LOAN AGREEMENT

 

This loan agreement (“Agreement”) is made this 9th day of April, 2018 by and
Alerus Financial, N.A., a banking institution organized and existing under the
laws of the United States, having an address of 2330 South Columbia Road, Grand
Forks, North Dakota 58201 (“Bank”) and American Church Mortgage Company, a
Minnesota corporation, having an address of 10400 Yellow Circle Drive, #102,
Minnetonka, MN 55343 (“Borrower”), for the purposes of extending to the Borrower
a Four Million ($4,000,000.00) Dollar credit accommodation on the terms and
conditions set forth herein.

 

1.       Amount of Credit/Purpose. The Bank will make a credit accommodation to
the Borrower from time to time during the one (1) year period beginning on the
date of this Agreement in an aggregate amount not to exceed at any time
outstanding Four Million ($4,000,000.00) Dollars (“Credit Accommodation”). This
Credit Accommodation will be made as set forth herein.

 

The sole purpose of the Credit Accommodation is for working capital to enable
Borrower to bridge the sale of mortgage bonds and investor’s certificates in the
ordinary course of Borrower’s business.

 

2.       The Note. The Borrower's obligation to repay the loans made by the Bank
as set forth herein will be evidenced by a promissory note of even date herewith
made by the Borrower in favor of the Bank, in the original principal amount of
Four Million ($4,000,000.00) Dollars (“Note”). The Note must be properly
executed by the Borrower and be in form and substance acceptable to the Bank.

 

3.       Revolving Loan. The Bank agrees to make loans to the Borrower from time
to time from and after the date of this Agreement in an aggregate amount not to
exceed at any time outstanding Four Million ($4,000,000.00) Dollars (“Revolving
Loan”). The Borrower may repay and reborrow pursuant to the terms and conditions
of the Revolving Loan, as long as no borrowing causes that dollar limit to be
exceeded and the Borrower is not otherwise in default hereunder. The Revolving
Loan shall bear interest at the rate set forth in the Note. The rate of interest
shall initially be determined as of the date of this Agreement and shall
thereafter be adjusted as described in the Note. The unpaid principal and
interest balance under the Revolving Loan shall be due and payable in full at
loan maturity as set forth in the Note.

 

4. Advances and Payments. Each advance pursuant to the Revolving Loan shall be
made on at least one (1) bank business days' prior written notice from the
Borrower to the Bank or telephonic request from any person purporting to be
authorized to request such advances on behalf of the Borrower, which notice or
request shall specify the date of the requested advance and the amount thereof.
The Bank may disburse the amount of the requested advance by crediting the same
to the Borrower's demand deposit account maintained with the Bank or in such
other manner as the Bank and the Borrower may from time to time agree. The
Borrower shall be obligated to repay all such advances notwithstanding the
failure of the Bank to receive such confirmation and notwithstanding the fact
that the person requesting same was not in fact authorized so to do. Any request
for such an advance, whether written, electronic or telephonic, shall be deemed
to be a representation that the statements set forth in this Agreement are
correct. All payments of principal and interest under the Note (as

 

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defined herein) shall be made to the Bank in immediately available funds.
Borrower agrees that the amount shown on the books and records of the Bank as
being the aggregate amount of advances outstanding shall be prima facie evidence
of the principal amount of the Note then outstanding. The Borrower hereby
authorizes the Bank, if and to the extent payment is not promptly made pursuant
hereto, to charge against the Borrower's account with the Bank an amount equal
to the accrued interest and fees from time to time due and payable to the Bank
pursuant to the Note or hereunder. Whenever any payment to be made hereunder or
under a Note shall be stated to be due on a Saturday, Sunday or a holiday for
banks under the laws of the State of Minnesota, such payment may be made on the
next succeeding bank business day, and such extension of time shall in such case
be included in the computation of payment of interest on the Note hereunder.

 

2.       Security. The Note shall be secured by a Security Agreement (“Security
Agreement”) executed by the Borrower granting the security interest in the
following property of the Borrower: all inventory, all equipment, all accounts,
all general intangibles, all fixtures and all other personal property of the
Borrower (“Security Interest”). This property is more fully described in the
Security Agreement which shall be executed by the Borrower at the time of
execution of this Agreement. The Security Interest shall extend to property of
the type described whether now owned or hereafter acquired.

