAINED EARNINGS (DEFICIT)-BEGINNING OF YEAR 5,884 5,069 5,069 284
DIVIDENDS PAID (52,340) -- (38,250) --
--------- --------- --------- ---------
RETAINED EARNINGS (DEFICIT)-END OF YEAR $ (14,624) $ 34,476 $ 5,884 $ 5,069
========= ========= ========= =========
F-3
<FN>
See accompanying accountant's report and notes to financial statements
</FN>
</TABLE>
<PAGE>
<TABLE>
CORNERSTONE MINISTRIES INVESTMENTS, INC.
STATEMENT OF CASH FLOWS
For the 10 months ended October 31, 1999, October 31, 1998 and
the years ended December 31, 1998 and December 31, 1997
<CAPTION>
10/31/99 10/31/98 12/31/98 12/31/97
----------- ----------- ----------- -----------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Cash from Operations:
Net income (loss) $ 31,832 $ 29,407 $ 39,065 $ 4,785
Items that do not use
Cash:
Amortization 11,524 -- 3,879 509
(Increase) Decrease in
Accounts Receivable (11,800) -- -- --
(Increase) Decrease in
Accrued Interest Receivable (31,550) (3,186) 377 (2,325)
(Increase) Decrease in
Intangible Assets 5,240 (990) (188,636) (15,262)
(Increase) Decrease in
Other Assets (383,501) -- -- --
Increase (Decrease)
Accounts Payable 161,861 -- 147,534 --
Increase (Decrease)
Interest Payable 59,405 600 2,697 --
Increase (Decrease) in
Income taxes payable (5,780) 5,690 4,599 1,181
Increase (Decrease) in
Deferred tax liability 5,524 -- 3,948 --
----------- ----------- ----------- -----------
Net Cash Provided (Used) by
Operating Activities (157,245) 31,521 13,463 (11,112)
Cash Flows From Investing Activities:
Loans purchased -- -- -- (446,736)
Loans made (2,542,578) (190,000) (364,585) --
Loan principal repayments received 486,855 156,626 162,703 23,439
----------- ----------- ----------- -----------
Net Cash Provided (Used) by
Investing Activities (2,055,723) (33,374) (201,882) (423,297)
Cash Flows From Financing Activties:
Stock subscriptions sold 461,160 50,000 219,870 450,000
Certificates of Indebtedness Issued 2,447,776 150,000 608,500 --
Dividends Paid (52,340) -- (38,250) --
----------- ----------- ----------- -----------
Net Cash Provided by Financing Activities 2,856,596 200,000 790,120 450,000
Net Increase (Decrease)
in Cash: 643,628 198,147 601,701 15,591
Cash-Beginning of 10 Month Period/Year 677,576 75,875 75,875 60,284
----------- ----------- ----------- -----------
Cash-End of 10 Month Period/Year $ 1,321,204 $ 274,022 $ 677,576 $ 75,875
=========== =========== =========== ===========
During the 10 months ended October 31, 1999
the Company paid cash interest of $110,919
F-4
<FN>
See accompanying accountant's report and notes to financial statements
</FN>
</TABLE>
<PAGE>
<TABLE>
CORNERSTONE MINISTRIES INVESTMENTS, INC.
STATEMENT OF CHANGES IN STOCKHOLDER'S EQUITY
For the years ended December 31, 1997, 1998
and the 10 months ended October 31, 1999
<CAPTION>
Retained Total
Common Paid-In Earnings Owner's
Stock Capital (Deficit) Equity
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Balance at December 31, 1996 10 9,990 237 10,237
Net Income (Loss) for the year ended
December 31, 1997 4,832 4,832
Dividends declared
Capital contribution 500 499,500 -- 500,000
---------- ---------- ---------- ----------
Balance at December 31, 1997 510 509,490 5,069 515,069
Net Income (Loss) for the year ended
December 31, 1998 39,065 39,065
Dividends declared (38,250) (38,250)
Capital contribution 220 219,650 -- 219,870
---------- ---------- ---------- ----------
Balance at December 31, 1998 730 729,140 5,884 735,754
Net Income (Loss) for the 10 months
ended October 31, 1999 (Unaudited) 31,832 31,832
Dividends declared (52,340) (52,340)
Capital contribution 461 460,699 -- 461,160
---------- ---------- ---------- ----------
Balance at October 31, 1999 1,191 1,189,839 (14,624) 1,176,406
========== ========== ========== ==========
F-5
<FN>
See accompanying accountant's report and notes to financial statements
</FN>
</TABLE>
<PAGE>
CORNERSTONE MINISTRIES INVESTMENTS, INC.
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1999
NOTE 1 - Summary of Significant Accounting Policies
(A) Conformity with Generally Accepted Accounting Principles and Accounting
Method
The accounting policies of the Company conform to generally accepted accounting
principles consistent to its industry. The Company uses the accrual method of
accounting.
(B) Description of Company's Operations
The Company is in the business of originating and purchasing Mortgage loans on
Church and Church related properties. Costs associated with loan applications
received directly from borrowers are expensed as period costs.
It was originally the intent of Management of The Company to cause The Company
to qualify as a Real Estate Investment Trust (REIT) under the tax laws of the
United States at sometime in the future. However, The Company's Board of
Directors has decided to no longer seek REIT status at this time due to market
conditions and the limitations imposed upon REIT's with respect to the raising
of capital.
(C) Organizational Information
The Company is a corporation organized under the laws of the State of Georgia.
(D) Organizational Expenses
The expenses associated with organizing the corporation and beginning business
are have been capitalized and are being amortized over 60 months.
NOTE 2 - RELATED PARTY TRANSACTIONS
The Company is being managed by individuals employed by its majority
shareholder. The Company is charged a management fee for these management
services. During the year ended December 31, 1997 The Company purchased loans
with a remaining balance of approximately $423,000 from its majority
shareholder.
During the 10 months ended October 31, 1999 the management fee charged was
$39,500. No management fee was charged in prior periods.
F-6
<PAGE>
CORNERSTONE MINISTRIES INVESTMENTS, INC.
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1999
NOTE 3 - LEASE COMMITMENTS
The Company currently has no lease commitments. It is sharing resources with its
majority shareholder.
NOTE 4 - REAL ESTATE LOANS RECEIVABLE
At October 31, 1999 and October 31, 1998 , the Company had Real Estate Loans
Receivable from Churches totaling $2,680,902 and $456,671 respectively. These
loans mature over a period beginning in 2000 and ending in 2012.
NOTE 5 - INTANGIBLE ASSETS
Intangible assets consist of costs incurred to 1)organize the Company, 2) costs
of registering the Company's equity and debt securities, 3) developing the
Prospectus for registering of the Company's securities, and 4) commissions paid
and/or accrued on the sale of debt securities and equity securities. These
intangibles are amortized on a straight line basis periods of 5 to 40 years.
NOTE 6 - INCOME TAXES
Income taxes payable and the corresponding expense have been computed on The
Company's net income for the 10 months ended October 31, 1999, October 31, 1998
and the years ended December 31, 1998, December 31, 1997 as follows:
10/31/99 10/31/98 12/31/98 12/31/97
------- ------- ------- -------
Current: Federal $ 1,667 $ 5,135 $ 4,128 $ 851
State 664 2,046 1,962 330
Deferred Federal 3,951 -- 2,820 --
State 1,574 -- 1,128 --
------- ------- ------- -------
$ 7,856 $ 7,181 $10,038 $ 1,181
======= ======= ======= =======
F-7
<PAGE>
CORNERSTONE MINISTRIES INVESTMENTS, INC.
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1999
NOTE 6 - INCOME TAXES (continued)
Deferred income taxes arise because of timing differences between financial
accounting and tax accounting rules for the deductibility of intangible
amortization expense.
NOTE 7 - CASH CONCENTRATION
A cash concentration risk arises when the Company has more cash in one financial
institution then is covered by insurance. At October 31, 1999 and October , 1998
the Company had cash in one institution that was over the amount insured by the
FDIC of $1,221,204 and $174,022 respectively.
NOTE 8 - OTHER ASSETS
Other Assets at October 31, 1999 includes approximately $270,000 held in escrow
to be distributed in the near term to churches as additional loan amounts. The
amount to be distributed is also included in Accounts Payable due to their short
term nature. As of the date of the accountant's report all but approximately
$1,000 of these funds had actually been distributed.
NOTE 9 - NAME CHANGE
Prior to the year ended December 31, 1998, the Company was named "Cornerstone
Ministries Fund, Inc.". During the year ended December 31, 1998, the Company
changed its name to "Cornerstone Ministries Investments, Inc." to allow it to
register its securities in all 50 states and to more correctly identify it with
its mission.
F-8
<PAGE>
[Alternate Certificate of Indebtedness Page]
$17,000,000
Cornerstone
Ministries
Investments, Inc.
SERIES B CERTIFICATES OF INDEBTEDNESS
-----------------
Cornerstone Ministries Investments, Inc. is offering these Series B
Certificates of Indebtedness directly to investors and also through selected
securities broker-dealers, on a best efforts basis.
The amount you pay for certificates will be repaid upon their maturity
date, unless you choose to replace them with any certificates we may be offering
at that time. We do not expect that there will be any trading market for the
certificates.
This offering will end when all the certificates have been purchased or
earlier, if we decide to close the offering. There is no requirement that a
minimum number of certificates must be sold.
-----------------
This offering involves a high degree of risk. See "Risk
Factors" beginning on page 4.
-----------------
Neither the Securities and Exchange Commission nor any state securities
regulator has approved or disapproved the shares or determined if this
prospectus is accurate or complete. Any representation to the contrary is a
criminal offense.
<TABLE>
<CAPTION>
======================================================================================================================
Certificate Annual Principal Public Offering Broker-dealer
Maturity Interest Amount Price per Discounts and Proceeds to
Date Rate Offered Certificate Commissions CMI
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
March 15, 2003 7.00% $ 3,000,000 $2,500 $ 75 $2,425
March 15, 2005 9.00% 14,000,000 $2,500 $125 $2,375
- ----------------------------------------------------------------------------------------------------------------------
Total $17,000,000 $790,000 $16,210,000
======================================================================================================================
</TABLE>
-----------------
The date of this Prospectus is___________, 2000
<PAGE>
PART II -- INFORMATION NOT REQUIRED IN PROSPECTUS
Item 24. Indemnification of Directors and Officers.
The Registrant's Articles of Incorporation, Article VII, provide that none
of its directors shall be personally liable to the Registrant or its
shareholders for monetary damages for breach of duty of care or other duty as a
director, except as liability is required by the Georgia Business Corporation
Code or other applicable law. The Registrant's Bylaws, Article VI, require the
Registrant to indemnify officers or directors who were wholly successful in the
defense of any proceeding to which they were parties because they were officers
or directors. This mandatory indemnification is against reasonable expenses they
incurred in the proceeding. The Registrant is permitted to indemnify officers
and directors, and to pay their reasonable defense expenses, except in such
cases as those involving conduct that was unlawful or in bad faith. Permission
must come from a majority of disinterested directors or shareholders.
These provisions in the Registrant's articles and bylaws may permit
indemnification to directors, officers or persons controlling the Registrant for
liabilities arising under the Securities Act of 1933. The Registrant has been
informed that, in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in the Securities Act and
is therefore unenforceable.
Item 25. Other Expenses of Issuance and Distribution.
Expenses of the Registrant in connection with the issuance and
distribution of the securities being registered are estimated as follows,
assuming the Maximum offering amount is sold:
Securities and Exchange Commission filing fee.............. $ 4,802
Blue sky fees and expenses................................. 6,400
Accountant's fees and expenses............................. 13,500
Special Counsel's fees and expenses........................ 75,000
General Counsel's fees and expenses........................ 35,000
Printing and Edgar filer .................................. 10,000
Postage and other delivery media........................... 5,000
Marketing expenses, including travel....................... 25,000
Miscellaneous.............................................. 10,298
---------
Total................................................. $ 185,000
=========
(The Registrant will bear all these expenses.)
Item 26. Recent Sales of Unregistered Securities.
<TABLE>
(a) The following information is given for all securities that the Registrant
sold within the past three years without registering the securities under the
Securities Act. The numbers give effect to the 1.5384 for one stock split, to be
effective January 14, 2000.
<CAPTION>
Date Title Amount
---- ----- ------
<S> <C> <C>
(1) October 1997 common stock 69,228 shares
(2) November 1998 through October 1999 common stock 106,308 shares
(2) November 1998 through October 1999 Series A Certificates of Indebtedness $3,056,276
(b) (1) No underwriters were used. There was one purchaser, Presbyterian
Investors Fund, Inc., which has total assets in excess of $5,000,000, is an
organization described in section 501(c)(3) of the Internal Revenue Code
and was not formed for the specific purpose of acquiring these securities.
Sophisticated persons as described in Rule 506(b)(2)(ii) directed its
purchase.
<PAGE>
(2) No underwriters were used. The following registered securities
broker-dealers participated as agents in the best efforts public offering
of these securities: Great Nation Investment Corp., Huntleigh Securities
Corp. and Medallion Equities, Inc.
(c) (1) All securities were sold for cash. The total offering price of the
securities sold was $450,000. No underwriting discounts or commissions were
paid.
(2) The total offering price of the securities sold was $691,030 from the
sale of shares and $3,056,276 from the sale of certificates. The total
compensation paid to securities broker-dealers was $111,980.
(d) The section of the Securities Act under which the Registrant claims
exemption from registration and the facts relied upon to make the exemption
available are:
(1) Section 4(2). The one purchaser became the majority shareowner. It
provides management and administrative services to the Registrant. It is an
accredited investor as defined by Rule 501 and is in the business of making
investments.
(2) Section 3(b). The entire offering was the subject of a qualification on
Form 1-A, pursuant to Regulation A of the General Rules and Regulations
under the Securities Act of 1933, File No.24-3710.
</TABLE>
<TABLE>
Item 27. Exhibits
Exhibits listed below are filed as part of this Registration Statement
pursuant to Item 601 of Regulation S-B.
<CAPTION>
Exhibit
Number Description
------ -----------
<S> <C>
1.1* Sales Agency Agreement with Huntleigh Securities Corp. and Medallion Equities, Inc.
3.1 Amended and Restated Articles of Incorporation of the Registrant
3.2 Amended and Restated By-laws of the Registrant
4.1 Article III.A., page 1 of the Amended and Restated Articles of Incorporation and Article III of the
Amended and Restated By-laws (Reference is made to Exhibits 3.1 and 3.2)
4.2 Description of common stock certificate
4.3 Form of Series B Certificate of Indebtedness
4.4 Trust Indenture for Series B Certificates of Indebtedness
4.5 Trust Indenture for Series A Certificates of Indebtedness
4.6 Amendment to Series A Trust Indenture
5* Opinion and consent of counsel with respect to the legality of the shares being registered
10.1 Administrative Services Agreement with Presbyterian Investors Fund, Inc.
23.1 Consent of T. Jackson McDaniel III, Certified Public Accountant
23.2 Consent of Counsel (reference is made to Exhibit 5)
#24 Power of Attorney
<FN>
- --------------------------------------
* To be filed by amendment
# As filed in Part II of this Registration Statement
</FN>
</TABLE>
Item 28. Undertakings.
(a) The Registrant hereby undertakes that it will:
(1) File, during any period in which it offers or sells securities, a
post-effective amendment to this registration statement to:
(i) Include any prospectus required by section 10(a)(3) of the
Securities Act;
<PAGE>
(ii) Reflect in the prospectus any facts or events which,
individually or together, represent a fundamental change in the
information in the registration statement; and
(iii) Include any additional or changed material information on
the plan of distribution.
(2) For determining liability under the Securities Act, treat each
post-effective amendment as a new registration statement of the
securities offered, and the offering of the securities at that
time to be the initial bona fide offering.
(3) File a post-effective amendment to remove from registration any of
the securities that remain unsold at the end of the offering.
(d) The registrant has been advised that, in the opinion of the Securities and
Exchange Commission, indemnification to directors, officers and controlling
persons of the registrant for liabilities arising under the Securities Act is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable.
<PAGE>
<TABLE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements of filing on Form SB-2 and authorizes this Registration
Statement to be signed on its behalf by the undersigned, in Norcross, Georgia,
on December , 1999.
<CAPTION>
<S> <C>
CORNERSTONE MINISTRIES INVESTMENTS, INC. (Issuer)
By S/CECIL A. BROOKS
---------------------------------------
Cecil A. Brooks, Chief Executive Officer
</TABLE>
<TABLE>
Each person whose signature appears below appoints Cecil A. Brooks, John T.
Ottinger, or either of them, his or her attorney-in-fact, with full power of
substitution and resubstitution, to sign any and all amendments (including
post-effective amendments) to this registration statement on Form SB-2 of
Cornerstone Ministries Investments, Inc., and to file them, with all their
exhibits and other related documents, with the Securities and Exchange
Commission, ratifying and confirming all that their attorney-in-fact and agent
or his or her substitute or substitutes may lawfully do or cause to be done by
virtue of this appointment.
In accordance with the requirements of the Securities Act of 1933, this
registration statement was signed by the following persons in the capacities and
on the dates stated.
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
S/CECIL A. BROOKS Chief Executive Officer, President and December 17, 1999
- -------------------------------------------- Chairman of the Board of Directors
Cecil A. Brooks
S/JOHN T. OTTINGER Vice President, Chief Financial Officer December 17, 1999
- -------------------------------------------- Secretary, Treasurer and Director
John T. Ottinger (Principal financial and accounting officer)
S/THEODORE R. FOX Director December 17, 1999
- --------------------------------------------
Theodore R. Fox
S/RICHARD E. MCLAUGHLIN Director December 14, 1999
- --------------------------------------------
Richard E. McLaughlin
S/JAYME SICKERT Director December 14, 1999
- --------------------------------------------
Jayme Sickert
S/IRVING B. WICKER Director December 14, 1999
- --------------------------------------------
Irving B. Wicker
S/TAYLOR MCGOWN Director December 14, 1999
- --------------------------------------------
Taylor McGown
S/HENRY R. DARDEN Director December 14, 1999
- --------------------------------------------
Henry Darden
S/WILLLIAM LAMBERTH Director December 14, 1999
- --------------------------------------------
William Lamberth
</TABLE>
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
CORNERSTONE MINISTRIES INVESTMENTS, INC.
I.
The name of the Corporation is Cornerstone Ministries Investments, Inc.
II.
The Corporation is organized to carry on any other lawful business
whatsoever, and to have, enjoy and exercise all the rights, powers and
privileges which are now or which may hereafter be conferred upon corporations
organized under the Georgia Business Corporation Code.
III.
The Corporation shall have authority to issue 30,000,000 shares of
capital stock, which shall be divided into classes and shall have the following
designations, preferences, limitations and relative rights:
A. Common Stock. One class shall consist of 29,000,000 shares of common
stock of $.01 par value, designated "Common Stock." The holders of Common Stock
shall be entitled to elect all of the members of the Board of Directors of the
Corporation, and such holders shall be entitled to vote as a class on all
matters required or permitted to be submitted to the shareholders of the
Corporation.
B. Preferred Stock. One class shall consist of 1,000,000 shares of
preferred stock of $.01 par value, designated "Preferred Stock." The Board of
Directors of the Corporation shall be empowered to divide any and all shares of
the Preferred Stock into series and to fix and determine the relative rights and
preferences of the shares of any series so established. Before any shares of
Preferred Stock of any particular series shall be issued, the Board of Directors
shall fix and determine, and is hereby expressly empowered to fix and determine,
in the manner provided by law, the following provisions of the shares of such
series: (i) the distinctive designation of such series and the number of shares
which shall constitute such series, which number may be increased (except where
otherwise provided by the Board of Directors in creating such series) or
decreased (but not below the number of shares thereof then outstanding) from
time to time by like action of the Board of Directors; (ii) the annual rate of
dividends payable on shares of such series, whether dividends shall be
cumulative and conditions upon which and the date when such dividends shall be
accumulated on all shares of such series issued prior to the record date for the
first dividend of such series; (iii) the time or times when the
Exhibit 3.1
<PAGE>
price or prices at which shares of such series shall be redeemable at the option
of the holder or of the Corporation and the sinking fund provisions, if any, for
the purchase or redemption of such shares; (iv) the amount payable on shares of
such series in the event of any liquidation, dissolution or winding up of the
affairs of the Corporation, whether all or a portion is paid before any amount
is paid on the Common Stock; (v) the rights, if any, of the holders of shares of
such series to convert such shares into, or exchange such shares for, shares of
Common Stock or shares of any other series of Preferred Stock and the terms and
conditions of such conversion or exchange; and (iv) whether the shares of such
series have voting rights and the extent of such voting rights, if any.
The Board of Directors shall have the power to reclassify any unissued
shares of any series of Preferred Stock from time to time by setting or changing
the preferences, conversion or other rights, voting powers, restrictions,
limitations as to dividends, qualifications, or terms or conditions of
redemption, including but not limited to, but subject to the limitations
described in, the above provisions.
IV.
The street address of the registered office of the Corporation is 6035
Atlantic Boulevard, Suite C, Norcross, Georgia 30071-1345 located in Gwinnett
County. The registered agent of the Corporation at such office is John T.
Ottinger.
V.
The mailing address of the principal office of the Corporation is 6035
Atlantic Boulevard, Suite C, Norcross, Georgia 30071-1345.
VI.
A. The Board of Directors of the Corporation, when evaluating any offer
of another individual, firm, corporation or other entity ("Person") (a) to make
a tender or exchange offer for any equity security of the Corporation, (b) to
merge or consolidate the Corporation with such other Person, or (c) to purchase
or otherwise acquire all or substantially all of the properties and assets of
the Corporation (such offers individually referred to as an "Acquisition
Proposal"), shall, in connection with the exercise of its business judgment in
determining what is in the best interest of the Corporation and its
shareholders, give due consideration to all relevant factors, including without
limitation, the consideration being offered in the Acquisition Proposal in
relation to the then-current market price of the Corporation's stock, but also
in relation to the then-current value of the Corporation in a freely negotiated
transaction and in relation to the Board of Directors' then-estimate of the
future value of the Corporation as an independent entity, the social and
economic effects on the employees, customers, suppliers, and other constituents
of the Corporation and on the communities in which the Corporation operates or
is located and the desirability of maintaining independence from any other
business or business entity; provided, however, that this Article shall be
deemed solely to grant discretionary authority to the directors and shall not be
deemed to provide any constituency any right to be considered.
-36-
<PAGE>
B. No amendment to these Articles of Incorporation shall amend, alter,
change or repeal any of the provisions of this Article VI, unless such
amendment, in addition to receiving any shareholder vote or consent required by
the laws of the State of Georgia in effect at the time, shall receive the
affirmative vote or consent of the holders of eighty percent (80%) of the
outstanding shares of each class of stock of the Corporation entitled to vote in
elections of directors.
VII.
No director of the Corporation shall be personally liable to the
Corporation or its shareholders for monetary damages for breach of duty of care
or other duty as a director; provided, however, that to the extent required by
applicable law, this Article shall not eliminate or limit the liability of a
director (i) for any appropriation, in violation of his duties, of any business
opportunity of the Corporation, (ii) for acts or omissions which involve
intentional misconduct or a knowing violation of law, (iii) for the types of
liability set forth in Section 14-2-832 of the Georgia Business Corporation
Code, or (iv) for any transaction from which the director derived an improper
personal benefit. If applicable law is amended to authorize corporate action
further eliminating or limiting the liability of directors, then the liability
of each director of the Corporation shall be eliminated or limited to the
fullest extent permitted by applicable law, as amended. Neither the amendment or
repeal of this Article, nor the adoption of any provision of these Articles of
Incorporation inconsistent with this Article, shall eliminate or reduce the
effect of this Article in respect of any acts or omissions occurring prior to
such amendment, repeal or adoption of an inconsistent provision.
VIII.
Except as otherwise specifically provided herein or in the Georgia
Business Corporation Code, these Articles of Incorporation may be amended,
altered, changed or repealed only by the affirmative vote or consent of the
holders of at least a majority in interest of the shares of each class of stock
of the Corporation entitled to vote in elections of directors. However, these
Articles may not be amended so as to impair the rights and obligations set forth
in Articles VII, VIII and XIII of the Bylaws, which rights and obligations may
only be amended or eliminated as set forth in the Bylaws. Except as provided in
the Bylaws and in the Georgia Business Corporation Code, the Board of Directors
may adopt and amend the Bylaws.
