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AMENDED AND RESTATED REIT ADVISORY
AGREEMENT
CHURCH LOAN ADVISORS, INC.
THIS AMENDED AND RESTATED ADVISORY AGREEMENT is entered into as
of this
22nd day of January 2004, between AMERICAN CHURCH MORTGAGE
COMPANY, a Minnesota
corporation (the "Company"), and CHURCH LOAN ADVISORS, INC., a
Minnesota
corporation (the "Advisor").
WHEREAS, the Company intends to qualify as a real estate
investment trust
("REIT"), as defined in the Internal Revenue Code of 1986, as
amended (the
"Code"), and to make investments of the type permitted to be
made by
qualified REITs under the Code;
WHEREAS, the Advisor is a corporation organized for the purpose
of advising
the Company as to its business of making mortgage loans to and
purchasing
mortgage-secured obligations of churches and other non-profit
religious
organizations and providing certain management and
administrative services
in connection with the Company's business affairs and the
administration,
operation and disposition of its assets;
WHEREAS, in connection with its management, administration and
operation,
the Company desires to make use of the advice and assistance of
the Advisor
and the sources of information and certain facilities available
to the
Advisor, and to have the Advisor undertake the duties and
responsibilities
hereinafter set forth, on behalf of and subject to the
supervision of the
Company's Board of Directors (the "Directors"), all as provided
for herein;
and
WHEREAS, the Advisor is willing to render such services, subject
to the
supervision of the Directors, on the terms and conditions
hereinafter set
forth; and
WHEREAS, the Advisor and the Company amended and restated the
REIT Advisory
Agreement dated May 15, 1995 (the "Amended Advisory Agreement");
and
WHEREAS, the parties have agreed to amend the terms and
provision of the
Original Advisory Agreement dated May 19, 1995 and substitute in
its
entirety the terms and provisions set forth herein.
NOW, THEREFORE, in consideration of the foregoing, and the
promises and
mutual covenants and agreements hereinafter set forth, the
parties agree that
the Amended Advisory Agreement dated May 19, 1995 is hereby
declared cancelled
and void and the parties entire agreement is as follows:
ARTICLE I - DUTIES OF THE ADVISOR
The Advisor shall use its best efforts to present to the Company
a
continuing and suitable business plan of operations consistent
with the business
policies and objectives of the Company, subject to the general
oversight of the
Directors and upon their direction, to perform the following
duties:
1.1 Business Plan. The Advisor shall present to the Company a
continuing
and suitable detailed business plan of operations and
opportunities to operate
its business consistent with the general business plan of the
Company.
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1.2 Loan Underwriting/Investment Advice. The Advisor shall serve
as the
Company's loan underwriter and investment advisor in connection
with its primary
business of making mortgage loans to churches and other
non-profit religious
organizations and, from time to time, purchasing for investment
mortgage-secured
obligations issued by such organizations, and in connection with
temporary
investments in furtherance of the Company's investment
guidelines and policies,
and recommend changes in the Company's investment guidelines and
policies, when
appropriate.
1.3 Investment and General Management. The Advisor shall
administer the
day-to-day operations of the Company, investigate and evaluate
business and
investment opportunities available to the Company that are
consistent with the
Company's objectives, investigate, select, and conduct relations
with
prospective borrowers seeking mortgage loans from the Company,
and evaluate,
negotiate and maintain relationships on the Company's behalf
with banks,
commercial lenders, borrowers, consultants, accountants,
mortgage loan
originators, brokers, participants, attorneys, appraisers,
insurers, and persons
acting in any other capacity relevant to the activities of the
Company, and as
necessary, negotiate contracts with, retain, and supervise
services performed by
such parties in connection with the Company's business.
1.4 Financial Administration. The Advisor shall administer such
day-to-day
bookkeeping and accounting functions as are required for the
proper management
of the assets of the Company and prepare or cause to be prepared
such reports as
may be required by any governmental authority. In connection
with the ordinary
conduct of the Company's business, the Advisor shall file or
cause to be filed
and/or prepared, any periodic reports, returns, or statements
required under the
Securities Exchange Act of 1934, as amended (the "Act"), the
Code, the
securities and tax statutes of any jurisdiction in which the
Company is
obligated to file such reports or the rules and regulations
promulgated under
any of the foregoing. The Advisor shall maintain the books of
account and
records relating to services performed for the Company
accessible for inspection
by the Company at any time during ordinary business hours.