 

3.       Documentation. The obligations of the Bank to make the loans hereunder
is subject to the conditions precedent that the Bank shall have received on or
before the day of execution of this Agreement all of the following documents,
each dated (unless otherwise indicated) such day, in form and substance
satisfactory to the Bank:

 

a.The Note, properly executed on behalf of the Borrower.

 

b.A certified copy of the resolutions of the Board of Directors of the Borrower
evidencing approval of this Agreement and the Note and other matters
contemplated hereby.

 

c.Copies of the Articles of Incorporation and Bylaws of the Borrower, certified
by the Secretary of the Borrower as being true and correct copies thereof and
signed copies of a certificate of the Secretary of the Borrower which shall
certify the names of the officers of the Borrower authorized to sign other
documents or certificates to be delivered pursuant to this Agreement by the
Borrower or any of their officers, together with the true signatures of such
officers. The Bank may conclusively rely on such certificate until it shall
receive a further certificate of the Secretaries or Assistant Secretaries of the
Borrower canceling or amending the prior certificate(s) and submitting the
signatures of the officers named in such further certificate(s).

 

d.The Security Agreement evidencing the Bank's security interests hereunder,
properly executed on behalf of the Borrower.

 

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4.       Other Conditions/Loan Covenants. The obligations of the Bank hereunder
are further expressly conditioned upon the following:

 

a.Financial Statements. Financial statements of the Borrower shall be provided
to the Bank within one-hundred (120) days of the Borrower' fiscal year end
during each year that any part of the Revolving Loan remains unpaid, outstanding
or available for advance. Furthermore, the Borrower shall provide the Bank with
interim corporate financial statements to the Bank on a quarterly basis, within
sixty (60) days of the end of each quarter.

 

i. In addition, upon the end of end of each calendar quarter, the Borrower shall
provide the Bank with true and correct copies of Borrower’s aging and listing of
all accounts receivable prepared in accordance with generally accepted
accounting principles which itemizes each account debtor by name and addresses
and which states the total amount payable to Borrower and contains a breakdown
indicating future amounts due and when due, current amounts due, amounts thirty
(30) days past due, sixty (60) days past due, and ninety (90) or more days past
due, and reflecting any credit adjustments, returns or allowances.

 

ii. Borrower shall provide the Bank with true and correct copies of Borrower’s
mortgage/bond loan reports in a form and manner acceptable to the Bank upon the
end of each calendar quarter that any part of the Revolving Loan remains unpaid,
outstanding or available for advance.

 

iii. Borrower shall provide the Bank such other documentation regarding the
Borrower’s business and operations as the bank may reasonably request from time
to time.

 

b.Income Tax Returns. True and correct copies of the income tax returns of the
Borrower shall be provided to the Bank within thirty (30) days of date of filing
during each year during which any part of the Revolving Loan remains unpaid,
outstanding or available for advance.

 

c.Depository Relationship. The Borrower at all times during the term of the
Revolving Loan shall maintain its primary banking depository relationship with
the Bank.

 

d.Loan Records. The Bank may maintain from time to time, at its discretion,
liability records as to any and all loans made or repaid and interest accrued or
repaid under this Agreement. All entries made on any such record shall be
presumed correct until Borrower establishes the contrary. On demand by the Bank,
Borrower will admit and certify in writing the exact principal balance which
Borrower then asserts to be outstanding to the Bank for loans under this
Agreement.

 

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e.Bank's Attorneys' Fees and Costs. Borrower shall, on or before the execution
hereof, reimburse Bank for all of Bank's attorneys' fees and costs incurred by
the Bank in drafting this Agreement and related documents or negotiating its
terms with the parties.

 

f.Origination Fee. Borrower acknowledges and agrees that it is paying an
origination fee to the Bank of Twenty-Thousand ($20,000.00) Dollars, which
origination fee shall be due and paid in full upon closing of the Revolving
Loan.

 

g.Further Covenants. At all time that any part of the Revolving Loan remains
unpaid, outstanding or available for advance, Borrower shall pay no quarterly
dividend to shareholders unless all payments due on the Revolving Loan have been
met.

 

h.Revolving Loan Reduced to Zero Annually. The Borrower shall reduce the balance
of the Revolving Loan to zero ($0.00) Dollars for a minimum of thirty (30) days
in each calendar year that the Loan remains outstanding.

