<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 2, 1997
REGISTRATION NO. 333-17969
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 2
TO
FORM S-4
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
------------------------
BFC GUARANTY CORP.
BFC FINANCE CORP.
(Exact name of Registrants as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 6799 52-1994622
DELAWARE 6799 52-1994568
(State of Incorporation) (Primary Standard Industrial (I.R.S. Employer
Classification Code Number) Identification
Number)
</TABLE>
BFC GUARANTY CORP.
BFC FINANCE CORP.
1455 PENNSYLVANIA AVENUE, SUITE 230
WASHINGTON, DC 20004
(202) 639-0512
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive offices)
ROGER BAILEY
BFC GUARANTY CORP.
BFC FINANCE CORP.
1455 PENNSYLVANIA AVENUE, SUITE 230
WASHINGTON, DC 20004
(202) 639-0512
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
--------------------------
COPY TO:
THOMAS J. MANCUSO, ESQ.
Brownstein Hyatt Farber & Strickland, P.C.
410 Seventeenth Street, 22nd Floor
Denver, CO 80202
(303) 534-6335
--------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after this Registration Statement becomes effective.
--------------------------
If any of the securities being registered on this Form are being offered
with the formation of a holding company and there is compliance with General
Instruction G, check the following box: / /
--------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED
PROPOSED MAXIMUM
MAXIMUM AGGREGATE AMOUNT OF
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE OFFERING REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED PER NOTE(1) PRICE FEE
<S> <C> <C> <C> <C>
Guarantees of Public Facilities
Revenue Bonds, Series 1996 B....... $66,975,000 100% $66,975,000 $20,930(2)
REMIC Lease-Backed Bonds Series 1996,
Class B............................ $67,075,000 100% $67,075,000 -0-
</TABLE>
(1) Estimated solely for the purposes of calculating the registration fee
pursuant to Rule 457.
(2) Previously paid.
--------------------------
THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
CROSS-REFERENCE SHEET
PURSUANT TO ITEM 501(B) OF REGULATION S-K
SHOWING LOCATION IN PROSPECTUS OF INFORMATION
REQUIRED BY ITEMS OF PART I OF FORM S-4
<TABLE>
<CAPTION>
REGISTRATION STATEMENT
ITEM NUMBER AND CAPTION CAPTION OR LOCATION IN PROSPECTUS
- ------------------------------------------------------- ---------------------------------------------------------
<S> <C>
1. Forepart of Registration Statement and
Outside Front Cover Page of Prospectus............. Outside Front Cover Page
2. Inside Front and Outside Back Cover Pages of
Prospectus......................................... Inside Front Cover Page; Outside Back Cover Page
3. Risk Factors, Ratio of Earnings to Fixed
Charges and Other Information...................... Prospectus Summary; Risk Factors; Selected Historical
Financial Data
4. Terms of the Transaction............................ Outside Front Cover Page; Prospectus Summary;
The Exchange Offer; Description of Exchange Bonds
5. Pro Forma Financial Information..................... Pro Forma Financial Data
6. Material Contracts with the Company Being
Acquired........................................... Inapplicable
7. Additional Information Required for
Reoffering by Persons and Parties Deemed
to be Underwriters................................. Inapplicable
8. Interests of Named Experts and Counsel.............. Legal Matters; Independent Auditors
9. Disclosure of Commission Position on
Indemnification for Securities Act Liabilities..... Inapplicable
10. Information with Respect to S-3 Registrants........ Inapplicable
11. Incorporation of Certain Information by
Reference.......................................... Inapplicable
12. Information with Respect to S-2 or S-3
Registrants........................................ Inapplicable
13. Incorporation of Certain Information by
Reference.......................................... Inapplicable
14. Information with Respect to Registrants other
than S-2 or S-3 Registrants........................ Outside Front Cover Page; Prospectus Summary;
Risk Factors; Use of Proceeds; Capitalization;
Selected Historical Financial Data; Management's
Discussion and Analysis of Financial Condition and
Results of Operations; The Project; The Authority;
The Districts; Credit Enhancement; Management;
Ownership of the Authority; Certain Transactions
15. Information with Respect to S-3 Companies.......... Inapplicable
16. Information with Respect to S-2 or S-3
Companies.......................................... Inapplicable
17. Information with Respect to Companies
Other than S-2 or S-3 Companies.................... Inapplicable
</TABLE>
<PAGE>
<TABLE>
<S> <C>
18. Information if Proxies, Consents or
Authorizations are to be Solicited................. Inapplicable
19. Information if Proxies, Consents or
Authorizations are not to be Solicited or in
an Exchange Offer.................................. Management; Ownership of the Authority; Certain
Transactions
</TABLE>
<PAGE>
EXPLANATORY NOTE
The legend along the left side of the front cover of the Prospectus will be
printed in red on the final version of the Prospectus.