1.5 Lawyers and Accountants. The Advisor shall obtain for the
Company, when
appropriate, the services of legal and accounting firms to
perform customary
legal and accounting services for the Company, and the Advisor
shall supervise
or monitor the activities of such professionals on behalf of the
Company as
would be performed by a prudent business owner.
1.6 Agent. Subject to approval of the Directors where required,
the Advisor
shall act as agent of the Company in making or acquiring
mortgage loans,
purchasing mortgage-secured obligations issued by churches or
religious
organizations and disbursing and collecting the funds, paying
the debts, and
fulfilling the obligations of the Company and handling,
prosecuting, and
settling any claims of or against the Company, including, but
not limited to
supervising the Company's exercise of its remedies in respect of
any mortgage
loan or mortgage-secured obligation which has defaulted. The
Advisor shall also
investigate, select, and conduct relations on behalf of the
Company with
individuals, corporations, and entities in furtherance of the
business
activities of the Company.
1.7 Exchanges, Dealers. The Advisor shall conduct relations on
behalf of
the Company with securities exchanges or with dealers making
markets in the
Company's securities.
1.8 Investment of Cash. The Advisor shall invest and reinvest
any monies of
the Company, and manage the Company's short-term investments
including the
acquisition and sale of money market instruments and/or church
mortgage bonds,
provided such instruments are consistent with the Company's
policies and are
only those instruments in which a real estate investment trust
is permitted to
invest under the Code from time to time.
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1.9 Bank Accounts. The Advisor may establish one or more bank
accounts in
the name of the Company or in its own name and may deposit into
and disburse
from such accounts any monies on behalf of the Company under
such terms and
conditions as the Directors may approve, provided that no funds
in any such
account shall be commingled with funds of the Advisor, and the
Advisor shall
from time to time as requested by the Directors render
appropriate accountings
of such payments and deposits to the Directors and to the
auditors of the
Company.
1.10 Offices and Personnel. The Advisor shall provide office
space,
equipment, personnel, accounting and auditing facilities, and
other facilities
as required for the performance of the foregoing services and
operation of the
Company's business.
1.11 Reports. The Advisor shall, as requested by the Board of
Directors,
make reports to the Board of Directors on its performance of the
foregoing
services and furnish advice and recommendations with respect to
other aspects of
the business of the Company.
1.12 Information Furnished Advisor. The Directors shall at all
times keep
the Advisor fully informed with regard to the investment policy
of the Company,
the capitalization policy of the Company, and generally their
then-current
intentions as to the future of the Company. In particular, the
Directors shall
notify the Advisor promptly of their intention to sell or
otherwise dispose of
any of the Company's investments, or to make any new investment.
The Company
shall furnish the Advisor with a certified copy of all financial
statements, a
signed copy of each report prepared by independent certified
public accountants,
and such other information with regard to its affairs as the
Advisor may from
time to time reasonably request.
ARTICLE II - QUALIFICATION AS A REAL ESTATE INVESTMENT TRUST
2.1 REIT Qualification. Notwithstanding any provision in this
Agreement to
the contrary, the Advisor shall refrain from any action
(including without
limitation the furnishing or rendering of services to tenants of
property or
managing real property) which, in its sole judgment made in good
faith, or in
the judgment of the Directors of which the Advisor has notice,
would (1)
adversely affect the status of the Company as a REIT, as defined
in the Code, or
(2) violate any law, rule, regulation, or statement of policy of
any
governmental body or agency having jurisdiction over the Company
or over its
securities, or (3) otherwise not be permitted by the Articles of
Incorporation
or Bylaws of the Company.
