UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
CURRENT REPORT
Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934
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Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Section 1. Registrant’s Business and Operations
| Item 1.01 | Entry into a Material Definitive Agreement. |
(a) Asset Sale Agreement. On May 27, 2022, American Church Mortgage Company (“ACMC”) entered into an Asset Agreement dated as of May 27, 2022 (the “Asset Sale Agreement”) with OSK XII, LLC (“OSK”), a third party not affiliated with ACMC. (All capitalized terms used in this Current Report on Form 8-K and not expressly defined herein have the meanings ascribed to them in the Asset Sale Agreement.)
Pursuant to the terms of the Asset Sale Agreement, OSK has agreed to acquire from ACMC substantially all of the assets of ACMC, consisting of ACMC’s Assets and Bonds (the “Transaction”). As provided in the Asset Sale Agreement, OSK agreed to pay the purchase price of $26,100,000, plus interest due on ACMC’s Secured Investor Certificates (the “Purchase Price”), adjusted as follows: (i) less all payments received by ACMC on account of the Loans and the Bonds from March 31, 2022 through the day before the “Closing Date” (defined below), (ii) plus the aggregate amount of asset level expenses set forth on a schedule prepared by ACMC as part of ACMC’s confidential schedules delivered to OSK (the “Schedules”). The Asset Sale Agreement provides that at least two days before the Closing Date, OSK must deliver $21,976,500, plus interest from April 1, 2022 to the Closing Date, to an account at Herring Bank, which will be used to redeem ACMC’s Secured Investor Certificates. The Transaction, which is subject to the closing conditions described below, is expected to close on or before June 30, 2022 or on such other date to which ACMC and OSK agree in writing (the “Closing Date”).
The Asset Sale Agreement contains customary representations, warranties and covenants for a transaction of this type and nature. ACMC also makes representations and warranties to OSK regarding ACMC’s good title to the Assets and Bonds and the enforceability of the Notes and the Mortgages. OSK’s representations to ACMC in the Asset Sale Agreement include a representation that neither OSK nor any general partner, limited partner, shareholder or joint venturer in OSK is involved in any financial difficulties which would impair or prevent a closing pursuant to the Asset Sale Agreement on the Closing Date, and that OSK has and will have as of the Closing Date sufficient liquid assets, capital and net worth to meet its obligations under the Asset Sale Agreement and the other Sale Documents and to pay the Purchase Price without any financing or other contingencies. The Asset Sale Agreement provides that the covenants made by ACMC and OSK in the Asset Sale Agreement will not survive the closing of the Transaction, except that ACMC’s representations and warranties set forth in Section 6.2 of the Asset Sale Agreement regarding the Assets and the Bonds will be independently enforceable pursuant to the Agreement’s procedure for a 30-day period following the Closing Date, after which time no claim for breach of Section 6.2 may be made.
Under the Asset Sale Agreement, with respect to any Proceeding brought by someone other than a party to the Asset Sale Agreement against one or more of the Seller Indemnitees (including ACMC) and that in any way relates to the Assets, the Bonds, or REO acquired by OSK after the Closing Date, OSK has agreed to indemnify those Seller Indemnitees against all indemnifiable Losses arising out of that Proceeding.
The closing of the Transaction is dependent upon the satisfaction or waiver of a number of closing conditions set forth in the Asset Sale Agreement including, among other things, the performance by ACMC and OSK of the covenants as set forth in the Asset Sale Agreement; the truthfulness of the representations and warranties of ACMC and OSK set forth in the Asset Sale Agreement at and as of the Closing Date; the receipt of any necessary government approvals; and the approval of ACMC’s shareholders.
Under the Asset Sale Agreement, ACMC may not, and ACMC must not authorize or permit any of its affiliates to, directly or indirectly, encourage, solicit, initiate, facilitate or continue inquiries regarding an acquisition proposal. The Asset Sale Agreement also provides that ACMC must, within two Business Days, advise OSK of any acquisition proposal for ACMC or the Assets or the Bonds or any inquiry ACMC receives with respect to or which could reasonably be expected to result in such an acquisition proposal and the material terms and conditions of such request, including the identity of the person or entity making the request. The Asset Sale Agreement further provides that if ACMC receives an acquisition proposal that its board of directors concludes in good faith, after consultation with outside counsel, constitutes a Superior Proposal, ACMC may, if it determines in good faith, after consultation with outside counsel, take such action that is required to comply with its fiduciary duties to its shareholders under applicable law, engage in negotiations with such third party, supply such third party with information about ACMC, and/or terminate the Asset Sale Agreement. ACMC must provide prior written notice to OSK at least two days in advance of ACMC taking any such action with respect to any Superior Proposal.
The Asset Sale Agreement provides that it may be terminated (i) at any time before the Closing Date by either ACMC or OSK by providing written notice to the other party; (ii) at any time before the Closing Date by the mutual written consent of ACMC and OSK; or (iii) after December 31, 2022, by either ACMC or OSK by providing written notice to the other party if the closing of the Transaction has not occurred by December 31, 2022. The Asset Sale Agreement also provides that if the Asset Sale Agreement is terminated by either party before the Closing Date as provided in clause (i) of this paragraph, the terminating party must pay the Termination Fee of $100,000 within two Business Days of such termination to the non-terminating party.
Upon completion of the Transaction, and after the payment of ACMC’s creditors, ACMC intends to distribute a portion of the sale proceeds to its shareholders. The distribution amount will be determined by ACMC’s board of directors and will be subject to such factors as the amount of taxes and expenses payable by ACMC, the amount of ACMC’s operating expenses, and other contingencies and estimates. Additional monies may be distributed over time based on cash available and any release of known and unknown liabilities. Given the amount of cash needed for the aforementioned expenses and contingencies, total proceeds paid out to shareholders are expected to be significantly less than the gross purchase price.