<PAGE>
SUBJECT TO COMPLETION, DATED JULY 2, 1997
PROSPECTUS
, 1997
GUARANTEE OF $66,975,000
CASTLE ROCK RANCH PUBLIC IMPROVEMENTS AUTHORITY
PUBLIC FACILITIES REVENUE BONDS, SERIES 1996B
BY BFC GUARANTY CORP.
OFFER TO EXCHANGE GUARANTEED PUBLIC FACILITIES REVENUE BONDS, SERIES 1996 B
FOR ANY AND ALL OUTSTANDING GUARANTEED PUBLIC FACILITIES REVENUE BONDS, SERIES
1996
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME,
ON , 1997 UNLESS EXTENDED
Castle Rock Ranch Public Improvements Authority, a Colorado nonprofit
corporation (the "Authority"), hereby offers (the "Exchange Offer"), upon the
terms and conditions set forth in this Prospectus (the "Prospectus") and the
accompanying Letter of Transmittal (the "Letter of Transmittal"), to exchange
$5,000 principal amount of its Public Facilities Revenue Bonds, Series 1996 B
(the "Exchange Bonds") for each $5,000 principal amount of its outstanding
Public Facilities Revenue Bonds, Series 1996 (the "Bonds"), of which $66,975,000
principal amount is outstanding. The Bonds are, and the Exchange Bonds will be,
credit enhanced (the "Credit Enhancement") by BFC Guaranty Corp. (the "Credit
Enhancement Provider") as described herein. The form and terms of the Exchange
Bonds are the same as the form and term of the Bonds (which they replace) except
that the Exchange Bonds will bear a Series B designation and, because the Credit
Enhancement will have been registered under the Securities Act of 1933, as
amended (the "Securities Act") pursuant to a Registration Statement of which
this prospectus is a part, the Exchange Bonds will not bear legends restricting
their transfer and will not contain certain provisions relating to an increase
in the interest rate which were included in the terms of the Bonds in certain
circumstances relating to the timing of the Exchange Offer. The Exchange Bonds
will evidence the same debt as the Bonds (which they replace) and will be issued
under and be entitled to the benefits of the Indenture (the "Indenture") dated
as of March 1, 1996 between the Authority and SouthTrust Bank of Alabama,
National Association (the "Trustee") governing the Bonds. See "The Exchange
Offer" and "Description of Exchange Bonds."
The Authority has not issued any other indebtedness, but has plans to issue
other indebtedness in the future. The Exchange Bonds will be limited obligations
of the Authority payable solely from the funds held under the Indenture,
Revenues (as defined herein) of the Authority and payments under the Credit
Enhancement. The Authority has executed a Deed of Trust (as defined herein) to
provide security to the Trustee for the benefit of the bondholders and to
provide security to the Credit Enhancement Provider with regard to amounts
payable by the Credit Enhancement Provider, including amounts payable pursuant
to a Reimbursement Agreement dated as of March 1, 1996 (the "Reimbursement
Agreement") between the Authority and the Credit Enhancement Provider.