IX.
The text of Articles II, III, IV, V, VI, VII and VIII of the Amended and
Restated Articles of Incorporation is amended language.
X.
The Amended and Restated Articles of Incorporation were adopted by the
Shareholders of the Corporation on October 18, 1999. The Amended and Restated
Articles of Incorporation were duly approved by the Shareholders in accordance
with the provisions of Section 14-2-1003 of the Georgia Business Corporation
Code.
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<PAGE>
IN WITNESS WHEREOF, the undersigned has executed these Articles of
Incorporation on December , 1999.
----------------------------
John T. Ottinger
Secretary
AMENDED AND RESTATED BYLAWS
OF
CORNERSTONE MINISTRIES INVESTMENTS, INC.
a Georgia corporation, adopted October 18, 1999
ARTICLE I.
DEFINITIONS
As used in these Bylaws, the terms set forth below shall have the
meanings indicated, as follows:
"Articles of Incorporation" means the Articles of Incorporation of the
Corporation, as amended from time to time.
"Board" shall mean the Board of Directors of the Corporation.
"Chief Executive Officer" shall mean the President of the Corporation,
or such other officer as shall be designated by the Board as having the duties
of the Chief Executive Officer, as described in Section 4 of Article V of these
Bylaws.
"Code" shall mean the Georgia Business Corporation Code, as amended from
time to time.
"Corporation" shall mean Cornerstone Ministries Investments, Inc., a
Georgia corporation.
"Secretary" shall mean the Secretary of the Corporation, or such other
officer as shall be designated by the Board as having the duties of the
corporate Secretary as described in Section 5 of Article V of these Bylaws.
"Secretary of State" shall mean the Secretary of State of Georgia.
"Voting group" shall have the meaning set forth in subsection (a) of
Section 6 of Article III of these Bylaws.
ARTICLE II.
GENERAL PROVISIONS REGARDING NOTICES
Section 1. NOTICES. Except as otherwise provided in the Articles of
Incorporation or these Bylaws, or as otherwise required by applicable law:
(a) Any notice required by these Bylaws or by law shall be in writing
unless oral notice is reasonable under the circumstances.
(b) Notice may be communicated in person; by telephone, telegraph,
teletype, or other form of wire or wireless communication; or by mail or private
carrier. If these forms of personal notice are impracticable, notice may be
communicated by a newspaper of general circulation in the area where published,
or by radio, television, or other form of public broadcast communication.
(c) Written notice by the Corporation to any shareholder, if in a
comprehensible form, is effective when mailed, if mailed with first-class
postage prepaid and correctly addressed to the shareholder's address shown
Exhibit 3.2
<PAGE>
in the Corporation's current record of shareholders; provided that if the
Corporation has more than 500 shareholders of record entitled to vote at a
meeting, it may utilize a class of mail other than first class if the notice of
the meeting is mailed, with adequate postage prepaid, not less than 30 days
before the date of the meeting.
(d) Written notice to the Corporation may be addressed to its registered
agent at its registered office or to the Corporation or its Secretary at its
principal office shown in its most recent annual registration with the Secretary
of State.
(e) Except as provided in subsection (c) of this Section 1, written
notice, if in a comprehensible form, is effective at the earliest of the
following:
(1) When received, or when delivered, properly addressed, to the
addressee's last known principal place of business or residence;
(2) Five days after its deposit in the mail, as evidenced by the
postmark, if mailed with first-class postage prepaid and
correctly addressed; or
(3) On the date shown on the return receipt, if sent by registered
or certified mail, return receipt requested, and the receipt is
signed by or on behalf of the addressee.
(f) Oral notice is effective when communicated if communicated in a
comprehensible manner.
(g) In calculating time periods for notice under these By-Laws, when
a period of time measured in days, weeks, months, years, or other measurement of
time is prescribed for the exercise of any privilege or the discharge of any
duty, the first day shall not be counted but the last day shall be counted.
Section 2. WAIVER OF NOTICE. Except as otherwise provided or required
by the Articles of Incorporation, these Bylaws or applicable law:
(a) A shareholder may waive any notice required to be given to such
shareholder, before or after the date and time stated in the notice. The waiver
must be in writing, be signed by the shareholder entitled to the notice, and be
delivered to the Corporation for inclusion in the minutes or filing with the
Corporation's corporate records.
(b) A shareholder's attendance at a meeting:
(1) Waives objection to lack of notice or defective notice of the
meeting, unless the shareholder at the beginning of the meeting
objects to holding the meeting or transacting business at the
meeting; and
(2) Waives objection to consideration of a particular matter at the
meeting that is not within the purpose or purposes described in
the meeting notice, unless the shareholder objects to
considering the matter when it is presented.
(c) Neither the business transacted nor the purpose of the meeting
need be specified in the waiver, except that any waiver by a shareholder of the
notice of a meeting of shareholders with respect to an amendment of the Articles
of Incorporation, a plan of merger or share exchange, a sale of assets or any
other action which would entitle the shareholder to exercise statutory
dissenter's rights under the Code and obtain payment for his shares shall not be
effective unless:
-3-
<PAGE>
(1) Prior to the execution of the waiver, the shareholder shall have
been furnished the same material that under the Code would have
been required to be sent to the shareholder in a notice of the
meeting, including notice of any applicable dissenters' rights
as provided in the Code; or
(2) The waiver expressly waives the right to receive the material
required to be furnished.
(d) A director may waive any notice required to be given to such
director by the Code, the Articles of Incorporation, or these Bylaws before or
after the date and time stated in the notice. Except as provided by subsection
(e) of this Section 2, the waiver must be in writing, signed by the director
entitled to the notice, and delivered to the Corporation for inclusion in the
minutes or filing with the Corporation's corporate records.
(e) A director's attendance at or participation in a meeting waives
any required notice to him of the meeting unless the director at the beginning
of the meeting (or promptly upon his arrival) objects to holding the meeting or
transacting business at the meeting and does not thereafter vote for or assent
to action taken at the meeting.
ARTICLE III.
SHAREHOLDERS' MEETINGS
Section 1. PLACE OF MEETING. The Board may designate any place within or
outside the State of Georgia as the place of meeting for any annual or special
shareholders' meeting. A waiver of notice signed by all shareholders entitled to
vote at a meeting may designate any place within or outside the State of Georgia
as the place for the holding of such meeting. If no designation is made, or if a
special meeting be otherwise called, the place of meeting shall be the principal
office of the Corporation.
Section 2. ANNUAL MEETING. An annual meeting of the shareholders shall
be held at such time and place as the Board shall determine, at which time the
shareholders shall elect a Board and transact such other business as may be
properly brought before the meeting.
Section 3. SPECIAL MEETINGS. Except to the extent otherwise prescribed
by statute or the Articles of Incorporation, special meetings of the
shareholders, for any purpose or purposes, may only be called by the Chairman of
the Board, the Chief Executive Officer, or the board of directors pursuant to
resolution adopted by a majority of the entire board of directors. Unless
required by Code ss. 14-2-702 and its successors, shareholders may not call
special meetings.
Section 4. NOTICE TO SHAREHOLDERS.
(a) Except as otherwise specifically provided in this Section 4,
requirements with respect to the giving of notice and waiver of notice shall be
governed by the provisions of Article II of these Bylaws.
(b) The Corporation shall give notice to each shareholder entitled
to vote thereat of the date, time and place of each annual and special
shareholders' meeting no fewer than ten (10) nor more than sixty (60) days
before the meeting date.
(c) Unless otherwise required by the Code with respect to meetings
at which specified actions will be considered (including but not limited to
mergers, certain share exchanges, certain asset sales by the Corporation, and
dissolution of the Corporation), notice of an annual meeting need not contain a
description of the purpose or purposes for which the meeting is called.
-4-
<PAGE>
(d) Notice of a special meeting must include a description of the
purpose or purposes for which the meeting is called.
(e) Unless a new record date is set (or is required by law or by the
terms of these Bylaws to be set) therefor, notice of the date, time and place of
any adjourned meeting need not be given otherwise than by the announcement at
the meeting before adjournment. If a new record date for the adjourned meeting
is or must be fixed, however, notice of the adjourned meeting must be given in
accordance with these Bylaws as if such adjourned meeting were a newly-called
meeting.
(f) If any corporate action proposed to be considered at a meeting
of shareholders would or might give rise to statutory dissenters' rights under
the Code, the notice of such meeting shall state that the meeting is to include
consideration of such proposed corporate action, and that the consummation of
such action will or might give rise to such dissenters' rights, and shall
include the description of such statutory dissenters' rights required by the
Code.
(g) If any corporate action which would give rise to statutory
dissenters' rights under the Code is taken by written consent of shareholders
without a meeting, or is taken at a meeting with respect to which less than all
shareholders were entitled to receive notice, or is otherwise taken without a
vote of shareholders, the Corporation shall cause notice thereof, including the
information concerning statutory dissenters' rights contemplated by paragraph
(b) above, to be given, not more than ten (10) days after the adoption of such
action by shareholder vote at a meeting or by written consent to those
shareholders who did not execute such written consent or who were not entitled
to receive notice of such meeting, or to all shareholders if such action was
otherwise taken without a vote of shareholders.
Section 5. FIXING OF RECORD DATE.
(a) For the purpose of determining shareholders entitled to notice
of or to vote at any meeting of shareholders, or shareholders entitled to demand
a special meeting of shareholders, or shareholders entitled to take any other
action, the Board may fix in advance (but not retroactively from the date the
Board takes such action) a date as the record date for any such determination of
shareholders, such date in any case to be not more than seventy (70) days prior
to the meeting or action requiring such determination of shareholders. If no
record date is fixed for the determination of shareholders entitled to notice of
or to vote at a meeting of shareholders, the close of business on the last
business day before the first notice of such meeting is delivered to
shareholders shall be the record date. If no record date is fixed for
determining shareholders entitled to take action without a meeting, the date the
first shareholder signs the consent shall be the record date for such purpose.
If no record date is fixed for determining shareholders entitled to demand a
special meeting, or to take other action, the date of receipt of notice by the
Corporation of demand for such meeting, or the date on which such other action
is to be taken by the shareholders, shall be the record date for such purpose.
(b) A separate record date may be established for each voting group
entitled to vote separately on a matter at a meeting.
(c) A determination of shareholders entitled to notice of or to vote
at a shareholders meeting is effective for any adjournment of the meeting unless
the Board fixes a new record date, which it must do if the meeting is adjourned
to a date more than 120 days after the date fixed for the original meeting.
(d) For the purpose of determining shareholders entitled to a
distribution by the Corporation (other than one involving a purchase, redemption
or other acquisition of the Corporation's shares), the record date shall be the
date fixed for such purpose by the Board, or if the Board does not fix such a
date, the date on which the Board authorizes such distribution.
-5-
<PAGE>
Section 6. QUORUM AND VOTING REQUIREMENTS.
(a) Except as otherwise provided by the Articles of Incorporation or
the Code:
(i) A "voting group" with respect to any given matter means
all shares of one or more class or series which, under
the Articles of Incorporation or the Code, are entitled
to vote and be counted together collectively on that
matter, and unless specified otherwise in the Articles
of Incorporation, the Code or these Bylaws, all shares
entitled to vote on a given matter shall be deemed to
be a single voting group for purposes of that matter.
(ii) Each outstanding share, regardless of class, is
entitled to one vote on each matter voted on at a
shareholders' meeting.
(iii) A majority of the votes entitled to be cast on the
matter by a voting group constitutes a quorum of that
voting group for action on that matter.
(iv) The presence of a quorum of each voting group entitled
to vote thereon shall be the requisite for transaction
of business on a given matter.
(v) Action on a matter other than election of directors is
approved by a voting group if a quorum of such voting
group exists and the number of votes cast within such
voting group in favor of such action exceeds the number
of votes cast within such voting group against such
action.
(vi) Except as otherwise provided in these Bylaws, all
shares entitled to vote for election of directors shall
vote thereon as a single voting group, and directors
shall be elected by a plurality of votes cast by shares
entitled to vote in the election in a meeting at which
a quorum of such voting group is present.
(b) Once a share is represented for any purpose other than solely to
object to holding a meeting or transacting business at the meeting, it is deemed
present for quorum purposes for the remainder of the meeting and for any
adjournment of that meeting unless a new record date is, or is required by law
or these By-Laws to be, set for that adjourned meeting.
(c) If a quorum for transaction of business shall not be present at
a meeting of shareholders, the shareholders entitled to vote thereat, present in
person or by proxy, shall have the power to adjourn the meeting from time to
time, until the requisite amount of voting stock shall be present. No notice
other than announcements at the meeting before adjournment shall be required of
the new date, time or place of the adjourned meeting, unless a new record date
for such adjourned meeting is, or is required by law or these Bylaws to be,
fixed. At such adjourned meeting (for which no new record date is, or is
required to be, set) at which a quorum shall be present in person or by proxy,
any business may be transacted that might have been transacted at the meeting
originally called.
Section 7. PROXIES. At every meeting of the shareholders, any
shareholder having the right to vote shall be entitled to vote in person or by
proxy, but no proxy shall be: (i) effective unless given in writing and signed,
either personally by the shareholder or his attorney-in-fact; or (ii) effective
until received by the Secretary or other officer or agent authorized to tabulate
votes; or valid after eleven months from its date, unless said proxy expressly
provides for a longer period.
Section 8. INFORMAL ACTIONS BY SHAREHOLDERS. Any action required or
permitted to be taken at a meeting of the shareholders may be taken without a
meeting if written consent (which may take the form of
-6-
<PAGE>
one or more counterpart copies), setting forth the action so taken, shall be
signed by all the holders of all the shares entitled to vote with respect to the
subject matter thereof and delivered to the Corporation for inclusion in the
minutes or filing with the corporate records. Such consent shall have the same
force and effect as a unanimous vote of the shareholders; provided, however,
that no such consent which purports to be an approval of any plan of merger,
share exchange, asset sale or other transaction (i) as to which shareholder
approval is required by the Code and (ii) with respect to which specific
disclosure requirements to voting shareholders are imposed by the Code, shall be
effective unless:
(1) prior to the execution of the consent, each consenting
shareholder shall have been furnished the same material which,
under the Code, would have been required to be sent to
shareholders in a notice of a meeting at which the proposed
action would have been submitted to the shareholders for action,
including notice of any applicable dissenters' rights; or:
(2) the written consent contains an express waiver of the right to
receive the material otherwise required to be furnished.
ARTICLE IV.
DIRECTORS
Section 1. GENERAL POWERS. All corporate powers of the Corporation shall
be exercised by or under the authority of, and the business and affairs of the
Corporation managed under the direction of, its Board, subject to any limitation
set forth in the Articles of Incorporation, or any amendment to these Bylaws
approved by the shareholders of the Corporation, or any otherwise lawful
agreement among the shareholders of the Corporation.
Section 2. NUMBER, ELECTION AND TERMS. The business and affairs of the
Corporation shall be managed by or under the direction of a board of directors
which, except as otherwise fixed by or pursuant to the provisions of the
Articles of Incorporation relating to the rights of the holders of any series of
Preferred Stock to elect additional directors under specified circumstances,
shall consist of not less than three (3) nor more than fifteen (15) persons. The
exact number of directors within the minimum and maximum limitations specified
in the preceding sentence shall be fixed from time to time by the board of
directors pursuant to a resolution adopted by a majority of the entire board of
directors. Beginning with the Corporation's annual meeting to be held in 2000,
the directors shall be divided into three classes, as nearly equal in number as
possible, with the term of office of the first class of directors to expire at
the annual meeting of shareholders of the Corporation to be held in 2001, the
term of office of the second class of directors to expire at the annual meeting
of shareholders of the Corporation to be held in 2002, and the term of office of
the third class of directors to expire at the annual meeting of shareholders of
the Corporation to be held in 2003. At each annual meeting of the shareholders
of the Corporation, and except as otherwise so fixed by or pursuant to the
provisions of the Articles of Incorporation relating to the rights of the
holders of any series of Preferred Stock to elect additional directors under
specified circumstances, directors elected to succeed those directors whose
terms expire at such annual meeting shall be elected for a term of office to
expire at the third succeeding annual meeting of shareholders of the Corporation
after their election.
Section 3. VACANCIES AND NEWLY CREATED DIRECTORSHIPS. Subject to the
rights of the holders of any series of Preferred Stock then outstanding, newly
created directorships resulting from any increase in the number of directors or
any vacancies occurring in the board of directors resulting from death,
resignation, retirement, disqualification, removal from office or other cause
shall be filled by the affirmative vote of a majority of the remaining directors
then in office, although less than a quorum of the board of directors, or by the
sole remaining director. A director so chosen to fill a vacancy created by an
increase in the number of directors shall hold office until the next annual
meeting
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of shareholders of the Corporation. A director chosen to fill a vacancy
caused by any reason other than an increase in the number of directors shall
hold office until the annual meeting of shareholders at which the term of the
class of directors to which such director belongs expires. No decrease in the
number of directors constituting the board of directors shall shorten the term
of any incumbent director.
Section 4. CONTINUANCES IN OFFICE. Notwithstanding the foregoing
provisions of this Article IV, any director whose term of office has expired
shall continue to hold office until his successor shall be elected and qualify.
Section 5. REMOVAL. Subject to the rights of the holders of any series
of Preferred Stock then outstanding, any director, or the entire board of
directors, may be removed from office at any time, but only for cause and only
by the affirmative vote of the holders of at least seventy-five percent (75%) of
the total number of votes entitled to be cast by the holders of all of the
shares of capital stock of the Corporation then entitled to vote generally in
the election of directors. The holder of each share of capital stock entitled to
vote thereon shall be entitled to cast the same number of votes as the holder of
such shares is entitled to cast generally in the election of each director.
Section 6. PLACE OF MEETING. The Board may hold its meetings at such
place or places within or without the State of Georgia as it may from time to
time determine.
Section 7. COMPENSATION. Directors may be allowed such compensation for
attendance at regular or special meetings of the Board and of any special or
standing committees thereof as may be from time to time determined by resolution
of the Board.
Section 8. REGULAR MEETINGS. A regular annual meeting of the Board shall
be held, without other notice than this Bylaw, immediately after, and at the
same place as, the annual meeting of shareholders. The Board may provide, by
resolution, the time and place within or without the State of Georgia, for the
holding of additional regular meetings without other notice than such
resolution.
Section 9. SPECIAL MEETINGS. Special meetings of the Board may be called
by the Chief Executive Officer or the presiding officer of the Board, if
different from the Chief Executive Officer, on not less than two (2) days'
notice to each director by mail, telegram, cablegram or other form of wire or
wireless communication, or personal delivery or other form of communication
authorized under the circumstances by the Code, and shall be called by the Chief
Executive Officer or the Secretary in like manner and on like notice on the
written request of any two (2) or more members of the Board. Such notice shall
state the time, date and place of such meeting, but need not describe the
purpose of the meeting. Any such special meeting shall be held at such time and
place as shall be stated in the notice of the meeting.
Section 10. GENERAL PROVISIONS REGARDING NOTICE AND WAIVER. Except as
otherwise expressly provided in this Article IV, matters relating to notice to
directors and waiver of notice by directors shall be governed by the provisions
of Article II of these By-Laws.
Section 11. QUORUM. At all meetings of the Board, unless otherwise
provided in the Articles of Incorporation or other provisions of these Bylaws,
the presence of a at least one-third of the then serving Directors shall
constitute a quorum for the transaction of business. In the absence of a quorum
a majority of the Directors present at any meeting may adjourn from time to time
until a quorum be had. Notice of the time and place of any adjourned meeting
need only be given by announcement at the meeting at which adjournment is taken.
Section 12. MANNER OF ACTING. Except as expressly otherwise provided by
the Articles of Incorporation or other provisions of these Bylaws, if a quorum
is present when a vote is taken, the affirmative vote of a majority of directors
present is the act of the Board. A director who is present at a meeting when
corporate action is taken is deemed to have assented to the action unless:
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(1) He objects at the beginning of the meeting (or promptly upon his
arrival) to holding it or transacting business at the meeting;
(2) His dissent or abstention from the action taken is entered in
the minutes of the meeting; or
(3) He does not vote in favor of the action taken and delivers
written notice of his dissent or abstention to the presiding
officer of the meeting before its adjournment or to the
Corporation immediately after adjournment of the meeting.
Section 13. COMMITTEES.
(a) Except as otherwise provided by the Articles of Incorporation,
the Board may create one or more committees and appoint members of the Board to
serve on them. Each committee may have one or more members, who serve at the
pleasure of the Board.
(b) The provisions of these Bylaws and of the Code which govern
meetings, action without meetings, notice and waiver of notice, and quorum and
voting requirements of the Board, shall apply as well to committees created
under this Section 11 and their members.
(c) To the extent specified by the Articles of Incorporation, these
Bylaws and the resolution of the Board creating such committee, each committee
may exercise the authority of the Board, provided that a committee may not:
(1) Approve, or propose to shareholders for approval, action
required by the Code to be approved by shareholders;
(2) Fill vacancies on the Board or on any of its committees;
(3) Exercise any authority which the Board may have to amend the
Articles of Incorporation;
(4) Adopt, amend, or repeal bylaws; or
(5) Approve a plan of merger not requiring shareholder approval.
Section 14. ACTION WITHOUT FORMAL MEETING. Except as expressly otherwise
provided in the Articles of Incorporation, any action required or permitted to
be taken at any meeting of the Board or of any committee thereof may be taken
without a meeting if written consent thereto (which may take the form of one or
more counterparts) is signed by all members of the Board or of such committee,
as the case may be, and such written consent is filed with the minutes of the
proceedings of the Board or committee. A consent executed in accordance herewith
has the effect of a meeting vote and may be described as such in any document.
Section 15. CONFERENCE CALL MEETINGS. Members of the Board, or any
committee of the Board, may participate in a meeting of the Board or committee
by means of conference telephone or similar communications equipment by means of
which all persons participating in the meeting can simultaneously hear each
other during the meeting, and participation in a meeting pursuant to this
Section shall constitute presence in person at such meeting.
Section 16. NOMINATIONS AND NOTIFICATION OF NOMINATIONS FOR DIRECTORS.
Nominations for election to the Board may be made by the Board, any nominating
committee thereof or by any holder of any outstanding class of capital stock of
the Corporation entitled to vote for the election of directors.
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Any shareholder entitled to vote for the election of directors may nominate a
person or persons for election as a director only if written notice of such
shareholder's intention to make any such nomination is given either by personal
delivery or mailed by the United States Mail, postage prepaid, certified and
return receipt requested, to the Secretary of the Corporation not later than the
later of (i) the close of business on the seventh (7th) calendar day following
the date on which notice of the meeting of shareholders for the election of
directors is first given to shareholders (any such notice of meeting of
shareholders shall not be given earlier than the record date for the meeting of
shareholders) and (ii) a date ninety (90) days prior to the date of the meeting
of shareholders. Each such notice shall set forth: (a) the name and address of
the shareholder who intends to make the nomination and of the person or persons
to be nominated; (b) a representation that the shareholder is a holder of record
of stock of the Corporation entitled to vote at such meeting and intends to
appear in person or by proxy at the meeting to nominate the person or persons
specified in the notice; (c) a description of all arrangements or understandings
between the shareholder and each nominee and any other person or persons (naming
such person or persons) pursuant to which the nomination or nominations are to
be made by the shareholder; (d) such other information regarding each nominee
proposed by such shareholder as would have been required to be included in a
proxy statement filed pursuant to the proxy rules of the Securities and Exchange
Commission had each nominee been nominated, or intended to be nominated, by the
Board; and (e) the consent of each nominee to serve as a director of the
Corporation if so elected.
The notification shall be signed by the nominating shareholder and shall
include or be accompanied by a signed written consent of each person to be named
as a nominee for election as a director. Purported nominations not made in
compliance with these procedures may be disregarded by the chairman of the
meeting, and upon his instructions, the inspectors of election shall disregard
all votes cast for each such nominee. The Board may also refuse to acknowledge
the nomination of any person not made in compliance with the foregoing
procedures.
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ARTICLE V.
