AMERICAN CHURCH MORTGAGE COMPANY
1,500,000
Shares of Common Stock
$.0l Par Value
UNDERWRITING AGREEMENT
________________, 1999
American Investors Group, Inc.
10237 Yellow Circle Drive
Minnetonka, Minnesota 55343
Ladies/Gentlemen:
American Church Mortgage Company (the "Company") is a Minnesota
corporation which intends to qualify as a real estate investment trust (a
"REIT") under federal income tax laws. The Company was formed on May 27,
1994 and is governed by the Bylaws (the "Bylaws") and the Articles of
Incorporation (the "Articles") in the form included as Exhibits to the
Registration Statement, as described in Section 1(a) hereof (such Bylaws and
Articles being hereinafter referred to as the "Organizational Documents").
The advisor to the Company is Church Loan Advisors, Inc., a Minnesota
corporation (the "Advisor").
The Company is offering on a "best efforts" basis 1,500,000 shares of
common stock (the "Shares") for a purchase price of $10.00 per Share with a
minimum purchase of 250 Shares ($2,500) or IRAs and qualified plans which
purchase a minimum of 200 Shares (2,000), all upon the other terms and
conditions set forth in the Prospectus, as described in Section 1(a) hereof.
The subscribers, each of whom will be required to enter into a subscription
agreement substantially similar to the form of Subscription Agreement (the
"Subscription Agreement") attached to, or inserted together with the
Prospectus, will, upon acceptance of their subscriptions by and in the
discretion of the Company, become stockholders of the Company (the
"Stockholders").
We understand that American Investors Group, Inc., ("American") may
allow other NASD-member broker-dealers to participate as "Soliciting Dealers"
in connection with the offer and sale of the Company's Shares. All
representations and warranties made herein to American shall be deemed also
to be made to any Soliciting Dealer under it.
1. REPRESENTATION AND WARRANTIES OF THE COMPANY. The Company hereby
represents, warrants and agrees with you that:
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(a) REGISTRATION STATEMENT AND PROSPECTUS. A registration
statement (File No. _____) on Form S-11 with respect to 1,650,000 Shares,
has been prepared by the Company pursuant to the Securities Act of 1933, as
amended (the "Act"), and the rules and regulations (the "Rules and
Regulations") of the Securities and Exchange Commission (the "Commission")
thereunder and has been filed with the Commission under the Act; one or
more amendments to such registration statement have been or may be so
prepared and filed. As used in this Agreement, the term "Registration
Statement" means such registration statement in the form in which it
becomes effective, the term "Effective Date" means the date upon which the
Registration Statement is or was first declared effective by the Commission
and the term "Prospectus" means the prospectus in the form constituting a
part of the Registration Statement as well as in the form first filed with
the Commission pursuant to its Rule 424 after the Registration Statement
becomes effective. The Commission has not issued any stop order suspending
the effectiveness of the Registration Statement and no proceedings for that
purpose have been instituted or are pending before or threatened by the
Commission under the Act. Of the 1,650,000 shares to be registered
pursuant to the Registration Statement, only 1,500,000 are to be offered to
the public pursuant to the Prospectus.
(b) COMPLIANCE WITH THE ACT. From the time the Registration
Statement becomes effective and at all times subsequent thereto up to and
including the Termination Date (as defined in Section 2(c) hereof):
(i) the Registration Statement, the Prospectus and any
amendment or supplements thereto will contain all statements which are
required to be stated therein by the Act and the Rules and Regulations and
will comply in all material respects with the Act and the Rules and
Regulations; and
(ii) neither the Registration Statement nor the Prospectus
nor any amendment or supplement thereto will at any such time include any
statement of a material fact or omit to state any material fact required to
be stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading.
(c) NO SUBSEQUENT MATERIAL EVENTS. Subsequent to the respective
dates as of which information is given in the Registration Statement and
Prospectus and prior to the Termination Date, except as contemplated in the
Prospectus or as disclosed in a supplement or amendment thereto or in the
periodic financial statements of the Company, the Company has not and will
not have:
(i) incurred any material liabilities or obligations, direct
or contingent; or
(ii) entered into any material transaction, not in the
ordinary course of business and, except as so disclosed, there has not been
and will not be any material adverse change in the financial position or
results of operations of the Company.
(d) CORPORATION STATUS. The Company is a corporation duly and
validly existing under the Minnesota Corporation Act, as amended (the
"Corporation Act").