2.2 Preservation of REIT Status. In the event that the terms of
this
Agreement at any time shall, in the opinion of counsel for the
Company, threaten
to impair the status of the Company as a REIT in a manner
adverse to the
interests of the shareholders of the Company, the Company shall
propose such
amendment to or substitute arrangements for this Agreement, with
prospective or
retroactive effect, as may in its opinion be appropriate or
advisable to protect
and preserve the status of the Company as a REIT. If the parties
cannot agree
upon the proposed amendments of this Agreement within thirty
(30) days after
such proposals are made, this Agreement shall be terminated as
of such time as
counsel for the Company shall recommend for the protection of
the status of the
Company as a REIT and for the protection of the rights of the
Company and its
shareholders.
ARTICLE III - FIDELITY BOND AND LIMITATION OF LIABILITY
3.1 Fidelity Bond. The Advisor shall, upon request of the
Directors,
maintain a fidelity bond with a responsible surety company, in
such reasonable
amounts as may be required by the Directors from time to time,
covering
officers, employees and agents handling funds and records of the
Company. Such
bond shall inure to the benefit of the Company in respect of
losses of such
property from acts of such persons through
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theft, embezzlement, fraud, error, or otherwise. In the event
that such a bond
is not generally available at a reasonable cost to companies
performing services
of the type to be provided by the Advisor hereunder, or in the
event that such a
bond is cancelled or not renewed by the bonding company, the
Advisor shall give
notice thereof to the Directors.
3.2 Limitation of Liability of the Advisor. The Advisor assumes
no
responsibility other than to render the services described
herein in good faith
and shall not be responsible for any action of the Directors in
following or
declining to follow any advice or recommendation of the Advisor.
The Advisor
will not be liable to the Company, its shareholders, or others,
except by reason
of acts constituting bad faith, misconduct, or negligence. The
Company shall
reimburse, indemnify, and hold the Advisor harmless for and from
any and all
expenses, losses, damages, liabilities, demands, charges, and
claims of any
nature whatsoever in respect to or arising from any acts or
omissions of the
Advisor undertaken in good faith and pursuant to the authority
granted to the
Advisor by this Advisory Agreement. The Advisor may consult with
legal counsel
(which may be the regular counsel of the Advisor or other
counsel), independent
public accountants, or other professional advisors and shall not
be liable for
any action taken or omitted in good faith by the Advisor in
accordance with the
advice of such counsel, accountants, or advisors, provided such
action is not
the result of misconduct or negligence.
ARTICLE IV - COMPENSATION
4.1 Compensation. The Advisor shall be paid and compensated for
its
services hereunder as follows:
(a) Annual Advisory Fee. The Advisor shall be paid, for the
services the
Advisor renders to the Company pursuant to this Advisory
Agreement, an
annual advisory fee, payable monthly, equal to 1-1/4% of
Average
Invested Assets of the Company (the "Advisory Fee"). This fee
is
reduced to 1.0% on average invested assets from $35 million to
$50
million and to .75% on average invested assets over $50 million.
For
purposes of this Agreement, "Average Invested Assets" of the
Company
shall be deemed to mean, for any period, the average of the
aggregated
book value of the assets of the Company invested, directly
or
indirectly, in loans (or an interest in loans) secured by real
estate,
and first mortgage bonds secured by real estate; before reserves
for
depreciation or bad debts or other similar non-cash reserves,
computed
by taking the average of such values at the end of each month
during
such period.
(b) Acknowledgement of Advisor's Loan Origination Fee. The
Advisor will be
paid in connection with and at the time of the closing of each
and
every mortgage loan made by the Company (or renewal or
extension
thereof) a fee equal to one half of any origination fee charged
to the
borrower, which shall be payable directly by the borrower to
the
Advisor.
(c) Acknowledgement of Loan Origination Expenses of Advisor. The
Advisor
will attempt to arrange and/or contract for appraisal, real
estate
title and independent accountant services to borrowers and
prospective
borrowers of the Company in order to provide cost and time
efficiencies to them in connection with their borrowing and
prospective borrowing from the Company. It is understood and
acknowledged that the Advisor will receive reimbursement for or
an
advancement of such expenses directly from such borrowers, at
the time
of a loan commitment and/or from the proceeds of loans made by
the
Company. All such expenses shall be identified by the Advisor to
the
Company.
The Advisory Fee (4.1(a) above) shall be computed within twenty
(20) days
following the end of e
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