OFFICERS
Section 1. NUMBER. The officers of the Corporation may include a Chief
Executive Officer, a Chief Financial Officer, a Secretary and such other
officers as may from time to time be chosen by the Board of Directors. Any
number of offices may be held by one person.
Section 2. ELECTION, TERM OF OFFICE AND QUALIFICATIONS. At any regular
meeting of the Board of Directors, the board may elect a Chief Executive
Officer, a Chief Financial Officer, a Secretary and such other officers and
assistant officers as may be deemed advisable. Such Officers shall hold office
until their successors are elected and qualified; provided, however, that any
officer may be removed with or without cause by the affirmative vote of a
majority of the whole Board of Directors.
Section 3. THE CHIEF EXECUTIVE OFFICER. The Chief Executive Officer, who
may also be referred to as the President, shall: (a) have general active
management of the business of the Corporation; (b) when present, preside at all
meetings of the Board and of the shareholders; (c) see that all orders and
resolutions of the Board are carried into effect; (d) sign and deliver in the
name of the Corporation any deeds, mortgages, bonds, contracts or other
instruments pertaining to the business of the Corporation, except in cases in
which the authority to sign and deliver is required by law to be exercised by
another person or as expressly delegated by the Articles of Incorporation or
Bylaws or by the Board to some other officer or agent of the Corporation; (e)
maintain records of and, whenever necessary, certify all proceedings of the
Board and the shareholders; and (f) perform other duties prescribed by the
Board.
Section 4. ASSISTANT EXECUTIVE OFFICER. Each Assistant Executive Officer
shall have such powers and shall perform such duties as may be prescribed by the
Board of Directors. In the event of absence or disability of the Chief Executive
Officer, an assistant executive officer shall succeed to his powers and duties
in the order in which they are elected or as otherwise prescribed by the Board
of Directors. The Assistant Executive Officers may also be referred to as Vice
Presidents.
Section 5. SECRETARY. The Secretary shall be secretary of and shall
attend all meetings of the shareholders and Board of Directors. The Secretary
shall act as clerk thereof and shall record all the proceedings of such meetings
in the minute book of the Corporation. The Secretary shall give proper notice of
meetings of shareholders and Directors. The Secretary shall keep the seal of the
Corporation, if any, and shall affix the same to any instrument requiring it and
shall attest the seal by his signature. The Secretary shall, with the Chief
Executive Officer or Chief Financial Officer, acknowledge all certificates for
shares of the Corporation, when required, and shall perform such other duties as
may be prescribed from time to time by the Board of Directors.
Section 6. CHIEF FINANCIAL OFFICER. The Chief Financial Officer, who may
also be referred to as the Treasurer, shall: (a) keep accurate financial records
for the Corporation; (b) deposit all money, drafts, and checks in the name of
and to the credit of the Corporation in the banks and depositories designated by
the Board; (c) endorse for deposit all notes, checks, and drafts received by the
Corporation as ordered by the Board, making proper vouchers therefor; (d)
disburse corporate funds and issue checks and drafts in the name of the
Corporation as ordered by the Board; (e) render to the Chief Executive Officer
and the Board, whenever requested, an account of all transactions by the Chief
Financial Officer and of the financial condition of the Corporation; and (f)
perform other duties prescribed by the Board or by the Chief Executive Officer.
Section 7. ASSISTANT OFFICERS. In the event of absence or disability of
any assistant executive officer, Secretary, or Chief Financial Officer, such
assistants to such officers shall succeed to the powers and duties of the absent
officer in the order in which they are elected or as otherwise prescribed by the
Board of
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Directors until such principal officer shall resume his duties or the Board of
Directors elects his replacement. Such assistant officers shall exercise such
other power and duties as may be delegated to them from time to time by the
Board of Directors, but they shall be subordinate to the principal officer they
are designated to assist.
Section 8. OFFICERS SHALL NOT LEND CORPORATE CREDIT. Except for the
proper use of the Corporation, no officer of this Corporation shall sign or
endorse in the name or on behalf of this Corporation, or in his official
capacity, any obligations for the accommodation of any other party or parties,
nor shall any check, note, bond, stock certificate or other security or thing of
value belonging to this Corporation be signed by any officer or Director as
collateral for any obligation other than valid obligations of this Corporation.
Section 9. OTHER OFFICERS AND AGENTS. The Board of Directors may appoint
such other officers and agents as it shall deem necessary, who shall hold their
offices for such terms and shall exercise such powers and perform such duties as
shall be determined from time to time by the Board of Directors.
Section 10. COMPENSATION. The salaries of all officers and agents of
the Corporation shall be fixed by the Board of Directors.
Section 11. REMOVAL; RESIGNATION. The officers of the Corporation shall
serve at the pleasure of the Board of Directors, and until their successors are
chosen and qualified. Any officer or agent may be removed by the Board of
Directors whenever, in its judgment, the best interests of the Corporation will
be served thereby, but such removal shall be without prejudice to the
contractual rights, if any, of the person so removed. Any officer may resign at
any time. Such resignation shall be made in writing, and shall take effect at
the time specified herein, and if a time is not specified, at the time of its
receipt by the Executive Officer or the Secretary. The acceptance of a
resignation shall not be necessary to make it effective. If the office of any
officer becomes vacant for any reason, the vacancy shall be filled by the Board
of Directors.
ARTICLE VI.
INDEMNIFICATION
Section 1. DEFINITIONS FOR INDEMNIFICATION PROVISIONS. As used in this
Article VI, the term:
(1) "Corporation" (when spelled with an initial capital letter)
includes any domestic or foreign predecessor entity of the
"Corporation" (as defined in Article I of these Bylaws) in a
merger or other transaction in which the predecessor's existence
ceased upon consummation of the transaction.
(2) "director" means an individual who is or was a director of the
Corporation or an individual who, while a director of the
Corporation, is or was serving at the Corporation's request as a
director, officer, partner, trustee, employee, or agent of
another foreign or domestic corporation, partnership, joint
venture, trust, employee benefit plan, or other enterprise. A
director is considered to be serving an employee benefit plan at
the Corporation's request if his duties to the Corporation also
impose duties on, or otherwise involve services by, him to the
plan or to participants in or beneficiaries of the plan.
Director includes, unless the context requires otherwise, the
estate or personal representative of a director.
(3) "expenses" include attorneys' fees.
(4) "liability" means the obligation to pay a judgment, settlement,
penalty, fine (including an excise tax assessed with respect to
an employee benefit plan), or reasonable expenses incurred with
respect to a proceeding.
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(5) "party" includes an individual who was, is, or is threatened to
be made a named defendant or respondent in a proceeding.
(6) "proceeding" means any threatened, pending, or completed action,
suit, or proceeding, whether civil, criminal, administrative, or
investigative and whether formal or informal.
Section 2. MANDATORY INDEMNIFICATION AGAINST EXPENSES. The Corporation
shall indemnify a director who was wholly successful, on the merits or
otherwise, in the defense of any proceeding to which he was a party because he
was a director of the Corporation against reasonable expenses incurred by the
director in connection with the proceeding.
Section 3. AUTHORITY FOR PERMISSIVE INDEMNIFICATION.
(a) Except as otherwise provided in this Section, the Corporation
may indemnify an individual who is a party to a proceeding because he is or was
a director against liability incurred in the proceeding if he conducted himself
in good faith and reasonably believed, in the case of conduct in his official
capacity, that such conduct was in the best interests of the Corporation; in all
other cases, that such conduct was at least not opposed to the best interests of
the Corporation; and in the case of any criminal proceeding, that he had no
reasonable cause to believe such conduct was unlawful.
(b) A director's conduct with respect to an employee benefit plan
for a purpose he believed in good faith to be in the interests of the
participants in and beneficiaries of the plan is conduct that the director
reasonably believed was at least not opposed to the best interests of the
Corporation; and
(c) The termination of a proceeding by judgment, order, settlement,
or conviction, or upon a plea of nolo contendere or its equivalent is not, of
itself, determinative that the director did not meet the standard of conduct
described in this Section 3.
(d) The Corporation may not indemnify a director under this Section
3:
(1) In connection with a proceeding by or in the right of the
Corporation in which the director was adjudged liable to the
Corporation; except for reasonable expenses incurred in
connection with the proceeding if it is determined that the
director has met the relevant standard of conduct under this
Section 3; or
(2) In connection with any other proceeding with respect to conduct
for which he was adjudged liable on the basis that personal
benefit was improperly received by him, whether or not involving
action in his official capacity.
Section 4. DETERMINATION AND AUTHORIZATION OF PERMITTED INDEMNIFICATION.
(a) The Corporation may not indemnify a director under Section 3 of
this Article VI unless authorized thereunder and a determination has been made
for a specific case proceeding that indemnification of the director is
permissible in the circumstances because he has met the relevant standard of
conduct set forth in such Section 3.
(b) The determination shall be made:
(1) If there are two or more disinterested directors, by the Board
by a majority vote of all the disinterested directors (a
majority of whom shall for such purpose constitute a quorum) or
by a
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majority of the members of a committee of two or more
disinterested directors appointed by such a vote;
(2) By special legal counsel:
(A) Selected in the manner prescribed in paragraph (1)
of this subsection; or
(B) If there are fewer than two disinterested
directors, selected by the Board (in which selection directors
who do not qualify as disinterested directors may participate);
or
(3) By the shareholders, but shares owned by or voted under the
control of a director who at the time does not qualify as a
disinterested director may not be voted on the determination.
(c) Authorization of indemnification or an obligation to indemnify
and evaluation as to reasonableness of expenses shall be made in the same manner
as the determination that indemnification is permissible, except that if there
are fewer than two disinterested directors or if the determination is made by
special legal counsel, authorization of indemnification and evaluation as to
reasonableness of expenses shall be made by those entitled under subsection
(b)(2)(B) of this Section 4 to select special legal counsel.
Section 5. SHAREHOLDER-APPROVED INDEMNIFICATION.
(a) Without regard to any limitations contained in any other section
of this Article VI, the Corporation may, if authorized by its shareholders by a
majority of votes which would be entitled to be cast in a vote to amend the
Corporation's Articles of Incorporation (which authorization may take the form
of an amendment to the Articles of Incorporation or a contract, resolution or
bylaw approved or ratified by the requisite shareholder vote), indemnify or
obligate itself to indemnify a director made a party to a proceeding, including
a proceeding brought by or in the right of the Corporation, but shares owned or
voted under the control of a director who at the time does not qualify as a
disinterested director with respect to any existing or threatened proceeding
that would be covered by the authorization may not be voted on the
authorization.
(b) The Corporation shall not indemnify a director under this
Section 5 for any liability incurred in a proceeding in which the director is
adjudged liable to the Corporation or is subjected to injunctive relief in favor
of the Corporation:
(1) For any appropriation, in violation of his duties, of any
business opportunity of the Corporation;
(2) For acts or omissions which involve intentional misconduct or a
knowing violation of law;
(3) For any type of liability for unlawful distribution under
Section 14-2-832 of the Code, or any successor statute; or
(4) For any transaction from which he received an improper personal
benefit.
(c) Where approved or authorized in the manner described in
subsection (a) of this Section 5, the Corporation may advance or reimburse
expenses incurred in advance of final disposition of the proceeding only if:
(1) The director furnishes the Corporation a written affirmation of
his good faith belief that his conduct does not constitute
behavior of the kind described in subsection (b) of this Section
5; and
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(2) The director furnishes the Corporation a written undertaking,
executed personally or on his behalf, to repay any advances if
it is ultimately determined that he is not entitled to
indemnification under this Section 5.
Section 6. ADVANCES FOR EXPENSES.
(a) The Corporation may pay for or reimburse the reasonable expenses
incurred by a director who is a party to a proceeding because he is a director
in advance of final disposition of the proceeding if:
(1) The director furnishes the Corporation a written affirmation of
his good faith belief that he has met the relevant standard of
conduct set forth in subsection (a) of Section 3 of this Article
VI or that the proceeding involves conduct for which liability
has been eliminated under a provision of the Articles as
authorized by paragraph (4) of subsection (b) of Code Section
14-2-202; and
(2) The director furnishes the Corporation a written undertaking to
repay any funds advanced if it is ultimately determined that he
is not entitled to indemnification under this Article.
(b) The undertaking required by paragraph (2) of subsection (a) of
this Section 6 must be an unlimited general obligation of the director but need
not be secured and may be accepted without reference to financial ability to
make repayment.
(c) Authorizations under this Section 6 shall be made:
(a) By the Board:
(A) When there are two or more disinterested directors,
by a majority vote of all the disinterested directors (a
majority of whom shall for such purpose constitute a quorum) or
by a majority of the members of a committee of two or more
disinterested directors appointed by such a vote; or
(B) When there are fewer than two disinterested
directors, by the vote necessary for action by the Board in
accordance with subsection (c) of Code Section 14-2-824, in
which authorization directors who do not qualify as
disinterested directors may participate; or
(b) By the shareholders, but shares owned or voted under the control
of a director who at the time does not qualify as a
disinterested director with respect to the proceeding may not be
voted on the authorization.
Section 7. INDEMNIFICATION OF OFFICERS, EMPLOYEES, AND AGENTS.
(a) The Corporation may indemnify and advance expenses under this
part to an officer of the Corporation who is a party to a proceeding because he
is an officer of the Corporation:
(a) To the same extent as a director; and
(b) If he is not a director, to such further extent as may be
provided by the Articles of Incorporation, the Bylaws, a
resolution of the Board, or contract except for liability
arising out of conduct that constitutes:
(A) Appropriation, in violation of his duties, of any
business opportunity of the Corporation;
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(B) Acts or omissions which involve intentional
misconduct or a knowing violation of law;
(C) The types of liability set forth in Code Section
14-2-832; or
(D) Receipt of an improper personal benefit.
(b) The provisions of paragraph (2) of subsection (a) of this
Section 7 shall apply to an officer who is also a director if the sole basis on
which he is made a party to the proceeding is an act or omission solely as an
officer.
(c) An officer of the Corporation who is not a director is entitled
to mandatory indemnification under Section 2, and may apply to a court under
Code Section 14-2-854 for indemnification or advances for expenses, in each case
to the same extent to which a director may be entitled to indemnification or
advances for expenses under those provisions.
(d) The Corporation may also indemnify and advance expenses to an
employee or agent who is not a director to the extent, consistent with public
policy, that may be provided by its Articles of Incorporation, Bylaws, general
or specific action of its Board, or contract.
Section 8. INSURANCE. The Corporation may purchase and maintain
insurance on behalf of an individual who is a director, officer, employee, or
agent of the Corporation or who, while a director, officer, employee, or agent
of the Corporation, serves at the request of the Corporation as a director,
officer, partner, trustee, employee, or agent of another foreign or domestic
corporation, partnership, joint venture, trust, employee benefit plan, or other
entity against liability asserted against or incurred by him in that capacity or
arising from his status as a director, officer, employee, or agent, whether or
not the Corporation would have power to indemnify or advance expenses to him
against the same liability under this part.
Section 9. EXPENSES FOR APPEARANCE AS WITNESS. Nothing contained in this
Article VI shall be deemed to limit the Corporation's power to pay or reimburse
expenses incurred by a director or officer in connection with his appearance as
a witness in a proceeding at a time when he is not a party.
ARTICLE VII.
FAIR PRICE REQUIREMENTS
Section 1. DEFINITIONS.
As used in this Article VII, the term:
(a) "Affiliate" means a person that directly, or indirectly through
one or more intermediaries, Controls or is Controlled By or is Under Common
Control With a specified person.
(b) "Announcement Date" means the date of the first general public
announcement of the proposal of the Business Combination.
(c) "Associate," when used to indicate a relationship with any
person, means:
(A) Any corporation or organization, other than the Corporation
or a subsidiary of the Corporation, of which such person is an officer,
director, or partner or is the Beneficial Owner of ten percent (10%) or
more of any class of equity securities;
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(B) Any trust or other estate in which such person has a
beneficial interest of ten percent (10%) or more or as to which such
person serves as trustee or in a similar fiduciary capacity; and
(C) Any relative or spouse of such person, or any relative of
such spouse, who has the same home as such person.
(d) "Beneficial Owner" means a person shall be considered to be
the beneficial owner of any equity securities:
(A) Which such person or any of such person's Affiliates or
Associates owns, directly or indirectly;
(B) Which such person or any of such person's Affiliates or
Associates, directly or indirectly, has:
(i) The right to acquire, whether such right is
exercisable immediately or only after the passage of time,
pursuant to any agreement, arrangement, or understanding or upon
the exercise of conversion rights, exchange rights, warrants or
options, or otherwise; or
(ii) The right to vote pursuant to any agreement,
arrangement, or understanding; or
(C) Which are owned, directly or indirectly, by any other person
with which such person or any of such person's Affiliates or Associates
has any agreement, arrangement, or understanding for the purpose of
acquiring, holding, voting, or disposing of equity securities, provided,
however, that a person shall not be considered to be a beneficial owner
of any equity securities which (i) have been tendered pursuant to a
tender or exchange offer made by such person or such person's Affiliates
or Associates until such tendered stock is accepted for purchase or
exchange or (ii) such person or such person's Affiliates or Associates
have the right to vote pursuant to any agreement, arrangement, or
understanding if the agreement, arrangement, or understanding to vote
such stock arises solely from a revocable proxy or consent given in
response to a proxy or consent solicitation made to one or more persons.
(e) "Business Combination" means:
(A) Any merger of the Corporation or any subsidiary with:
(i) Any Interested Shareholder; or
(ii) Any other corporation, whether or not itself an
Interested Shareholder, which is, or after the merger would be,
an Affiliate of an Interested Shareholder that was an Interested
Shareholder prior to the consummation of the transaction;
(B) Any share exchange with (i) any Interested Shareholder or
(ii) any other corporation, whether or not itself an Interested
Shareholder, which is, or after the share exchange would be, an
Affiliate of an Interested Shareholder that was an Interested
Shareholder prior to the consummation of the transaction;
(C) Any sale, lease, transfer, or other disposition, other than
in the ordinary course of business, in one transaction or in a series of
transactions in any 12-month period, to any Interested Shareholder or
any Affiliate of any Interested Shareholder, other than the Corporation
or any of its subsidiaries, of any assets of the Corporation or any
subsidiary having, measured at the time the
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transaction or transactions are approved by the board of directors of
the Corporation, an aggregate book value as of the end of the
Corporation's most recently ended fiscal quarter of ten percent (10%) or
more of the net assets of the Corporation as of the end of such fiscal
quarter;
(D) The issuance or transfer by the Corporation, or any
subsidiary, in one transaction or a series of transactions in any
12-month period, of any equity securities of the Corporation or any
subsidiary which have an aggregate market value of five percent (5%) or
more of the total market value of the outstanding common and preferred
shares of the Corporation whose shares are being issued to any
Interested Shareholder or any Affiliate of any Interested Shareholder,
other than the Corporation or any of its subsidiaries, except pursuant
to the exercise of warrants or rights to purchase securities offered pro
rata to all holders of the Corporation's Voting Shares or any other
method affording substantially proportionate treatment to the holders of
Voting Shares;
(E) The adoption of any plan or proposal for the liquidation or
dissolution of the Corporation in which anything other than cash will be
received by an Interested Shareholder or any Affiliate of any Interested
Shareholder; or
(F) Any reclassification of securities, including any reverse
stock split, or recapitalization of the Corporation, or any merger of
the Corporation with any of its subsidiaries, or any share exchange with
any of its subsidiaries, which has the effect, directly or indirectly,
in one transaction or a series of transactions in any 12-month period,
of increasing by five percent (5%) or more the proportionate amount of
the outstanding shares of any class or series of equity securities of
the Corporation or any subsidiary which is directly or indirectly
beneficially owned by any Interested Shareholder or any Affiliate of any
Interested Shareholder.
(f) "Continuing Director" means any member of the board of directors
who is not an Affiliate or Associate of an Interested Shareholder or any of its
Affiliates, other than the Corporation or any of its subsidiaries, and who was a
director of the Corporation prior to the Determination Date, and any successor
to such Continuing Director who is not an Affiliate or an Associate of an
Interested Shareholder or any of its Affiliates, other than the Corporation or
its subsidiaries, and is recommended or elected by a majority of all of the
Continuing Directors.
(g) "Control," including the terms "Controlling," "Controlled By,"
and "Under Common Control With," means the possession, directly or indirectly,
of the power to direct or cause the direction of the management and policies of
a person, whether through the ownership of voting securities, by contract, or
otherwise, and the beneficial ownership of shares representing ten percent (10%)
or more of the votes entitled to be cast by the Corporation's Voting Shares
shall create an irrebuttable presumption of control.
(h) "Determination Date" means the date on which an Interested
Shareholder first became an Interested Shareholder.
(i) "Fair Market Value" means:
(A) In the case of securities, the highest closing sale price,
during the period beginning with and including the Determination Date
and for 29 days prior to such date, of such a security on a principal
United States securities exchange registered under the Securities
Exchange Act of 1934 on which such securities are listed, or, if such
securities are not listed on any such exchange, the highest closing
sales price or, if none is available, the average of the highest bid and
asked prices reported with respect to such a security, in each case
during the 30-day period referred to above, on the National Association
of Securities Dealers, Inc., Automatic Quotation System, or any system
then in use, or, if no such quotations are available, the fair market
value on the date in question of such a security as determined in good
faith at
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<PAGE>
a duly called meeting of the board of directors by a majority of all of
the Continuing Directors, or, if there are no Continuing Directors, by
the entire board of directors; and
(B) In the case of property other than securities, the fair
market value of such property on the date in question as determined in
good faith at a duly called meeting of the board of directors by a
majority of all of the Continuing Directors, or, if there are no
Continuing Directors, by the entire board of directors of the
Corporation.
(j) "Interested Shareholder" means any person, other than the
Corporation or its subsidiaries, that:
(A) Is the Beneficial Owner of ten percent (10%) or more of the
voting power of the outstanding Voting Shares of the Corporation; or
(B) Is an Affiliate of the Corporation and, at any time within
the two-year period immediately prior to the date in question, was the
Beneficial Owner of ten percent (10%) or more of the voting power of the
then outstanding Voting Shares of the Corporation.
For the purpose of determining whether a person is an Interested Shareholder,
the number of Voting Shares deemed to be outstanding shall not include any
unissued Voting Shares which may be issuable pursuant to any agreement,
arrangement, or understanding, or upon exercise of conversion rights, warrants,
or options, or otherwise.
(k) "Net Assets" means the amount by which the total assets of the
Corporation exceed the total debts of the Corporation.
(l) "Voting Shares" means shares entitled to vote generally in the
election of directors.
Section 2. ADDITIONAL BUSINESS COMBINATION APPROVAL.
In addition to any vote otherwise required by law or the Articles of
Incorporation of the Corporation, a Business Combination shall be:
(a) Unanimously approved by the Continuing Directors, provided
that the Continuing Directors constitute at least three members of the
board of directors at the time of such approval; or
(b) Recommended by at least two-thirds of the Continuing
Directors and approved by a majority of the votes entitled to be cast by
holders of Voting Shares, other than Voting Shares beneficially owned by
the Interested Shareholder who is, or whose Affiliate is, a party to the
Business Combination.
Section 3. EXCEPTION TO VOTE REQUIREMENT OF ARTICLE VII, SECTION 2.