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(e) AUTHORIZATION OF AGREEMENT. This Agreement has been duly and
validly authorized, executed and delivered by or on behalf of the Company
and constitutes the valid and binding agreement of the Company in
accordance with its terms (except as such enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar Laws of
the United States, any state or any political subdivision which affect
creditors' rights generally or by equitable principles relating to the
availability of remedies); the performance of this Agreement and the
Organizational Documents and the consummation of the transactions
contemplated herein and therein, respectively, and the fulfillment of the
terms hereof and thereof, respectively, do not and will not result in a
breach of any of the terms and provisions of, or constitute a default
under, any statute, indenture, mortgage, deed of trust, voting trust
agreement, note, lease or other agreement or instrument to which the
Company is a party or by which the Company or its property is bound, or
under any rule or regulation or order of any court or other governmental
agency or body with jurisdiction over the Company or any of its properties;
and no consent, approval, authorization or order of any court or
governmental agency or body has been or is required for the performance of
this Agreement or by the Organizational Documents, or for the consummation
of the transactions contemplated hereby and thereby, respectively (except
as have been obtained under the Act, from the National Association of
Securities Dealers, Inc. (the "NASD") or as may be required under state
securities or blue sky laws in connection with the offer and sale of the
Shares or under the laws of states in which the Company may own real
properties in connection with its qualification to transact business in
such states or as may be required by subsequent events which may occur).
(f) PENDING ACTIONS. There is no material action, suit or
proceeding pending or, to the knowledge of the Company, threatened, to
which the Company is a party, before or by any court or governmental agency
or body which adversely affects the offering of the Shares.
(g) REQUIRED FILINGS. There are no contracts or other documents
required to be filed by the Act or the Rules and Regulations of the
Commission thereunder as exhibits to the Registration Statement which have
not been so filed.
(h) FEDERAL INCOME TAX LAW. The Company has obtained an opinion
of Maun & Simon, PLC stating, that under existing federal income tax laws
and regulations, assuming the Company acts as described in the "Federal
Income Tax Considerations" section of the Prospectus and the Company timely
files the requisite elections, counsel is of the opinion that the Company
has been organized in conformity with the requirements for qualification as
a REIT beginning with its taxable year ending December 31, 1996, and its
method of operation (as described in the Prospectus and represented by
management) will enable it to satisfy the REIT Requirements (as defined in
the Prospectus).
(i) INDEPENDENT PUBLIC ACCOUNTANTS. To the best of the Company's
knowledge, the accountants who have certified certain financial statements
appearing in the Prospectus are independent public accountants within the
meaning of the Act and the Rules and Regulations.
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(j) SALES LITERATURE. In addition to and apart from the
Prospectus, the Company will use certain supplemental sales material in
connection with the offering of the Shares. This material, prepared by the
Company, will consist of a brochure describing the Advisor and its
Affiliates and the objectives of the Company. These materials shall be
hereinafter referred to collectively as the "sales literature." No person
has been authorized to prepare for, or furnish to, a prospective investor
any sales literature other than: (i) that described herein; and (ii)
newspaper advertisements or solicitations of interested limited to
identifying the Offering and the location of sources of further
information. Use of any sales literature is conditioned upon filing with
and, if required clearance by appropriate regulatory agencies. Such
clearance (if provided), however, does not indicate that the regulatory
agency allowing the use of the materials has passed on the merits of the
Offering or the adequacy or accuracy of the sales materials. Except as
described herein, the Company has not authorized the use of other
supplemental literature or sales literature in connection with this
Offering. Although it is believed that the information contained in the
sales literature does not conflict with any of the information set forth in
the Prospectus, the sales literature does not purport to be complete, and
should not be considered as a part of the Prospectus, or as incorporated in
the Prospectus by reference, or as forming the basis of the Offering.
(k) AUTHORIZATION OF THE SHARES. The Company has an authorized and
outstanding capitalization as set forth in the Registration Statement and
Prospectus. The sale of the Shares has been duly and validly authorized by
the Company, and when subscriptions for the Shares have been accepted by
the Company as contemplated in the Prospectus and the Shares have been
issued to the respective subscribers, the Shares will represent ownership
in the Company and will conform to the description thereof contained in
the Prospectus. Stockholders have no preemptive rights to purchase or
subscribe for securities of the Company, and the Shares are not convertible
or subject to redemption at the option of the Company. The Shares are
entitled to one vote per Share and do not have cumulative voting rights.
Subject to the rights of the holders of any class of capital stock of the
Company having any preference or priority over the Shares, the Stockholders
are entitled to distributions in such amounts as may be declared by the
Board of Directors from time to time out of funds legally available for
such payments and, in the event of liquidation, to share ratably in any
assets of the Company remaining after payment in full of all creditors and
provisions for any liquidation preferences on any outstanding preferred
stock ranking prior to the Shares.
