The Cornerstone Capital Corporation 7 Day Tax-Exempt Floating Rate Bond financing facilitates cost efficient financing through access to the capital markets for qualified borrowers desiring to borrow $1,000,000 or more. The bonds are secured by a Bank Letter of Credit. The bonds are issued through a municipal entity and the proceeds are then lent to Manufacturing Companies on a pass-through basis enabling the Manufacturing Companies to borrow at tax-exempt interest rates.

Cornerstone Capital Corporation is involved at many levels. Cornerstone Capital Corporation provides the initial due diligence to determine which borrowers qualify. Cornerstone also works with the Bank that provides the Letter of Credit, which credit enhances the bonds and provides liquidity to the bond holders. Cornerstone Capital Corporation also serves as Placement and Remarketing Agent for the bonds.

Who qualifies as a borrower?
Borrowers eligible for tax-exempt financing include any corporation, partnership, individual or other entity approved by Cornerstone Capital Corporation that is engaged in manufacturing, which satisfies the $10 million and $40 million limitations. Eligible borrowers can borrow up to $10 million on a tax-exempt basis.

What is the $10 Million Limitation?
To comply with the $10 million limitation, the combined total of outstanding Industrial Revenue Bonds (IDBs), together with all other capital expenditures relating to the borrower within the same local jurisdiction as the project to be financed, cannot exceed $10 million. For this purpose, the other capital expenditures taken into account include all expenditures by the borrower, or by others for facilities of which the borrower is a principal user located within the same local jurisdiction as the project, that are (i) properly chargeable to capital account, whether or not the taxpayer elects to treat such expenditures as a current expense, and (ii) made during the 6-year period commencing 3 years before the issuance of the proposed IDB and concluding 3 years after such issuance.

What is the $40 Million Limitation?
To comply with the $40 million limitation, the principal amount of the proposed IDB, together with the outstanding principal amounts of all other tax-exempt IDBs issued to provide facilities throughout the country for the benefited borrower or related persons, cannot exceed $40 million.

What projects qualify?
Tax-exempt bonds can only be issued for manufacturing projects if at least 95% of the bond proceeds is used (i) for manufacturing (including processing) facilities and (ii) is used to acquire land or property of a character subject to the allowance for depreciation under the Internal Revenue Code of 1986 (the "Tax Code"). At least 70% of the bond proceeds must be used for "core manufacturing", and up to 25% of bond proceeds can be used for items directly related and ancillary to core manufacturing (such as employee parking, etc.). The remaining 5% can be used for any purpose permitted under applicable state law.

Reimbursement
Tax-exempt bonds can only be issued to reimburse the borrower for expenditures incurred before the bonds are issued if the issuer of the bonds (not the borrower) has adopted an "inducement resolution" (sometimes also called a "reimbursement resolution"). If a borrower expects to incur such costs, it should contact bond counsel to have an inducement resolution adopted by the issuer of the bonds at the earliest opportunity.

Volume Cap
In order to limit the amount of tax-exempt bonds issued for manufacturing projects, the Tax Code has capped the amount of such bonds in any state to an annual limit based on the state's population. This is referred to as a state's "volume cap." Typically a state agency is responsible for awarding volume cap to particular borrowers and projects and, through an application process, may factor into its decision to award volume cap considerations such as jobs created, wages paid, etc. Some states award volume cap on "merit," others use a blind lottery system. Bond counsel can assist in preparing and submitting an application for volume cap.

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What can be financed? Eligible expenditures include: Real Estate Acquisition Financing Capital Expenditure Financing Equipment Financing Employee Parking

Who Can Participate? Any legal entity that is engaged in manufacturing, which satisfies the $10 million and $40 million limitations. Eligible borrowers can borrow up to $10 million on a tax-exempt basis.

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Program Structure
The 7 Day Tax-Exempt Floating Rate Bonds are designed to offer the customer utmost flexibility. The bonds allow the Cornerstone customer to borrow on a short-term 7 day reset basis. Alternatively, each borrower may independently select to fix or cap its interest rate through the use of interest rate swaps or liability caps.