In connection with the Transaction, on the Closing Date, ACMC plans to enter into a termination agreement (the “Termination Agreement”) which terminates the services of its advisor, Church Loan Advisors, Inc. After the Closing Date, ACMC also plans to enter into a plan of liquidation and dissolution (the “Plan”) which details the necessary actions to effect a liquidation and dissolution of ACMC.
The Asset Sale Agreement, the Transaction, and the Plan are subject to the approval of ACMC’s shareholders.
A copy of the Asset Sale Agreement is attached to this Current Report on Form 8-K as Exhibit 2.1 and is incorporated herein by reference. The foregoing description of the Asset Sale Agreement is qualified in its entirety by reference to the full text of the Asset Sale Agreement.
The Asset Sale Agreement has been attached as an exhibit to this Current Report on Form 8-K to provide ACMC’s investors and shareholders with information regarding its terms. Such exhibit is not intended to provide any other factual information about ACMC or OSK or any other individual, person or entity. The representations, warranties and covenants contained in the Asset Sale Agreement are subject to qualifications and limitations agreed to by the parties to the Asset Sale Agreement, including information contained in the confidential Schedules exchanged between the parties; were made only for the purposes of the Asset Sale Agreement and as of specified dates; and were solely for the benefit of the parties to the Asset Sale Agreement. Certain of the representations and warranties in the Asset Sale Agreement have been made for the purposes of allocating contractual risk between the parties to the Asset Sale Agreement instead of establishing these matters as facts and may be subject to a contractual standard of materiality different from what might be viewed as material to investors. ACMC’s investors and shareholders are not third party beneficiaries under the Asset Sale Agreement. Moreover, information concerning the subject matter of the representations and warranties in the Asset Sale Agreement may change after the date of the Asset Sale Agreement or the Closing Date, which subsequent information may or may not be fully reflected in ACMC’s public disclosures. Accordingly, ACMC’s investors and shareholders should not rely on the representations and warranties in the Asset Sale Agreement as characterizations of the actual state of facts or condition of ACMC, OSK or any of their respective subsidiaries or affiliates.
Additional Information Regarding the Transaction
ACMC will file with the Securities and Exchange Commission (the “SEC”) a proxy statement containing information about the Asset Sale Agreement and the Transaction. ACMC’S SHAREHOLDERS AND INVESTORS ARE ADVISED TO READ ACMC’S PROXY STATEMENT IN ITS ENTIRETY WHEN IT BECOMES AVAILABLE AND ANY OTHER DOCUMENTS THAT ACMC FILES WITH THE SEC BECAUSE THE PROXY STATEMENT AND THESE DOCUMENTS WILL CONTAIN IMPORTANT INFORMATION ABOUT ACMC, OSK, THE ASSET SALE AGREEMENT, THE TRANSACTION, AND RELATED TRANSACTIONS.
ACMC’s shareholders and investors may obtain copies of the proxy statement and other documents that ACMC files with the SEC, when they are available, free of charge at the SEC’s website at www.sec.gov. ACMC’s definitive proxy statement and other relevant documents may also be obtained (when available) free of charge by writing to: Corporate Secretary, American Church Mortgage Company, 10400 Yellow Circle Drive, Suite 102, Minnetonka, Minnesota 55343.
Participants in Solicitation of Proxies
ACMC and its directors and executive officers may be deemed to be participants in the solicitation of proxies with respect to the Transactions and the Asset Sale Agreement. Information regarding ACMC’s directors and executive officers is contained in the ACMC’s Annual Report on Form 10-K for the year ended December 31, 2021 and its revised proxy statement dated May 19, 2022, which are filed with the SEC. As of May 27, 2022, ACMC’s directors and executive officers together owned 85,306 shares of ACMC’s outstanding common stock, or 5.08% of ACMC’s outstanding common stock. Additional information concerning the interests of ACMC’s participants in the solicitation will be set forth in the proxy statement relating to the Asset Sale Agreement and the Transaction when it becomes available free of charge as indicated above.
Forward-Looking Statements
This Current Report on Form 8-K contains forward-looking statements (“forward-looking statements”) within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act, regarding the Transaction; the Asset Sale Agreement; the transactions contemplated by the Asset Sale Agreement; the Termination Agreement; the Plan; the preparation and mailing of the proxy statement; the approval of matters to be presented to shareholders at a special meeting of ADMC’s shareholders that will be held to approve the Asset Sale Agreement, the Transaction, and the Plan (the “Special Meeting”); the timing of the Special Meeting; the assets and liabilities of ACMC; the net proceeds anticipated to be available for distribution to ACMC’s shareholders; and the distribution of funds to shareholders, all of which are based on information currently available to ACMC’s management as well as management’s assumptions and beliefs. For this purpose, any statements contained in this Current Report on Form 8-K that are not statements of historical fact may be deemed to be forward-looking statements. When used in this Current Report on Form 8-K and in documents incorporated herein by reference, forward-looking statements include, without limitation, statements regarding our expectations, beliefs, or intentions that are signified by terminology such as “subject to,” “believes,” “anticipates,” “plans,” “expects,” “intends,” “estimates,” “may,” “will,” “should,” “can,” the negatives thereof, variations thereon, and similar expressions. Such forward-looking statements reflect ACMC’s current views with respect to future events based on what ACMC believes are reasonable assumptions; however, such statements are subject to certain risks and uncertainties. Risks include, but are not limited to: the inability of ACMC to obtain all required consents and approvals, including shareholder approval of the Asset Sale Agreement, the Transaction, and the Plan; the conditions to the closing of the Transaction may not be satisfied; tax or other applicable laws may change; the Transaction may involve unexpected costs, liabilities, and/or delays; the outcome of any legal proceedings related to the Transaction or otherwise; the occurrence of any event, change, or other circumstance that could give rise to the termination of the Asset Sale Agreement; risks that the Transaction disrupts current plans and operations; other risks to closing the Transaction, including the risk that the Transaction will not be closed within the expected time frame or at all; and the risks associated with the church mortgage industry in general. The risks, uncertainties, material assumptions, and other factors that could affect actual results are discussed in more detail in ACMC’s Annual Reports on Form 10-K and other documents available at the SEC’s website at http://www.sec.gov and are available by writing to: Corporate Secretary, American Church Mortgage Company, 10400 Yellow Circle Drive, Suite 102, Minnetonka, Minnesota 55343. ACMC’s shareholders and investors are urged to consider these risks, uncertainties, and factors carefully in evaluating the forward-looking statements and are cautioned not to place undue reliance on such forward-looking statements. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may differ materially from those in the forward-looking statements. ACMC disclaims any intention or obligation to update or review any forward-looking statements or information, whether as a result of new information, future events, or otherwise. ACMC undertakes no obligation to comment on analyses, expectations, or statements made by third-parties in respect of ACMC or the Transaction.