SEE "RISK FACTORS" BEGINNING ON PAGE 9 HEREOF FOR A DISCUSSION OF CERTAIN
FACTORS THAT SHOULD BE CONSIDERED BY HOLDERS WHO TENDER THEIR BONDS IN THE
EXCHANGE OFFER.
The Authority itself has no taxing power. The Authority is acting as an
instrumentality of Dawson Ridge Metropolitan District No. 5 (the "District"). On
November 7, 1995, the voters of the District and certain related improvement
districts (the "Related Districts") approved the execution and delivery of an
Operating Agreement and an Intergovernmental Agreement obligating the Related
Districts to provide funds to the District for payment to the Authority to the
extent that revenues from the Project (as defined herein) are insufficient to
fund debt service on the Bonds and operating expenses of the Project, such
i
<PAGE>
funds to be derived from a mill levy that is subject to certain limitations,
including a 35-mill limitation on taxable property within the District and the
Related Districts (collectively, the "Districts"). The Operating Agreement and
the Intergovernmental Agreement will not become effective until one of two
conditions (hereinafter discussed) for imposition of the mill levy are
satisfied. In order to provide an alternate source of revenue, the Authority has
entered into a Development Agreement dated as of March 1, 1996, with Douglas
County Development Corporation, the owner of approximately 75% of the taxable
property in the Districts, providing for a payment in lieu of taxes by Douglas
County Development Corporation and all subsequent owners of the property owned
by Douglas County Development Corporation in the Districts. Neither the
principal of the Bonds, nor the interest accruing thereon, shall ever constitute
a general indebtedness of the Authority, the District or the Related Districts
or an indebtedness of the State of Colorado or any political subdivision thereof
within the meaning of any constitutional or statutory provision whatsoever or
shall ever constitute or give rise to a pecuniary liability of the State of
Colorado or any political subdivision thereof or a charge against the general
credit or taxing power of the State of Colorado or any political subdivision
thereof, nor will the Bonds be, or be deemed to be, an obligation of the State
of Colorado or any political subdivision thereof. The taxing power of the
District and the Related Districts is limited.
Certain terms and documents relating to the Bonds and the Credit Enhancement
are described herein under the caption "DEFINITIONS OF CERTAIN TERMS AND
DESCRIPTIONS OF PRINCIPAL DOCUMENTS."
The Authority will accept for exchange any and all Bonds validly tendered
and not withdrawn prior to 5:00 p.m., New York City time, on , 1997,
unless extended by the Authority in its reasonable discretion (the "Expiration
Date"). Notwithstanding the foregoing, the Authority will not extend the
Expiration Date beyond , 1997. Tenders of Bonds may be withdrawn at
any time prior to 5:00 p.m. on the Expiration Date. The Exchange Offer is
subject to certain customary conditions. The Bonds were sold by the Authority on
March 27, 1996 in a transaction not registered under the Securities Act in
reliance upon exemptions under the Securities Act. Because of the exemption from
registration relied upon for the issuance of the Credit Enhancement, the Bonds
may not be reoffered, resold or otherwise transferred in the United States
unless the Credit Enhancement is registered under the Securities Act or unless
an applicable exemption from the registration requirements of the Securities Act
is available. The Exchange Bonds are being offered hereunder in order to satisfy
the obligations of the Authority and the Credit Enhancement Provider under the
Registration Rights Agreement (as defined herein) entered into by the Authority
in connection with the offering of the Bonds. See "The Exchange Offer."