(a) The vote required by Section 2 of this Article VII does not
apply to a Business Combination if each of the following conditions is met:
(a) The aggregate amount of the cash, and the Fair Market Value
as of five days before the consummation of the Business Combination of
consideration other than cash, to be received per share by holders of
any class of common shares or any class or series of preferred shares in
such Business Combination is at least equal to the highest of the
following:
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<PAGE>
(A) The highest per share price, including any
brokerage commissions, transfer taxes, and soliciting dealers'
fees, paid by the Interested Shareholder for any shares of the
same class or series acquired by it:
(i) Within the two-year period immediately
prior to the Announcement Date; or
(ii) In the transaction in which it became
an Interested Shareholder, whichever is higher;
(B) The Fair Market Value per share of such class or
series as determined on the Announcement Date or as determined
on the Determination Date, whichever is higher; or
(C) In the case of shares other than common shares, the
highest preferential amount per share to which the holders of
shares of such class or series are entitled in the event of any
voluntary or involuntary liquidation, dissolution, or winding up
of the Corporation, provided that this subparagraph shall only
apply if the Interested Shareholder has acquired shares of such
class or series within the two-year period immediately prior to
the Announcement Date;
(b) The consideration to be received by holders of any class or
series of outstanding shares is to be in cash or in the same form as the
Interested Shareholder has previously paid for shares of the same class
or series. If the Interested Shareholder has paid for shares of any
class or series of shares with varying forms of consideration, the form
of consideration for such class or series of shares shall be either cash
or the form used to acquire the largest number of shares of such class
or series previously acquired by it;
(c) After the Interested Shareholder has become an Interested
Shareholder and prior to the consummation of such Business Combination:
(A) Unless approved by a majority of the Continuing
Directors, there shall have been:
(i) No failure to declare and pay at the
regular date therefor any full periodic dividends,
whether or not cumulative, on any outstanding preferred
shares of the Corporation;
(ii) No reduction in the annual rate of
dividends paid on any class of common shares, except as
necessary to reflect any subdivision of the shares;
(iii) An increase in such annual rate of
dividends as is necessary to reflect any
reclassification, including any reverse share split,
recapitalization, reorganization, or any similar
transaction which has the effect of reducing the number
of outstanding shares; and
(iv) No increase in the Interested
Shareholder's percentage ownership of any class or
series of shares of the Corporation by more than one
percent (1%) in any 12-month period;
(B) The provisions of divisions (i) and (ii) of
subparagraph (A) of this paragraph shall not apply if the
Interested Shareholder or an Affiliate or Associate of the
Interested Shareholder did not vote as a director of the
Corporation in a manner inconsistent with divisions (i) and (ii)
of subparagraph (A) of this paragraph and the Interested
Shareholder, within ten (10)
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<PAGE>
days after any act or failure to act inconsistent with divisions
(i) and (ii) of subparagraph (A) of this paragraph, notified the
board of directors of the Corporation in writing that the
Interested Shareholder disapproved thereof and requested in good
faith that the board of directors rectify the act or failure to
act; and
(d) After the Interested Shareholder has become an Interested
Shareholder, the Interested Shareholder has not received the benefit,
directly or indirectly, except proportionately as a shareholder, of any
loans, advances, guarantees, pledges, or other financial assistance or
any tax credits or other tax advantages provided by the Corporation or
any of its subsidiaries, whether in anticipation of or in connection
with such Business Combination or otherwise.
Section 4. REPEAL OF ARTICLE VII AND LIMITATIONS.
(a) This Article VII shall be irrevocable except that it may be
repealed by the affirmative vote of at least two-thirds of the Continuing
Directors and a majority of the votes entitled to be cast by the voting shares
of the Corporation, other than shares beneficially owned by any Interested
Shareholder and affiliates and associates of any Interested Shareholder, in
addition to any other vote required by the Articles of Incorporation or Bylaws
to amend these Bylaws.
(b) The requirement of Section 2 of this Article VII shall not apply
to Business Combinations with an Interested Shareholder or its Affiliates if,
during the three-year period immediately preceding the consummation of the
Business Combination, the Interested Shareholder has not at any time during such
period:
(1) Ceased to be an Interested Shareholder; or
(2) Increased its percentage ownership of any class or series of
common or preferred shares of the Corporation by more than one
percent (1%) in any 12-month period.
ARTICLE VIII.
BUSINESS COMBINATIONS WITH INTERESTED SHAREHOLDERS
Section 1. DEFINITIONS.
For purposes of this Article VIII, the definitions contained in Article
VII, Section 1 shall be applicable with the following exceptions:
(1) For purposes of this part, "Business Combination" means:
(A) Any merger or consolidation of the Corporation or
any subsidiary with (i) any Interested Shareholder; or (ii) any
other corporation, whether or not itself an Interested
Shareholder, which is, or after the merger or consolidation
would be, an Affiliate of an Interested Shareholder that was an
Interested Shareholder prior to the consummation of the
transaction other than as a result of the Interested
Shareholder's ownership of the Corporation's voting stock;
(B) Any sale, lease, transfer, or other disposition,
other than in the ordinary course of business, in one
transaction or in a series of transactions, to any Interested
Shareholder or any Affiliate or Associate of any Interested
Shareholder, other than the Corporation or any of its
subsidiaries, of any assets of the Corporation or any subsidiary
having, measured at the time the transaction or transactions are
approved by the board of directors of the Corporation, an
aggregate book value as of the end of the Corporation's most
recently ended fiscal quarter of ten percent (10%) or more of
the Net Assets of the Corporation as of the end of such fiscal
quarter;
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<PAGE>
(C) The issuance or transfer by the Corporation, or any
subsidiary, in one transaction or a series of transactions, of
any equity securities of the Corporation or any subsidiary which
have an aggregate market value of five percent (5%) or more of
the total market value of the outstanding common and preferred
shares of the Corporation whose shares are being issued to any
Interested Shareholder or any Affiliate or Associate of any
Interested Shareholder, other than the Corporation or any of its
subsidiaries, except pursuant to the exercise of warrants or
rights to purchase securities offered pro rata to all holders of
the Corporation's Voting Shares or any other method affording
substantially proportionate treatment to the holders of Voting
Shares, and except pursuant to the exercise or conversion of
securities exercisable for or convertible into shares of the
Corporation, or any subsidiary, which securities were
outstanding prior to the time that any Interested Shareholder
became such;
(D) The adoption of any plan or proposal for the
liquidation or dissolution of the Corporation;
(E) Any reclassification of securities, including any
reverse stock split, or recapitalization of the Corporation, or
any merger or consolidation of the Corporation with any of its
subsidiaries, which has the effect, directly or indirectly, of
increasing by five percent (5%) or more the proportionate amount
of the outstanding shares of any class or series of equity
securities of the Corporation or any subsidiary which is
directly or indirectly beneficially owned by any Interested
Shareholder or any Affiliate of any Interested Shareholder;
(F) Any receipt by the Interested Shareholder, or any
Affiliate or Associate of the Interested Shareholder, other than
in the ordinary course of business, of the benefit, directly or
indirectly (except proportionately as a shareholder of the
Corporation), of any loans, advances, guarantees, pledges, or
other financial benefits or assistance or any tax credits or
other tax advantages provided by or through the Corporation or
any of its subsidiaries; or
(G) Any share exchange with (i) any Interested
Shareholder or (ii) any other corporation, whether or not itself
an Interested Shareholder, which is, or after the share exchange
would be, an Affiliate of an Interested Shareholder that was an
Interested Shareholder prior to the consummation of the
transaction; and
(2) For purposes of this Article VIII, the presumption of
"control" created by paragraph (7) of Article VII, Section 1 shall not apply
where such person holds voting stock, in good faith and not for the purpose of
circumventing this Article VIII, as an agent, bank, broker, nominee, custodian,
or trustee for one or more owners who do not individually or as a group have
Control of the Corporation.
Section 2. BUSINESS COMBINATIONS WITH INTERESTED SHAREHOLDERS.
(a) The Corporation shall not engage in any Business Combination
with any Interested Shareholder for a period of five years (5) following the
time that such shareholder became an Interested Shareholder, unless:
(a) Prior to such time, the Corporation's board of directors
approved either the Business Combination or the transaction which
resulted in the shareholder becoming an Interested Shareholder;
(b) In the transaction which resulted in the shareholder
becoming an Interested Shareholder, the Interested Shareholder became
the Beneficial Owner of at least ninety percent (90%) of the voting
stock of the Corporation outstanding at the time the transaction
commenced, excluding for purposes of determining the number of shares
outstanding those shares owned by: (A) persons who are directors or
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<PAGE>
officers, their Affiliates, or Associates; (B) subsidiaries of the
Corporation; and (C) any employee stock plan under which participants do
not have the right (as determined exclusively by reference to the terms
of such plan and any trust which is part of such plan) to determine
confidentially the extent to which shares held under such plan will be
tendered in a tender or exchange offer; or
(c) Subsequent to becoming an Interested Shareholder, such
shareholder acquired additional shares resulting in the Interested
Shareholder being the Beneficial Owner of at least ninety percent (90%)
of the outstanding voting stock of the Corporation, excluding for
purposes of determining the number of shares outstanding those shares
owned by (A) persons who are directors or officers of the Corporation,
their Affiliates, or Associates; (B) subsidiaries of the Corporation;
and (C) any employee stock plan under which participants do not have the
right (as determined exclusively by reference to the terms of such plan
and any trust which is part of such plan) to determine confidentially
the extent to which shares held under such plan will be tendered in a
tender or exchange offer, and the Business Combination was approved at
an annual or special meeting of shareholders by the holders of a
majority of the voting stock entitled to vote thereon, excluding from
said vote, for the purpose of this paragraph only, the voting stock
beneficially owned by the Interested Shareholder or by (A) persons who
are directors or officers of the Corporation, their Affiliates, or
Associates; (B) subsidiaries of the Corporation; and (C) any employee
stock plan under which participants do not have the right (as determined
exclusively by reference to the terms of such plan and any trust which
is part of such plan) to determine confidentially the extent to which
shares held under such plan will be tendered in a tender or exchange
offer.
(b) The restrictions contained in this Section 2 shall not apply if
a shareholder: (1) becomes an Interested Shareholder inadvertently; (2) as soon
as practicable divests sufficient shares so that the shareholder ceases to be an
Interested Shareholder; and (3) would not, at any time within the five-year
period immediately prior to a Business Combination between the Corporation and
such shareholder, have been an Interested Shareholder but for the inadvertent
acquisition.
Section 3. REPEAL OF ARTICLE VIII.
This Article VIII shall be irrevocable except that it may be repealed by
the affirmative vote of at least two-thirds of the Continuing Directors and a
majority of the votes entitled to be cast by the voting shares of the
Corporation, other than shares beneficially owned by any Interested Shareholder
and affiliates and associates of any Interested Shareholder, in addition to any
other vote required by the Articles of Incorporation or Bylaws to amend these
Bylaws.
ARTICLE IX.
FISCAL YEAR
The fiscal year of the Corporation shall be established by the Board or,
in the absence of Board action establishing such fiscal year, by the Chief
Executive Officer.
ARTICLE X.
ANNUAL STATEMENTS
(a) No later than four months after the close of each fiscal year,
and in any case prior to the next annual meeting of shareholders, the
Corporation shall prepare:
(i) A balance sheet showing in reasonable detail the financial
condition of the Corporation as of the close of the fiscal
year, and
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<PAGE>
(ii) A profit and loss statement showing the results of its
operation during the fiscal year.
Upon written request, the Corporation shall mail promptly to any
shareholder of record a copy of the most recent such balance sheet and profit
and loss statement. If prepared for other purposes, the Corporation shall also
furnish upon written request a statement of sources and applications of funds
and a statement of changes in shareholders' equity for the fiscal year. If
financial statements are prepared by the Corporation on the basis of generally
accepted accounting principles, the annual financial statements must also be
prepared, and disclose that they are prepared, on that basis. If financial
statements are prepared otherwise than on the basis of generally accepted
accounting principles, they must so disclose and must be prepared on the same
basis as other reports or statements prepared by the Corporation for the use of
others.
(b) If the annual financial statements are reported upon by a public
accountant, his report must accompany them. If not, the statements must be
accompanied by a statement of the Chief Executive Officer or the person
responsible for the Corporation's accounting records:
(1) Stating his reasonable belief whether the statements were
prepared on the basis of generally accepted accounting
principles and, if not, describing the basis of preparation; and
(2) Describing any respects in which the statements were not
prepared on a basis of accounting consistent with the statements
prepared for the preceding year.
ARTICLE XI.
CAPITAL STOCK
Section 1. FORM.
(a) Except as otherwise provided for in paragraph (b) of this
Section 1, the interest of each shareholder shall be evidenced by a certificate
representing shares of stock of the Corporation, which shall be in such form as
the Board may from time to time adopt and shall be numbered and shall be entered
in the books of the Corporation as they are issued. Each certificate shall
exhibit the holder's name, the number of shares and class of shares and series,
if any, represented thereby, the name of the Corporation and a statement that
the Corporation is organized under the laws of the State of Georgia. Each
certificate shall be signed by one or more officers of the Corporation specified
by resolution of the Board, but in the absence of such specifications, shall be
valid if executed by the Chief Executive Officer or any Deputy or Assistant
thereto, and such execution is countersigned by the Secretary, or any Deputy or
Assistant thereto. Each stock certificate may but need not be sealed with the
seal of the Corporation.
(b) If authorized by resolution of the Board, the Corporation may
issue some or all of the shares of any or all of its classes or series without
certificates. The issuance of such shares shall not affect shares already
represented by certificates until they are surrendered to the Corporation.
Within a reasonable time after the issuance or transfer of any shares not
represented by certificates, the Corporation shall send to the holder of such
shares a written statement setting forth, with respect to such shares (i) the
name of the Corporation as issuer and the Corporation's state of incorporation,
(ii) the name of the person to whom such shares are issued, (iii) the number of
shares and class of shares and series, if any, and (iv) the terms of any
restrictions on transfer which, were such shares represented by a stock
certificate would be required to be noted on such certificate, by law, by the
Articles of Incorporation or these By-Laws, or by any legal agreement among the
shareholders of the Corporation.
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<PAGE>
Section 2. TRANSFER. Transfers of stock shall be made on the books of
the Corporation only by the person named in the certificate, or, in the case of
shares not represented by certificates, the person named in the Corporation's
stock transfer records as the owner of such shares, or, in either case, by
attorney lawfully constituted in writing. In addition, with respect to shares
represented by certificates, transfers shall be made only upon surrender of the
certificate therefor, or in the case of a certificate alleged to have been lost,
stolen or destroyed, upon compliance with the provisions of Section 4, Article
XI of these Bylaws.
Section 3. RIGHTS OF HOLDER. The Corporation shall be entitled to treat
the holder of record of any share of the Corporation as the person entitled to
vote such share (to the extent such share is entitled to vote), to receive any
distribution with respect to such share, and for all other purposes and
accordingly shall not be bound to recognize any equitable or other claim to or
interest in such share on the part of any other person, whether or not it shall
have express or other notice thereof, except as otherwise provided by law.
Section 4. LOST OR DESTROYED CERTIFICATES. Any person claiming a
certificate of stock to be lost, stolen or destroyed shall make an affidavit or
affirmation of the fact in such manner as the Board may require and shall if the
Board so requires, give the Corporation a bond of indemnity in the form and
amount and with one or more sureties satisfactory to the Board, whereupon an
appropriate new certificate may be issued in lieu of the one alleged to have
been lost, stolen or destroyed.
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<PAGE>
ARTICLE XII.
SEAL
The corporate seal shall be in such form as shall be specified in the
minutes of the organizational meeting of the Corporation, or as the Board may
from time to time determine.
ARTICLE XIII.
AMENDMENT TO BYLAWS
Section 1. AMENDMENT OF BYLAWS BY BOARD OF DIRECTORS. Except as
otherwise provided in the Articles of Incorporation, these Bylaws, by applicable
law or by the provisions of this Article XIII, the board of directors may amend
or repeal any provision of the Bylaws of the Corporation or adopt any new Bylaw,
unless the shareholders have adopted, amended or repealed a particular Bylaw
provision and, in doing so, have expressly reserved to the shareholders the
right of amendment or repeal therefor. The board of directors may adopt, amend,
alter or repeat the Bylaws of the Corporation only by the vote of a majority of
the entire Board.
Section 2. SUPERMAJORITY REQUIRED FOR AMENDMENT BY SHAREHOLDERS. The
shareholders of the Corporation have the right, in accordance with the voting
requirements set forth in this Section 2 of Article XIII, to amend or repeal any
provision of these Bylaws, or to adopt new Bylaw provisions, even though such
provisions may also be adopted, amended or repealed by the Board. Except as may
otherwise specifically be required by law, Section 4 of Article VII and Section
3 of Article VIII, the affirmative vote of the holders of not less than
seventy-five percent (75%) of the total number of votes entitled to be cast by
the holders of all of the shares of capital stock of the Corporation then
entitled to vote generally in the election of directors shall be required for
the shareholders to adopt, amend, alter or repeal any provision of the Bylaws of
the Corporation.
Text and description of graphic and image material appearing on the form of
certificate for shares of the common stock of
CORNERSTONE MINISTRIES INVESTMENTS, INC.
Exhibit 4.2 to Registration Statement on Form SB-2
The borders around the edge of the certificate and around the space for
certificate number and number of shares are standard printer's forms, with no
text. The Company's corporate seal is reproduced at the bottom center of the
front. The Company's logo ([need a description of the logo, if any]) appear
centered near the top. Facsimile signatures of the president and secretary of
the Company are at the bottom left and right, and the name and space for
authorized signature of the transfer agent are on the lower right side of the
certificate face.
On the reverse side of the certificate, before the language and spaces for use
in effecting a transfer of the shares represented by the certificate, are these
words:
A statement of the rights, preferences, privileges and restrictions
granted to or imposed upon the respective classes or series of shares of stock
of the Corporation, and upon the holders thereof as established by the Articles
of Incorporation or by any certificate of determination of preferences, and the
number of shares constituting each series or class and the designations thereof,
may be obtained by any shareholder of the Corporation upon request and without
charge from the Secretary of the Corporation at the principal office of the
Corporation.
Exhibit 4.2
SERIES B CERTIFICATE OF INDEBTEDNESS
No. ________________ $________________
CORNERSTONE MINISTRIES INVESTMENTS, INC. ("ISSUER") promises to pay to
______________________________________________________ or registered
assigns, the principal sum of
________________________________________ Dollars ($__________).
Taxpayer I.D. Number: _________________ CUSIP Number:_________________.
SERIES A CERTIFICATES OF INDEBTEDNESS
Payment Dates:______________ and ________________.
Record Dates:_______________ and ________________.
Maturity Date:______________
Interest Rate:______________
Dated:_________________, 2000
__________________________, as CORNERSTONE MINISTRIES
Trustee, certifies that this is INVESTMENTS, INC.
one of the Certificates
referred to in the Trust
Indenture.
By:____________________________ By:__________________________
Cecil A. Brooks, President
Name:__________________________
Attest:_______________________
Title:_________________________ John T. Ottinger, Secretary
[SEAL] [SEAL]
Exhibit 4.3
<PAGE>
The registered owner of this Certificate shall be entitled to all the rights and
privileges and subject to the conditions, limitations and agreements set forth
in the Trust Indenture executed in connection with the offering of the
securities described on the front side of this Certificate, the terms,
covenants, conditions and agreements of such Trust Indenture being incorporated
herein by this reference.
The Issuer will furnish to any Certificate owner upon written request and
without charge a copy of the Trust Indenture. Requests may be made to John T.
Ottinger, Cornerstone Ministries Investments, Inc., 6035 Atlantic Boulevard,
Suite F, Norcross, Georgia 30071-1345.
Abbreviations. Customary abbreviations may be used in the name of a Certificate
owner or an assignee, such as TEN COM (=tenants in common), TEN ENT (=tenants by
the entireties), JT TEN (= joint tenants with rights of survivorship and not as
tenants in common), CUST (= Custodian), and U/G/M/A (- Uniform Gifts to Minors
Act).
- --------------------------------------------------------------------------------
SECURITY POWER FORM:
THE FOLLOWING MUST BE COMPLETED TO TRANSFER YOUR CERTIFICATE TO ANOTHER
For value received I/We hereby sell, assign and transfer unto
- --------------------------------------------------------------------------------
(Name and address of Transferee must be printed or typed)
- ----------------------------------------------- ------/-----/-------
City State Zip Code Social Security Number
all right, title and interest to this Series B Certificate of Indebtedness,
including all outstanding principal and accrued interest, and do hereby
irrevocably constitute and appoint the Registrar to transfer the said
Certificate on the books of the within named Issuer, with full power of
substitution in the premises and to issue a new Certificate to the Transferee
(New Owner). The Social Security Number of the Transferee (New Owner) his/her
name and mailing address where he/she wishes to receive interest checks or
notices must be provided to the Registrar along with the transfer fee BEFORE
TRANSFER can be completed. The transfer request must be received 15 calendar
days prior to an interest payment date.
If Joint Ownership, Both Must Sign Certificate
Date:____________, ___ ______________________________________________
Signed (Registered Owner as Shown on Front)
In the presence of:
- --------------------------------------------------------------------------------
Authorized Signature Guarantee Signed (Registered Owner as Shown on Front)
Above Signatures must be guaranteed (not notarized) by a participant in a
Medallion Guarantee Program.
- --------------------------------------------------------------------------------
New Owner - Please check this form for accuracy before you sign. Your
Certificate will be registered exactly as shown. You will be charged a fee per
Certificate if you require further changes. You must sign below to verify your
Social Security Number. Please provide your daytime telephone number (___)
_____-______________.
- --------------------------------------------------------------------------------
Please send me/us a confirmation and retain Certificate.
- --------------------------------------------------------------------------------
Under penalties of perjury, I certify (1) that the number shown on this form is
my correct taxpayer identification number, and (2) that I am not subject to
<PAGE>
backup withholding because: (a) I have not been notified that I am subject to
backup withholding as a result of failure to report all interest or dividends,
or (b) the Internal Revenue Service has notified me that I am no longer subject
to backup withholding.
_______________________________________________ SS#_________-_______-______
Signature of Transferee whose number is shown Date:___________________
at right (or)
_______________________________________________ TIN#_________-_______-_____
Signature of Authorized Signer for Transferee Date:___________________
================================================================================
CORNERSTONE MINISTRIES INVESTMENTS, INC.