Section 8 – Other Events
| Item 8.01 | Other Events |
Due to the pending Transaction and the need to hold the Special Meeting to approve the Transaction, the Asset Sale Agreement, and the Plan, the annual meeting of ACMC’s shareholders scheduled for June 28, 2022 as addressed in ACMC’s revised proxy statement dated May 19, 2022 has been cancelled.
Section 9 – Financial Statements and Exhibits
| Item 9.01. | Financial Statements and Exhibits |
(d) Exhibits. The following document is filed as an exhibit to this Current Report on Form 8-K:
Exhibit
Number Description
| 2.1 | Asset Sale Agreement by and between American Church Mortgage Company and OSK XII, LLC dated May 27, 2022. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
May 27, 2022 AMERICAN CHURCH MORTGAGE COMPANY
By: /s/ Philip J. Myers
Philip J. Myers
Chief Executive Officer and President
(Principal Executive Officer)
Exhibit 2.1
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT, is dated May 27, 2022, is between the undersigned American Church Mortgage Company, a Minnesota corporation (“Seller”), and OSK XII, LLC, a Minnesota limited liability company (“Buyer”) and sets forth the terms and conditions whereby the Seller agrees to sell and the Buyer agrees to purchase the Assets and Bonds identified herein, which constitutes substantially all the assets of Seller.
NOW THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Seller and the Buyer hereby agree as follows:
1. Definitions. Capitalized terms shall be defined as set forth in this Agreement, including in Appendix A to this Agreement.
2. Agreement to Purchase and Sell. Subject to and in accordance with the terms and conditions of this Agreement, the Seller hereby agrees to sell, assign, transfer and convey to the Buyer on the Closing Date, and the Buyer hereby agrees to purchase and accept on the Closing Date, all rights, title, and interests of the Seller, together with all payment and performance obligations of the Seller, as of the Closing Date, in, to and under the Assets (including REO) and the Bonds set forth on Schedule A and Schedule B, respectively, attached hereto.
3. Payment of Purchase Price; Closing. The closing shall occur and the Purchase Price shall be paid on the Closing Date. Closing Documents shall be delivered by hand or overnight delivery no later than the Closing Date.
3.1 Reserved.
3.2 Payment of Adjusted Purchase Price. On the Closing Date, the Buyer shall pay to the Seller by wire transfer in immediately available funds, the amount of the Purchase Price adjusted as follows: (i) less all payments received by the Seller on account of the Loans and the Bonds from the Calculation Date through the day before the Closing Date, (ii) plus the aggregate amount of asset level expenses set forth on Schedule C. The Purchase Price shall be allocated to the Assets and Bonds on a settlement statement prepared by the Buyer and available for the Buyer’s review two Business Days prior to the Closing Date. At least two days prior to the Closing Date, Buyer shall deliver to an account owned and controlled by Buyer at the Bond Trustee, the funds sufficient to redeem Seller’s Secured Investor Certificates, which amount shall equal $21,976,500, plus interest from April 1, 2022 through the Closing Date or the actual date of redemption of the Secured Investor Certificates whichever is later.
3.3 Conveyance. Upon receipt of the Purchase Price, the Seller shall sell, assign, transfer and convey the Assets and Bonds to the Buyer subject to and in accordance with the provisions of this Agreement.
3.4 Taxes, Fees, Etc. The Buyer shall pay all transfer, filing and recording fees, taxes, and any applicable documentary taxes, required to be paid, and hereby agrees to indemnify and hold the Seller harmless from and against any and all claims, liability, costs and expenses arising out of or in connection with the failure of the Buyer to pay any such amount on a timely
basis. This Section shall not require the Buyer to pay any taxes, costs or expenses related to the Seller’s sale or income tax obligations occasioned by the sale of the Assets or Bonds.
3.5 Payments Subsequent to the Closing Date. From time to time after the Closing Date, the Seller shall pay to the Buyer, promptly after receipt thereof, the amount of any Collections received by the Seller on or after the Closing Date (to the extent collected in good funds by the Seller).
4. Transfer of Assets and Bonds.
4.1 Closing Documents. Not later than the Business Day prior to the Closing Date, the Seller shall deliver to the Buyer (i) a Bill of Sale in the form attached hereto as Attachment 1, selling, assigning, transferring and conveying to the Buyer all rights, title and interests of the Seller in, to and under the Loans, all on the terms and conditions set forth in this Agreement; (ii) the original Notes, or affidavits of lost Notes, endorsed to the Buyer by allonge in the form attached hereto as Attachment 2; (iii) the original Bonds, to the extent in existence, and the bond powers necessary to transfer title to the Bonds list on Schedule B hereto and held by Seller as of the date of Closing Date, in the form attached hereto as Attachment 3 (iv) the original Bonds (v) assignments of the Mortgages in the form attached hereto as Attachment 4; and (v) a Deed in the form attached hereto as Attachment 5, selling, assigning, transferring and conveying to the Buyer all rights, title and interests of the Seller in, to and under the REO, all on the terms and conditions set forth in this Agreement (collectively, the “Closing Documents”). The endorsements and assignments included in the Closing Documents shall be without recourse, representation or warranty of any kind or nature. Such qualifying language on the endorsements and assignments shall not affect, limit or enlarge the obligations of the Seller and the rights, remedies and recourse of the Buyer under this Agreement. The Closing Documents shall be held in escrow pending closing.