Based on no-action letters issued by the staff of the Securities and
Exchange Commission to third parties, the Credit Enhancement Provider believes
the Credit Enhancement issued pursuant to the Exchange Offer may be offered for
resale, resold and otherwise transferred by any holder thereof (other than any
such holder that is an "affiliate" of the Authority or the Credit Enhancement
Provider within the meaning of Rule 405 under the Securities Act) without
compliance with the registration and prospectus delivery provisions of the
Securities Act, provided that such Credit Enhancement is acquired in the
ordinary course of such holders' business and such holder has no arrangement or
understanding with any person to participate in the distribution of such
Exchange Bonds. See "The Exchange Offer--Purpose and Effect of the Exchange
Offer" and "The Exchange Offer--Resale of the Exchange Bonds." The Exchange
Bonds themselves are exempt from registration under Section 3(a)(2) of the
Securities Act. By virtue of the Credit Enhancement, each broker-dealer (a
"Participating Broker-Dealer") that receives Exchange Bonds for its own account
pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Bonds. The Letter of
Transmittal states that by so acknowledging and by delivering a prospectus, a
participating Broker-Dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act. This Prospectus, as it
may be amended or supplemented from time to time, may be used by a Participating
Broker-Dealer in connection with resales
ii
<PAGE>
of Exchange Bonds received in exchange for Bonds where such Bonds were acquired
by such Participating Broker-Dealer as a result of market-making activities or
other trading activities. The Credit Enhancement Provider has agreed that, for a
period of 180 days after the Expiration Date, it will make this Prospectus
available to any Participating Broker-Dealer for use in connection with any such
resale. See "Plan of Distribution."
Holders of Bonds not tendered and accepted in the Exchange Offer will
continue to hold such Bonds and will be entitled to all the rights and benefits
and will be subject to the limitations applicable thereto under the Indenture
and with respect to transfer under the Securities Act. The Authority will pay
all the expenses incurred by it incident to the Exchange Offer. See "The
Exchange Offer."
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
There has not previously been any public market for the Bonds or the
Exchange Bonds. The Authority does not intend to list the Exchange Bonds on any
securities exchange or to seek approval for quotation through any automated
quotation system. There can be no assurance that an active market for the
Exchange Bonds will develop. See "Risk Factors--Lack of Public Market."
Moreover, to the extent that Bonds are tendered and accepted in the Exchange
Offer, the trading market for untendered and tendered but unaccepted Bonds could
be adversely affected.
The Exchange Bonds will be available only in book-entry form. The Authority
expects that the Exchange Bonds issued pursuant to this Exchange Offer will be
issued in the form of a Global Certificate (as defined herein), which will be
deposited with, or on behalf of, The Depository Trust Company and registered in
the name of CEDE & CO., its nominee. Beneficial interests in the Global
Certificate representing the Exchange Bonds will be shown on, and transfers
thereof to qualified institutional buyers will be effected through, records
maintained by The Depository Trust Company and its participants. After the
initial issuance of the Global Certificate, Exchange Bonds in certificated form
will be issued in exchange for the Global Certificate only on the terms set
forth in the Indenture. See "Description of Exchange Bonds--Book-Entry; Delivery
and Form."
In order to secure its obligations under the Collateralized Credit
Enhancement Agreement, the Credit Enhancement Provider has pledged and delivered
to the Trustee $67,075,000 principal amount of REMIC Lease-Backed Bonds, Series
1996, Class B (the "Series B REMIC Bonds") issued by BFC Finance Corp. payable
from an interest in a trust estate (the "REMIC Trust Estate") under an indenture
of trust (the "REMIC Indenture") between BFC Finance Corp. and SouthTrust Bank
of Alabama, National Association (the "REMIC Trustee"), in accordance with the
provisions of a Bond Pledge and Security Agreement between the Credit
Enhancement Provider, the Trustee and the REMIC Trustee. An election was made to
have the REMIC Trust Estate treated as a "real estate mortgage investment
conduit" for federal income tax purposes. This Prospectus also relates to the
Series B REMIC Bonds.
