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SECURITY AGREEMENT
THIS SECURITY AGREEMENT ("Security Agreement") is made as of April 26, 2002
by American Church Mortgage Company, a Minnesota corporation (the "Company"), in
favor of The Xxxxxxx National Bank, a national banking association, as trustee
under the Indenture described below (the "Trustee").
WHEREAS, the Company has entered into an Indenture dated as of the
approximate date hereof with the Trustee (the "Indenture"), whereby the Trustee
has agreed to act as the indenture trustee under the Trust Indenture Act of 1939
for the benefit of the holders of those certain Series A Secured Investor
Certificates issued by the Company (the "Securities"); and
WHEREAS, under the terms of the Indenture, the Company has agreed to pledge
certain collateral as security for the payment of principal and interest on the
Securities.
Now, therefore, the Company agrees with Trustee as follows:
1. Security Interest. The Company hereby pledges to, and grants to the
Trustee a security interest (herein called the "Security Interest") in, the
Collateral (as described in Section 2 below) to secure the payment and
performance of the following debts, liabilities and obligations of the Company
(such debts, liabilities and obligations being herein collectively referred to
as the "Obligations"):
(a) the payment of principal and interest on the Securities, as required
under the terms and conditions of the Securities;
(b) the Company's obligations under the Indenture and this Security
Agreement; and
(c) all amounts owed under any modifications, renewals or extensions of
any of the foregoing Obligations.
2. Collateral. As used herein, the term "Collateral" means the following
property:
(a) The promissory notes and investment property described in Schedule A;
(b) Such Additional Notes that are designated by the Company as Collateral
pursuant to Section 3 below;
(c) Any Substituted Notes that are substituted by Company for existing
Collateral pursuant to Section 4 below;
(d) supporting obligations of the Notes described in (a), (b), and (c)
above; and
(e) proceeds of any and all of the foregoing.
Each of the items described in (a), (b), and (c) above is referred to
herein as a "Note" and the all of such items are collectively referred to herein
as the "Notes."
The Company shall within five (5) business days of the date hereof, and in
any event prior to the sale of any Securities, deliver to the Trustee the Notes
described in Schedule A, together with endorsements by the Company in blank for
such Notes. 3. Additional Collateral. Subject to the terms of Section 4.9 of the
Indenture, the Company may at any time designate additional promissory notes or
similar instruments or investment property ("Additional Notes") as Collateral
for the Obligations. The Company may make such designation by delivering (a) the
original Additional Notes and (b) an endorsement in blank for the Additional
Notes to the Trustee and upon the Trustee's receipt, the Additional Notes shall
be deemed to be Collateral.
4. Substitution of Collateral.
(a) Provided that no Event of Default has occurred and is continuing, the
Company shall have the right (and, under the terms of the Indenture,
in certain circumstances the obligation) to substitute promissory
notes or other similar instruments or investment property that meet
the terms and conditions of Section 4.9 of the Indenture ("Substituted
Notes") for Notes previously pledged as Collateral ("Released Notes").
(b) The Company may make such a substitution by delivering to the Trustee:
(i) a written notice to the Trustee executed by an officer of the
Company which contains (A) a description of the Substituted
Note(s), (B) a statement that such Substituted Note has been
pledged by the Company as Collateral under this Security
Agreement, (C) a certification by the Company that the
representations and warranties regarding Collateral contained in
Section 6 below are true with respect to the Substituted Note,
(D) a description of the Notes to be released from the Security
Interest (i.e., a description of the Released Note(s)), and (E) a
certification by the Company that upon the release of the
Released Notes from the Security Interest, the value of the
Collateral shall be at least 120% of the aggregate principal
amount of the Securities then outstanding (the "Minimum Value");
(ii) the original Substituted Note(s); and
(iii) an endorsement in blank for the Substituted Notes.
(c) So long as the aggregate value of the Collateral after the release of
the Released Notes is at least the Minimum Value, the value of the
Substituted Note(s) being substituted for the Released Note(s) may be
less than the value of the Released Note(s).
(d) Upon the Trustee's receipt of the documents described in Section 4(b),
the Substituted Note(s) shall be deemed to be Collateral and the
Released Note(s) shall be deemed to be released from the Security
Interest and shall no longer be subject to the terms of this Security
Agreement. The Trustee shall promptly thereafter return the Released
Note(s) to the Company, together with any endorsement of such Released
Note(s) made by the Company.
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(e) In the event that the Trustee has filed (or has caused to be filed) a
financing statement in order to perfect the Security Interest in a
Note that has become a Released Note, the Trustee shall prepare and
file a financing statement amendment which releases the Released Note
from the Security Interest and the Security Agreement (the "Release").