4.2 Reserved.
4.3 Delivery of Collateral Documents, Etc. Promptly after the closing, the Seller shall deliver to the Buyer the entire Review File including, without limitation, originals of each Collateral Document to the extent originals are in the Seller’s possession.
4.4 Execution of Separate Asset and Bond Assignments. At and after the closing, to the extent prepared by the Buyer, the Seller shall execute, and acknowledge if appropriate, for delivery to the Buyer one or more additional documents to the extent required by applicable public recording or filing laws to transfer to such Buyer the rights, title and interests of the Seller in, to and under the purchased Assets and Bonds (collectively, “Separate Assignments”). The Separate Assignments shall be without recourse, representation or warranty of any kind or nature. Such qualifying language on the Separate Assignments shall not affect, limit or enlarge the obligations of the Seller and the rights, remedies and recourse of the Buyer under this Agreement. The Buyer shall prepare and furnish any and all further Separate Assignments, if necessary, in form satisfactory to the Seller. The Buyer shall promptly file or record each Separate Assignment, at its sole cost and expense.
4.5 Hazard, Liability Insurance, Etc. At the request and sole cost and expense of the Buyer, the Seller shall cooperate with the Buyer in executing written requests to each hazard, casualty and liability insurer, and to the writing agent for each flood hazard insurer, issuing a policy of insurance obtained by an Obligor with respect to the Assets and Bonds, requesting an endorsement of its policy of insurance effective on the Closing Date adding the Buyer as the mortgagee, the loss payee and/or an insured named therein, as the case may be, together with instructions that such endorsement be forwarded directly to the Buyer, with a copy to the Seller at the address herein specified for notices. Each such request shall be prepared by the Buyer at its sole cost and expense, and any additional premium or other charge in connection therewith shall be paid by the Buyer. The Buyer shall not be entitled to be added to or acquire an interest in any policy of insurance obtained by the Seller. Any loss on or after the Closing Date either to an Obligor, the Buyer or to the value or collectability of the Assets and Bonds due to the Seller’s cancellation of collateral or real property risk insurance or its failure to identify the Buyer as loss payee, mortgagee or other insured is the sole responsibility of the Buyer. To the extent the Assets or Bonds constitute personal or real property, the Seller expressly disclaims any obligation to provide title insurance, pay property taxes, or pay any related transaction taxes or other fees.
5. Representations and Warranties of the Buyer. The Buyer hereby represents and warrants as follows:
5.1 Organization, Existence, Etc. The Buyer is duly formed or organized, validly existing and in good standing under the laws of the jurisdiction of its formation or organization, and is registered or qualified to conduct business in all other jurisdictions in which the failure to be so registered or qualified would materially and adversely affect the ability of the Buyer to perform its obligations hereunder.
5.2 Authority and Enforceability, Etc. The Buyer has the power and authority to execute, deliver and perform each of the Sale Documents to which it is a party and has taken all necessary action to authorize such execution, delivery and performance. The Buyer’s execution of this Agreement and its performance of its obligations hereunder are not subject to any further approval, vote or contingency from any person or committee. Assuming due authorization, execution and delivery by the Seller, the Sale Documents and all obligations of the Buyer thereunder are the legal, valid and binding obligations of the Buyer, enforceable in accordance with the terms of the Sale Documents, except as such enforcement may be limited by bankruptcy, insolvency, reorganization or other laws affecting the enforcement of creditor’s rights generally and by general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law).
5.3 Conflict with Existing Laws or Contracts. The execution and delivery of the Sale Documents and the performance by the Buyer of its obligations thereunder will not conflict with or be a breach of any provision of any law, regulation, judgment, order, decree, writ, injunction, contract, agreement or instrument to which the Buyer is subject; and the Buyer has obtained any consent, approval, authorization or order of any court or governmental agency or body required for the execution, delivery and performance by the Buyer of the Sale Documents.
5.4 Financial Condition. Neither the Buyer nor any general partner, limited partner, shareholder or joint venturer in the Buyer is involved in any financial difficulties which would impair or prevent a closing pursuant to this Agreement on the Closing Date. The Buyer has now and will have as of the Closing Date sufficient liquid assets, capital and net worth to meet its obligations under the Sale Documents and to pay the Purchase Price without any financing or other contingencies.
5.5 Decision to Purchase. The Buyer’s bid and decision to purchase the Assets and Bonds is based upon its own comprehensive review and independent expert evaluation and analysis of the Review File and other materials deemed relevant by the Buyer and its agents. The Buyer has made such independent investigation and due diligence review as the Buyer deems to be warranted into the nature, title, attachment, perfection, priority, validity, enforceability, collectability, and value of the Assets and Bonds, the title, condition and value of any collateral securing the Assets or Bonds, the market conditions and other characteristics of the places where any such collateral is located, and all other facts it deems material to the purchase of the Assets and Bonds.
5.6 No Reliance. In entering into this Agreement and the other Sale Documents, the Buyer has not relied upon any oral or written information from the Seller or any of their respective employees, agents, attorneys or representatives, other than the limited representations and warranties of the Seller contained herein. The Buyer acknowledges that no employee, agent, attorney or representative of the Seller has been authorized to make, and that the Buyer has not relied upon, any statements, representations or warranties other than those specifically contained in this Agreement.