While there is a certain degree of interest rate risk with adjustable rate debt, short term rates historically have been well below long-term rates.

The average 7 Day Bond rate for the last 17 years, from 1990 until 2008, was 3.07%.

For interest rate information contact Peter Paras, Jr. of Cornerstone Capital Corporation at
888.773.3222.

Process
Borrowers cannot issue tax-exempt bonds on their own. Under the Tax Code, only states or political subdivisions of states (such as cities or counties) can issue tax-exempt bonds. Once the bonds are issued, the issuer lends the proceeds to the borrower, and only the borrower is liable for repayment of the bonds. The issuer's procedural rules for issuing bonds are determined by state and local laws. Typically, an issuer will ask an economic development entity affiliated with the issuer to give preliminary approval to the project before adopting an ordinance or resolution approving the issuance of bonds. This process can take from 4-6 weeks.

Low Up-Front Cost
The total up-front cost of the 7 Day Tax-Exempt Floating Rate Bond Program (excluding fees and costs associated with the issuance of the Letter of Credit) is approximately 2.50% of the total amount borrowed by any borrower. Most, if not all of this up-front charge can be capitalized in the bond issue if approved by the bank. The up-front charge is a one time expenditure and covers the issuance costs associated with the bond issue (e.g., placement, legal, printing, rating agency, and trustee fees, etc.).

On-Going Fees
In addition to the interest rate on the bonds, on-going expenses of approximately 0.35% and the appropriate Letter of Credit fee will be passed through to the borrower as illustrated in the example below:

(1) Determined by the Letter of Credit Bank
(2) Includes remarketing, trustee, Issuer and rating agency surveillance fees; and based on a $2,500,000 borrowing.

Credit Approval
Borrowers that access the 7 Day Tax-Exempt Floating Rate Bond Program are required to provide a bank letter of credit. The Letter of Credit bank is responsible for evaluating and assuming the underlying credit risk of the transaction, to the extent of its legal loan limits. The Program requires that the Letter of Credit bank have short-term ratings of "A-1+/P=1" by Standard & Poor's and Moody's, respectively.

Matching Assets to Liabilities
The program allows borrowers to: (i) receive a 7 day interest rate; (ii) hedge interest rate risk with the use of protection vehicles such as interest rate swaps or caps; and (iii) while in the 7 day mode, repay the borrowing in whole or in part without penalty with 45 days notice. These program attributes give participating borrowers utmost flexibility in managing the liability side of their balance sheets.

Program Timing
Generally, after execution of a detailed Commitment Letter by the borrower and the Letter of Credit Bank, the borrower can be funded within 45 days.

Summary
Qualified borrowers are eligible to participate in the 7 Day Tax-Exempt Floating Rate Bond Program subject to requisite Letter of Credit Bank approval. Existing or potential clients who are seeking funding for construction, acquisition, renovation, equipment and/or other capital expenditures, should consider the 7 Day Tax-Exempt Floating Rate Bond Program as a potential funding vehicle.

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Application, Closing and Funding Procedures
The Cornerstone program utilizes a straightforward application and closing procedure and is funded by the issuance of the 7 Day Tax-Exempt Floating Rate Bonds.

• Complete and return an application to Cornerstone Capital Corporation.
• Cornerstone undertakes a credit evaluation of each participant to determine security requirements.
• Upon approval of the application by a Letter of Credit Bank, a Cornerstone Commitment Letter, executed by Cornerstone, is issued to the borrower detailing the required security elements, operative loan covenants and other requirements and contingencies necessary for loan closing.
• Borrower’s counsel reviews the Commitment Letter.
• Borrower executes and returns Commitment Letter, along with any commitment fees stipulated in the Commitment Letter to Cornerstone.
• Bond documents are generated and distributed to the financing team.
• Borrowers generally can be funded within 45 days following execution of the Commitment Letter. Interim financing may also be available if a borrower has immediate funding needs.

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