AND
AMERICAN SECURITIES TRANSFER AND TRUST
Trustee
[---------------------------]
Paying Agent and Registrar
-----------------
Trust Indenture
Dated as of December __, 1999
-----------------
$17,000,000.00
Series B Certificates of Indebtedness
Due Three and Five Years after Issue Date
Exhibit 4.4
================================================================================
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
ARTICLE 1 * DEFINITIONS AND INCORPORATION BY REFERENCE...................................................1
Section 1.01. Definitions............................................................................1
Section 1.02. Other Definitions......................................................................3
Section 1.03. Incorporation by Reference of Trust Indenture Act......................................3
Section 1.04. Rules of Construction..................................................................3
ARTICLE 2 * THE SECURITIES...............................................................................4
Section 2.01. Form and Dating........................................................................4
Section 2.02. Execution and Authentication...........................................................4
Section 2.03. Registrar and Paying Agent.............................................................4
Section 2.04. Security Owner Lists...................................................................5
Section 2.05. Registration, Transfer and Exchange....................................................5
Section 2.06. Replacement Securities.................................................................5
Section 2.07. Outstanding Securities.................................................................5
Section 2.08. Temporary Securities...................................................................6
Section 2.09. Cancellation...........................................................................6
Section 2.10. Defaulted Interest.....................................................................6
Section 2.11. Book Entry Form........................................................................6
ARTICLE 3 * REDEMPTION...................................................................................7
Section 3.01. Notices to Paying Agent................................................................7
Section 3.02. Selection of Securities to be Redeemed.................................................7
Section 3.03. Notice of Redemption...................................................................7
Section 3.04. Deposit of Redemption Price............................................................8
Section 3.05. Effect of Notice of Redemption.........................................................8
Section 3.06. Securities Redeemed in Part............................................................8
ARTICLE 4 * COVENANTS....................................................................................8
Section 4.01. Payment of Securities..................................................................8
Section 4.02. Books and Records......................................................................9
Section 4.03. Use of Proceeds........................................................................9
Section 4.04. Corporate Existence....................................................................9
Section 4.05. Compliance Certificate.................................................................9
Section 4.06. SEC Reports...........................................................................10
ARTICLE 5 * SUCCESSOR CORPORATION.......................................................................10
Section 5.01. When Corporation May Merge, etc.......................................................10
ARTICLE 6 * DEFAULTS AND REMEDIES.......................................................................10
Section 6.01. Events of Default.....................................................................10
Section 6.02. Acceleration..........................................................................11
Section 6.03. Remedies..............................................................................12
<PAGE>
Section 6.04. Waiver of Past Defaults...............................................................12
Section 6.05. Control by Majority...................................................................12
Section 6.06. Limitation on Suits...................................................................13
Section 6.07. Rights of Owners to Receive Payment...................................................13
Section 6.08. Limited Liability.....................................................................13
Section 6.09. Trustee May File Proofs of Claim......................................................13
Section 6.10. Priorities............................................................................14
Section 6.11. Undertaking for Costs.................................................................14
ARTICLE 7 * TRUSTEE, PAYING AGENT AND REGISTRAR.........................................................14
Section 7.01. Duties................................................................................14
Section 7.02. Rights of Trustee, Paying Agent and Registrar.........................................16
Section 7.03. Disclaimers...........................................................................16
Section 7.04. Individual Rights of Trustee, Paying Agent and Registrar..............................16
Section 7.05. Notice of Defaults....................................................................16
Section 7.06. Reports by Trustee to Owners..........................................................17
Section 7.07. Compensation and Indemnity............................................................17
Section 7.08. Replacement of Trustee, Paying Agent or Registrar.....................................17
Section 7.09. Successor by Merger, etc..............................................................18
Section 7.10. Eligibility; Disqualification.........................................................19
Section 7.11. Preferential Collection of Claims Against Corporation.................................19
ARTICLE 8 * DISCHARGE OF INDENTURE......................................................................19
Section 8.01. Termination of Corporation's Obligations..............................................19
Section 8.02. Application of Trust Money............................................................20
Section 8.03. Repayment to Corporation..............................................................20
ARTICLE 9 * AMENDMENTS, SUPPLEMENTS AND WAIVERS.........................................................21
Section 9.01. Without Consent of Owners.............................................................21
Section 9.02. With Consent of Owners................................................................21
Section 9.03. Revocation and Effect of Consents.....................................................22
Section 9.04. Notation on or Exchange of Securities.................................................22
Section 9.05. Trustee to Sign Amendments, etc.......................................................22
Section 9.06. Future Certificates...................................................................23
Section 9.07. Compliance with Trust Indenture Act...................................................23
ARTICLE 10 * MISCELLANEOUS..............................................................................23
Section 10.01. Notices...............................................................................23
Section 10.02. Communications by Security Owners with Other Security Owners..........................24
Section 10.03. Certificate and Opinion as to Conditions Precedent....................................24
Section 10.04. Statements Required in Certificate or Opinion.........................................25
Section 10.05. When Securities Disregarded...........................................................25
Section 10.06. Rules by Trustee, Paying Agent, Registrar.............................................26
<PAGE>
Section 10.07. Legal Holidays........................................................................26
Section 10.08. Governing Law.........................................................................26
Section 10.09. No Adverse Interpretation of Other Agreements.........................................26
Section 10.10. No Recourse Against Others............................................................26
Section 10.11. Successors............................................................................26
Section 10.12. Duplicate Originals...................................................................26
Section 10.13. Trust Indenture Act Controls..........................................................27
</TABLE>
CORNERSTONE MINISTRIES INVESTMENTS, INC.
Reconciliation and Tie between Trust Indenture Act of 1939
and the Indenture dated as of December __, 1999
Trust Indenture Act Section Indenture Section
- --------------------------- -----------------
ss.310(a)(1) 7.10
(a)(2) 7.10
(a)(3) N.A.
(a)(4) 3.06
(b) 7.08; 7.10; 10.01
(c) N.A.
ss. 311(a) 7.11
(b) 7.11
(c) N.A.
ss. 312(a) 2.04
(b) 10.02
(c) 10.02
ss. 313(a) 7.06
(b) 7.06; 10.01
(c)(1) 2.04; 7.06; 10.01
(c)(2) N.A.
(c)(3) 2.04; 7.06; 10.01
(d) 7.06
ss. 314(a) 4.06, 10.01
(b) N.A.
(c)(1) 10.03
(c)(2) 10.03
(c)(3) N.A.
(d) N.A.
(e) 10.04
(f) N.A.
ss. 315(a) 7.01(2)
(b) 7.05; 10.01
(c) 7.01(1)
(d) 7.01(3)
(e) 6.11
ss. 316(a)(last sentence) 10.05
(a)(1)(A) 6.05
(a)(1)(B) 6.04
(a)(2) N.A.
(b) 6.07
<PAGE>
ss.317(a)(1) 6.03
(a)(2) 6.09
(b) 8.02; 10.01
ss.318(a) 10.13
N.A. means Not Applicable.
NOTE: This Reconciliation and Tie shall not, for any purpose, be deemed to be a
part of the Indenture.
<PAGE>
TRUST INDENTURE dated as of December __, 1999, among
CORNERSTONE MINISTRIES, INC., a Georgia corporation
("Corporation"); AMERICAN SECURITIES TRANSFER AND TRUST
("Trustee"), a Colorado corporation; and
[___________________], an [____________] bank and trust
company ("Paying Agent" or "Registrar" as the case may be).
Each party agrees as follows for the benefit of the other
party and for the equal and ratable benefit of the Owners of
the Corporation's 1999 Unsecured Certificates ("Securities"):
DEFINITIONS AND INCORPORATION BY REFERENCE
Definitions
"Certificate" means any of the Series B Certificates of
Indebtedness known as "Series B Certificates" issued pursuant
to the terms hereof or any Certificates issued in the future
hereunder.
"Certificate Payment Fund" means the fund created with Paying
Agent into which the Corporation shall pay not less than three
(3) days prior to any principal and interest paying date an
amount sufficient to make all principal and interest payments.
"Certificated Security" means a Security represented by a
physical certificate.
"Corporation" means the party named as such in this Indenture
until a successor replaces it and thereafter means the
successor.
"Default" means any event which is, or after notice or lapse
of time or both would be, an Event of Default.
"Indenture" means this Indenture as amended or supplemented
from time to time.
"Obligations" means the principal and interest due and payable
with respect to Certificates issued pursuant to this
Indenture, all expenses and fees of Trustee, Paying Agent, and
Registrar, and all debts, liabilities and obligations of the
Corporation to the Trustee and Certificate Owners related to
the Certificates, however evidenced and whether now existing
or hereafter incurred, direct or indirect, matured or not
matured, absolute or contingent, now due or hereafter to
become due (including, without limitation, any and all costs
and attorneys' fees incurred by the Trustee in the collection,
whether by suit or by any other means, of any of the
Obligations) and the extension or renewals of any of the
foregoing.
"Officer" means the Chairman of the Board, the President, any
Vice President, the Treasurer, or the Secretary of the
Corporation.
"Officers' Certificate" means a certificate signed by two
Officers or by an Officer and an Assistant Treasurer or
Assistant Secretary of the Corporation.
"Owner" or "Security Owner" means the person in whose name a
Registered Security is registered on Registrar's books.
"Non-certificated Securities" means Securities registered as
to ownership in book entry form only.
"Paying Agent" means the party named as such in this Indenture
until a successor replaces it, and thereafter means the
successor.
<PAGE>
"Principal" of a Security means the amount stated as principal
on the face of the Security plus, when appropriate, the
premium, if any on the Security.
"Registered Security" means Securities of the Corporation
issued pursuant to this Indenture and fully registered on
Registrar's books.
"Registered Security Owner" means the registered owner of any
Registered Security.
"Registrar" means the party named as such in this Indenture
until a successor replaces it, and thereafter means the
successor.
"SEC" means the Securities and Exchange Commission.
"Securities" means the Certificates, as amended or
supplemented from time to time.
"TIA" means the Trust Indenture Act of 1939 (15
U.S.C.ss.ss.77aaa et. seq.) as in effect on the date of this
Indenture.
"Trustee" means the party named as such in this Indenture
until a successor replaces it and thereafter means the
successor.
"Trust Officer" means the Chairman of the Board, the President
or any other officer or assistant officer of the Trustee
assigned by the Trustee to administer its corporate trust
matters.
Other Definitions
Term Defined in Section
"Bankruptcy Law" 6.01
"Event of Default" 6.01
"Legal Holiday" 10.06
"U.S. Government Obligations" 8.01
Incorporation by Reference of Trust Indenture Act.
Whenever this Indenture refers to a provision of the TIA, the
provision is incorporated by reference in and made a part of
this Indenture. The following TIA terms in this Indenture have
the following meanings:
"Indenture Securities" means the Securities.
"Obligor" on the Indenture Securities means the Corporation.
All other TIA terms used in this Indenture that are defined by
the TIA, defined by TIA reference to another statute, or
defined by SEC rule have the meanings assigned to them.
Rules of Construction.
Unless the context otherwise requires:
-ii-
<PAGE>
a term has the meaning assigned to it;
an accounting term not otherwise defined has the meaning assigned to it in
accordance with generally accepted accounting principles;
"or" is not exclusive; and
words in the singular include the plural, and in the plural include the
singular.
THE SECURITIES
Form and Dating.
The Securities and Registrar's certificate of authentication
shall be substantially in the form of Exhibit A. The
Securities may have notations, legends or endorsements
required by law, stock exchange rule or usage. The Corporation
shall approve the form of the Securities and any notation,
legend or endorsement on them. Each Security shall be dated
the date of its authentication.
Execution and Authentication.
Two Officers shall sign the Certificated Securities for the
Corporation by facsimile signature. The Corporation's seal
shall be reproduced on the Securities. If an Officer who
signed a Certificated Security no longer holds that office at
the time Registrar authenticates the Certificated Security,
the Certificated Security shall be valid nevertheless.
No Certificated Security shall be valid until Registrar
manually signs the certificate of authentication on the
Certificated Security or authorizes Registrar to register the
Non-certificated Security in the official registry. The
signature shall be conclusive evidence that the Security has
been authenticated under this Indenture.
Registrar shall authenticate Securities for original issue in
the aggregate principal amount of up to $17,000,000 upon a
written order of the Corporation signed by two Officers or by
an Officer and an Assistant Treasurer of the Corporation. The
aggregate principal amount of Securities outstanding at any
time may be increased pursuant to the provisions of Section
9.06 hereof.
Registrar and Paying Agent.
The Corporation has appointed [______________________] as
Registrar and Paging Agent. [_________________] address is
[__________________________________ __________________]
Requests for transfer or exchange and for payment of
Securities shall be made to [______________________] at said
address.
Security Owner Lists.
Registrar shall preserve, in as current a form as is
reasonably practicable, the most recent list available to it
of the names and addresses of Registered Security Owners.
Registrar, on behalf of the Corporation, shall furnish to the
Trustee, on or before each semiannual interest payment date
and at such other times as the Trustee may request in writing,
a list in such form and as of such date as the Trustee may
reasonably require of the names and addresses of Registered
Security Owners.
-iii-
<PAGE>
Registration, Transfer and Exchange.
The Corporation will issue fully Registered Securities in the
form of Exhibit A. The Securities will be initially issued
only as Registered Securities.
When a Certificated Security is presented to Registrar with a
request to register the transfer, Registrar shall register the
transfer as requested if the requirements of applicable state
law are met. To permit transfers and exchanges, the
Corporation shall execute Securities at Registrar's request.
Registrar may charge a reasonable fee for any transfer or
exchange but not for any exchange pursuant to Section 2.09,
3.06 or 9.04.
Replacement Securities.
If the Owner of a Certificated Security claims that a
Certificated Security has been lost, destroyed or wrongfully
taken, Registrar shall issue and the Corporation shall execute
a replacement Security. An indemnity bond must be delivered by
the Owner to Registrar in an amount sufficient, in the
judgment of Registrar, to protect the Corporation, the
Trustee, Paying Agent, and Registrar from any loss which any
of them may suffer if a Certificated Security is replaced.
Registrar may charge for its expenses in replacing a Security.
Outstanding Securities.
Securities outstanding at any time are all Securities
authenticated by Registrar except for those canceled by it and
those described in this Section. Securities outstanding
include those held by the Corporation or its affiliates.
If a Security is replaced pursuant to Section 2.06, it ceases
to be outstanding unless Registrar receives proof satisfactory
to it that the replaced Security is held by a bona fide
purchaser.
If Paying Agent holds on a redemption date or maturity date
money sufficient to pay Securities payable on that date, then
on and after that date such Securities cease to be outstanding
and interest on them ceases to accrue. Such Securities carry
no rights except the right to receive payment.
The Registered Security Owner shall be treated as the owner of
the Security for all purposes of this Indenture.
Temporary Securities.
Until definitive Securities are ready for delivery, the
Corporation may prepare and Registrar shall authenticate
temporary Securities. Temporary Securities shall be
substantially in the form of definitive Securities but may
have variations that the Corporation considered appropriate
for temporary Securities. Without unreasonable delay, the
Corporation shall prepare and Registrar shall authenticate
definitive Securities in exchange for temporary Securities.
Cancellation.
The Corporation at any time may direct Registrar to cancel
unsold Securities or Securities owned by the Corporation.
Registrar and no one else shall cancel and destroy
Certificated Securities surrendered for transfer, exchange,
payment or cancellation. The Corporation may not issue new
Securities to replace Securities it has paid or delivered to
Registrar for cancellation.
-iv-
<PAGE>
Defaulted Interest.
If and to the extent the Corporation defaults in a payment of
interest on any Registered Securities, it shall pay the
defaulted interest to the persons who are Registered Security
Owners on a subsequent special record date. The Corporation
shall fix the record date and payment date. At least thirty
(30) days before the record date, the Corporation shall mail
to each Registered Security Owner a notice that states the
record date, the payment date, and the amount of defaulted
interest to be paid. The Corporation may pay defaulted
interest in any other lawful matter.
Book Entry Form.
Notwithstanding anything contained herein to the contrary,
each of the Certificates issued hereunder may be issued in
book entry form as a Non-certificated Security.
REDEMPTION
Notices to Paying Agent.
If the Corporation wants to redeem Securities pursuant to the
terms of the Securities, it shall notify Paying Agent of the
redemption date and the principal amount of Securities to be
redeemed. If the Corporation wants to credit against such
redemption any Securities it has not previously directed
Registrar to cancel, it shall deliver such directions along
with any Certificated Securities to be canceled. The
Corporation shall give each notice provided for in this
Section at least ten (10) days prior to the proposed date of
mailing a notice of redemption as provided in Section 3.03.
Selection of Securities to be Redeemed.
If less than all the Securities are to be redeemed, Paying
Agent shall select the Securities to be redeemed by a method
Paying Agent considers fair and appropriate. Paying Agent
shall make the selection from Securities outstanding and not
previously called for redemption. Paying Agent may select for
redemption portions of the principal of Securities that have a
denomination larger than $500. Provisions of this Indenture
that apply to whole Securities called for redemption also
apply to portions of Securities called for redemption.
Notice of Redemption.
At least thirty (30) days but not more than sixty (60) days
before a redemption date, the Corporation shall mail and first
publish notice of redemption as provided in Section 10.01.
The notice shall identify the Securities to be redeemed and
shall state:
the redemption date;
the redemption price as specified in the Securities;
The name and address of Paying Agent;
that Certificated Securities called for redemption must be surrendered to Paying
Agent to collect the redemption price; and
-v-
<PAGE>
that interest ceases to accrue on Securities called for redemption on and after
the redemption date.
At the Corporation's request, Paying Agent shall give the
notice of redemption in the Corporation's name and at its
expense.
Deposit of Redemption Price.
On or before the redemption date, the Corporation shall
deposit with Paying Agent money sufficient to pay the
redemption price of and accrued interest on all Securities to
be redeemed on that date.
Effect of Notice of Redemption.
Once notice of redemption is given, Securities called for
redemption become due and payable on the redemption date and
at the redemption price stated in the notice. Certificated
Securities must be surrendered to Paying Agent. Securities
shall be paid at the redemption price stated in the notice,
plus interest accrued to the redemption date.
Securities Redeemed in Part.
Upon surrender of a Certificated Security that is redeemed in
part only, Registrar shall authenticate for the Owner a new
Certificated Security equal in principal amount to the
unredeemed portion of the Certificated Security surrendered.
COVENANTS
Payment of Securities.
The Corporation shall promptly pay the principal of and
interest on the Securities on the dates and in the manner
provided in the Securities. An installment of principal or
interest shall be considered paid on the date it is due if
Paying Agent holds on that date money designated for and
sufficient to pay the installment. To facilitate the payment
of principal and interest, the Corporation has created with
Paying Agent a Certificate Payment Fund into which the
Corporation shall pay, not less than three (3) business days
prior to any principal and interest paying date, an amount
sufficient to make all principal and interest payments. Paying
Agent will disburse from said fund all payments of principal
and interest on Certificates, Fiduciaries' fees and such other
sums as are due and payable as provided herein.
Paying Agent shall notify the Corporation of the amounts
required to be deposited into said fund at least five (5) days
prior to any principal and interest payment date.
The Corporation shall pay interest on overdue principal at the
rate borne by the Securities; it shall pay interest on overdue
installments of interest at the same rate to the extent
lawful.
Books and Records.
The Corporation covenants and agrees that it will, at all
times and from time to time, permit the Trustee and its agents
or accountants to have access to and to inspect and make
extracts from, the Corporation's books, accounts, papers,
documents and memoranda pertinent to any of the covenants,
conditions and agreements of this Indenture in respect of the
Securities.
-vi-
<PAGE>
Use of Proceeds.
The Corporation hereby covenants to use the proceeds from the
sale of the Securities in accordance with the terms and
conditions set forth in the Prospectus of the Corporation with
respect to the Securities.
Corporate Existence.
Subject to Article 5 hereof, the Corporation will do or cause
to be done all things necessary to preserve and keep in full
force and effect its corporate existence, rights and
franchises; provided, however, that the Corporation shall not
be required to preserve any right or franchise if it shall
determine that the preservation is no longer desirable in the
conduct of the Corporation's business and that the loss will
not be disadvantageous in any material respect to the Owners.
Compliance Certificate.
The Corporation shall deliver to the Trustee within one
hundred twenty (120) days after the end of each fiscal year of
the Corporation an Officers' Certificate stating whether the
signers know of any Default by the Corporation in performing
its covenants in Article 4 hereof. If they do know of such a
Default, the certificate shall describe the Default. The
Officers' Certificate need not comply with Section 10.04. The
first Officers' Certificate shall be delivered to the Trustee
by May 1, 2001.
SEC Reports.
The Corporation shall file with the Trustee, within fifteen
(15) days after filing same with the SEC, copies of the annual
reports and of the information, documents, and other reports
(or copies of such portions of any of the foregoing as the SEC
may by rules and regulations prescribe) which the Corporation
is required to file with the SEC pursuant to Sections 13 or
15(d) of the Securities Exchange Act of 1934. The Corporation
also shall comply with the other provisions of TIA Section
314(a).
SUCCESSOR CORPORATION
When Corporation May Merge, etc.
The Corporation shall not consolidate with or merge into, or
transfer all or substantially all of its assets to, another
corporation unless the resulting, surviving or transferee
corporation assumes by supplemental Indenture all the
obligations of the Corporation under the Securities and this
Indenture. No consent of any Security Owner or Trustee is
required with respect to any such consolidation, merger or
transfer that complies with the previous sentence.
DEFAULTS AND REMEDIES
Events of Default.
An "Event of Default" occurs if:
the Corporation defaults in the payment of interest on any Security when the
same becomes due and payable and such Default continues for a period of sixty
(60) days;
-vii-
<PAGE>
the Corporation defaults in the payment of the principal of any Security when
the same becomes due and payable at maturity, upon redemption or otherwise and
such Default continues for a period of sixty (60) days;
the Corporation defaults by failing to comply with any of its other agreements
in connection with the Securities or this Indenture and such Default continues
for the period and after the notice specified below;
the Corporation, pursuant to or within the meaning of any Bankruptcy Law:
commences a voluntary case;
consents to the entry of an order for relief against it in an involuntary case;
consents to the appointment of a Custodian of it or for any substantial part of
its property;
makes a general assignment for the benefit of its creditors; or
fails generally to pay its debts as they become due; or
a court of competent jurisdiction enters an order or decree under any Bankruptcy
Law that:
is for relief against the Corporation in an involuntary case;
appoints a Custodian of the Corporation or for any substantial part of its
property; or
orders the liquidation of the Corporation;
and the order or decree remains unstated and
in effect for ninety (90) days.
The term "Bankruptcy Law" means title 11, United States Code
or any similar federal or state law for the relief of debtors.
The term "Custodian" means any receiver, trustee, assignee,
liquidator or similar official under any Bankruptcy law.
Paying Agent and Registrar shall promptly notify Trustee in
writing of the occurrence of any Event of Default.
A Default under clauses (1), (2) and (3) above is not an Event
of Default until the Trustee notifies the Corporation of such
Default and the Corporation does not cure such Default within
ninety (90) days after receipt of the notice. The notice must
specify the Default, demand that it be remedied and state that
the notice is a "Notice of Default."
Acceleration.
-viii-
<PAGE>
If an Event of Default occurs and is continuing, and the
Trustee has been made aware thereof, the Trustee, by notice to
the Corporation or the Owners of at least a majority in
principal amount of the Securities, may declare the principal
of and accrued interest on all the Securities to be due and
payable immediately. Upon a declaration such principal and
interest shall be due and payable immediately. Notwithstanding
the foregoing, if, at any time after the principal of the
Securities has been declared due and payable, all Defaults
have been cured and all amounts in respect of which the
Corporation shall be in default, together with the expenses
and reasonable charges of the Trustee, Paying Agent and/or
Registrar and reasonable attorneys' fees with interest at a
rate equal to two (2) percentage points in excess of the
highest rate on any of the Certificates on such expenses,
charges and fees, then the Trustee shall waive such Default
and its consequences by written notice to the Corporation.
Remedies.
If an Event of Default occurs and is continuing, the Trustee
may pursue any available remedy by proceeding at law or in
equity to collect the payment of principal or interest on the
Securities or to enforce the performance of any provision of
the Securities or this Indenture.
The Trustee may maintain a proceeding even if it does not
possess any of the Securities or does not produce any of them
in the proceedings. A delay or omission by the Trustee or any
Security Owner in exercising any right or remedy accruing upon
an Event of Default shall not impair such right or remedy or
constitute a waiver of or acquiescence in the Event of
Default. No remedy is exclusive of any other remedy. All
available remedies are cumulative.
Waiver of Past Defaults.
Subject to Section 9.02 hereof, the Owners of a majority in
principal amount of the Securities, by notice to the Trustee,
may waive an existing Default or Event of Default and its
consequences. When a Default or Event of Default is waived, it
is cured and stops continuing.
Control by Majority.
The Owners of a majority in principal amount of the Securities
may direct the time, method and place of conducting any
proceeding for any remedy available to the Trustee or
exercising any trust or power conferred on it. The Trustee,
however, may refuse to follow any direction that conflicts
with law or this Indenture, that is unduly prejudicial to the
rights of other Security Owners, or that may involve the
Trustee in personal liability.
Limitation on Suits.
A Security Owner may not pursue any remedy with respect to
this Indenture or the Securities unless:
the Owner gives to the Trustee written notice of a continuing Event of Default;
the Owners of at least a majority in principal amount of the Securities make a
written request to the Trustee to pursue the remedy;
-iv-
<PAGE>
such Owner or Owners offer to the Trustee indemnity satisfactory to the Trustee
against any loss, liability or expense; and
the Trustee does not comply with the request within sixty (60) days after
receipt of the request and the offer of indemnity.
A Security Owner may not use this Indenture to prejudice the
rights of another Security Owner or to obtain a preference or
priority over any other Security Owner.
Rights of Owners to Receive Payment.
Notwithstanding any other provision of this Indenture, the
right of any Owner of a Security to receive when due under the
terms of the Security payment of principal and interest on the
Security, or to bring suit for the enforcement of any such
payment on or after such respective due dates, shall not be
impaired or affected without the consent of the Owner of the
Security.
Limited Liability.
The Securities are general obligations of the Corporation, and
no entity other than the Corporation shall have any liability
for repayment of the Securities.
Trustee May File Proofs of Claim.
The Trustee may file such proofs of claim and other papers or
documents as may be necessary or advisable in order to have
the claims of the Trustee and the Security Owners allowed in
any judicial proceedings relative to the Corporation, its
creditors or its property.
Priorities.
If the Trustee collects any money pursuant to this Article 6,
it shall pay out the money in the following order:
First: for amounts due under Section 7.07;
Second: to Security Owners for amounts due and unpaid on the
Securities for principal and interest, ratably, without
preference or priority of any kind, according to the amounts
due and payable on the Securities for principal and interest,
respectively; and
Third: to the Corporation.