The Trustee hereby authorizes the Company to file a copy of the
Release in the appropriate filing office if the Trustee has not filed
the Release within ten (10) business days of the Trustee's receipt of
the documents described in Section 4(b). This authorization is
intended to comply with the terms of Minn. Stat. ss. 336.9-509 and no
further writing is required as evidence of the Trustee's grant of
authority to the Company to file the Release.
5. Representations, Warranties and Agreements. The Company represents,
warrants and agrees that:
(a) The Company is a corporation organized under the laws of the state of
Minnesota;
(b) The Company's exact legal name is as set forth in the first paragraph
of this Security Agreement;
(c) This Agreement has been duly and validly authorized by all necessary
corporate action and the person executing this Agreement on behalf of
the Company has the requisite authority to act for the Company. (d)
Until the Obligations are paid in full, the Company will:
(i) preserve its corporate existence and not, in one transaction or a
series of related transactions, merge into or consolidate with
any other entity, or sell all or substantially all of its assets;
(ii) not change its name, its type of organization, the state of its
incorporation or organization, or its organizational
identification number; and
(iii)not change its corporate name without providing the Trustee with
30 days' prior written notice.
6. Representations, Warranties and Agreements With Respect to Collateral.
The Company represents, warrants and agrees that:
(a) The Company has (or will have at the time the Company acquires rights
in Collateral hereafter arising) absolute title to each item of
Collateral free and clear of all claims, security interests, liens,
encumbrances, and restrictions on transfer or pledge except the
Security Interest and will defend the Collateral against all claims or
demands of all persons other than the Trustee. Except as provided in
the Indenture, the Trustee does not authorize, and the Company agrees
not to (i) make any sales of any of the Collateral; or (ii) grant any
other security interest in the Collateral.
(b) Each right to payment and each instrument, document, chattel paper and
other agreement constituting or evidencing Collateral is (or will be
when arising or issued) the valid genuine and legally enforceable
obligation, subject to no defense, set-off or counterclaim (other than
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those arising in the ordinary course of business) of the account
debtor or other obligor named therein or in the Company's records
pertaining thereto as being obligated to pay such obligation. The
Company will neither agree to any material modification or amendment
nor agree to any cancellation of any such obligation without the
Trustee's prior written consent, and will not subordinate any such
right to payment to claims of other creditors of such account debtor
or other obligor.
(c) The Company covenants that it will:
(i) promptly pay all taxes and other governmental charges levied or
assessed upon or against any Collateral or upon or against the
creation, perfection or continuance of the Security Interest;
(ii) keep all Collateral free and clear of all security interests,
liens and encumbrances except the Security Interest;
(iii)at all reasonable times, permit the Trustee or its
representatives to examine or inspect any Collateral, wherever
located, and to examine, inspect and copy the Company's books and
records pertaining to the Collateral and its business and
financial condition and to send and discuss with account debtors
and other obligors requests for verifications of amounts owed to
the Company;
(iv) upon the request of the Trustee, provide photocopies of any of
the Collateral (or, to the extent that such Collateral is not of
a tangible nature, photocopies of documentation evidencing the
Collateral);
(v) promptly notify the Trustee of any loss of or material damage to
any Collateral or of any adverse change, known to the Company, in
the prospect of payment of any sums due on or under any
instrument, chattel paper, or account constituting Collateral;
(vi) not use or keep any Collateral, or permit it to be used or kept,
for any unlawful purpose or in violation of any federal, state or
local law, statute or ordinance; and
If the Company at any time fails to perform or observe any agreement contained
in this Section 6(c), and if such failure shall continue for a period of ten
calendar days after the Trustee gives the Company written notice thereof, the
Trustee may (but need not) perform or observe such agreement on behalf and in
the name, place and stead of the Company (or, at the Trustee's option, in the
Trustee's own name) and may (but need not) take any and all other actions which
the Trustee may reasonably deem necessary to cure or correct such failure
(including, without limitation, the payment of taxes, the satisfaction of
security interests, liens, or encumbrances, the performance of obligations under
contracts or agreements with account debtors or other obligors, the procurement
and maintenance of insurance, and the procurement of repairs, transportation or
insurance); and, except to the extent that the effect of such payment would be
to render any loan or forbearance of money usurious or otherwise illegal under
any applicable law, the Company shall thereupon pay the Trustee within fifteen
(15) business days of the Company's receipt of the Trustee's demand, the amount
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of all moneys expended and all costs and expenses (including reasonable
attorneys' fees for any purpose relating to the enforcement of the Trustee's
rights hereunder including consultation, drafting documents, sending notices
and/or instituting, prosecuting or defending litigation or arbitration) incurred
by the Trustee in connection with or as a result of the Trustee's performing or
observing such agreements or taking such actions, together with interest thereon
from the date expended or incurred by the Trustee at the highest rate then
applicable to any of the Obligations.