 

5.       Representations and Warranties. In consideration of this Agreement, the
Borrower represents and warrants to the Bank as follows:

 

a.Corporate Existence and Power. The Borrower is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of Minnesota, and is duly licensed or qualified to transact business in all
jurisdictions where the character of the property owned or leased or the nature
of the business transacted by them makes such licensing or qualification
necessary. The Borrower has all requisite power and authority, corporate or
otherwise, to conduct its businesses, to own its property and to execute and
deliver, and to perform all of its obligations under this Agreement, the Note
and the Security Agreement.

 

b.Authorization of Borrowing; No Conflict as to Law or Agreements. The
execution, delivery and performance by the Borrower of this Agreement, the Note
and the Security Agreement and the borrowings from time to time hereunder have
been duly authorized by all necessary corporate action and do and will not:

 

i.require any consent or approval of the stockholders of the Borrower, or any
authorization, consent or approval by any governmental department, commission,
board, bureau, agency or instrumentality, domestic or foreign;

 

ii.violate any provision of any law, rule or regulation (including, without
limitation, Regulation X of the Board of Governors of the Federal Reserve
System) or of any order, writ, injunction or decree presently in effect having
applicability to the Borrower or to the Articles of Incorporation or Bylaws of
the Borrower;

 

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iii.result in a breach of or constitute a default under any indenture or loan or
credit agreement or any other agreement, lease or instrument to which the
Borrower is a party or by which they or their properties may be bound or
affected; or

 

iv.result in, or require, the creation or imposition of any mortgage, deed of
trust, pledge, lien, security interest or other charge or encumbrance of any
nature (other than the Security Agreement) upon or with respect to any of the
properties now owned or hereafter acquired by the Borrower.

 

c.Legal Agreements. This Agreement, the Security Agreement and the Note,
constitute the legal, valid and binding obligations of the Borrower enforceable
against the Borrower in accordance with their respective terms.

 

d.Financial Condition. The Borrower has previously furnished the following
financial statements to the Bank: company prepared Fiscal Year ending December
31, 2016, and December 31, 2017. Such balance sheets and income statements
fairly present the financial conditions of the Borrower on the dates thereof and
the results of its operations for the periods then ended, and were prepared in
accordance with generally accepted accounting principles.

 

e.Adverse Change. There has been no material adverse change in the business,
properties or condition (financial or otherwise) of the Borrower since the date
of the latest financial statements referred to in paragraph 8(d).

 

f.Litigation. There are no actions, suits or proceedings pending or, to the
knowledge of the Borrower, threatened against or affecting the Borrower or the
properties of the Borrower before any court or governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign,
which, if determined adversely to the Borrower, would have a material adverse
effect on the financial condition, properties, or operations of the Borrower.

 

g.Federal Reserve System Regulations. The Borrower is not engaged in the
business of extending credit for the purpose of purchasing or carrying margin
stock (within the meaning of Regulation U of the Board of Governors of the
Federal Reserve System), and no part of the proceeds of any advance will be used
to purchase or carry any margin stock or to extend credit to others for the
purpose of purchasing or carrying any margin stock. Borrower will not directly
or indirectly invest all or any part of the proceeds of the Loan in any security
subject to the margin requirements of Regulations G, T, U, or X of the Board of
Governors of the Federal Reserve System or use all or any part of proceeds of
the Loan to reduce or retire any indebtedness which was originally incurred to
purchase any margin securities or for any other purpose which would violate any
of the margin regulations of the Board of Governors of the Federal Reserve
System.

 

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h.Investment Company Act. Borrower is not, and is not directly or indirectly
controlled by, or acting on behalf of, any person which is, an “Investment
Company” within the meaning of the Investment Company Act of 1940, as amended.

 

i.Taxes. The Borrower has filed all federal, state and local tax returns which
to the knowledge of the officers of the Borrower is required to be filed, and
the Borrower has paid or caused to be paid to the respective taxing authorities
all taxes as shown on said returns or on any assessment received by them to the
extent such taxes have become due.

 

j.Titles and Liens. The Borrower has good title to each of the properties and
assets reflected in the latest balance sheet referred to in paragraph 8(d)
above, free and clear of all mortgages, security interests, liens and
encumbrances, except for mortgages, security interests and liens in favor of any
senior lender or loan described in such financial statements and other
covenants, restrictions, rights, and minor irregularities in title which do not
materially interfere with the business or operations of the Borrower as
presently conducted.