The Trustee may fix a record date and payment date for any
payment to Registered Security Owners.
Undertaking for Costs.
In any suit for the enforcement of any right or remedy under
this Indenture or in any suit against the Trustee for any
action taken or omitted by it as Trustee, a court in its
discretion may require the filing by any party litigant in the
suit of an undertaking to pay the costs of the suit, and the
court in its discretion may assess reasonable costs, including
reasonable attorneys' fees, against any party litigant in the
suit, having due regard to the merits and good faith of the
claims or defenses made by the party litigant. This Section
does not apply to a suit by the Trustee, a suit brought by a
Owner of Securities pursuant to Section 6.07, or a suit
-x-
<PAGE>
by Owners of more than ten percent (10%) in principal amount
of the Securities.
TRUSTEE, PAYING AGENT AND REGISTRAR
Duties.
If an Event of Default has occurred and is continuing, the Trustee shall
exercise its rights and powers and use the same degree of care and skill in its
exercise as a prudent person would exercise or use under the circumstances in
the conduct of his or her own affairs.
Except during the continuance of an Event of Default:
The Trustee need perform only those duties that are specifically set forth in
this Indenture and no others; and
In the absence of bad faith on its part, the Trustee, Paying Agent or Registrar
may conclusively rely, as to the truth of the statements and the correctness of
the opinions expressed therein, upon certificates or opinions furnished to it
and conforming to the requirements of this Indenture. The Trustee, Paying Agent
or Registrar, however, shall examine the certificates and opinions to determine
whether or not they conform to the requirements of this Indenture.
Neither Trustee, Paying Agent nor Registrar may be relieved from liability for
its own negligent action, its own negligent failure to act, or its own willful
misconduct, except that:
This paragraph does not limit the effect of paragraph (2) of this Section 7.01;
Neither Trustee, Paying Agent nor Registrar shall be liable for any error of
judgment made in good faith, unless it is proved that the such entity was
negligent in ascertaining the pertinent facts; and
Neither Trustee, Paying Agent nor Registrar shall be liable with respect to any
action it takes or omits to take in good faith in accordance with a direction
received by it pursuant to Sections 6.05 or 6.06.
Every provision of this Indenture that in any way relates to Trustee, Paying
Agent or Registrar is subject to paragraphs (1), (2) and (3) of this Section
7.01.
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<PAGE>
The Trustee may refuse to perform any duty or exercise any right or power unless
it receives indemnity satisfactory to it against any loss, liability or expense.
Neither Trustee, Paying Agent nor Registrar shall be liable for interest on any
money received by it except as otherwise agreed with the Corporation.
Rights of Trustee, Paying Agent and Registrar.
Trustee, Paying Agent or Registrar may rely on any document believed by it to be
genuine and to have been signed or presented by the proper person. It need not
investigate any fact or matter stated in the document.
Before a Trustee, Paying Agent or Registrar acts or refrains from acting, it may
require an Officers' Certificate or an opinion of counsel. Neither Trustee,
Paying Agent nor Registrar shall be liable for any action it takes or omits to
take in good faith in reliance on such an Officer's Certificate or opinion.
Trustee may act through agents and shall not be responsible for the misconduct
or negligence of any agent appointed with due care.
Neither Trustee, Paying Agent nor Registrar shall be liable for any action it
takes or omits to take in good faith which it believes to be authorized or
within its rights or powers.
Disclaimers.
Neither Trustee, Paying Agent nor Registrar makes any
representation as to the validity or adequacy of this
Indenture or the Securities, nor shall it be accountable for
the Corporation's use of the proceeds from the Securities, nor
shall it be responsible for any statement in the Securities,
other than its certificate of authentication, or in any
prospectus used in the sale of the Securities, other than
statements provided in writing by such entity for use in such
prospectus.
Individual Rights of Trustee, Paying Agent and Registrar.
Trustee, Paying Agent or Registrar, each in its individual or
any other capacity, may become the owner or pledgee of
Securities and may otherwise deal with the Corporation with
the same rights it would have if it were not Trustee, Paying
Agent or Registrar.
Notice of Defaults.
If an Event of Default occurs and is continuing, and if it is
known to the Trustee, the Trustee shall mail and first publish
as provided in Section 10.01 notice of the Default within
ninety (90) days after it occurs. Except in the case of a
Default in payment on any Security, the Trustee may
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<PAGE>
withhold the notice if and so long as a committee of its Trust
Officers in good faith determines that withholding the notice
is in the interests of Security Owners.
Reports by Trustee to Owners.
Within sixty (60) days after each March 15, beginning with the
March 15 following the date of this Indenture, the Trustee
shall provide to the Security Owners specified in TIA Section
313(c) a brief report dated as of such August 1 that complies
with TIA Section 313(a). The Trustee also shall comply with
TIA Section 313(b).
A copy of each report at the time of its mailing to Security
Owners shall be filed with the SEC.
Compensation and Indemnity.
The Corporation shall pay to the Trustee, Paying Agent and
Registrar from time to time reasonable compensation for their
services as set forth in separate agreements. The Corporation
shall reimburse the Trustee upon request for all reasonable
out-of-pocket expenses incurred by Trustee. Such expenses may
include the reasonable compensation and expenses of the
Trustee's agents and attorneys. The Corporation shall
indemnify the Trustee against any loss or liability incurred
in connection with providing services hereunder. Trustee shall
notify the Corporation promptly of any claim for which it may
seek indemnity. The Corporation shall defend the claims and
the Trustee shall cooperate in such defense. The Trustee may
have separate counsel and the Corporation shall pay the
reasonable fees and expenses of such counsel. The Corporation
need not pay for any settlement made without its consent. The
Corporation need not reimburse any expense or indemnify
against any loss or liability incurred by Trustee through its
own negligence or bad faith.
To secure the Corporation's payment obligations in this
Section, the Trustee, Paying Agent and Registrar shall have a
lien prior to the Securities on all trust monies.
Replacement of Trustee, Paying Agent or Registrar.
The Trustee, Paying Agent or Registrar may resign by so
notifying the Corporation. The Corporation may at any time
without cause remove Trustee, Paying Agent or Registrar by so
notifying the removed entity. The Corporation or the Owners of
a majority in principal amount of the Securities may appoint a
successor Trustee, Paying Agent or Registrar with the
Corporation's consent or may remove Trustee, Paying Agent or
Registrar if:
the Trustee, Paying Agent or Registrar is adjudged a bankrupt or an insolvent;
a receiver or other public officer takes charge of the Trustee, Paying Agent or
Registrar or its property; or
the Trustee, Paying Agent or Registrar otherwise becomes incapable of acting.
If the Trustee, Paying Agent or Registrar resigns or is
removed or if a vacancy exists in the office of Trustee,
Paying Agent, or Registrar for any reason, the Corporation
shall promptly appoint a successor.
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<PAGE>
A successor Trustee, Paying Agent or Registrar shall deliver a
written acceptance of its appointment to the Retiring Trustee,
Paying Agent or Registrar and to the Corporation. Immediately
thereafter, the retiring Trustee, Paying Agent or Registrar
shall transfer all property held by it hereunder to the
successor Trustee, Paying Agent or Registrar, the resignation
or removal of the retiring Trustee, Paying Agent or Registrar
shall become effective, and the successor Trustee, Paying
Agent or Registrar shall have all the rights, powers and
duties of the prior Trustee, Paying Agent or Registrar, as the
case may be, under this Indenture. A successor Trustee, Paying
Agent or Registrar shall give notice of its succession to each
Security Owner as provided in Section 10.01.
If a successor Trustee, Paying Agent or Registrar does not
take office within sixty (60) days after its predecessor
resigns or is removed, the retiring Trustee, Paying Agent or
Registrar, the Corporation or the Owners of a majority in
principal amount of the Securities may petition any court of
competent jurisdiction for the appointment of a successor.
Successor by Merger, etc.
If a Trustee, Paying Agent or Registrar consolidates with,
merges or converts into, or transfers all or substantially all
of its corporate trust assets to another corporation, the
resulting, surviving or transferee corporation without any
further act shall be the successor.
Eligibility; Disqualification.
This Indenture shall always have a Trustee who satisfies the
requirements of TIA Section 310(a)(1). The Trustee shall have
a combined capital and surplus of at least $500,000 as set
forth in its most recent published annual report of condition.
The Trustee shall comply with TIA Section 310(b), including
the optional provision permitted by the second sentence of TIA
Section 310(b)(9).
Preferential Collection of Claims Against Corporation.
The Trustee shall comply with TIA Section 311(a), excluding
any creditor relationship listed in TIA Section 311(b). A
Trustee who has resigned or been removed shall be subject to
TIA Section 311(a) to the extent indicated.
DISCHARGE OF INDENTURE
Termination of Corporation's Obligations.
The Corporation at any time may terminate its obligation to
pay an installment of principal or interest if it deposits
with Paying Agent money or U.S. Government Obligations
sufficient to pay the installment when due. The Corporation
shall designate the installment.
The Corporation at any time may terminate all of its
obligations under the Securities and this Indenture if it
deposits with Paying Agent money or U.S. Government
Obligations as provided in the Securities. The Corporation's
obligations, however, in paragraph 10 of the Securities and in
Sections 2.04, 2.05, 2.06, 2.07, 7.06 and 7.07 hereof shall
survive until the Securities are no longer outstanding.
Thereafter, the Corporation's obligations in such paragraph 10
and in Section 7.06 hereof shall survive.
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<PAGE>
Before or after a deposit the Corporation may make
arrangements satisfactory to Paying Agent for the redemption
of Securities at a future date in accordance with Article 3
hereof.
After a deposit pursuant to the second paragraph of this
Section 8.01, the Trustee shall acknowledge in writing the
discharge of the Corporation's obligations under the
Securities and this Indenture except for those surviving
obligations specified above.
An installment of principal or interest shall be considered
paid on the date such installment is due if the Trustee or
Paying Agent holds on that date money sufficient to pay the
installment.
In order to have money available on payment dates to pay
principal or interest on the Securities, the U.S. Government
Obligations shall be payable as to principal or interest on or
before such payment dates in such amounts as will provide the
necessary money. U.S. Government Obligations shall not be
callable at the issuer's option.
"U.S. Government Obligations" means:
direct obligations of the United States for the payment of which its full faith
and credit is pledged; or
obligations of a person controlled or supervised by and acting as an agency or
instrumentality of the United States the payment of which is unconditionally
guaranteed as a full faith and credit obligation by the United States.
Application of Trust Money.
Paying Agent shall hold in trust money or U.S. Government
Obligations deposited with it pursuant to Section 8.01. Paying
Agent shall apply the deposited money and the money from U.S.
Government Obligations in accordance with this Indenture to
the payment of principal and interest on the Securities.
Paying Agent shall notify the Trustee of any Default by the
Corporation in making such payments.
Repayment to Corporation.
Paying Agent shall promptly pay to the Corporation any excess
money or securities held by it at any time. Paying Agent shall
pay to the Corporation any money held by it for the payment of
principal or interest that remains unclaimed for two (2)
years.
AMENDMENTS, SUPPLEMENTS AND WAIVERS
Without Consent of Owners.
The Corporation may amend or supplement this Indenture or the
Securities without notice to or consent of any Security Owner:
to cure any ambiguity, omission, defect or inconsistency;
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<PAGE>
to make any change that does not adversely affect the rights of any Security
Owner in any material respect;
(3) to issue additional Certificates hereunder;
(4) to incur any amount of indebtedness, whether secured
or unsecured; or
(5) to evidence the succession of a successor corporation
or other entity to the Corporation and the assumption
by such successor of the covenants of the Corporation
herein and in the Securities.
The Trustee may waive compliance by the Corporation with any
provision of this Indenture or the Securities without notice
to or consent of any Security Owner if the waiver does not
adversely affect the rights of any Security Owner.
With Consent of Owners.
The Corporation may amend or supplement this Indenture or the
Securities without notice to any Security Owner but with the
written consent of the Owners of not less than a majority in
principal amount of the Securities. The Owners of a majority
in principal amount of the Securities may waive compliance by
the Corporation with any provision of this Indenture or the
Securities without notice to any Security Owner. Without the
consent of each Security Owner affected, however, an
amendment, supplement or waiver, including a waiver pursuant
to Section 6.04, may not:
reduce the amount of Securities whose Owners must consent to an amendment,
supplement or waiver;
reduce the rate or extend the time for payment of interest on any Security;
reduce the principal of or extend the fixed maturity of any Security;
make any Security payable in money other than that stated in the Security; or
waive a Default on payment of principal or of interest on any Security.
Revocation and Effect of Consents.
Any consent to an amendment, supplement or waiver by a Owner
of a Security shall bind the Owner and every subsequent Owner
of a Security or portion of a Security that evidences the same
debt as the consenting Owner's Security, even if notation of
such consent is not made on any Security. Any such Owner or
subsequent Owner, however, may revoke such consent as to his
or her Security or portion of a Security. The Trustee must
receive the notice of such revocation before the date the
amendment, supplement or waiver becomes effective.
After an amendment, supplement or waiver becomes effective, it
shall bind every Security Owner unless it makes a change
described in clauses (2), (3), (4), or (5) of Section 9.02. In
that case the
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<PAGE>
amendment, supplement or waiver shall bind each Owner of a
Security who has consented to it and every subsequent Owner of
a Security or portion of a Security that evidences the same
debt as the consenting Owner's Security.
Notation on or Exchange of Securities.
If an amendment, supplement or waiver changes the terms of a
Security, the Trustee may require the Owner of a Certificated
Security to deliver it to Registrar. Registrar may place an
appropriate notation on the Certificated Security about the
changed terms and return it to the Owner. Alternatively, if
the Corporation or Registrar so determine, the Corporation in
exchange for the Certificated Security shall issue and
Registrar shall authenticate a new Certificated Security that
reflects the changed terms.
Trustee to Sign Amendments, etc.
The Trustee shall sign any amendment, supplement or waiver
authorized pursuant to this Article if the amendment,
supplement or waiver does not adversely affect the rights of
the Trustee. If it would have such an adverse effect, the
Trustee may but need not sign such amendment, supplement or
waiver. The Corporation may not sign an amendment or
supplement until the Board of Directors of the Corporation
approves it.
Future Certificates.
The Corporation shall have the right to issue additional
Certificates hereunder, provided the Corporation is not in
default under any provision of this Trust Indenture. Such
additional Certificates shall be issued pursuant to resolution
duly adopted by the governing body of the Corporation;
provided, however, that the additional Certificates are issued
pursuant to a supplement to this Indenture. An executed copy
of said supplemental Indenture, signed by the Corporation, the
Trustee, Paying Agent, Registrar shall serve as a modification
of this Indenture. Such additional Certificates shall be of
equal standing and priority with all other series of
Certificates issued hereunder.
Compliance with Trust Indenture Act.
Every amendment to or supplement of this Indenture or the
Securities shall comply with the TIA as then in effect.
MISCELLANEOUS
Notices.
Any notice or communication shall be sufficiently given if in
writing and delivered in person or mailed by first class mail
addressed as follows:
if to the Corporation:
Cornerstone Ministries Investments, Inc.
6035 Atlantic Boulevard, Suite C
Norcross, Georgia 30071-1345
Attention: Chief Financial Officer
if to Registered Paging Agent:
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<PAGE>
-----------------------------
-----------------------------
-----------------------------
Attention: Corporate Trust Department
if to the Trustee:
American Securities Transfer and Trust
12039 West Aleameda Parkway
Lakewood, Colorado 80228
Attention: Mr. Gregory Tubbs, Senior Vice President
The Corporation or the Trustee by notice to the other may
designate additional or different addresses for subsequent
notices or communications.
Any notice or communication to Security Owners shall be
sufficiently given if mailed by first class mail to each
Registered Security Owner.
Any notice or communication mailed to a Security Owner shall
be mailed to him at his address as it appears on the lists or
registration books of Registrar and shall be sufficiently
given to him if so mailed within the time prescribed.
Failure to give notice or communication to a Security Owner or
any defect in it shall not affect its sufficiency with respect
to other Security Owners. If a notice or communication is
mailed, it is duly given, whether or not the Security Owner
receives or reads it.
Communications by Security Owners with Other Security Owners.
Security Owners may communicate, pursuant to TIA Section
312(b), with other Security Owners with respect to their
rights under this Indenture. Except as to any notice to the
Trustee or to the Corporation, which is deemed given only when
received, if any notice or communication is mailed in the
manner provided in Section 10.01 hereof, it is deemed duly
given, whether or not the addressee receives such notice or
communication.
Certificate and Opinion as to Conditions Precedent.
Upon any request or application by the Corporation to Trustee,
Paying Agent or Registrar to take any action under the
Indenture, the Corporation shall furnish to the Trustee,
Paying Agent or Registrar:
an Officers' Certificate stating that, in the opinion of the signers, all
conditions precedent, if any, provided for in this Indenture relating to the
proposed action have been complied with; and
an opinion of counsel stating that, in the opinion of such counsel, all such
conditions precedent have been complied with.
Each opinion of counsel shall be in writing. The legal counsel
who renders it may be an employee of or counsel to the
Corporation. The legal counsel shall be acceptable to the
Trustee, Paying Agent or Registrar.
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<PAGE>
Statements Required in Certificate or Opinion.
Each certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture shall
include:
a statement that the person making such certificate or opinion has read such
covenant or condition;
a brief statement as to the nature and scope of the examination or investigation
upon which the statements or opinions contained in such certificate or opinion
are based;
a statement that, in the opinion of such person, he has made such examination or
investigation as is necessary to enable him to express an informed opinion as to
whether or not such covenant or condition has been complied with; and
a statement as to whether or not, in the opinion of such person, such condition
or covenant has been complied with.
When Securities Disregarded.
In determining whether the Owners of the required principal
amount of Securities have concurred in any direction, waiver
or consent, Securities owned by the Corporation or by a
person, directly or indirectly controlling or controlled by or
under direct or indirect common control with the Corporation
shall be disregarded, except that for the purposes of
determining whether the Trustee shall be protected in relying
on any such direction, waiver or consent, only Securities
which the Trustee knows are so owned shall be so disregarded.
Furthermore, subject to the foregoing only, Securities
outstanding at the time shall be considered in any such
determination.
Rules by Trustee, Paying Agent, Registrar.
The Trustee may make reasonable rules for the administration
of this Indenture. Such rules may cover matters relating to
actions by or a meeting of Security Owners. Paying Agent or
Registrar may make reasonable rules for its functions.
Legal Holidays.
A "Legal Holiday" is a Saturday, Sunday, a legal holiday or a
day on which banking institutions are not required to be open.
If a payment date is a Legal Holiday at a place of payment,
payment may be made at that place on the next succeeding day
that is not a Legal Holiday, and no interest shall accrue for
the intervening period.
Governing Law.
This Indenture and the Securities shall be governed by the
laws of the State of Georgia.
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<PAGE>
No Adverse Interpretation of Other Agreements.
This Indenture may not be used to interpret another indenture,
loan or debt agreement of the Corporation. Any such indenture,
loan or debt agreement may not be used to interpret this
Indenture.
No Recourse Against Others.
As described in the Securities, all liability of any director,
officer, employee or stockholder, as such, of the Corporation
is waived and released.
Successors.
All agreements of the Corporation in this Indenture and the
Securities shall bind its successor. All agreements of the
Trustee or Registrar and Paging Agent in this Indenture shall
bind its successor.
Duplicate Originals.
The parties may sign any number of copies of this Indenture.
Each sign copy shall be an original, but all of them taken
together represent but one and the same agreement.
Trust Indenture Act Controls.
If any provision of this Indenture limits, qualifies, or
conflicts with another provision which is required to be
included in this Indenture by the TIA, the required provision
shall control.
[SIGNATURE PAGES FOLLOW]
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<PAGE>
<TABLE>
<CAPTION>
<S> <C>
SIGNATURES
Signed, sealed and delivered in the CORNERSTONE MINISTRIES INVESTMENTS, INC.
presence of the undersigned this
day of 1999.
By: __________________________________________________________
Unofficial Witness Title: _______________________________________________________
Attest:
Notary Public
My Commission Expires: ____ ____
Assistant Secretary
(SEAL)
Signed, sealed and delivered in the AMERICAN SECURITIES TRANSFER
presence of the undersigned this ____ AND TRUST
day of 1999.
By: _________________________________________________________
Title: ______________________________________________________
Unofficial Witness
Attest:
Notary Public
_______________________________________________________________________
My Commission Expires: ____ Assistant Trust Officer
(SEAL)
Signed, sealed and delivered in the
presence of the undersigned this ____
day of 1999. [PAYING AGENT AND REGISTRAR'S NAME]
Unofficial Witness By:
Title: _______________________________________________________
Notary Public Attest:
My Commission Expires:
______________________________________________________________
Assistant Trust Officer
(SEAL)
</TABLE>
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CORNERSTONE MINISTRIES INVESTMENTS, INC.
Corporation
AND
COLONIAL TRUST COMPANY
Trustee
---------------
Trust Indenture
Dated as of July 27, 1998
--------------
$3,300,000.00
Series A Certificates of Indebtedness
Due April 15, 2000, 2001, 2002 and 2003
TRUST INDENTURE dated as of July 27, 1998, between CORNERSTONE
MINISTRIES INVESTMENTS, INC., a Georgia corporation
("Corporation"), and COLONIAL TRUST COMPANY, an Arizona
corporation ("Trustee," "Paying Agent," "Registrar" and
"Escrow Agent").
Each party agrees as follows for the benefit of the other
party and for the equal and ratable benefit of the Owners of
the Corporation's Series A Certificates of Indebtedness
("Securities"):
Exhibit 4.5
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<PAGE>
GRANTING CLAUSE: The Corporation hereby grants, bargains,
sells, and conveys unto the Trustee, and the Trust hereby
created, all of its right, title and interest in and to the
collateral described in Exhibit "A" attached hereto and made a
part hereof (the "Collateral") and grants a continuing
security interest therein for the purposes herein expressed.
TO HAVE AND TO HOLD the Collateral, together with all the
appurtenances thereto appertaining (said properties, rights,
privileges and franchises including any cash and securities
hereafter deposited or required to be deposited with the
Trustee herein collectively called the "Trust Estate") unto
the Trustee and its successors and assigns forever.
ARTICLE 1 * DEFINITIONS AND INCORPORATION BY REFERENCE
Section 1.01. Definitions
"Certificate" means any of the Series A Certificates of
Indebtedness issued pursuant to the terms hereof or any
Certificates issued in the future hereunder.
"Certificate Payment Fund" means the fund created with Paying
Agent into which the Corporation shall pay not less than three
(3) business days prior to any principal and interest paying
date an amount sufficient to make all principal and interest
payments.
"Certificated Security" means a Security represented by a
physical certificate.
"Collateral" means the property as described in Exhibit "A",
whether now existing or hereafter acquired.
"Corporation" means the party named as such in this Indenture
until a successor replaces it and thereafter means the
successor.
"Default" means any event which is, or after notice or lapse
of time or both would be, an Event of Default.
"Indenture" means this Indenture as amended or supplemented
from time to time.
"Obligations" means the principal and interest due and payable
with respect to Certificates issued pursuant to this
Indenture, all expenses and fees of Trustee, Paying Agent and
Registrar, and all debts, liabilities and obligations of the
Corporation to the Trustee and Certificate Owners related to
the Certificates, however evidenced and whether now existing
or hereafter incurred, direct or indirect, matured or not
matured, absolute or contingent, now due or hereafter to
become due (including, without limitation, any and all costs
and attorneys' fees incurred by the Trustee in the collection,
whether by suit or by any other means, of any of the
Obligations) and the extension or renewals of any of the
foregoing.
"Officer" means the Chairman of the Board, the President, any
Vice President, the Treasurer, or the Secretary of the
Corporation.
"Officers' Certificate" means a certificate signed by two
Officers or by an Officer and an Assistant Treasurer or
Assistant Secretary of the Corporation. Sections 10.04 and
10.05.
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<PAGE>
"Owner" or "Security Owner" means the person in whose name a
Registered Security is registered on the Registrar's books.
"Non-certificated Securities" means Securities registered as
to ownership in book entry form only.
"Principal" of a Security means the amount stated as principal
on the face of the Security plus, when appropriate, the
premium, if any on the Security.