7. Perfection of Security Interests. The Trustee shall have the right to file,
from time to time, such financing statements as the Trustee may reasonably
require in order to perfect the Security Interest. To the extent permitted by
law, the Company hereby authorizes and empowers the Trustee to file one or more
financing statements and any other documents or instruments as are necessary to
perfect the Security Interest, all without the signature or prior consent of the
Company.
8. Events of Default. Each of the following occurrences shall constitute an
event of default under this Agreement (herein called "Event of Default"):
(a) an "Event of Default" (as defined in the Indenture) shall have
occurred and is continuing beyond any applicable grace or cure period;
(b) any representation or warranty by the Company set forth in this
Agreement shall prove materially false or misleading; or
(c) the Trustee shall receive at any time after the date hereof an
official report from the Secretary of State of the State of Minnesota
or any other state where the Collateral is located indicating that the
Security Interest is not prior to all other security interests or
other interests reflected in the report.
9. Remedies upon Event of Default. Upon the occurrence of an Event of
Default under Section 8 and at any time thereafter, the Trustee may exercise any
one or more of the following rights and remedies:
(a) require the prompt delivery to the Trustee of an assignment of any
mortgage or other supporting obligation in a form sufficient for
recording of such assignment;
(b) notify any account debtor that the Company's right to payment has been
assigned or transferred to the Trustee and that all amounts shall be
paid directly to the Trustee;
(c) exercise and enforce any or all rights and remedies available upon
default to a secured party under the Uniform Commercial Code,
including but not limited to the right to take possession of any
Collateral, proceeding without judicial process (without a prior
hearing or notice thereof, which the Company hereby expressly waives),
and the right to sell, lease or otherwise dispose of any or all of the
Collateral, and in connection therewith, the Trustee may require the
Company to make the Collateral available to the Trustee at a place to
be designated by the Trustee which is reasonably convenient to both
parties, and if notice to the Company of any intended disposition of
Collateral or any other intended action is required by law in a
particular instance, such notice shall be deemed commercially
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reasonable if given at least 10 calendar days prior to the date of
intended disposition or other action; or
(d) exercise or enforce any or all other rights or remedies available to
the Trustee by law or agreement against the Collateral, against the
Company or against any other person or property.
Whether or not an Event of Default has occurred, the Company shall pay when due
or reimburse the Trustee on demand for all costs of collection of any of the
Obligations and all other out-of-pocket expenses incurred by the Trustee in
connection with the creation, perfection, satisfaction, protection, defense or
enforcement of the Security Interest or the creation, continuance, protection,
defense or enforcement of this Security Agreement or any or all of the
Obligations, including but not limited to: (i) filing fees; (ii) costs of
foreclosure; (ii) costs of obtaining money damages; and (iii) reasonable
attorney's fees for any purpose relating to the enforcement of this Security
Agreement including consultation, drafting documents, sending notices and/or
instituting, prosecuting or defending litigation or arbitration.
If during a sale of Collateral following an Event of Default, the Trustee sells
any of the Collateral upon credit, the Company will be credited only with
payments actually made by the purchaser, received by the Trustee and applied to
the indebtedness of such purchaser. In the event the purchaser fails to pay for
the Collateral, the Trustee may resell the Collateral and the Company shall be
credited with the proceeds of the Sale. To the extent permitted under applicable
law, the Trustee may disclaim any warranty of title or any other warranty with
respect to any Collateral sold by the Trustee following an Event of Default.
10. Notice.
(a) Any notice, document or other communication from one party to the
other is duly given if in writing and delivered in person or mailed by
first-class mail (registered or certified, return receipt requested),
telex, telecopier or overnight air courier guaranteeing next day
delivery, to the other's address:
If to the Company:
AMERICAN CHURCH MORTGAGE COMPANY
00000 Xxxxxx Xxxxxx Xxxxx
Xxxxxxxxxx, XX 00000
Attention: President
Fax: (000) 000-0000
If to the Trustee:
THE XXXXXXX NATIONAL BANK
0000 Xxxxx Xxxxxxxx Xxxxxx
Xxxxxxxx, XX 00000
Attention: Corporate Trust Department
Fax: (000) 000-0000
(b) All notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; five
(5) Business Days after being deposited in the mail, postage prepaid,
if mailed; when answered back, if telexed; when receipt acknowledged,
if telecopied; and the next Business Day after timely delivery to the
courier, if sent by overnight air courier guaranteeing next day
delivery.
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(c) Each party, by notice to the other, may designate additional or
different addresses for subsequent notices or communications.
