-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, KoMsBW08C4zxRSMw2nXZVxc8nwhf0+izSgWNJaeOAfUlcGD719RnAY7+UrlE5DFM 9EkUuEgVqKkL+U/vgPy4zA== 0000950005-99-001106.txt : 19991224 0000950005-99-001106.hdr.sgml : 19991224 ACCESSION NUMBER: 0000950005-99-001106 CONFORMED SUBMISSION TYPE: SB-2 PUBLIC DOCUMENT COUNT: 9 FILED AS OF DATE: 19991223 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CORNERSTONE MINISTRIES INVESTMENTS INC CENTRAL INDEX KEY: 0001035270 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 582232313 STATE OF INCORPORATION: GA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SB-2 SEC ACT: SEC FILE NUMBER: 333-93475 FILM NUMBER: 99779524 BUSINESS ADDRESS: STREET 1: 6035 ATLANTIC BOULEBARD SUITE C CITY: NORCROSS STATE: GA ZIP: 30071-1345 BUSINESS PHONE: 7707291433 MAIL ADDRESS: STREET 1: 534 PACIFIC AVENUE CITY: SAN FRANCISCO STATE: CA ZIP: 941323 FORMER COMPANY: FORMER CONFORMED NAME: CORNERSTONE MINISTRIES FUND INC DATE OF NAME CHANGE: 19970310 SB-2 1 SB-2 As filed with the Securities and Exchange Commission on December 23, 1999 CIK: 0001035270 Registration No. 333- ================================================================================ SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 --------------- FORM SB-2 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 --------------- Cornerstone Ministries Investments, Inc. (Name of small business issuer in its charter)
Georgia 6531 58-2232313 (State or jurisdiction of incorporation or (Primary Standard Industrial (I.R.S. Employer Identification No.) organization) Classification Code Number)
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) --------------- Copies to: Drew Field 534 Pacific Avenue San Francisco, CA 94133 415.296.9795 --------------- Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of this Registration Statement. --------------- CALCULATION OF REGISTRATION FEE ==================================================================================================================================== 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 - ------------------------------------------------------------------------------------------------------------------------------------ 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 ------ Total $5,358
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 ================================================================================ 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. CORNERSTONE MINISTRIES INVESTMENTS, INC. Cross-reference Sheet Showing Location in Prospectus of: PART I -- INFORMATION REQUIRED IN PROSPECTUS
Form SB-2 Item Number and Caption Caption in Prospectus --------------------------------- --------------------- 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
350,000 SHARES Cornerstone Ministries Investments, Inc. COMMON STOCK ------------ 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. ------------ 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. ------------ ================================================================================ Public Broker-dealer Offering Discounts and Proceeds to Price Commissions CMI - -------------------------------------------------------------------------------- Per Share ............. $ 6.50 $ 0.455 $ 6.045 - -------------------------------------------------------------------------------- Total ................. $ 2,275,000 $ 159,250 $ 2,115,750 ================================================================================ ------------ The date of this Prospectus is___________, 2000 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. ----------------------- TABLE OF CONTENTS
Page Page ---- ---- 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
----------------------- 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. - -------------------------------------------------------------------------------- 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 PIFATLANTA@aol.com. - -------------------------------------------------------------------------------- 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. 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. 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 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. 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 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 $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. 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 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. 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. 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. 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. 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. 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. 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.
Name of Beneficial Owner Number of Percentage of Total Common Stock Beneficially Owned Shares Beneficially Owned Before Offering After Offering 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) * Amounts to less than one percent.
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. 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. 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. 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 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 CORNERSTONE MINISTRIES INVESTMENTS, INC. BALANCE SHEET October 31, 1999 and October 31, 1998, December 31, 1998 and December 31, 1997 ASSETS
10/31/99 10/31/98 12/31/98 12/31/97 ----------- ----------- ----------- ----------- (Unaudited) (Unaudited) 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 See accompanying accountant's report and notes to financial statements
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
10/31/99 10/31/98 12/31/98 12/31/97 --------- --------- --------- --------- (Unaudited) (Unaudited) 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 See accompanying accountant's report and notes to financial statements
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
10/31/99 10/31/98 12/31/98 12/31/97 ----------- ----------- ----------- ----------- (Unaudited) (Unaudited) 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 See accompanying accountant's report and notes to financial statements
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
Retained Total Common Paid-In Earnings Owner's Stock Capital (Deficit) Equity ---------- ---------- ---------- ---------- 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 See accompanying accountant's report and notes to financial statements
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 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 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 [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.
====================================================================================================================== Certificate Annual Principal Public Offering Broker-dealer Maturity Interest Amount Price per Discounts and Proceeds to Date Rate Offered Certificate Commissions CMI - ---------------------------------------------------------------------------------------------------------------------- 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 ======================================================================================================================
----------------- The date of this Prospectus is___________, 2000 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. (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.
Date Title Amount ---- ----- ------ (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. (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.
Item 27. Exhibits Exhibits listed below are filed as part of this Registration Statement pursuant to Item 601 of Regulation S-B.
Exhibit Number Description ------ ----------- 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 - -------------------------------------- * To be filed by amendment # As filed in Part II of this Registration Statement
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; (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. 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.
CORNERSTONE MINISTRIES INVESTMENTS, INC. (Issuer) By S/CECIL A. BROOKS --------------------------------------- Cecil A. Brooks, Chief Executive Officer
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.
Signature Title Date --------- ----- ---- 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
EX-3.1 2 AMENDED AND RESTATED ARTICLES OF INCORPORATION 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 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- 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. -37- IN WITNESS WHEREOF, the undersigned has executed these Articles of Incorporation on December , 1999. ---------------------------- John T. Ottinger Secretary EX-3.2 3 AMENDED AND RESTATED BYLAWS 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 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- (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- (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- 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- 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 -7- 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: -8- (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. -9- 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. -10- 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 -11- 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. -12- (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 -13- 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 -14- (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; -15- (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; -16- (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 -17- 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 -18- 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: -19- (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) -20- 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; -21- (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 -22- 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 -23- (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. -24- 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. -25- 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. EX-4.2 4 EXHIBIT 4.2 TO REGISTRATION STATEMENT ON FORM SB-2 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 EX-4.3 5 SERIES B CERTIFICATE OF INDEBTEDNESS 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 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 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:___________________ EX-4.4 6 TRUST INDENTURE ================================================================================ 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 ================================================================================
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 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 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
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 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. 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. "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- 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- 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- 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- 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- 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- 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- 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- 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- 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. -xi- 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 -xii- 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. -xiii- 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. -xiv- 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; -xv- 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 -xvi- 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: -xvii- ----------------------------- ----------------------------- ----------------------------- 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. -xviii- 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. -xix- 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] -xx-
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)
-21- EX-4.5 7 TRUST INDENTURE 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 -22- 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. -2- "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. -3- "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- 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. -5- 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 -6- 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; -7- (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. -8- 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. -9- 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. -10- 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; -11- 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. -12- 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; -13- (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 -14- 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. -15- 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). -16- 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. -17- 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. -18- 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. -19- 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. -20- 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. -21- 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). -22- 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. -23- 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) -24- Dated: July 27, 1998 COLONIAL TRUST COMPANY By:_______________________________________ Name: Attest: Title: - ---------------------------------- Assistant Trust Officer (SEAL) -25- 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. EX-4.6 8 FIRST AMENDMENT TO TRUST INDENTURE 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 EX-10.1 9 ADMINISTRATIVE SERVICES AGREEMENT 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 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 -----END PRIVACY-ENHANCED MESSAGE-----