"Registered Security" means Securities of the Corporation
issued pursuant to this Indenture and fully registered on the
Registrar's books.
"Registered Security Owner" means the registered owner of any
Registered Security.
"SEC" means the Securities and Exchange Commission.
"Securities" means the Certificates, as amended or
supplemented from time to time.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. ss.ss.
77 aaa et. seq.) as in effect on the date of this Indenture.
"Trust Estate" means the Collateral and any cash and
securities hereafter deposited or required to be deposited
with the Trustee.
"Trustee" means the party named as such in this Indenture
until a successor replaces it and thereafter means the
successor.
"Trust Officer" means the Chairman of the Board, the President
or any other officer or assistant officer of the Trustee
assigned by the Trustee to administer its corporate trust
matters.
Section 1.02. Other Definitions
Term Defined in Section
"Bankruptcy Law" 6.01
"Event of Default" 6.01
"Legal Holiday" 10.08
"Paying Agent" 2.03
"Registrar" 2.03
"U.S. Government Obligations" 8.01
Section 1.03. Incorporation by Reference of Trust Indenture Act.
Whenever this Indenture refers to a provision of the TIA, the
provision is incorporated by reference in and made a part of
this Indenture. The following TIA terms used in this Indenture
have the following meanings:
"Commission" means the SEC.
"Indenture Securities" means the Securities.
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<PAGE>
"Indenture Security Owner" means a Security Owner.
"Indenture to be qualified" means this Indenture.
"Indenture Trustee" or "institutional trustee" means the
Trustee.
"Obligor" on the indenture securities means the Corporation.
All other TIA terms used in this Indenture that are defined by
the TIA, defined by TIA reference to another statute, or
defined by the SEC rule have the meanings assigned to them.
Section 1.04. Rules of Construction.
Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the
meaning assigned to it in accordance with generally
accepted accounting principles;
(3) "or" is not exclusive; and
(4) words in the singular include the plural, and in the
plural include the singular.
ARTICLE 2 * THE SECURITIES
Section 2.01. Form and Dating.
The Securities and the Trustee's certificate of authentication
shall be substantially in the form of Exhibit "B". The
Securities may have notations, legends or endorsements
required by law, stock exchange rule or usage. The Corporation
shall approve the form of the Securities and any notation,
legend or endorsement on them. Each Security shall be dated
the date of its authentication.
Section 2.02. Execution and Authentication.
Two Officers shall sign the Certificated Securities for the
Corporation by facsimile signature. The Corporation's seal
shall be reproduced on the Securities.
If an Officer who signed a Certificated Security no longer
holds that office at the time the Trustee authenticates the
Certificated Security, the Certificated Security shall be
valid nevertheless.
No Certificated Security shall be valid until the Trustee
manually signs the certificate of authentication on the
Certificated Security or authorizes the Registrar to register
the Non-certificated Security in the official registry. The
signature shall be conclusive evidence that the Security has
been authenticated under this Indenture.
-4-
<PAGE>
The Trustee shall authenticate Securities for original issue
in the aggregate principal amount of up to $3,300,000 upon a
written order of the Corporation signed by two Officers or by
an Officer and an Assistant Treasurer of the Corporation. The
aggregate principal amount of Securities outstanding at any
time may be increased pursuant to the provisions of Section
9.07 hereof.
Section 2.03. Registrar and Paying Agent.
The Corporation has appointed Colonial Trust Company, whose
address is 5336 North 19th Avenue, Phoenix, Arizona 85015, as
Registrar and Paying Agent. Requests for transfer or exchange
and for payment of Securities shall be made to Colonial Trust
Company at said address.
Section 2.04. Trust Monies.
All monies received as proceeds from the sale of the
Securities and interest accrued thereon from payments made by
the Corporation to Paying Agent into the Certificate Payment
Fund or otherwise ("Trust Monies") shall be deemed part of the
Trust Estate. All Trust Monies shall be held for the ratable
benefit of the Owners of the Certificates. Trust Monies may be
invested in any form of account or deposit insured by
depositor insurance or in interest-bearing obligations issued
by the United States government or any political subdivision
thereof or money market mutual funds consisting solely of such
investments. Paying Agent and/or Trustee may commingle such
Trust Monies with similar funds of other issues, but shall
maintain detailed records to reflect the share thereof
attributable to each issuer. Periodic statements shall be
provided to the Corporation reflecting all receipts and
disbursements of Trust Monies. The Trust Monies shall not be
assignable by the Corporation nor subject to the process of
any court upon legal action by or against the Corporation or
by anyone claiming under or through it. Paying Agent shall
hold in trust for the benefit of Security Owners or the
Trustee all money held by the Paying Agent for the payment of
principal or interest on the Securities, and shall notify the
Trustee of any default by the Corporation in making any such
payment.
Section 2.05. Security Owner Lists.
The Trustee shall preserve in as current a form as is
reasonably practicable the most recent list available to it of
the names and addresses of Registered Security Owners who
submit their names and addresses to the Trustee in accordance
with TIA ss. 313(c). If the Trustee is not the Registrar, the
Corporation shall furnish to the Trustee on or before each
semiannual interest payment date and at such other times as
the Trustee may request in writing a list in such form and as
of such date as the Trustee may reasonably require of the name
and addresses of Registered Security Owners.
Section 2.06. Registration, Transfer and Exchange.
The Corporation will issue fully Registered Securities in the
form of Exhibit "B". The Securities will be initially issued
only as Registered Securities.
When a Certificated Security is presented to the Registrar
with a request to register the transfer, the Registrar shall
register the transfer as requested if the requirements of
applicable state law are met. To permit transfers and
exchanges, the Trustee shall authenticate Securities at the
Registrar's request. The Registrar may charge a reasonable fee
for any transfer or exchange but not for any exchange pursuant
to Section 2.09, 3.06 or 9.05.
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Section 2.07. Replacement Securities.
If the Owner of a Certificated Security claims that a
Certificated Security has been lost, destroyed or wrongfully
taken, the Registrar shall issue and the Trustee shall
authenticate a replacement Security. An indemnity bond must be
sufficient in the judgment of the Registrar and the Trustee to
protect the Corporation, the Trustee, the Paying Agent, and
the Registrar from any loss which any of them may suffer if a
Certificated Security is replaced. The Registrar may charge
for its expenses in replacing a Security.
Section 2.08. Outstanding Securities.
Securities outstanding at any time are all Securities
authenticated by the Trustee except for those cancelled by it
and those described in this Section. Securities outstanding
include those held by the Corporation or its affiliates.
If a Security is replaced pursuant to Section 2.07, it ceases
to be outstanding unless the Trustee receives proof
satisfactory to it that the replaced Security is held by a
bona fide purchaser.
If the Paying Agent holds on a redemption date or maturity
date money sufficient to pay Securities payable on that date,
then on and after that date such Securities cease to be
outstanding and interest on them ceases to accrue. Such
Securities carry no rights except the right to receive
payment.
The Registered Security Owner shall be treated as the owner of
the Security for all purposes of this Indenture.
Section 2.09. Temporary Securities.
Until definitive Securities are ready for delivery, the
Corporation may prepare and the Trustee shall authenticate
temporary Securities. Temporary Securities shall be
substantially in the form of definitive Securities but may
have variations that the Corporation considered appropriate
for temporary Securities. Without unreasonable delay, the
Corporation shall prepare and the Trustee shall authenticate
definitive Securities in exchange for temporary Securities.
Section 2.10. Cancellation.
The Corporation at any time may direct the Trustee to cancel
unsold Securities or Securities owned by the Corporation. The
Registrar and the Paying Agent shall forward to the Trustee
any Certificated Securities surrendered to them for transfer,
exchange or payment. The Trustee and no one else shall cancel
and destroy Certificated Securities surrendered for transfer,
exchange, payment or cancellation. The Corporation may not
issue new Securities to replace Securities it has paid or
delivered to the Trustee for cancellation.
Section 2.11. Defaulted Interest.
If and to the extent the Corporation defaults in a payment of
interest on any Registered Securities, it shall pay the
defaulted interest to the persons who are Registered Security
Owners on a
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subsequent special record date. The Corporation shall fix the
record date and payment date. At least thirty (30) days before
the record date, the Corporation shall mail to each Registered
Security Owner a notice that states the record date, the
payment date, and the amount of defaulted interest to be paid.
The Corporation may pay defaulted interest in any other lawful
matter.
Section 2.12. Book Entry Form.
Notwithstanding anything contained herein to the contrary,
each of the Certificates issued hereunder may be issued in
book entry form as a non-certificated Security.
Section 2.13. Escrow of Proceeds.
The proceeds from the sale of the certificates shall be held
in escrow by Trustee as Trust Monies under Section 2.04, and
shall be released to the Corporation in accordance with the
"Use of Proceeds" section of the Prospectus.
ARTICLE 3 l REDEMPTION
Section 3.01. Notices to Trustee.
If the Corporation wants to redeem Securities pursuant to the
terms of the Securities, it shall notify the Trustee of the
redemption date and the principal amount of Securities to be
redeemed. If the Corporation wants to credit against any such
redemption Securities it has not previously directed the
Trustee to cancel, it shall deliver such directions along with
any Certificated Securities to be cancelled. The Corporation
shall give each notice provided for in this Section at least
ten (10) days prior to the proposed date of mailing a notice
of redemption as provided in Section 3.03 hereof.
Section 3.02. Selection of Securities to be Redeemed.
If less than all the Securities are to be redeemed, the
Trustee shall select the Securities to be redeemed by a method
the Trustee considers fair and appropriate. The Trustee shall
make the selection from Securities outstanding not previously
called for redemption. The Trustee may select for redemption
portions of the principal of Securities that have a
denomination larger than $500. Provisions of this Indenture
that apply to Securities called for redemption also apply to
portions of Securities called for redemption.
Section 3.03. Notice of Redemption.
At least 30 days but not more than 60 days before a redemption
date, the Corporation shall mail and first publish notice of
redemption as provided in Section 10.02.
The notice shall identify the Securities to be redeemed and
shall state:
(1) the redemption date;
(2) the redemption price as specified in the Securities;
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(3) The name and address of the Paying Agent;
(4) that Certificated Securities called for redemption
must be surrendered to the Paying Agent to collect
the redemption price; and
(5) that interest ceases to accrue on Securities called
for redemption on and after the redemption date.
At the Corporation's request, the Trustee shall give the
notice of redemption in the Corporation's name and at its
expense.
Section 3.04. Deposit of Redemption Price.
On or before the redemption date, the Corporation shall
deposit with the Paying Agent money sufficient to pay the
redemption price of and accrued interest on all Securities to
be redeemed on that date.
Section 3.05. Effect of Notice of Redemption.
Once Notice of redemption is given, Securities called for
redemption become due and payable on the redemption date and
at the redemption price stated in the notice. Certificated
Securities must be surrendered to the Paying Agent. Securities
shall be paid at the redemption price stated in the notice,
plus accrued interest to the redemption date.
Section 3.06. Securities Redeemed in Part.
Upon surrender of a Certificated Security that is redeemed in
part only, the Trustee shall authenticate for the Owner a new
Certificated Security equal in principal amount to the
unredeemed portion of the Certificated Security surrendered.
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ARTICLE 4 l COVENANTS
Section 4.01. Payment of Securities.
The Corporation shall promptly pay the principal of and
interest on the Securities on the dates and in the manner
provided in the Securities. An installment of principal or
interest shall be considered paid on the date it is due if the
Trustee or Paying Agent holds on that date money designated
for and sufficient to pay the installment. To facilitate the
payment of principal and interest, the Corporation has created
with Paying Agent a Certificate Payment Fund into which the
Corporation shall pay not less than three (3) business days
prior to any principal and interest paying date an amount
sufficient to make all principal and interest payments. Paying
Agent will disburse from said fund all payments of principal
and interest on Certificates, Trustee's fees and such other
sums as are provided herein. Paying Agent shall notify the
Corporation of the amounts required to be deposited into said
fund at least five (5) business days prior to any principal
and interest payment date.
The Corporation shall pay interest on overdue principal at the
rate borne by the Securities; it shall pay interest on overdue
installments of interest at the same rate to the extent
lawful.
Section 4.02. Books and Records.
The Corporation covenants and agrees that it will, at all
times and from time to time, permit the Trustee and its agents
or accountants to have access to and to inspect and make
extracts from, the Corporation's books, accounts, papers,
documents and memoranda pertinent to any of the covenants,
conditions and agreements of this Indenture in respect of the
Securities.
Section 4.03. Use of Proceeds.
The Corporation hereby covenants to use the proceeds from the
sale of the Securities in accordance with the terms and
conditions set forth in the Prospectus of the Corporation with
respect to the Securities.
Section 4.04. Corporate Existence.
Subject to Article 5, the Corporation will do or cause to be
done all things necessary to preserve and keep in full force
and effect its corporate existence, rights and franchises;
provided, however, that the Corporation shall not be required
to preserve any right or franchise if it shall determine that
the preservation is no longer desirable in the conduct of the
Corporation's business and that the loss will not be
disadvantageous in any material respect to the Owners.
Section 4.05. Compliance Certificate.
The Corporation shall deliver to the Trustee within 120 days
after the end of each fiscal year of the Corporation an
Officers' Certificate stating whether or not the signers know
of any default by the Corporation in performing its covenants
in Article 4. If they do know of such a default, the
certificate shall describe the default. The certificate need
not comply with Section 10.05. The first certificate shall be
delivered to the Trustee by May 1, 1999.
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Section 4.06. SEC Reports.
The Corporation shall file with the Trustee within 15 days
after it files them with the SEC copies of the annual reports
and of the information, documents, and other reports (or
copies of such portions of any of the foregoing as the SEC may
by rules and regulations prescribe) which the Corporation is
required to file with the SEC pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934. The Corporation also
shall comply with the other provisions of TIA ss. 314(a).
Section 4.07. Collateral.
This Indenture and the Securities are secured by a security
interest, lien, charge or encumbrance on the proceeds of the
offering (cash and investments) and various loans made by the
Corporation which shall be collaterally assigned to the
Trustee for the benefit of the Owners of the Securities. At
all times, the Corporation agrees that the principal balance
of the then outstanding Certificates will be secured by the
proceeds of this offering and loans collaterally assigned to
the Trustee in an amount (combined face value of such cash and
investments and principal balance of all collaterally assigned
loans) not less than the outstanding principal balance of the
then outstanding Certificates. In furtherance of the
foregoing, the proceeds from the sale of the Certificates
shall be segregated and maintained in escrow by Trustee until
used in accordance with the use of proceeds provisions of the
Prospectus. In allocating loans to be collaterally assigned to
the Trustee, the Corporation shall select loans made in
accordance with its then current policies and procedures,
which are fairly representative of the Corporation's entire
loan portfolio. The Corporation shall be entitled to
substitute loans which meet the foregoing requirements from
time to time. The Corporation shall provide to Trustee 120
days following the close of each fiscal year or within 30 days
after written request by the Trustee a certificate of an
executive officer confirming that, as of the date of response,
the Corporation is in compliance with its collateral
obligations hereunder and containing such other details as the
Trustee may reasonably request. Additionally, the Corporation
agrees to execute and deliver to Trustee a separate collateral
assignment of each note and mortgage (which terms shall
include deeds of trust, deeds to secure debt and other
securities instruments) as each loan is made by the
Corporation and execute such other and further assignments and
documents as may be reasonably required by Trustee to evidence
the security interest created hereby in favor of Trustee.
The Trustee shall have no responsibility or obligation to
determine the validity of any lien or Collateral assigned to
the Trustee to secure the Certificates, the priority of the
lien position, the value of the underlying property securing
the lien, the correctness of the documentation evidencing the
lien or the assignment thereof or otherwise. Furthermore, the
Trustee shall have no liability for any loss resulting from
any invalidity or insufficiency in regard to the Collateral,
the collateral documentation or the assignment thereto by the
Corporation.
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ARTICLE 5 * SUCCESSOR CORPORATION
Section 5.01. When Corporation May Merge, etc.
The Corporation shall not consolidate with or merge into, or
transfer all or substantially all of its assets to, another
corporation unless the resulting, surviving or transferee
corporation assumes by supplemental indenture all the
obligations of the Corporation under the Securities and this
Indenture.
ARTICLE 6 * DEFAULTS AND REMEDIES
Default.
Section 601. Events of Default.
An "Event of Default" occurs if:
(1) the Corporation defaults in the payment of interest
on any Security when the same becomes due and payable
and the default continues for a period of sixty (60)
days;
(2) the Corporation defaults in the payment of the
principal of any Security when the same becomes due
and payable at maturity, upon redemption or otherwise
and the default continues for a period of sixty (60)
days;
(3) the Corporation fails to comply with any of its other
agreements in the Securities or this Indenture and
the default continues for the period and after the
notice specified below;
(4) the Corporation pursuant to or within the meaning of
any Bankruptcy Law:
(A) commences a voluntary case;
(B) consents to the entry of an order for relief
against it in an involuntary case;
(C) consents to the appointment of a Custodian
of it or for any substantial part of its
property;
(D) makes a general assignment for the benefit
of its creditors; or
(E) fails generally to pay its debts as they
become due; or
(5) a court of competent jurisdiction enters an order or
decree under any Bankruptcy Law that:
(A) is for relief against the Corporation in an
involuntary case;
(B) appoints a Custodian of the Corporation or
for any substantial part of its property; or
(C) orders the liquidation of the Corporation;
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and the order or decree remains unstayed and
in effect for 90 days.
The term "Bankruptcy Law" means Title 11, United States Code
or any similar Federal or State law for the relief of debtors.
The term "Custodian" mans any receiver, trustee, assignee,
liquidator or similar official under any Bankruptcy law.
A default under clauses (1), (2) and (3) above is not an Event
of Default until the Trustee notifies the Corporation of the
default and the Corporation does not cure the default within
ninety (90) days after receipt of the notice. The notice must
specify the default, demand that it be remedied and state that
the notice is a "Notice of Default."
Section 6.02. Acceleration.
If an Event of Default occurs and is continuing, the Trustee
by notice to the Corporation or the Owners of at least a
majority in principal amount of the Securities by notice to
the Corporation and the Trustee may declare the principal of
and accrued interest on all the Securities to be due and
payable immediately. Upon a declaration such principal and
interest shall be due and payable immediately. Notwithstanding
the foregoing, if at any time after the principal of the
Securities has been declared due and payable, all defaults
have been cured and all amounts in respect of which the
Corporation shall be in default, together with the expenses
and reasonable charges of Trustee and reasonable attorneys'
fees with interest at a rate equal to two (2) percentage
points in excess of the highest rate on any of the
Certificates on such expenses, charges and fees, then the
Trustee shall waive such default and its consequences by
written notice to the Corporation.
Section 603. Sale of Collateral.
If an Event of Default has occurred and has not been cured as
provided herein, the Trustee shall have the right, without
further notice to the Corporation, to (i) enter upon and into
the premises of the Corporation without liability for trespass
and to remove all of the Collateral and all books, records,
invoices, and other documentation relating thereto, and (ii)
take possession, hold, operate and manage the Collateral;
however, the Trustee shall not be obligated to take possession
in the event of default. The Trustee may require the
Corporation to assemble or package the Collateral and make it
available to the Trustee at a place to be designated by the
Trustee reasonably convenient to the parties, and in such
event the Corporation agrees to make available to the Trustee
all of the Corporation's facilities for the purposes of
removing or taking possession of the Collateral or putting it
in a saleable form.
The Trustee at its sole option and discretion may, or the
Trustee shall upon receipt of written requests from 50% in
principal amount of all the outstanding Certificates, sell,
assign, lease, or otherwise dispose of the Collateral, in
whole or in part, at public or private sale upon terms and
conditions established by the Trustee. Any notice required to
be given in connection with such disposition shall be given in
accordance with Section 10.02 hereof at least ten (10) days
prior to the proposed sale or other disposition, which amount
of time the parties hereto agree shall be reasonable. The
Trustee need not give such notice, however, with respect to
Collateral which is perishable or threatens to decline
speedily in value or is of a type customarily sold on a
recognized market. At any public sale or disposition of the
Collateral the Trustee shall have the right to bid and become
the purchaser, and to have at its discretion all or any part
of the Obligations credited against the purchase price bid by
the Trustee for the Collateral. The proceeds from any sale or
disposition of the Collateral shall be applied first to all
expenses. In the event any such remaining proceeds are
sufficient to pay the Obligations any surplus shall be
remitted to the Corporation.
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To facilitate the exercise by the Trustee of the rights and
remedies set forth in this Section, the Corporation hereby
constitutes the Trustee or its agents, or any other person
whom the Trustee may designate, as attorney-in-fact for the
Corporation, at the Corporation's own cost and expense, to
exercise all or any of the following powers, which being
coupled with an interest, shall be irrevocable, shall continue
until all Obligations have been paid in full and shall be in
addition to any other rights and remedies that the Trustee may
have: (1) to remove from any premises where they may be
located any and all documents, instruments, files, and records
relating to Collateral and any receptacles and cabinets
containing the same, and at the Corporation's cost and expense
to use such of the personnel, supplies, and space of the
Corporation at its place of business as may be necessary to
properly administer and control the Collateral or the
collections and realizations thereon; (2) to receive, open,
and dispose of all mail related to the Church Loan Fund
addressed to the Corporation and to notify postal authorities
to change the address for delivery thereof to such address as
the Trustee may designate; and (3) to take or bring, in the
Trustee's name or in the name of the Corporation, all steps,
actions, suits, or proceedings deemed by the Trustee necessary
or desirable to effect collection of or to realize upon the
Collateral.
Section 604. Other Remedies.
If an Event of Default occurs and is continuing, the Trustee
may pursue any available remedy by proceeding at law or in
equity to collect the payment of principal or interest on the
Securities or to enforce the performance of any provision of
the Securities or this Indenture.
The Trustee may maintain a proceeding even if it does not
possess any of the Securities or does not produce any of them
in the proceedings. A delay or omission by the Trustee or any
Security Owner in exercising any right or remedy accruing upon
an Event of Default shall not impair the right or remedy or
constitute a waiver of or acquiescence in the Event of
Default. No remedy is exclusive of any other remedy. All
available remedies are cumulative.
Section 6.05. Waiver of Past Defaults.
Subject to Section 9.02 the Owners of a majority in principal
amount of the Securities by notice to the Trustee may waive an
existing Default or Event of default and its consequences.
When a Default or Event of Default is waived, it is cured and
stops continuing.
Section 6.06. Control by Majority.
The Owners of a majority in principal amount of the Securities
may direct the time, method and place of conducting any
proceeding for any remedy available to the Trustee or
exercising any trust or power conferred on it. The Trustee,
however, may refuse to follow any direction that conflicts
with law or this Indenture, that is unduly prejudicial to the
rights of other Security Owners, or that may involve the
Trustee in personal liability.
Section 6.07. Limitation on Suits.
A Security Owner may not pursue any remedy with respect to
this Indenture or the Securities unless:
(1) the Owner gives to the Trustee written notice of a
continuing Event of Default;
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(2) the Owners of at least a majority in principal amount
of the Securities make a written request to the
Trustee to pursue the remedy;
(3) such Owner or Owners offer to the Trustee indemnity
satisfactory to the Trustee against any loss,
liability or expense; and
(4) the trustee does not comply with the request within
60 days after receipt of the request and the offer of
indemnity.
A Security Owner may not use this Indenture to prejudice the
rights of another Security Owner or to obtain a preference or
priority over any other Security Owner.
Section 6.08. Rights of Owners to Receive Payment.
Notwithstanding any other provision of this Indenture, the
right of any Owner of a Security to receive payment of
principal and interest on the Security, or to bring suit for
the enforcement of any such payment on or after such
respective dates, shall not be impaired or affected without
the consent of the Owner of the Security.
Section 6.09. Trustee May File Proofs of Claim.
The Trustee may file such proofs of claim and other papers or
documents as may be necessary or advisable in order to have
the claims of the Trustee and the Security Owners allowed in
any judicial proceedings relative to the Corporation, its
creditors or its property.
Section 6.10. Priorities.