5.7 Buyer a Sophisticated Investor. The Buyer is a sophisticated investor (as that term is used in regulations promulgated under the Securities Act of 1933) who could withstand the loss of the entire Purchase Price.
5.8 Information True and Correct, Full Disclosure. The information provided by the Buyer in connection with its qualification as a bidder, was true and correct on the date provided and did not omit any information necessary to the accuracy and full disclosure of information provided and such information is accurate and complete on the date hereof.
5.9 Confidentiality Agreement. The Buyer has not violated any of the terms of the Confidentiality Agreement. At no time has the Buyer or any of its representatives or agents communicated with any Obligor or any of its representatives or agents regarding the Assets and Bonds. The Buyer has no affiliation with, any ownership interest in, or agreement with the Obligor or any of its representatives or agents regarding the Assets or Bonds.
5.10 Brokers. No broker or other party entitled to a commission is involved in connection with this transaction.
6. Seller’s Representations, Warranties and Recourse. This sale is made without recourse against the Seller, or representation or warranty by the Seller, whether express, implied or imposed by law, of any kind or nature except as provided in Sections 6 and 23 of this Agreement. The Seller has attempted to provide accurate information to the Buyer. Without
limiting the generality of the foregoing, the Seller does not represent, warrant or insure the accuracy or completeness of any information or its sources of information contained in the Review File, Collateral Documents, Assets, Notes, REO, Bonds or Loans (whether contained in originals, duplicate originals, copies, or magnetic media, including computer tapes and disks), including without limitation any reports or other information prepared by accountants, engineers, appraisers, environmental consultants or other professionals. The Seller has not, does not and will not make any representations or warranties with respect to the collectability of any Loan or Bond or the value or condition any Mortgaged Property or REO or collateral securing any Loan or any Bond. To the extent the Assets, REO or Bonds constitute personal or real property, such property is sold “as is, where is,” and without any warranties of any kind or type and the Seller expressly disclaims any representations or warranties with respect to such property.
6.1 Representations and Warranties by the Seller. The Seller hereby represents and warrants as follows:
6.1.1 Organization, Existence, Etc. The Seller is duly formed or organized, validly existing and in good standing under the laws of the jurisdiction of its formation or organization, and is registered or qualified to conduct business in all other jurisdictions in which the failure to be so registered or qualified would materially and adversely affect the ability of the Seller to perform its obligations hereunder.
6.1.2 Authority, Enforceability, Etc. Subject to obtaining the approvals set forth in Section 7.4 of this Agreement, the Seller has taken all necessary action to authorize execution, delivery and performance of each of the Sale Documents to which it is a party. Assuming due authorization, execution and delivery by the Buyer and obtaining the approvals set forth in Section 7.4, the Sale Documents and all the obligations of the Seller thereunder are the legal, valid and binding obligations of the Seller enforceable in accordance with the terms of the Sale Documents, except as such enforcement may be limited by bankruptcy, insolvency, reorganization or other laws affecting the enforcement of creditors’ rights generally and by general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law).
6.1.3 Conflict with Existing Laws or Contracts. The execution and delivery of the Sale Documents and the performance by the Seller of its obligations thereunder will not conflict with or be a breach of any material provision of any law, regulation, judgment, order, decree, writ, injunction, contract, agreement or instrument to which the Seller is subject; and the Seller has obtained any consent, approval, authorization or order of any court or governmental agency or body required for the execution, delivery and performance by the Seller of the Sale Documents.
6.1.4 Legal Action Against Seller. There is no action, suit or proceeding of which the Seller has received actual notice pending against the Seller in any court or by or before any other governmental agency or instrumentality which would materially affect the ability of the Seller to carry out the transactions contemplated by the Sale Documents.
6.1.5 Brokers. No broker or other party entitled to a commission is involved in connection with this transaction.
6.2 Representations and Warranties by Seller as to the Assets and Bonds. The Seller hereby represents and warrants that, as to the Assets and Bonds only, the following representations and warranties are true and correct in all material respects as of the date hereof, except with respect to Sections 6.2.4 and 6.2.9, which shall be true and correct as of the Closing Date.
6.2.1 Title to Assets and Bonds. Upon repayment of Seller’s Secured Investor Certificates, the Seller has good title to and is the sole owner of the Assets and the Bonds, free and clear of any liens, claims, encumbrances or other charges whatsoever. The Assets and Bonds are not subject to any prior assignment, conveyance, transfer or participation or agreement to assign, convey, transfer or participate, in whole or in part.
6.2.2 Enforceability. The Bonds, Notes and Mortgages are the legal, valid and binding obligations of the Obligor thereof, enforceable against such Obligor in accordance with their terms (a) except as such enforcement may be limited by bankruptcy, insolvency, reorganization or other similar laws affecting the enforcement of creditors rights generally and by general equity principles (regardless of whether such enforcement is considered in a proceeding in equity or at law) and (b) except particular remedies, waivers and other provisions may not be enforceable, but such unenforceability does not affect the practical realization of the intended benefits of the Mortgages, meaning the ability of the holder thereof to foreclose the Mortgages for any payment default by the maker or obligor thereunder.
6.2.3 No Defense by Obligor. To the best of Seller’s knowledge, the Obligor has no valid defense that prevents enforcement by the holder thereof of the provisions of the Bonds, Notes or Mortgages, or realization by the holder thereof or its assigns against the Mortgaged Property that arises from applicable local, state or federal laws, regulations or other requirements pertaining to usury and any or all other requirement of any federal, state or local law including, without limitation, truth-in-lending, real estate settlement procedures, consumer credit protection, and equal credit opportunity or disclosure laws applicable to such Bonds and Loans. To the best of the Seller’s knowledge, the Loans and the Bonds are not subject to any valid right of rescission, set-off, abatement, diminution, counterclaim or defense that prevents enforcement by the Bond Trustee or the Seller thereof or either of their assigns of the provisions of the Bonds, Notes or Mortgages, or realization by the Bond Trustee or Seller thereof or their assigns against the Mortgaged Property of the intended benefits of such Mortgage and no such claims have been asserted as of the date hereof with respect to such Loan.