2. OFFERING AND SALE OF THE SHARES. On the basis of the
representations, warranties and agreements herein contained, and subject to
the terms and conditions herein set forth, the Company hereby appoints you as
its exclusive Underwriter to solicit and to cause other dealers (as described
in subparagraph (a) below) to solicit subscriptions for the Shares at the
subscription price and upon the other terms and conditions set forth in the
Prospectus and in the Subscription Agreement, and you agree to use your best
efforts as such Underwriter to procure subscribers for 1,500,000 Shares,
during the period commencing with the Effective Date and ending on the
Termination Date (the "Offering Period"). The number of Shares, if any, to
be reserved for sale by each Soliciting Dealer may be decided by the mutual
agreement, from time to time, of you and the Company. In the absence of such
mutual agreement, the Company shall, subject to the provisions of Section
2(b) hereof, accept Subscription Agreements based upon a first-come, first
accepted reservation or other similar method.
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(a) SOLICITING DEALERS. The Shares offered and sold through you
under this Agreement shall be offered and sold only by you and, at your
sole option, and other securities dealers (collectively the "Soliciting
Dealers"), each of whom are members of the NASD, executing agreements with
you substantially in the form of the Soliciting Dealers Agreement attached
hereto as Exhibit A.
(b) SUBSCRIPTION AGREEMENTS AND SUBSCRIBERS' FUNDS. Each person
desiring to purchase Shares through you or any other Soliciting Dealer will
be required to complete and execute the Subscription Agreement and to
deliver such document to you or such Soliciting Dealer, together with a
check made payable to the Underwriter or if sold by a Soliciting Dealer
qualified to handle customer funds under NASD rules, to such Soliciting
Dealer, upon which the Underwriter shall collect and remit (net of
commissions) all such funds to the Company on a regular basis in accordance
with NASD rules.
Each Soliciting Dealer shall forward any such Subscription Agreement
and check to you not later than noon of the next business day after receipt
of the Subscription Agreement (and if the Soliciting Dealer conducts its
internal supervisory procedures at the location where the Subscription
Agreement and check were initially received). When such internal
supervisory procedures are performed at a different location (the "Final
Review Office"), the Subscription Agreement and check must be transmitted
to the Final Review Office by noon of the next business day following
receipt of the Subscription Agreement and check by the Soliciting Dealer.
The Final Review Office will, by noon of the next business day following
receipt of the Subscription Agreement and check, forward both to you as
processing broker-dealer in order that you may complete your review of the
documentation and process the Subscription Agreement and check. The
Company will have representatives available to review the Subscription
Agreement at the Minnetonka office of American in order to determine
whether it wishes to accept the proposed purchaser as a Stockholder, it
being understood that the Company reserves the unconditional right to
reject the tender of any Subscription Agreement and to reject all tenders
after 1,500,000 Shares have been sold. Any check received by you directly
or as processing broker-dealer from the Soliciting Dealers will, in all
cases (and subject to the foregoing), be forwarded to the Company as soon
as practicable, but in any event by the end of the second business day
following receipt by you of the Subscription Agreement and check. Should
the Company determine to reject the tender of any Subscription Agreement,
the Company will promptly notify you or such Soliciting Dealer of such
determination, and you shall send the check and the Subscription Agreement
to the rejected subscriber.
(c) TERMINATION OF THE OFFERING. The Offering Period will
terminate upon the earlier of (i) two years from the date of the Prospectus
(subject to requalification in certain states, the Company may extend the
Offering Period from time to time, but no event for longer than two years
and sixty (60) days from the date of the original Prospectus); (ii) the
sale of all the Shares (1,500,000); or (iii) election by the Company to
terminate.
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(d) UNDERWRITER COMPENSATION.
(i) The Company agrees to pay to you a sales commission of 5.95%
of the sales price (or $.595) for each Share sold, as set forth in the
Prospectus under the caption "Plan of Distribution," subject to the
limitation described below, all or any part of which may be reallowed by you,
subject to federal and state securities laws, to the Soliciting Dealers who
sell the Shares as described more fully in the Soliciting Dealers Agreement.
As Underwriter, American will also receive a non-accountable expense
allowance of up to $133,000, of which $30,000 shall be payable upon the sale
of the first 100,000 Shares ($1,000,000), and the balance ($103,000) of which
shall be payable ratably thereafter at the rate of $7,357.14 per 100,000
Shares sold after the first 100,000 Shares.
Notwithstanding the foregoing, it is understood and agreed that no
commission shall be payable with respect to particular Shares if the Company
rejects a proposed subscriber's Subscription Agreement.
(ii) The sales commissions to you shall be paid not less frequent
than weekly basis, based upon the acceptance of a subscriber as a Stockholder
by the Company since the last date of such payment to you, in an amount equal
to the sales commissions payable with respect to such Shares.