If the Trustee collects any money pursuant to this Article, it
shall pay out the money in the following order:
First: to the Trustee for amounts due under Section 7.07;
Second: to Security Owners for amounts due and unpaid on the
Securities for principal and interest, ratably, without
preference or priority of any kind, according to the amounts
due and payable on the
Securities for principal and interest, respectively; and
Third: to the Corporation.
The Trustee may fix a record date and payment date for any
payment to Registered Security Owners.
Section 6.11. Undertaking for Costs.
In any suit for the enforcement of any right or remedy under
this Indenture or in any suit against the Trustee for any
action taken or omitted by it as Trustee, a court in its
discretion may require the filing by any party litigant in the
suit of an undertaking to pay the costs of the suit, and the
court in its discretion may assess reasonable costs, including
reasonable attorneys' fees, against
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any party litigant in the suit, having due regard to the
merits and good faith of the claims or defenses made by the
party litigant. This Section does not apply to a suit by the
Trustee, a suit by a Owner of Securities pursuant to Section
6.07, or a suit by Owners of more than 10% in principal amount
of the Securities.
ARTICLE 7 l TRUSTEE
Section 7.01. Duties of Trustee.
(a) If an Event of Default has occurred and is
continuing, the Trustee, which for purposes of this
Article 7 shall include its responsibilities as
Registrar, Paying Agent, Escrow Agent as well as
Trustee, shall exercise its rights and powers and use
the same degree of care and skill in their exercise
as a prudent man would exercise or use under the
circumstances in the conduct of his own affairs.
(b) Except during the continuance of an Event of Default:
(1) The Trustee need perform only those duties
that are specifically set forth in this
Indenture and no others.
(2) In the absence of bad faith on its part, the
Trustee may conclusively rely, as to the
truth of the statements and the correctness
of the opinions expressed therein, upon
certificates or opinions furnished to the
Trustee and conforming to the requirements
of this Indenture. The Trustee, however,
shall examine the certificates and opinions
to determine whether or not they conform to
the requirements of this Indenture.
(c) The Trustee may not be relieved from liability for
its own negligent action, its own negligent failure
to act, or its own willful misconduct, except that:
(1) This paragraph does not limit the effect of
paragraph (b) of this Section.
(2) The Trustee shall not be liable for any
error of judgment made in good faith by a
Trust Officer, unless it is proved that the
Trustee was negligent in ascertaining the
pertinent facts.
(3) The Trustee shall not be liable with respect
to any action it takes or omits to take in
good faith in accordance with a direction
received by it pursuant to Sections 6.05 and
6.06.
(d) Every provision of this Indenture that in any way
relates to the Trustee is subject to paragraphs (a),
(b) and (c) of this Section.
(e) The Trustee may refuse to perform any duty or
exercise any right or power unless it receives
indemnity satisfactory to it against any loss,
liability or expense.
(f) The Trustee shall not be liable for interest on any
money received by it except as otherwise agreed with
the Corporation.
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Section 7.02. Rights of Trustee.
(a) The Trustee may rely on any document believed by it
to be genuine and to have been signed or presented by
the proper person. The Trustee need not investigate
any fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it
may require an Officers' Certificate or an opinion of
counsel. The Trustee shall not be liable for any
action it takes or omits to take in good faith in
reliance on an Officer's Certificate or opinion.
(c) The Trustee may act through agents and shall not be
responsible for the misconduct or negligence of any
agent appointed with due care.
(d) The Trustee shall not be liable for any action it
takes or omits to take in good faith which it
believes to be authorized or within its rights or
powers.
(e) The Trustee shall not be responsible for the
sufficiency of the Collateral.
(f) The Trustee assumes no duty to ensure the procuring
of insurance on the Collateral or the payment of
taxes and assessments with respect thereto.
Section 7.03. Trustee's Disclaimer.
The Trustee makes no representation as to the validity or
adequacy of this Indenture or the Securities, it shall not be
accountable for the Corporation's use of the proceeds from the
Securities, and it shall not be responsible for any statement
in the Securities, other than its certificate of
authentication, or in any Prospectus used in the sale of the
Securities, other than statements provided in writing by the
Trustee for use in such Prospectus.
Section 7.04. Individual Rights of Trustee, etc.
The Trustee in its individual or any other capacity may become
the owner or pledgee of Securities and may otherwise deal with
the Corporation with the same rights it would have if it were
not Trustee. Any Paying Agent, Registrar or Co-registrar may
do the same with like rights. The Trustee, however, must
comply with Sections 7.10 and 7.11.
Section 7.05. Notice of Defaults.
If an Event of Default occurs and is continuing, and if it is
known to the Trustee, the Trustee shall mail and first publish
as provided in Section 10.02 notice of the default within 90
days after it occurs. Except in the case of a default in
payment on any Security, the Trustee may withhold the notice
if and so long as a committee of its Trust Officers in good
faith determines that withholding the notice is in the
interests of Security Owners.
Section 7.06 Reports by Trustee to Owners.
Within sixty (60) days after each August 1, beginning with the
October following the date of this Indenture, the Trustee
shall provide to the Security Owners specified in TIA
ss.313(c) a brief report dated as of such August 1 that
complies with TIA ss.313(a). The Trustee also shall comply
with TIA ss.313(b).
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A copy of each report at the time of its mailing to Security
Owners shall be filed with the SEC.
Section 7.07. Compensation and Indemnity.
The Corporation shall pay to the Trustee from time to time
reasonable compensation for its services as set forth in a
separate agreement between the Corporation and Trustee. The
Corporation shall reimburse the Trustee upon request for all
reasonable out-of-pocket expenses incurred by it. Such
expenses may include the reasonable compensation and expenses
of the Trustee's agents and attorneys. The Corporation shall
indemnify the Trustee against any loss or liability incurred
by it. The Trustee shall notify the Corporation promptly of
any claim for which it may seek indemnity. The Corporation
shall defend the claims and the Trustee shall cooperate in the
defense. The Trustee may have separate counsel and the
Corporation shall pay the reasonable fees and expenses of such
counsel. The Corporation need not pay for any settlement made
without its consent. The Corporation need not reimburse any
expense or indemnify against any loss or liability incurred by
the Trustee through negligence or bad faith.
To secure the Corporation's payment obligations in this
Section, the Trustee shall have a lien prior to the Securities
on all Trust Monies.
Section 7.08. Replacement of Trustee.
The Trustee may resign by so notifying the Corporation. The
Corporation may remove the Trustee at any time, without cause,
by so notifying the removed Trustee. The Corporation or the
Owners of a majority in principal amount of the Securities may
appoint a successor Trustee with the Corporation's consent.
The Corporation or the Owners of a majority in principal
amount of the Securities may remove the Trustee if:
(1) the Trustee fails to comply with Section 7.10;
(2) the Trustee is adjudged a bankrupt or an insolvent;
(3) a receiver or other public officer takes charge of
the Trustee or its property; or
(4) the Trustee otherwise becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in
the office of Trustee for any reason, the Corporation shall
promptly appoint a successor Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the Retiring Trustee and to the Corporation.
Immediately after that, the retiring Trustee shall transfer
all property held by it as Trustee to the successor Trustee,
the resignation or removal of the retiring Trustee shall
become effective, and the successor Trustee shall have all the
rights, powers and duties of the Trustee under this Indenture.
A successor Trustee shall give notice of its succession to
each Security Owner as provided in Section 10.02.
If a successor Trustee does not take office within 60 days
after the retiring Trustee resigns or is removed, the retiring
Trustee, the Corporation or the Owners of a majority in
principal amount of the Securities may petition any court of
competent jurisdiction for the appointment of a successor
Trustee.
If the Trustee fails to comply with Section 7.10, any Security
Owner may petition any court of competent jurisdiction for the
removal of the Trustee and the appointment of a successor
Trustee.
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Section 7.09. Successor Trustee by Merger, etc.
If the Trustee consolidates with, merges or converts into, or
transfers all or substantially all of its corporate trust
assets to another corporation, the resulting, surviving or
transferee corporation without any further act shall be the
successor Trustee.
Section 7.10. Eligibility; Disqualification.
This Indenture shall always have a Trustee who satisfies the
requirements of TIA ss.310(a)(1). The Trustee shall have a
combined capital and surplus of at least $500,000 as set forth
in its most recent published annual report of condition. The
Trustee shall comply with TIA ss.310(b), including the
optional provision permitted by the second sentence of TIA
ss.310(b)(9).
Section 7.11. Preferential Collection of Claims Against Corporation.
The Trustee shall comply with TIA ss.311(a), excluding any
creditor relationship listed in TIA ss.311(b). A Trustee who
has resigned or been removed shall be subject to TIA ss.311(a)
to the extent indicated.
ARTICLE 8 l DISCHARGE OF INDENTURE
Section 8.01. Termination of Corporation's Obligations.
The Corporation at any time may terminate its obligation to
pay an installment of principal or interest if it deposits
with the Trustee money or U.S. Government Obligations
sufficient to pay the installment when due. The Corporation
shall designate the installment.
The Corporation at any time may terminate all of its
obligations under the Securities and this Indenture if it
deposits with the Trustee money or U.S. Government Obligations
as provided in the Securities. The Corporation's obligations,
however, in paragraph 10 of the Securities and in Sections
2.04, 2.05, 2.06, 2.07, 7.07 and 7.08 shall survive until the
Securities are no longer outstanding. Thereafter, the
Corporation's obligations in such paragraph 10 and in Section
7.07 shall survive.
Before or after a deposit the Corporation may make
arrangements satisfactory to the Trustee for the redemption of
Securities at a future date in accordance with Article 3.
After a deposit pursuant to the second paragraph of this
Section, the Trustee shall acknowledge in writing the
discharge of the Corporation's obligations under the
Securities and this Indenture except for those surviving
obligations specified above.
An installment of principal or interest shall be considered
paid on the date it is due if the Trustee or Paying Agent
holds on that date money sufficient to pay the installment.
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In order to have money available on payment dates to pay
principal or interest on the Securities, the U.S. Government
Obligations shall be payable as to principal or interest on or
before such payment dates in such amounts as will provide the
necessary money. U.S. Government Obligations shall not be
callable at the issuer's option.
"U.S. Government Obligations" means:
(1) direct obligations of the United States for the
payment of which its full faith and credit is
pledged; or
(2) obligations of a person controlled or supervised by
and acting as an agency or instrumentality of the
United States the payment of which is unconditionally
guaranteed as a full faith and credit obligation by
the United States.
Section 8.02. Application of Trust Money.
The Trustee shall hold in trust money or U.S. Government
Obligations deposited with it pursuant to Section 8.01. It
shall apply the deposited money and the money from U.S.
Government Obligations in accordance with this Indenture to
the payment of principal and interest on the Securities.
Section 8.03. Repayment to Corporation.
The Trustee shall promptly pay to the Corporation any excess
money or securities held by it at any time. The Trustee shall
pay to the Corporation any money held by it for the payment of
principal or interest that remains unclaimed for two years.
ARTICLE 9 * AMENDMENTS, SUPPLEMENTS AND WAIVERS
Section 9.01. Without Consent of Owners.
The Corporation may amend or supplement this Indenture or the
Securities without notice to or consent of any Security Owner:
(1) to cure any ambiguity, omission, defect or
inconsistency;
(2) to make any changes that do not adversely affect the
rights of any Security Owner; or
(3) to secure additional Certificates issued by the
Corporation hereunder pursuant to Section 9.07
hereof.
The Trustee may waive compliance by the Corporation with any
provision of this Indenture or the Securities without notice
to or consent of any Security Owner if the waiver does not
adversely affect the rights of any Security Owner.
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Section 9.02. With Consent of Owners.
The Corporation may amend or supplement this Indenture or the
Securities without notice to any Security Owner but with the
written consent of the Owners of not less than a majority in
principal amount of the Securities. The Owners of a majority
in principal amount of the Securities may waive compliance by
the Corporation with any provision of this Indenture or the
Securities without notice to any Security Owner. Without the
consent of each Security Owner affected, however, an
amendment, supplement or waiver, including a waiver pursuant
to Section 6.04, may not:
(1) reduce the amount of Securities whose Owners must
consent to an amendment, supplement or waiver;
(2) reduce the rate or extend the time for payment of
interest on any Security;
(3) reduce the principal of or extend the fixed maturity
of any Security;
(4) make any Security payable in money other than that
stated in the Security; or
(5) waive a default on payment of principal or of
interest on any Security.
Section 9.03. Compliance with Trust Indenture Act.
Every amendment to or supplement of this Indenture or the
Securities shall comply with the TIA as then in effect.
Section 9.04. Revocation and Effect of Consents.
A consent to an amendment, supplement or waiver by a Owner of
a Security shall bind the Owner and every subsequent Owner of
a Security or portion of a Security that evidences the same
debt as the consenting Owner's Security, even if notation of
the consent is not made on any Security. Any such Owner or
subsequent Owner, however, may revoke the consent as to his
Security or portion of a Security. The Trustee must receive
the notice of revocation before the date the amendment,
supplement or waiver becomes effective.
After an amendment, supplement or waiver becomes effective, it
shall bind every Security Owner unless it makes a change
described in clauses (2), (3), (4), or (5) of Section 9.02. In
that case the amendment, supplement or waiver shall bind each
Owner of a Security who has consented to it and every
subsequent Owner of a Security or portion of a Security that
evidences the same debt as the consenting Owner's Security.
Section 9.05. Notation on or Exchange of Securities.
If an amendment, supplement or waiver changes the terms of a
Security, the Trustee may require the Owner of a Certificated
Security to deliver it to the Trustee. The Trustee may place
an appropriate notation on the Certificated Security about the
changed terms and return it to the Owner. Alternatively, if
the Corporation or the Trustee so determine, the Corporation
in exchange for the Certificated Security shall issue and the
Trustee shall authenticate a new Certificated Security that
reflects the changed terms.
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Section 9.06. Trustee to Sign Amendments, etc.
The Trustee shall sign any amendment, supplement or waiver
authorized pursuant to this Article if the amendment,
supplement or waiver does not adversely affect the rights of
the Trustee. If it does, the Trustee may but need not sign it.
The Corporation may not sign an amendment or supplement until
the Board of Directors of the Corporation approves it.
Section 9.07. Future Certificates.
The Corporation shall have the right to issue additional
Certificates to be secured hereby, provided the Corporation is
not in default under any provision of this Trust Indenture.
Such additional Certificates shall be issued pursuant to
resolution duly adopted by the governing body of the Issuer;
provided, however, that the additional Certificates are issued
pursuant to a supplement to this Trust Indenture. An executed
copy of said Supplemental Trust Indenture, signed by the
Corporation and the Trustee, shall serve as a modification of
this Indenture. Such additional Certificates shall be of equal
standing and priority with all other series of Certificates
issued pursuant to this Indenture.
Section 9.08. Release of Collateral.
Upon the written request of the Corporation, the Trustee may,
from time to time, so long as the Corporation shall not be in
default hereunder, release from the lien hereof any
Collateral, (i) in the ordinary course of business upon the
payment or sale of a loan, or (ii) when the amount of
Collateral exceeds the amount required by Section 4.07 hereof,
or (iii) when in its judgment, based upon the Certificate of
some disinterested person selected by the Trustee for purpose
of investigating the question, other property of equal value
is substituted therefor and subjected to the lien hereof, so
that such a release shall not impair the security of the
Security Owners.
ARTICLE 10 * MISCELLANEOUS
Section 10.01. Trust Indenture Act Controls.
If any provision of this Indenture limits, qualifies, or
conflicts with another provision which is required to be
included in this Indenture by the TIA, the required provision
shall control.
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Section 10.02. Notices.
Any notice or communication shall be sufficiently given if in
writing and delivered in person or mailed by first class mail
addressed as follows:
if to the Corporation:
Cornerstone Ministries Investments, Inc.
6035 Atlantic Boulevard, Suite F
Norcross, Georgia 30071-1345
if to the Trustee:
Colonial Trust Company
5336 North 19th Avenue
Phoenix, Arizona 85015
Attention: Corporate Trust Department
The Corporation or the Trustee by notice to the other may
designate additional or different addresses for subsequent
notices or communications.
Any notice or communication to Security Owners shall be
sufficiently given if mailed by first-class mail to each
Registered Security Owner.
Any notice or communication mailed to a Security Owner shall
be mailed to him at his address as it appears on the lists or
registration books of the Registrar and shall be sufficiently
given to him if so mailed within the time prescribed.
Failure to give notice or communication to a Security Owner or
any defect in it shall not affect its sufficiency with respect
to other Security Owners. If a notice or communication is
mailed, it is duly given, whether or not the Security Owner
receives or reads it.
Section 10.03. Communication by Owners with Other Owners.
Security Owners may communicate pursuant to TIA ss.312(b) with
other Security Owners with respect to their rights under this
Indenture or the Securities. The Corporation, the Trustee, the
Registrar and anyone else shall have the protection of TIA
ss.312(c).
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Section 10.04. Certificate and Opinion as to Conditions Precedent.
Upon any request or application by the Corporation to the
Trustee to take any action under the Indenture, the
Corporation shall furnish to the Trustee:
(1) an Officers' Certificate stating that, in the opinion
of the signers, all conditions precedent, if any,
provided for in this Indenture relating to the
proposed action have been complied with; and
(2) an opinion of counsel stating that, in the opinion of
such counsel, all such conditions precedent have been
complied with.
Each opinion of counsel shall be in writing. The legal counsel
who renders it may be an employee of or counsel to the
Corporation. The legal counsel shall be acceptable to the
Trustee.
Section 10.05. Statements Required in Certificate or Opinion.
Each certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture shall
include:
(1) a statement that the person making such certificate
or opinion has read such covenant or condition;
(2) a brief statement as to the nature and scope of the
examination or investigation upon which the
statements or opinions contained in such certificate
or opinion are based;
(3) a statement that, in the opinion of such person, he
has made such examination or investigation as is
necessary to enable him to express an informed
opinion as to whether or not such covenant or
condition has been complied with; and
(4) a statement as to whether or not, in the opinion of
such person, such condition or covenant has been
complied with.
Section 10.06. When Securities Disregarded.
In determining whether the Owners of the required principal
amount of Securities have concurred in any direction, waiver
or consent, Securities owned by the Corporation or by a
person, directly or indirectly controlling or controlled by or
under direct or indirect common control with the Corporation
shall be disregarded, except that for the purposes of
determining whether the Trustee shall be protected in relying
on any such direction, waiver or consent, only Securities
which the Trustee knows are so owned shall be so disregarded.
Also, subject to the foregoing only, Securities outstanding at
the time shall be considered in any such determination.
Section 10.7. Rules by Trustee, Paying Agent, Registrar.
The Trustee may make reasonable rules for the administration
of this Indenture. Such rules may cover matters relating to
actions by or a meeting of Security-Owners. The Paying Agent
or Registrar may make reasonable rules for its functions.
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Section 10.8. Legal Holidays.
A "Legal Holiday" is a Saturday, Sunday, a legal holiday or a
day on which banking institutions are not required to be open.
If a payment date is a Legal Holiday at a place of payment,
payment may be made at that place on the next succeeding day
that is not a Legal Holiday, and no interest shall accrue for
the intervening period.
Section 10.9. Governing Law.
This Indenture and the Securities shall be governed by the
laws of the State of Georgia.
Section 10.10. No Adverse Interpretation of Other Agreements.
This Indenture may not be used to interpret another indenture,
loan or debt agreement of the Corporation. Any such indenture,
loan or debt agreement may not be used to interpret this
Indenture.
Section 10.11. No Recourse Against Others.
As described in the Securities, all liability of any director,
officer, employee or stockholder, as such, of the Corporation
is waived and released.
Section 10.12. Successors.
All agreements of the Corporation in this Indenture and the
Securities shall bind its successor. All agreements of the
Trustee in this Indenture shall bind its successor.
Section 10.13. Duplicate Originals.
The parties may sign any number of copies of this Indenture.
Each sign copy shall be an original, but all of them taken
together represent the same agreement.
SIGNATURES
Dated: July 27, 1998 CORNERSTONE MINISTRIES
INVESTMENTS, INC.
By:______________________________________
John T. Ottinger, Secretary
(SEAL)
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Dated: July 27, 1998 COLONIAL TRUST COMPANY
By:_______________________________________
Name:
Attest: Title:
- ----------------------------------
Assistant Trust Officer (SEAL)
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EXHIBIT "A"
COLLATERAL
The proceeds of the offering of the Series A Certificates of
Indebtedness to be held in escrow by Trustee (including the securities and
investments and other investments thereof) and the loans as determined from time
to time by the Corporation which are collaterally assigned to Trustee as
provided herein.
FIRST AMENDMENT TO TRUST INDENTURE
This First Amendment to Trust Indenture (this "Amendment") is entered
into as of November 17, 1998, by and between Cornerstone Ministries Investments,
Inc., a Georgia corporation (the "Corporation"), and Colonial Trust Company, an
Arizona corporation (individually the "Trustee" and collectively, along with the
Corporation, the "Parties").
RECITALS
A. The Parties previously entered into a Trust Indenture effective as
of July 27, 1998 (the "Trust Indenture") relating to the Corporation's Series A
Certificates of Indebtedness. Capitalized terms used but not otherwise defined
in this Amendment have the meanings ascribed to such terms in the Trust
Indenture.
B. The Parties desire to amend the Trust Indenture to permit the Owners
of at least twenty-five percent (25%) in principal amount of the Securities to
accelerate the principal of and all accrued interest on all the Securities
following an Event of Default.
NOW, THEREFORE, in reliance upon the recitals set forth above, the
Parties hereto agree as follows:
1. The first sentence of Section 6.02 of the Trust Indenture is hereby stricken
in its entirety and replaced with the following:
"If an Event of Default occurs and is continuing, the Trustee
by notice to the Corporation or the Owners of at least twenty-five
percent (25%) of principal amount of the Securities by notice to the
Corporation and the Trustee may declare the principal of and accrued
interest on all the Securities to be due and payable immediately."
2. The address for the Corporation in Section 10.02 of the Trust Indenture is
hereby stricken in its entirety and replaced with the following:
"Cornerstone Ministries Investments, Inc.
6035 Atlantic Boulevard
Suite C
Norcross, Georgia 30071-1345"
3. All other provisions of the Trust Indenture shall remain unchanged and are
hereby declared to be in full force and effect, except as expressly amended
hereby.
IN WITNESS WHEREOF, the Parties hereto have executed this Amendment as
of the date first above written.
CORPORATION:
CORNERSTONE MINISTRIES INVESTMENTS, INC.
By: ______________________________________________
John T. Ottinger, Secretary
[SEAL]
TRUSTEE:
COLONIAL TRUST COMPANY
By: ______________________________________________
John K. Johnson, President
[SEAL]
Exhibit 4.6
January 3, 1999
Board of Directors
Cornerstone Ministries Investments, Inc
6035 Atlantic Blvd. Suite C
Norcross, GA 30071
Gentleman:
This letter will confirm Presbyterian Investors Fund, Inc. agreement to
provide clerical and office support for 1999 to Cornerstone Ministries
Investments, Inc. For the consideration detailed below, PIF will
provide the following services:
Office space, including storage space for loan and investor files
Telephone service including long distance services
Fax and e-mail services
Mail pick up and delivery
Secretarial services
Loan administration services (record keeping and processing of
payments).
Management services
For these services CMI will pay to PIF a monthly administrative fee of
1/12th of 1.5% of the assets of CMI. Based upon our understanding of
the work required the Trustees of Presbyterian Investors Fund, Inc.
believe this to be a fair and reasonable compensation
Please sign below and return this to our office.
Sincerely,
S/JOHN T. OTTINGER
John T. Ottinger
For Trustees of Presbyterian Investors Fund, Inc.
Accepted:
S/CECIL A. BROOKS
Cecil A. Brooks, for the Board of Cornerstone Ministries Investments,
Inc.
Exhibit 10.1
<PAGE>
T. JACKSON McDANIEL III
Certified Public Accountant
1439 McLendon Drive
Suite C
Decatur, GA 30033
(770) 491-0609
I consent to the use of my reports and financial statements included in the
prospectus for Cornerstone Ministries Investments, Inc. and the reference to me
under the heading "Experts" in its registration statement on form SB-2.
S/T. JACKSON MCDANIEL III, CPA December 15, 1999
-----------------------------------
T. Jackson McDaniel III, CPA
Exhibit 23.1