6.2.4 Certain Schedule Information. The information set forth on Schedule A and Schedule B is true and correct as of the date of calculation.
6.2.5 No Modification. Except by written instrument or other written documentation contained in the Review File, neither the Seller nor the Bond Trustee nor, to the best of the Seller’s knowledge, any prior holder of the Loans or the Bonds has modified any Note, Bond or Mortgage or satisfied, canceled or subordinated any Note, Bond or Mortgage in whole or in part or released all or any material portion of the Mortgaged Property from the lien of the Mortgages or executed any instrument of release, cancellation or satisfaction. The Notes, the Bonds, and the Mortgages and any documents modifying their terms included in the Review File are true and correct copies of the documents they purport to be and have not been
superseded, amended, modified, canceled or otherwise changed except as disclosed in the Review File.
6.2.6 Review File. With the exception of any Excluded Information, the Review File includes all material documents in the possession of the Seller, or copies thereof, relating to the Assets and Bonds.
6.2.7 Disbursement of Loan Proceeds. No Obligor has the right to disbursement of additional loan proceeds or future advances with respect to the Loans or the Bonds.
6.2.8 Cross-Collateralization; Retained Credits. The Loans and the Bonds are not secured by the same property as any other loan or bond held by the Seller or its affiliated entities, which is not the subject of this Agreement. Seller is not retaining any credit, depository or trust relationships with an Obligor or any Obligor’s agents, employees.
6.2.9 Litigation. Except as set forth on Schedule D, there is no litigation, proceeding or governmental investigation pending, or any order, injunction or decree outstanding, existing or relating to the Assets, Bonds or Mortgaged Property.
6.2.10 Insolvency; Deceased Obligor. Neither any Mortgaged Property nor any portion thereof is the subject of, and no Obligor is a debtor in, any state or federal bankruptcy or insolvency or similar proceeding. To the best of Seller’s knowledge, no Obligor is deceased.
7. Conditions Precedent to Closing. The respective obligations of the Buyer and the Seller to complete the purchase and sale of the Assets and Bonds pursuant to this Agreement are subject to the fulfillment on or prior to Closing Date of each of the following additional conditions to be fulfilled by the other, unless the same is specifically waived in writing by the party for whose benefit the same is to be fulfilled:
7.1 Performance of Covenants. The Seller and the Buyer shall have performed all of their respective covenants and agreements contained herein which are required to be performed by them on or prior to the Closing Date.
7.2 Representations and Warranties. All representations and warranties of the Buyer set forth in Section 5 and the Seller set forth in Section 6.1 of this Agreement shall be true in all material respects at and as of the Closing Date.
7.3 Governmental Approvals. All requisite federal, state and local governmental and regulatory approvals relating to the transactions contemplated hereby, if any, shall have been obtained.
7.4 Seller Approvals. Seller shall have obtained approval of this Agreement and the transactions contemplated herein by its Board of Directors and Shareholders.
7.5 Other Approvals. Upon the request of the other, the Seller and the Buyer shall provide certified copies of appropriate resolutions, directions and consents approving the execution and delivery of the Sale Documents and the consummation of the transactions
contemplated thereby together with such other certificates of incumbency and other evidences of authority as the Seller or the Buyer or their respective counsel may reasonably require.
8. Certain Obligations of the Buyer.
8.1 Collection Practices. Including, without limitation, during the Post-Close Servicing Period, the Buyer will not violate any laws relating to unfair credit collection or foreclosure practices in connection with the Assets or Bonds. The Buyer hereby agrees to indemnify the Seller and to hold it harmless from and against any and all claims, demands, losses, damages, penalties, fines, forfeitures, judgments, legal fees and any other costs, fees, and expenses incurred by the Seller as a result of (1) a breach by the Buyer of the aforesaid warranty or (2) any claim, demand, or assertion that, after the Closing Date, the Buyer was in any way involved in or had in any way authorized any unlawful collection or foreclosure practices in connection with the Assets and Bonds transferred to the Buyer pursuant to this Agreement. The Buyer agrees to notify the Seller within ten Business Days of notice or knowledge of any such claim or demand.
8.2 Reporting to or for the Internal Revenue Service. The Buyer agrees to submit all Internal Revenue Service Forms and Information Returns for the Assets or Bonds for the period during which it owns the Assets or Bonds.
8.3 Buyer’s Duties Regarding Litigation. If any Asset or Bond is or becomes subject to any claim, action, lawsuit, foreclosure action, bankruptcy, or other proceeding, administrative or judicial, or similar action filed by or against any Obligor (collectively, “Litigation”), Buyer shall, within ten days after the Closing Date, provide Seller and Seller’s counsel in connection with each such Litigation with the name of counsel selected by Buyer to represent Buyer’s interests in such Litigation. Buyer shall, at its own cost, liability, responsibility and risk, within ten days after the Closing Date, notify the applicable clerk of all applicable courts and all counsel of record that ownership of the subject Asset or Bond was transferred from Seller to Buyer. Buyer shall, at its own cost, have its counsel file appropriate pleadings with all applicable courts within ten days after the Closing Date substituting Buyer’s counsel for Seller’s counsel, removing Seller as a party to all Litigation and substituting Buyer as the real party in interest in all such Litigation, such that Seller shall have no further obligation with respect to any such Litigation, including any fees or costs of any receiver arising from and after the Closing Date. Seller shall have the right to notify its counsel representing its interests to cease participating in all Litigation upon the Closing Date or any date thereafter. Buyer hereby irrevocably appoints the Seller and Seller’s agents as the true and lawful attorney of Buyer (which appointment is coupled with an interest) in the name, place and stead of, and at the expense of, the Buyer to take such actions and file such motions and other documents with the court and otherwise as necessary to substitute Buyer in place of Seller in all such Litigation, to effectuate Seller’s counsel’s withdrawal as counsel from the Litigation, and to otherwise effectuate Buyer’s assumed obligations with respect to such Litigation. Seller may, but shall not be obligated to, utilize this power of attorney.