3. COVENANTS OF THE COMPANY. The Company covenants and agrees with
you as follows:
(a) REGISTRATION STATEMENT. The Company will use its best efforts to
cause the Registration Statement and any subsequent amendments thereto to
become effective as promptly as possible and will not at any time after the
Effective Date of the Registration Statement, file any amendment to the
Registration Statement or supplement to the Prospectus of which you shall not
previously have been advised and furnished a copy at a reasonable time prior
to the proposed filing or to which you shall have reasonably objected or
which is not, to the best of the Company's knowledge, in compliance with the
Act and the Rules and Regulations, the Company will prepare and file with the
Commission and will use its best efforts to cause to become effective as
promptly as possible:
(i) any amendments to the Registration Statement or supplements
to the Prospectus which may be required pursuant to the undertakings in the
Registration Statement; and
(ii) upon your reasonable request, any amendments to the
Registration Statement or supplements to the Prospectus which, in the opinion
of you or your counsel, may be necessary or advisable in view of the
requirements of the Act and the Rules and Regulations in connection with the
offer and sale of the Shares during the Offering Period.
(b) SEC ORDERS. As soon as the Company is advised or obtains knowledge
thereof, it will advise you of any request made by the Commission for
amending the Registration Statement, supplementing the Prospectus or for
additional information, or of the issuance by the Commission of any stop
statement or of any order preventing or suspending the use of the Prospectus
or the institution of any proceedings for that purpose, and will use its best
efforts to prevent the issuance of any such order and, if any such order is
issued, to obtain the removal thereof as promptly as possible.
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(c) BLUE SKY QUALIFICATIONS. The Company will use its best efforts to
qualify the Shares for offering and sale under the securities or blue sky
laws of such jurisdictions as you may reasonably request and to make such
applications, file such documents and furnish such information on as may be
reasonably required for that purpose. The Company will, at your request,
furnish you copies of all material documents and correspondence sent to or
received from such jurisdictions and will promptly advise you as soon as the
Company obtains knowledge thereof when the Shares are qualified for offering
and sale in each such jurisdiction. The Company will promptly advise you of
any request made by the securities administrators of each such jurisdiction
for revising the Registration Statement or the Prospectus or for additional
information or of the issuance by such securities administrators of any stop
order preventing or suspending the use of the Prospectus or of the
institution of any proceedings for that purpose, and will use its best
efforts to prevent the issuance of any such order and if any such order is
issued, to obtain the removal thereof as promptly as possible. The Company
will furnish you with a Blue Sky Memorandum dated as of the Effective Date,
which will be supplemented to reflect changes or additions to the information
disclosed in such memorandum.
(d) AMENDMENTS AND SUPPLEMENTS. If at any time when a Prospectus
relating to the Shares is required to be delivered under the Act, any event
shall have occurred to the knowledge of the Company as a result of which the
Prospectus as then amended or supplemented would include any untrue statement
of a material fact, or omit to state a material fact necessary to make the
statements therein not misleading in light of the circumstances existing at
the time it is so required to be delivered to a subscriber, or if it is
necessary at any time to amend the Registration Statement or supplement the
Prospectus relating to the Shares to comply with the Act, the Company will
promptly notify you thereof and will prepare and file with the Commission an
amendment or supplement which will correct such statement or effect such
compliance.
(e) COPIES OF REGISTRATION STATEMENT. The Company will furnish you
copies of the Registration Statement (only one of which need be signed and
need include all exhibits), the Prospectus and all amendments and supplements
thereto, including any amendment or supplement prepared after the Effective
Date, and such other information with respect to the Company as you may from
time to time reasonably request, in each case as soon as available and in
such quantities as you may reasonably request.
(f) QUALIFICATION TO TRANSACT BUSINESS. The Company will take all
steps necessary to ensure that at all times the Company will be validly
existing as a corporation and will be qualified to do business in all
jurisdictions in which the conduct of its business requires such
qualification and where such qualification is required under local law.
(g) AUTHORITY TO PERFORM AGREEMENTS. The Company undertakes to obtain
all consents, approvals, authorizations or orders of any court or
governmental agency or body which are required for the performance of this
Agreement and under the Organizational Documents or the consummation of to
transactions contemplated hereby and thereby, respectively, or the conducting
by the Company of the business described in the Prospectus.
(h) COPIES OF REPORTS. The Company will use its best efforts to furnish
to you as promptly as shall be practicable the following:
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(i) a copy of each report or general communication (whether
financial or otherwise) sent to the Stockholders;
(ii) a copy of each report (whether financial or otherwise) filed
with the Commission; and
(iii) such other information as you may from time to time
reasonably request regarding the financial condition and operations of the
Company.
(i) USE OF PROCEEDS. The Company will apply the proceeds from the sale
of the Shares as stated in the Prospectus.
(j) ORGANIZATION AND OFFERING EXPENSES. In no event shall the total of
the organizational expenses and expenses of the Offering to be paid directly
by the Company exceed 10% of the gross proceeds of the Offering.