iii
<PAGE>
AVAILABLE INFORMATION
The Credit Enhancement Provider and BFC Finance Corp. (Collectively, the
"Registrants") have filed with the Securities and Exchange Commission a
Registration Statement on Form S-4 (the "Exchange Offer Registration Statement,"
which term shall encompass all amendments, exhibits, annexes and schedules
thereto) pursuant to the Securities Act, and the rules and regulations
promulgated thereunder, covering the Credit Enhancement of the Exchange Bonds
being offered hereby. This Prospectus does not contain all the information set
forth in the Exchange Offer Registration Statement. For further information with
respect to the Authority, the Exchange Offer and the Credit Enhancement and
Credit Enhancement Provider, reference is made to the Exchange Offer
Registration Statement. Statements made in this Prospectus as to the contents of
any contract, agreement or other document referred to are not necessarily
complete. With respect to each such contract, agreement or other document filed
as an exhibit to the Exchange Offer Registration Statement, reference is made to
the exhibit for a more complete description of the document or matter involved,
and each such statement shall be deemed qualified in its entirety by such
reference. The Exchange Offer Registration Statement, including the exhibits
thereto, can be inspected and copied at the public reference facilities
maintained by the Commission at Room 1024, 450 Fifth Street, N.W., Washington,
D.C. 20549, at the Regional Offices of the Commission at 7 World Trade Center,
Suite 1300, New York, New York 10048 and at Northwestern Atrium Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such materials
can be obtained from the Public Reference Section of the Commission at 450 Fifth
Street, N.W., Washington, DC 20549, at prescribed rates. The Commission also
maintains a Web site that contains reports, proxy and information statements and
other materials that are filed through the Commission's Electronic Data
Gathering, Analysis and Retrieval system. This Web site can be accessed at
http://www.sec.gov.
As a result of the filing of the Exchange Offer Registration Statement with
the Securities and Exchange Commission, the Registrants will become subject to
the informational requirements of the Securities Exchange Act of 1934, as
amended, and in accordance therewith will be required to file periodic reports
and other information with the Securities and Exchange Commission. The
obligation of the Registrants to file periodic reports and other information
with the Securities and Exchange Commission will be suspended if the Exchange
Bonds are held of record by fewer than 300 holders as of the beginning of any
fiscal year of the Registrants other than the fiscal year in which the Exchange
Offer Registration Statement is declared effective. The Credit Enhancement
Provider will nevertheless be required to continue to file reports with the
Securities and Exchange Commission if the Exchange Bonds are listed on a
national securities exchange, although the Authority does not intend to list the
Exchange Bonds on any securities exchange. In addition and in the event the
Registrants cease to be subject to the informational requirements of the
Securities Exchange Act of 1934, as amended, in order to satisfy the
requirements of Rule 15c2-12 of the Securities Exchange Act of 1934, as amended,
the Authority, the Credit Enhancement Provider, the Districts and the Trustee
have entered into a Continuing Disclosure Agreement for the benefit of owners of
the Bonds. Pursuant to such agreement, the Authority, the Credit Enhancement
Provider and the Districts have covenanted to provide to each nationally
recognized municipal securities information repository and to the Colorado state
information depository, if and when established, certain annual financial
information and operating data, including audited financial statements, within
210 days following the end of each of their fiscal years. The Authority, the
Credit Enhancement Provider and each District have covenanted to provide notice
in a timely manner to each nationally recognized municipal securities
information repository or to the Municipal Securities Rulemaking Board and to
the Colorado state information depository of its failure to provide the required
annual financial information on or before the date specified in the Continuing
Disclosure Agreement.
iv
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY, AND SHOULD BE READ IN
CONJUNCTION WITH, THE MORE DETAILED INFORMATION AND FINANCIAL DATA, INCLUDING
THE FINANCIAL STATEMENTS, ELSEWHERE IN THIS PROSPECTUS.
THE AUTHORITY, THE CREDIT ENHANCEMENT PROVIDER AND BFC FINANCE CORP.
The Authority is a nonprofit corporation created as an instrumentality of
the District for the purpose of acquiring from Douglas County Development
Corporation, an affiliate of The Franklin L. Haney Company, an approximately 876
acre portion of the Dawson Ridge development in the Town of Castle Rock,
Colorado (the "Real Estate"), and for the acquisition from Douglas County
Development Corporation of an estimated 900 acre feet of water rights in the
Arapahoe, Laramie-Fox Hills, Denver and lower Dawson aquifers (collectively with
the Real Estate, the "Property") for $54,550,000. It is anticipated that the
Authority will construct a 36-hole golf course on the Real Estate, to be
operated as a municipal golf course, although none of the necessary governmental
approvals or permits have been obtained. Consequently, no assurances can be
given that the contemplated golf course will be ultimately constructed. See "The
Project" and "The Authority."