9. Notice to Obligor. The Buyer and Seller shall, within 30 days after the Closing Date or such other period as may be required by applicable regulations or laws, give notice of this transfer to the Obligors by first class U.S. Mail.
10. Notice of Claim. The Buyer shall immediately notify the Seller of any claim, threatened claim, or any litigation against the Seller or any of their predecessors or affiliates, which may come to its attention relating to the Assets or Bonds.
11. Notices. All notices or deliveries required or permitted hereunder shall be in writing and delivered personally or by generally recognized overnight delivery service, and shall be deemed given (a) when delivered, if delivered personally, or (b) on the following Business Day, if sent by generally recognized overnight delivery service or email, in each case to the Seller at the following address, to the Buyer at the address set forth on the signature page below, or such other address as either party may hereafter designate by notice given in compliance with this Section to the other party:
| SELLER: | American Church Mortgage Company 10400 Yellow Circle Drive, Suite 102 Minnetonka, Minnesota 55343 Attention: Philip Myers Email: phil@amerinvest.com |
12. Severability. Each part of this Agreement is intended to be severable. If any term, covenant, condition or provision hereof is unlawful, invalid, or unenforceable for any reason whatsoever, and such illegality, invalidity, or unenforceability does not affect the remaining parts of this Agreement, then all such remaining parts hereof shall be valid and enforceable and have full force and effect as if the invalid or unenforceable part had not been included.
13. Construction. Unless the context otherwise requires, singular nouns and pronouns (including defined terms), when used herein, shall be deemed to include the plural and vice versa, and impersonal pronouns shall be deemed to include the personal pronoun of the appropriate gender.
14. Assignment. This Agreement and the terms, covenants, conditions, provisions, obligations, undertakings, rights and benefits hereof, including any attachments hereto, shall be binding upon, and shall inure to the benefit of, the undersigned parties and their respective heirs, executors, administrators, representatives, successors, and assigns. Notwithstanding anything herein to the contrary, however, the Buyer shall not assign its rights under this Agreement without the prior written consent of the Seller, except that the Buyer may assign its rights under this Agreement to an affiliate, and in the event of any assignment both the Buyer and assignee shall be jointly and severally liable hereunder.
15. Entire Agreement; Prior Understandings. This Agreement supersedes any and all prior discussions and agreements between the Seller and the Buyer with respect to the purchase of the Assets and Bonds and other matters contained herein, and this Agreement contains the sole and entire understanding between the parties hereto with respect to the transactions contemplated herein.
16. Survival. Each and every covenant made by the Buyer or the Seller in this Agreement shall not survive the closing and shall merge into the Closing Documents, provided, however, that the Seller's representations and warranties set forth in Section 6.2 shall be independently enforceable for a 30 day period following the Closing Date, after which time no claim for breach of Section 6.2 may be made.
17. Choice of Law. This Agreement shall be governed by and construed in accordance with the laws of the state of Minnesota, without giving effect to any choice of law or conflict of laws provision or rule (whether of the State of Minnesota or any other jurisdiction) that would cause the application of the law of any jurisdiction other than the State of Minnesota.
18. Amendment. The Agreement may be amended or modified only by a written agreement executed and delivered by duly authorized officers of Seller and Buyer. This Agreement may not be modified or amended except as provided in the immediately preceding sentence and any purported amendment by any Party or Parties effected in a manner which does not comply with this Section 18 shall be void, ab initio.
19. Fees and Expenses. Except as otherwise set forth in this Agreement, all fees and expenses incurred in connection with this Agreement and the transactions contemplated hereby and thereby, including the fees and disbursements of counsel, financial advisors and accountants, shall be paid by the party incurring such fees or expenses.
20. Time of the Essence. Time is of the essence of all provisions of this Agreement.
21. Further Assurances. Seller agrees to execute and deliver such instruments and take such further actions as Buyer may, from time to time, request in order to effectuate the purposes and to carry out the terms of this Agreement.
22. Servicing Transfer. Except as set forth in this Section 22, the Assets and Bonds are being sold on a servicing-released basis. From the Closing Date through and including December 31, 2022, Seller and its Advisor will continue to service and administer the Assets and Bonds in the same manner as previously serviced by or on behalf of Seller (except that Seller shall not take any material action without the prior written approval of Buyer). On the first Business Day of each month during the Post-Close Servicing Period, Buyer shall pay Advisor a monthly servicing fee of $24,000. At the sole cost and expense of Buyer, Seller and Advisor will cooperate in the appointment of TMI Trust Company as successor bond trustee (or any other substitute or successor bond trustee designated by Buyer) with respect to all bond issuances. At the sole cost and expense of Buyer, Seller and Advisor shall cooperate with requests of Buyer relating the transfer of servicing, including, without limitation, by cooperating with any designated successor servicer and cooperating with requests related to ACH authorizations.