4. COVENANTS OF THE UNDERWRITER. You covenant and agree with the
Company on your behalf and on behalf of the Soliciting Dealers as follows:
(a) COMPLIANCE WITH LAWS. With respect to your participation and the
participation by each Soliciting Dealer in the offer and sale of the Shares
(including, without limitation, any resales and transfers of Shares), you
agree, and each Soliciting Dealer agrees, to comply and shall comply with any
applicable requirements of the Act, the Securities Exchange Act of 1934, as
amended, and the published rules and regulations of the Commission
thereunder, and the applicable state securities or blue sky laws, the Rules
of Fair Practice of the NASD, including the requirements of Section 34 of
Article III and in particular, the investor suitability requirements of
Sections 3(b)(1), 3(b)(2) and 3(c) and the disclosure and due diligence
requirements of Sections 4(a), 4(b) or 4(c), and 4(d) therein and all rules
and regulations promulgated or issued with respect to any of the foregoing
and also including Sections 2730, 2740, 2420 and 2750 of Article III therein.
In particular, you agree not to deliver the sales literature to any person
prior to the Effective Date and, after the Effective Date, not to deliver the
sales literature to any person unless the sales literature is accompanied or
preceded by the Prospectus. In addition, you shall, in accordance with
applicable law or any state securities administrator, provide or cause
Soliciting Dealers to provide to any prospective investor copies of any
document which is part of the Registration Statement; including, without
limitation, documents which are required by specific states to be delivered
to investors resident in their state, of which requirements the Company shall
so advise you be means of written instruction which shall be considered a
supplement hereto.
With respect to your and each Soliciting Dealer's participation in any
resales or transfers of the Shares, you agree, and each Soliciting Dealer
agrees, to comply and shall comply with any applicable requirements, as set
forth above. In addition, you and each Soliciting Dealer agree that should
you assist with the resale or transfer of the Shares, you and each Soliciting
Dealer will fulfill the obligations pursuant to Sections 3(b) and 4(d) of
Article III, Section 34 of the Rules of Fair Practice of the NASD.
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(b) NO ADDITIONAL INFORMATION. In offering the Shares for sale, you
and each Soliciting Dealer shall not give or provide any information or make
any representations other than those contained in the Prospectus, the sales
literature or any other document provided to you for such purpose by the
Company.
(c) SALES OF SHARES. You and each Soliciting Dealer shall solicit
purchases of the Shares only in the jurisdictions in which you and such
Soliciting Dealer are legally qualified to so act and in which you and each
Soliciting Dealer have been advised by the Company, by means of the Blue Sky
Memorandum, that such solicitations can be made.
(d) SUBSCRIPTION AGREEMENT. Subscriptions will be submitted by you and
each Soliciting Dealer to the Company only on the form which is included with
the Prospectus. You and each Soliciting Dealer understand and acknowledge
that the Subscription Agreement must be executed and signed by the subscriber.
(e) SUITABILITY. In offering the Shares to any person. you and each
Soliciting Dealer shall have reasonable grounds to believe (based on such
information as the investment objectives, other investments, financial
situation and needs of the person or any other information known by you after
due inquiry) that:
(i) such person has the capability of understanding the
fundamental aspect of the Company, which capacity may be evidenced by the
following: (A) the nature of employment experience; (B) educational level
achieved; (C) access to advice from qualified sources, such as attorneys,
accountants, tax advisors, etc.; and (D) prior experience with investments of
a similar nature;
(ii) such person has apparent understanding of (A) the
fundamental risks and possible financial hazards of this type of investment;
(B) the lack of liquidity of this investment, (C) the Advisor's role in
directing or managing the investment; and (D) the tax consequences of the
investment; and
(iii) such person has the financial capability to invest in the
Company and you or each Soliciting Dealer (as the case may be) shall maintain
records disclosing the basis upon which you and each Soliciting Dealer
determined the suitability of any persons offered Shares. Notwithstanding
the foregoing, you and each Soliciting Dealer shall have reasonable grounds
to believe that such person has either (a) a minimum annual gross income of
$45,000 and a net worth (exclusive of home, home furnishing and automobiles)
of $45,000; or (b) a net worth (determined with the foregoing exclusions) of
$150,000. Suitability standards may be higher in certain states as set forth
in the Subscription Agreement.
You and/or the Soliciting Dealers shall maintain for at least six years
a record of the information obtained to determine that an investor meets the
suitability standards imposed on the offer and sale of the Shares (both at
the time of the initial subscription and at the time of any additional
subscriptions) and a representation of the investor that the investor is
investing for the investors own account or, in lieu of such representation,
information indicating that the investor for whose account the investment was
made met the suitability standards.
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(f) DUE DILIGENCE. Prior to offering the Shares for sale, you and each
Soliciting Dealer shall have conducted an inquiry such that you have
reasonable grounds to believe and do believe, based on information made
available to you by the Company through the Prospectus or other materials,
that all material facts are adequately and accurately disclosed and provide a
basis for evaluating the purchase of the Shares. In determining the adequacy
of disclosed facts pursuant to the foregoing, you and each Soliciting Dealer
may obtain, upon request, information on material facts relating at a minimum
to the following:
(1) items of compensation;
(2) Company properties;
(3) tax aspects;
(4) conflicts and risk factors; and
(5) financial statements and other pertinent reports.