 

6.       Default and Termination. The obligations of the Bank to advance funds
pursuant to the Revolving Loan shall automatically terminate without any notice
should a petition be filed by or against the Borrower under the United States
Bankruptcy Code. The Bank also retains the option to terminate its obligations
pursuant to the Revolving Loan without any notice to the Borrower:

 

a.If any default in the performance, or breach, of any covenant or agreement on
the part of Borrower contained in this Agreement, the Note or the Security
Agreement occurs.

 

b.If the Borrower fails to pay when due any indebtedness, the Borrower may owe
for money borrowed.

 

c.If a garnishment summons or writ of attachment is issued against or served
upon the Bank for the attachment of any of the Borrower’s property in the Bank's
possession or any indebtedness owing to the Borrower.

 

d.If the Borrower submits to the Bank any credit application or financial
statement containing any information which shall prove to have been incorrect in
any respect when made, or if any of the warranties, representations or covenants
of the Borrower to the Bank herein or elsewhere shall prove to have been
inaccurate in any material respect when made.

 

e.If the Borrower ceases to be actively engaged in the business the Borrower is
presently engaged in.

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f.If adverse conditions develop at any time affecting the Borrower’s affairs,
financial or otherwise, and the Bank in good faith determines that such adverse
conditions impair the due and punctual payment of the Note or any future
advances that might be made pursuant to the Revolving Loan.

 

7.       No Waiver; Cumulative Remedies. No failure or delay on the part of the
Bank in exercising any right, power or remedy hereunder or under the Security
Agreement shall operate as a waiver thereof; nor shall any single or partial
exercise of any such right, power or remedy preclude any other or further
exercise thereof or the exercise of any other right, power or remedy hereunder
or under the Security Agreement. The remedies herein and in the Security
Agreement provided are cumulative and not exclusive of any remedies provided by
law.

 

8.       Amendments, Etc. No amendment, modification, termination or waiver of
any provision of this Agreement, the Security Agreement or the Note or consent
by the Borrower to any departure therefrom shall be effective unless the same
shall be in writing and signed by the Bank and then such waiver or consent shall
be effective only in the specific instance and for the specific purpose for
which given. No notice to or demand on the Borrower in any case shall entitle
the Borrower to any other or further notice or demand in similar or other
circumstances.

 

9.       Addresses for Notices, Etc. Except as otherwise expressly provided
herein, all notices, requests, demands and other communications provided for
hereunder and under the Security Agreement shall be in writing and mailed or
delivered to the applicable party at its address indicated below:

 

If to the Borrower:

 

American Church Mortgage Company

10400 Yellow Circle Drive, #102

Minneapolis, MN 55343

 

If to the Bank:

 

Alerus Financial, N.A.

2330 South Columbia Road

Grand Forks, North Dakota 58201

 

or, as to each party, at such other address as shall be designated by such party
in a written notice to the other party complying as to delivery with the terms
of this section. All such notices, requests, demands and other communications
shall, when mailed, be effective when deposited in the mail, addressed as
aforesaid.

 

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10.       Binding Effect, Assignment. This Agreement and the Security Agreement
shall be binding upon and inure to the benefit of the Borrower and the Bank and
their respective successors and assigns, except that the Borrower shall not have
the right to assign their rights hereunder or thereunder or any interest herein
or therein without the prior written consent of the Bank.

 

11.       Governing Law. This Agreement, the Note and the Security Agreement
shall be governed by, and construed in accordance with, the laws of the State of
Minnesota.

 

12.       Severability of Provisions. Any provision of this Agreement which is
prohibited or unenforceable shall be ineffective to the extent of such
prohibition or unenforceability without invalidating the remaining provisions
hereof.

 

13.       Headings. Section headings in this Agreement are included herein for
convenience of reference only and shall not constitute a part of this Agreement
for any other purpose.

 

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
by their respective officers thereunto duly authorized, as of the date first
above written.

 

 

BORROWER:

 

AMERICAN CHURCH MORTGAGE

COMPANY, a Minnesota corporation

 

 

By: _________________________

 

Its: _President_________________

 

 

 

BANK:

 

ALERUS FINANCIAL, N.A.

 

 

By: _________________________

 

Its: _Market President__________

 

 

 

 

 

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