The Credit Enhancement Provider is a newly-formed Delaware corporation
formed for the purpose of providing the Credit Enhancement. The Credit
Enhancement Provider has executed a Collateralized Credit Enhancement Agreement
to provide for the due, prompt and complete payment of the Bonds. As collateral,
the Credit Enhancement Provider has pledged and delivered to the Trustee
$67,075,000 of Series B REMIC Bonds. See "Credit Enhancement."
BFC Finance Corp. Is a newly-formed Delaware corporation formed for the
purpose of issuing the REMIC Bonds.
The Authority's address is 4582 South Ulster Street, Suite 902, Denver,
Colorado 80237, and its telephone number is (303) 770-4760.
The Credit Enhancement Provider's and BFC Finance Corp.'s address is 1455
Pennsylvania Avenue, Suite 230, Washington, DC 20004, and its telephone number
is (202) 639-0512.
THE PROJECT
The proceeds of the Bonds will be used for the acquisition from Douglas
County Development Corporation, an affiliate of The Franklin L. Haney Company,
of the Property. The purchase price for this acquisition ($54,550,000) was not
determined in an arm's length negotiation, but rather is the appraised fair
market value determined by THK Associates, Inc., independent appraisers, in
their February 26, 1996 appraisal. It is anticipated that the Authority will
construct a 36-hole golf course on the Real Estate, to be operated by the
Authority as a municipal golf course. No assurances, however, can be given that
the contemplated golf course will be ultimately constructed. The Bonds will be
used solely for real estate and water rights acquisitions (and payment of cost
of issuance, including the payment of fees and expenses of the Credit
Enhancement Provider in connection with providing the Credit Enhancement).
Following the completion of construction documentation and the issuance of all
the necessary government permits and approvals, the Authority intends to issue
one or more subsequent series of bonds in order to finance the design,
construction and completion of golf course and recreational facility
improvements and equipment, and for roadway construction (all such acquisition
and construction constituting the "Project").
The construction and completion of the golf course and other recreational
facility improvements is currently estimated to cost $5,150,000. The Authority
also expects to incur approximately $25,000,000 of additional costs to complete
nonrevenue producing infrastructure, including roadways, which will be
transferred to the District on completion. Under the terms of the Indenture, any
additional bonds issued by the Authority will be issued on a subordinate basis.
There can be no assurance that the Authority will be
1
<PAGE>
able to issue any additional bonds or issue them in amounts needed to finance
construction of the golf course and other recreational facility improvements and
non-revenue producing infrastructure.
On November 7, 1995, the voters of the District and the Related Districts
approved the execution and delivery of an Operating Agreement and an
Intergovernmental Agreement obligating the Related Districts to provide funds to
the District for payment to the Authority to the extent that revenues from the
Project are insufficient to fund debt service on the Bonds and operating
expenses of the Project, such funds to be derived from a mill levy that is
subject to certain limitations, including a 35-mill limitation on taxable
property within the Districts. The Operating Agreement and the Intergovernmental
Agreement will not become effective until one of two conditions (discussed in
"SECURITY AND SOURCE OF PAYMENT") for imposition of the mill levy are satisfied.
In order to provide an alternate source of revenue, the Authority has entered
into a Development Agreement dated as of March 1, 1996, with Douglas County
Development Corporation, the owner of approximately 75% of the taxable property
in the Districts, providing for a payment in lieu of taxes by Douglas County
Development Corporation and all subsequent owners of the property owned by
Douglas County Development Corporation in the Districts. See "DEFINITIONS OF
CERTAIN TERMS AND DESCRIPTIONS OF PRINCIPAL DOCUMENTS" herein for a more
complete description of the Operating Agreement, the Intergovernmental Agreement
and the Development Agreement.