Notwithstanding the foregoing, you and each Soliciting Dealer may rely upon
the results of an inquiry conducted by another Soliciting Dealer, provided
that:
(i) such Soliciting Dealer has reasonable grounds to believe
that such inquiry was conducted with due care;
(ii) the results of the inquiry were provided to you with the
consent of the Soliciting Dealer conducting or directing the inquiry; and
(iii) no Soliciting Dealer that participated in the inquiry is an
affiliate of the Company or the Advisor.
Prior to the sale of the Shares, you and each Soliciting Dealer shall
inform the prospective purchaser of all pertinent facts relating to the
liquidity and marketability of the Shares during the term of the investment.
5. EXPENSES. The Company agrees with you that, whether or not the
transactions contemplated in this Agreement are consummated, the Company will
pay all fees and expenses incident to the performance of its obligations
under this Agreement, including, but not limited to:
(a) the Commission's registration fee;
(b) expenses of printing the Registration Statement, the Prospectus and
any amendment or supplement thereto and the expense of furnishing to you
copies of the Registration Statement, the Prospectus and any amendment or
supplement thereto as herein provided;
(c) fees and expenses of its accountants and counsel in connection with
the Offering contemplated by this Agreement.
(d) fees and expenses incurred in connection with any required filing
with the NASD;
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(e) all of your expenses in connection with the Offering contemplated
hereby and as limited by the Prospectus, including, but not limited to, the
salaries, fringe benefits, travel expenses and similar expenses of your
employees and personnel incurred in connection with the Offering; and
(f) expenses of qualification of the Shares for offering and sale under
state blue sky and securities laws, and expenses in connection with the
preparation and printing of the Blue Sky Survey.
In no event, however, will the total of: (a) the selling commissions
paid to the Soliciting Dealers, (b) the marketing contribution and due
diligence expense allowance fee paid to the Soliciting Dealers, and (c)
reimbursement of certain expenses to be paid to Soliciting Dealers for
special incentive marketing programs as described in the Prospectus, exceed
10.0% of the gross proceeds of the Offering.
6. CONDITIONS OF OBLIGATIONS. Your obligations hereunder shall be
subject to the accuracy of the representations and warranties on the part of
the Company contained in Section 1 hereof, the accuracy of the statements of
the Company made pursuant to the provisions hereof, to the performance by the
Company of its covenants, agreements and obligations contained in Sections 3
and 5 hereof, and to the following additional conditions:
(a) EFFECTIVENESS OF REGISTRATION STATEMENT. The Registration
Statement shall have become effective at such time and date as you and the
Company shall have agreed; no stop order suspending the effectiveness of the
Registration Statement shall have been issued and, to the best knowledge of
the Company or you, no proceedings for that purpose shall have been in
threatened or contemplated by the Commission; and any request by the
Commission for additional information (to be included in the Registration
Statement or Prospectus or otherwise) shall have been complied with to the
reasonable satisfaction of you or your counsel.
(b) ACCURACY OF REGISTRATION STATEMENT. You shall not have advised the
Company that the Registration Statement or the Prospectus, or any amendment
or any supplement thereto, in the reasonable opinion of you or your counsel,
contains any untrue statement of fact which is material, or omits to state a
fact which is material and is required to be stated therein or is necessary
to make the statements therein not misleading.
7. INDEMNIFICATION.
(a) The Company agrees to indemnify and hold harmless you, each
Soliciting Dealer and each person, if any, who controls you or any Soliciting
Dealer within the meaning of the Act (collectively, the "Indemnified
Parties"), against any and all loss, liability, claim, damage and expense
whatsoever caused by any untrue statement or alleged untrue statement of a
material fact contained in the Registration Statement, the Prospectus or any
amendment or supplement thereto, or the omission or alleged omission
therefrom of a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they
were made, not misleading. Such indemnification shall be subject to the
provisions of Sections 7(b) and (c) of this Agreement.
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The Company shall not provide for indemnification for any liability or
loss suffered by you, nor shall it provide that you be held harmless for any
loss or liability suffered by the Company unless all of the following
conditions are met (i) the party seeking indemnification has determined, in
good faith, that the course of conduct which caused the loss or liability was
in the best interest of the Company; (ii) the other person seeking
indemnification was acting on behalf of or performing services on the part of
the Company; (iii) such liability or loss was not the result of negligence or
misconduct on the part of the indemnified party; and (iv) such
indemnification or agreement to be held harmless is recoverable only out of
the assets of the Company and not from the Stockholders.
