1. (a) If any portion of the net proceeds from the sale of the securities is to be used for the construction of real estate improvements, a schedule detailing the construction of the project and a statement of estimated cost with respect to each part of the construction project. The cost estimate shall be substantiated by a statement of a qualified independent contractor or other qualified and independent person. The application shall demonstrate that with the proceeds of the proposed financing, the applicant will have funds sufficient to complete the project.

2. (b) A copy of the resolution adopted by the governing body of the applicant providing:

   1. (1) for a fund devoted exclusively to the payment of interest and principal on the debt securities proposed to be issued and pledging a specified portion of the monthly revenues of the applicant to the fund devoted exclusively to the payment of such interest and principal. The portion pledged shall be sufficient for the payment of current interest and maturing installments of principal;
   2. (2) that such fund shall be maintained with and administered by a federally insured bank located in any of the United States;
   3. (3) That all monies received from the sale of securities shall be deposited in a trust account available only for expenditures on account of the project for which the indebtedness is to be incurred; and

   4. (4) that such trust account shall be maintained with and administered by a bank or savings and loan association located in California. This subsection (b)(4) shall not apply to:

      1. (A) a firmly underwritten public offering; or
      2. (B) a public offering where the issuer and selling broker-dealer commit as a part of the verified application of the issuer that less than 50 percent of the debt is to be held by persons who have addresses in this state according to the records of the underwriter. For the purposes of this rule, a public offering is “firmly underwritten” when an underwriter unconditionally agrees to purchase all the debt to be issued by a church in a specified offering to the public, subject to agreed upon provisions relating to acts occasioned by nature without the interference of any human agency.
3. (c) An opinion of legal counsel attesting to: the authority of the applicant to offer and sell the debt securities; the status of the applicant as a nonprofit organization; and whether after the sale, the church debt securities will be valid, binding obligations of the applicant in accordance with the issuer's governing documents.

The application must contain the information required by Sections 260.110 and 260.113 of the Commissioner's Rules. In addition, the following information must be filed as an exhibit to the application:

Note: Authority cited: Section 25610, Corporations Code. Reference: Section 25140, Corporations Code.

History

1. New section filed 2-8-89; operative 3-10-89 (Register 89, No. 8).

2. New subsection (c) filed 4-1-2005; operative 5-1-2005 (Register 2005, No. 13).