Development of the Project will require that the Town of Castle Rock approve
amendments to each of the Districts service plans, as discussed in "THE
DISTRICTS--Service Plan" and"--Town of Castle Rock Agreements." At the present
time, the Town of Castle Rock is not accepting any applications for service plan
amendments until it finalizes new policies regarding the use and powers of
special districts located within its jurisdiction. These new policies are
expected to be in place in 1997. Once the new policies are in effect, the
Districts will submit their applications for service plan amendments to the Town
of Castle Rock. Such amendments to the Districts' service plans may also be a
condition to the effectiveness of the Operating Agreement and the
Intergovernmental Agreement, as described in "SECURITY AND SOURCE OF PAYMENT."
There can be no assurance that the Town of Castle Rock will approve the
amendments to the Districts' service plans. In addition, undertaking completion
of the Project will require various governmental permits and approvals
(including revisions of the previously approved Planned Unit Development ("PUD")
for the Dawson Ridge development). While the Districts and the Authority have
commenced initial conversations with Town of Castle Rock staff on the nature and
extent of such requirements, no formal PUD amendments will be submitted to the
Town of Castle Rock or the Town of Castle Rock Zoning Commission until the Town
of Castle Rock has approved the amendments to the Districts' service plans. Even
if the service plan amendments are approved by the Town of Castle Rock, no
assurance can be given that the requisite approvals for actual development of
the Project will be forthcoming or that they will be obtained in a timely
fashion.
In the event that the design and construction of the golf course and
recreational facility improvements and equipment within the Project are not
completed, there will be no revenues from the operation of those facilities
available for payment of principal and interest on the Bonds, although property
tax revenues or fees in lieu thereof under the Development Agreement will
continue to be available for that purpose. If the golf course and recreational
facilities are built, but the residential development of Dawson Ridge is not
completed as planned, then the amount of property tax revenues and Development
Agreement revenues collected by the Districts together with the net revenues
from operation could be insufficient to make full payment of principal and
interest on the Bonds. In either such event, the Credit Enhancement Provider
must pay the debt service on the Bonds (exclusive of Extra Payments), but the
Credit Enhancement Provider might foreclose on the Project and convert it into a
non-public facility. Such a change in use could adversely affect the exclusion
of interest on the Bonds from gross income for federal income tax purposes.
Consequently, the Deed of Trust requires that, before the Credit Enhancement
Provider can foreclose on the Project, it must obtain an opinion of Special Tax
Counsel acceptable to the Trustee that such foreclosure will not adversely
affect the exclusion of interest on the Bonds from gross income for federal
2
<PAGE>
income tax purposes. In addition, the Deed of Trust will be terminated as to the
Bondholders if the Credit Enhancement Provider forecloses on it because of a
default by the Authority under the Reimbursement Agreement.
At the present time there exist no material contracts with respect to the
development of the Project. With respect to the planned golf course, the
Authority previously engaged Global Golf Course Design, Inc. for the preparation
of a detailed design and construction package based on a review of Real Estate
suitability, creation of a detailed golf course design, and overview of on-site
construction requirements. Contracts for final design of the golf course between
the Authority and Global Golf Course Design, Inc. are anticipated to be executed
once the service plan amendments are approved by the Town of Castle Rock.
THE OFFERING
<TABLE>
<S> <C>
Securities Offered.................. The Bonds were sold by the Authority on March 29,
1996 to Lehmann Brothers Inc., acting as placement
agent, pursuant to a Purchase Agreement dated March
26, 1996 (the "Purchase Agreement"). Lehmann Brothers
Inc. subsequently resold the Bonds to qualified
institutional buyers pursuant to Rule 144A under the
Securities Act and to institutional accredited
investors that agreed to comply with certain transfer
restrictions and other conditions. The Authority is a
public instrumentality of the State of Colorado. As a
result, the offer and sale of the Bonds and the
Exchange Bonds is exempt from the registration
requirements of the Securities Act pursuant to
Section 3(a)(2) of the Securities Act. However, the
Credit Enhancement Provider is not a public
instrumentality and the Credit Enhancement is not so
exempt.