In no case shall the Company be liable under this indemnity agreement
with respect to any claim made against any of the Indemnified Parties unless
the Company shall be notified in writing (as provided in Section 10) of the
nature of the claim within a reasonable time after the assertion thereof, but
failure to so notify the Company shall not relieve the Company from any
liability which the Company may have incurred otherwise than on account of
this indemnity agreement. The Company shall be entitled to participate, at
its own expense, in the defense of, or if it so elects within a reasonable
time after receipt of such notice, to assume the defense of any claim or suit
for which the Indemnified Parties seek indemnification hereunder. If the
Company elects to assume the defense, such defense shall be conducted by
counsel chosen by it and reasonably satisfactory to the Indemnified Parties.
In the event that the Company elects to assume the defense of any such suit
and retain such counsel, the Company shall not be liable to the Indemnified
Parties in the suit under this Section 7 for any legal or other expenses
subsequently incurred by the Indemnified Parties, and the Indemnified Parties
shall bear the fees and expenses of any additional counsel thereafter
retained by the Indemnified Parties unless: (A) the employment of counsel by
the indemnified Party has been authorized by the Company; or (B) the Company
shall not in fact have employed counsel to assume the defense of such action,
in any of which events such fees and expenses shall be borne by the Company.
The Company may advance amounts to the Indemnified Parities for legal
and other expenses and costs incurred as a result of any legal action for
which indemnification is being sought only if all of the following conditions
are satisfied: (i) the legal action relates to acts or omissions with respect
to the performance of duties or services by the Indemnified Party for or on
behalf of the Company, (ii) the legal action is initiated by a third party
who is not a Stockholder and a court of competent jurisdiction specifically
approves such advancement; and (iii) the Indemnified Parties receiving such
advances undertake to repay the advanced funds to the Company, together with
the applicable legal rate of interest thereon, in cases in which such
Indemnified Parties are found not to be entitled to indemnification.
Notwithstanding the foregoing provisions of this Section 7, the Company
will not be liable in any such case to the extent that any loss, liability,
claim, damage or expense arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission made in reliance upon
and in conformity with written information furnished to the Company by or on
behalf of you or any Soliciting Dealer specifically for use with reference to
you or such Soliciting Dealer in the preparation of the Registration Statement
(or any amendment thereof) or the Prospectus (or any supplement thereto). The
foregoing indemnity agreement is subject to the condition that, insofar as it
relates to any untrue statement, alleged untrue statement, omission or alleged
omission made in the Prospectus but eliminated or remedied in any amendment or
supplement thereto, such indemnity
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agreement shall not inure to your benefit or any Soliciting Dealer from whom
the person asserting any loss, liability, claim, damage or expense purchased
the Shares which are the subject thereof (or to the benefit of any person who
controls you or any Soliciting Dealer), if a copy of the Prospectus as so
amended or supplemented was not sent or given to such person at or prior to
the time the subscription of such person was accepted by the Company but only
if a copy of the Prospectus (as so amended or supplemented) has been supplied
by the Company to you or any Soliciting Dealer prior to such acceptance.
This indemnity agreement will be in addition to any liability which the
Company may otherwise have.
(b) The Company agrees to indemnity and hold harmless you and the
Soliciting Dealers in the manner and to the extent provided in subparagraph
(a) of this Section 7; provided, however, that no such indemnification by the
Company of you or a Soliciting Dealer shall be permitted under this Agreement
from or out of an alleged violation of federal or state securities laws
unless one or more of the following conditions are met: (i) there has been a
successful adjudication on the merits of each count involving alleged
securities law violations by you or any Soliciting Dealer and a court of
competent jurisdiction has approved indemnification of the litigation costs;
(ii) such claims against you or any Soliciting Dealer have been dismissed
with prejudice on the merits by a court of competent jurisdiction as to the
particular indemnitee and the court has approved indemnification of the
litigation costs; or (iii) a court of competent jurisdiction approves a
settlement of the claims against you or any Soliciting Dealer and finds that
indemnification of the settlement and related costs should be made and the
court considering the request has been advised of the position of the
Commission and of the published position of any state securities regulatory
authority in which securities of the Company were offered and sold as to
indemnification for securities law violations.
(c) You and each Soliciting Dealer agree to indemnify and hold harmless
the Company, and each person, if any, who controls the Company within the
meaning of the Act and any controlling person of the Company (i) to the same
extent as in the foregoing indemnity from the Company to you and each
Soliciting Dealer but only with reference to statements or omissions based
upon the information relating to you or any Soliciting Dealer furnished in
writing by you or such Soliciting Dealer or on your or their behalf expressly
for use in the Registration Statement or the Prospectus, or any amendment or
supplement thereto, and (ii) for any violation by you or any Soliciting
Dealer, in the sale of the Shares, of any applicable state or federal law or
any rule, regulation or instruction thereunder, provided that such violation
is not in reliance on any violation by the Company of such law, rule,
regulation or instruction.