11. Miscellaneous.
(a) This Agreement can be waived, modified, amended, terminated or
discharged and the Security Interest can be released, only explicitly
in a writing signed by the Trustee. A waiver signed by the Trustee
shall be effective only in the specific instance and for the specific
purpose given. Mere delay or failure to act shall not preclude the
exercise or enforcement of any of the Trustee's rights or remedies.
(b) All rights and remedies of the Trustee shall be cumulative and may be
exercised singularly or concurrently, at the Trustee's option, and the
exercise or enforcement of any one such right or remedy shall neither
be a condition to nor bar the exercise or enforcement of any other.
(c) This Agreement shall be binding upon and inure to the benefit of the
Company and the Trustee and their respective heirs, representatives,
successors and assigns and shall take effect when signed by the
Company and delivered to the Trustee, and the Company waives notice of
the Trustee's acceptance hereof. The Trustee may execute this
Agreement if appropriate for the purpose of filing, but the failure of
the Trustee to execute this Agreement shall not affect or impair the
validity or effectiveness of this Agreement. All representations and
warranties contained in this Agreement shall survive the execution,
delivery and performance of this Agreement and the creation and
payment of the Obligations.
(d) To facilitate execution, this Agreement may be executed in as many
separate counterparts as may be convenient or required. It shall not
be necessary that the signature of each party, or that the signature
of all persons required to bind any party, appear on each counterpart.
Each counterpart when so executed and delivered shall be deemed to be
an original, and all counterparts taken together shall constitute but
one and the same instrument. It shall not be necessary in making proof
of this Agreement to produce or account for more than a single
counterpart containing the respective signatures of, or on behalf of,
each of the parties, hereto. Signature pages from any counterpart may
be detached from the counterpart and attached with other signature
pages to a single copy of the Agreement to physically form one
document.
(e) This Agreement shall be governed by the internal laws of the State of
Minnesota. If any provision or application of this Agreement is held
unlawful or unenforceable in any respect, such illegality or
unenforceability shall not affect other provisions or applications
which can be given effect and this Agreement shall be construed as if
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the unlawful or unenforceable provision or application had never been
contained herein or prescribed hereby. Any term not defined herein
shall have, to the extent applicable, the definition set forth in
Chapter 336.9 of Minnesota Statutes.
IN WITNESS WHEREOF, the Company and the Trustee hereby execute this Security
Agreement as of the date first written above.
Company: AMERICAN CHURCH MORTGAGE COMPANY
By: /s/ Xxxxxx X. Xxxxx
-------------------------------
Xxxxxx X. Xxxxx, President
Trustee: THE XXXXXXX NATIONAL BANK
By: /s/ Xxxxxxx Xxxxxxx
---------------------------------
Xxxxxxx Xxxxxxx
Senior Vice President and
Trust Officer
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A-1
SCHEDULE A
Initial Collateral
Date of Original Principal Outstanding Principal
Note Loan Recipient Value Balance as of April 25, 2002
04/25/96 Landmark Apostolic Church $290,000.00 $250,418.00
05/15/96 Fountain of Life Church 375,000.00 195,791.00
05/06/96 River of Life Church 425,000.00 249,537.00
11/13/97 Evangel Temple 312,000.00 266,255.00
03/30/98 Praise Tabernacle Baptist 245,000.00 227,104.00
09/24/98 Mt. Ararat Baptist Church 170,000.00 159,410.00
03/02/99 Praise Chapel International 115,000.00 108,469.00
03/17/99 Vineyard Christian Center 640,000.00 603,024.00
04/28/99 Red Xxxxx Baptist Church 400,000.00 379,222.00
05/17/99 Bread of Life 435,000.00 379,176.00
05/20/99 Greater Hill Zion Baptist Church 500,000.00 472,595.00
07/04/99 Xxxxxx Xxxxxx of Longview 500,000.00 475,437.00
07/30/99 Praise Tabernacle Jamaica 335,000.00 318,226.00
09/08/99 Greater Fort Lauderdale 605,000.00 573,999.00
11/22/99 New Growth in Xxxxxx 460,000.00 440,054.00
11/18/99 Xxxxx Chapel A.M.E. Church 265,000.00 252,919.00
01/21/00 Praise Christian Center 500,000.00 479,800.00
06/05/00 Sierra Vista C.O.G.I.C. 450,000.00 440,986.00
06/05/00 Bend Christian Center 425,000.00 417,901.00
11/02/00 St. Xxxx AME Church 200,000.00 197,578.00
06/19/01 Second Missionary Baptist Church 225,000.00 222,019.00
03/28/02 Fun Family Christian Center 815,000.00 813,818.00
-----------------------------------------------------------
$8,687,000.00 $7,923,738.00
A-1