23. Limitation of Damages. Neither party shall be liable to the other party for any consequential, special or punitive damages. If the Seller fails to consummate the sale of the Assets and the Bonds upon the terms and conditions set forth in this Agreement, the Buyer's sole remedy shall be for specific performance or for the refund of any sums previously received by the Seller from the Buyer. If after the Closing Date the Seller breaches any representation or warranty set forth in Section 6 which has not expired, the Buyer shall give written notice
to the Seller within 30 days of discovery of such breach, and the Seller shall have the right to cure such breach during a period of ninety (90) days after receipt of such notice. If such breach or failure is not duly cured within such ninety (90) day period, or not waived or consented to in writing by the Buyer, the Seller shall elect, in its sole discretion to either (i) repurchase the Assets and Bonds at the Repurchase Price, or (ii) to pay to Buyer the Buyer's actual damages directly caused by such breach, up to an amount not exceeding the Repurchase Price. The Buyer's remedies set forth in this Section 23 shall be the exclusive remedies of the Buyer, and the Buyer shall not be entitled to any other rights, remedies or other relief, at law or in equity, for the Seller's breach of any representation, warranty or covenant set forth in this Agreement.
24. Termination. This Agreement may be terminated as follows:
(a) at any time prior to the Closing Date, by either party by providing written notice to the other party;
(b) at any time prior to the Closing Date, by the mutual written consent of Seller and Buyer; or
(c) after December 31, 2022, by either party by providing written notice to the other party if the closing has not occurred by December 31, 2022.
If this Agreement is terminated pursuant to Section 24(a) then the terminating party shall pay the Termination Fee by wire transfer in immediately available funds within two Business Days of such termination to the non-terminating party. Upon termination, the parties hereto shall bear their own costs and expenses.
25. Indemnification by Buyer. With respect to any Proceeding brought by someone other than a party to this Agreement against one or more of the Seller Indemnitees and that in any way directly or indirectly relates to the Assets, Bonds or REO acquired by Buyer after the Closing Date, Buyer shall indemnify those Seller Indemnitees against all indemnifiable Losses arising out of such Proceeding.
26. Limited Solicitation of Other Bids. Seller shall not, and shall not authorize or permit any of its affiliates to, directly or indirectly, encourage, solicit, initiate, facilitate or continue inquiries regarding an acquisition proposal. Seller shall promptly (within two Business Days) advise Buyer orally and in writing of any acquisition proposal for the Seller or the Assets and Bonds, or any inquiry it receives with respect to or which could reasonably be expected to result in an acquisition proposal for Seller or the Assets and Bonds and the material terms and conditions of such request including the identity of the person or entity making the same. Notwithstanding anything in the Agreement to the contrary, if Seller receives an acquisition proposal that Seller’s Board of Directors concludes in good faith, after consultation with outside counsel, constitutes a Superior Proposal (as defined below), Seller may, if it determines in good faith, after consultation with outside counsel, take such action is required to comply with its fiduciary duties to its shareholders under applicable law, engage in negotiations with such third party, and supply such third party with information on Seller and/or terminate this Agreement as set forth in Section 24(a) of this Agreement. Seller shall provide prior written notice to Buyer, at least two days in advance of its taking any action contemplated by this Section 26 or Section 24(a) with respect to any Superior
Proposal. As used herein, “Superior Proposal” means any bona fide acquisition proposal made in writing (x) that includes consideration that the Seller’s Board of Directors in good faith determines is greater than the Purchase Price, and otherwise is on terms that the Seller’s Board of Directors has determined in its good faith judgment (after consultation with outside counsel and after taking into account all legal, financial (including the financing terms of such proposal), regulatory and other aspects of the proposal) are more favorable to Seller’s shareholders from a financial point of view than this Agreement, (y) with respect to which the Seller’s Board of Directors has determined in good faith (after consultation with outside counsel and after taking into account all legal, financial (including the financing terms of such proposal), regulatory and other aspects of the proposal) is reasonably likely to be consummated (if accepted), and (z) that is not subject to any financing or due diligence conditions.
27. Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which together shall be deemed to be one and the same agreement. A signed copy of this Agreement delivered by email shall be deemed to have the same legal effect as delivery of an original signed copy of this Agreement.
[Signatures on Following Page]
EXECUTED AS OF THE DATE FIRST WRITTEN ABOVE.
| BUYER: | SELLER: | |
| OSK XII, LLC | AMERICAN CHURCH MORTGAGE COMPANY | |
| By: /s/ Adam Bernier | By: /s/ Philip J. Myers | |
| Name: Adam Bernier | Name: Philip Myers | |
| Title: Chief Financial Officer | Title: Chairman, President and Secretary |
Buyer’s Address for Notice:
c/o O’Brien-Staley Partners
5050 France Avenue South
Edina, Minnesota 55410
Attention: Adam Bernier
Email: adam.bernier@osp-group.com
Acknowledged and Agreed as to Section 22 only:
ADVISOR:
CHURCH LOAN ADVISORS, INC.
By: /s/ Philip J. Myers
Name: Philip Myers
Title: Chief Executive Officer
Cover |
May 27, 2022 |
|---|---|
| Cover [Abstract] | |
| Document Type | 8-K |
| Amendment Flag | false |
| Document Period End Date | May 27, 2022 |
| Entity File Number | 000-25919 |
| Entity Registrant Name | American Church Mortgage Company |
| Entity Central Index Key | 0000934543 |
| Entity Tax Identification Number | 41-1793975 |
| Entity Incorporation, State or Country Code | MN |
| Entity Address, Address Line One | 10400 Yellow Circle Drive |
| Entity Address, Address Line Two | Suite 102 |
| Entity Address, City or Town | Minnetonka |
| Entity Address, State or Province | MN |
| Entity Address, Postal Zip Code | 55343 |
| City Area Code | 952 |
| Written Communications | false |
| Soliciting Material | true |
| Pre-commencement Tender Offer | false |
| Pre-commencement Issuer Tender Offer | false |
| Title of 12(b) Security | Common Stock, $0.01 par value |
| Trading Symbol | ACMC |
| Security Exchange Name | NONE |
| Entity Emerging Growth Company | false |
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