You and each Soliciting Dealer further agree to indemnify and hold
harmless the Company and any controlling person of the Company against any
losses, liabilities claims, damages or expenses to which the Company or any
such controlling person may become subject under the securities or blue sky
laws of any jurisdiction insofar as such losses, liabilities, claims, damages
or expenses (or actions, proceedings or investigations in respect thereof)
arise by reason of a sale of the Shares through the efforts of you (with
respect to sales effected without the assistance of a Soliciting Dealer) or a
Soliciting Dealer (with respect to sales effected by such Soliciting Dealer)
which is effected other than in accordance with the Blue Sky Memorandum
supplied to you by the Company (a "Non-Permitted Sale"). whether such
Non-Permitted Sale is caused by a sale in a jurisdiction on other than those
specified in the Blue Sky Memorandum, by a sale in a jurisdiction in which
you or the Soliciting Dealer
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is not registered to sell the Shares or which results in a sale in a
jurisdiction in excess of the number of Shares permitted to be sold in such
jurisdiction, and will reimburse the Company or any such controlling person
for any legal fees, monetary penalties or other expenses reasonably incurred
by any of them in connection with investigating, curing or defending against
any such losses, liabilities, claims, damages, actions, proceedings or
investigations. This indemnity agreement will be in addition to any
liability which you or any Soliciting Dealer may otherwise have.
(d) The notice provisions contained in Section 7(a) hereof, relating to
notice to the Company, shall be equally applicable to you and each Soliciting
Dealer if the Company or any controlling person of the Company seeks
indemnification pursuant to Section 7(c) hereof. In addition, you and each
Soliciting Dealer may participate in the defense, or assure the defense, of
any such suit so brought under Section 7(c) hereof and have the same rights
and privileges as the Company enjoys with respect to such suits under Section
7(a) hereof.
8. TERMINATION OF THIS AGREEMENT. This Agreement may be terminated by
you in the event that the Company shall have materially failed to comply with
any of the material provisions of this Agreement on its part to be performed
at or prior to the Effective Date or if any of the representations,
warranties, covenants or agreements of the Company herein contained shall not
have been materially complied with or satisfied within the time specified.
In any case, this Agreement shall terminate at the close of business on the
Termination Date. Termination of this Agreement pursuant to this Section 8
shall be without liability of any party to any other party other than as
provided in Sections 5 and 7 hereof which shall survive such termination.
9. REPRESENTATIONS, WARRANTIES AND AGREEMENTS TO SURVIVE DELIVERY. All
representations, warranties and agreements contained in this Agreement or
contained in certificates of the Company submitted pursuant hereto shall
remain operative and in full force and effect, regardless of any
investigation made by or on behalf of you or any person who controls you, or
by or on behalf of the Company and shall survive the Termination Date.
10. NOTICES. All communications hereunder shall be in writing and, if
sent to you, shall be mailed by registered mail or delivered or telegraphed
and confirmed in writing to American Investors Group, Inc., 10237 Yellow
Circle Drive, Minnetonka, Minnesota 55343 (Attention: Ms. Kathi Genz) and,
if sent to the Company, shall be mailed by registered mail or delivered or
telegraphed and confirmed in writing to American Church Mortgage Company,
10237 Yellow Circle Drive, Minnetonka, Minnesota 55343 (Attention: Mr.
David Reinhart).
11. PARTIES. This Agreement shall inure to the benefit of and be
binding upon you, the Company and its successors and assigns. This Agreement
and the conditions and provisions hereof, are intended to be and shall be for
the sole and exclusive benefit of the parties hereto and their respective
successors and controlling persons, and for the benefit of no other person,
firm or corporation, and the term "successors and assigns," as used herein,
shall not include any purchaser of Shares as such.
12. APPLICABLE LAW. This Agreement and any disputes relative thereto
shall be governed by and construed under the laws of the State of Minnesota.
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13. EFFECTIVENESS OF AGREEMENT. This Agreement shall become effective
on the date set forth on the first page hereof, and the obligations of the
parties shall be effective on the Effective Date, or at such earlier time as
you and the Company agree.
14. NOT A SEPARATE ENTITY. Nothing contained herein shall constitute
you and/or the Soliciting Dealers or any of them as an association,
partnership, limited liability company, unincorporated business or other
separate entity.
If the foregoing is in accordance with your understanding of our
agreement kindly sign and return it to us, whereupon this instrument will
become a binding agreement between you and the Company in accordance with its
terms.
AMERICAN CHURCH MORTGAGE COMPANY
a Minnesota corporation
--------------------------------------------
David G. Reinhart, President
Accepted as of the date
first above written:
AMERICAN INVESTORS GROUP, INC.
- -----------------------------------
Philip J. Myers, President
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