The Exchange Offer.................. $5,000 principal amount of the Exchange Bonds in
exchange for each $5,000 principal amount of Bonds.
As of the date hereof, $66,975,000 aggregate
principal amount of Bonds are outstanding. The
Authority will issue the Exchange Bonds to holders on
or promptly after the Expiration Date.
Based on an interpretation by the staff of the
Securities and Exchange Commission set forth in no
action letters issued to third parties, the Authority
and the Credit Enhancement Provider believe that
Credit Enhancement issued in connection with the
Exchange Bonds issued pursuant to the Exchange Offer
in exchange for Bonds may be offered for resale,
resold and otherwise transferred by any holder
thereof (other than any such holder which is an
"affiliate" of the Authority or the Credit
Enhancement Provider within the meaning of Rule 405
under the Securities Act) without compliance with the
registration and prospectus delivery provisions of
the Securities Act, provided that such Credit
Enhancement is acquired in the ordinary course of
such holder's business and that such holder does not
intend to participate and has no arrangement or
understanding with
</TABLE>
3
<PAGE>
<TABLE>
<S> <C>
any person to participate in the distribution of such
Credit Enhancement.
By virtue of the Credit Enhancement, each
Participating Broker-Dealer that receives Exchange
Bonds for its own account pursuant to the Exchange
Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such
Exchange Bonds. The Letter of Transmittal states that
by so acknowledging and by delivering a prospectus, a
Participating Broker-Dealer will not be deemed to
admit that it is an "underwriter" within the meaning
of the Securities Act. This Prospectus, as it may be
amended or supplemented from time to time, may be
used by a Participating Broker-Dealer in connection
with resales of Exchange Bonds received in exchange
for Bonds where such Bonds were acquired by such
Participating Broker-Dealer as a result of
market-making activities or other trading activities.
The Credit Enhancement Provider has agreed that, for
a period of 180 days after the Expiration Date, it
will make this Prospectus available to any
Participating Broker-Dealer for use in connection
with any such resale. See "Plan of Distribution."
Any holder who tenders in the Exchange Offer with the
intention to participate, or for the purpose of
participating, in a distribution of the Exchange
Bonds could not rely on the position of the staff of
the Securities and Exchange Commission enunciated in
no-action letters and, in the absence of an exemption
therefrom, must comply with the registration and
prospectus delivery requirements of the Securities
Act in connection with any resale transaction.
Failure to comply with such requirements in such
instance may result in such holder incurring
liability under the Securities Act for which the
holder is not indemnified by the Authority.
Expiration Date..................... 5:00 p.m., New York City time, on ,
1997 unless the Exchange Offer is extended, in which
case the term "Expiration Date" means the latest date
and time to which the Exchange Offer is extended.
Accrued Interest on the Exchange
Bonds and the Bonds............... Each Exchange Bond will bear interest from its
issuance date. Holders of Bonds that are accepted for
exchange will receive, in cash, accrued interest
thereon to, but not including, the issuance date of
the Exchange Bonds. Such interest will be paid with
the first interest payment on the Exchange Bonds.
Interest on the Bonds accepted for exchange will
cease to accrue upon issuance of the Exchange Bonds.
Conditions.......................... The Exchange Offer is subject to certain customary
conditions, which must be satisfied or waived by the
Authority
</TABLE>
4
<PAGE>
<TABLE>
<S> <C>
and the Credit Enhancement Provider prior to the
Expiration Date. See "The Exchange
Offer--Conditions."
Procedures for Tendering Bonds...... Each holder of Bonds wishing to accept the Exchange
Offer must complete, sign and date the accompanying
Letter of Transmittal, or a facsimile thereof, in
accordance with the instructions contained herein and
therein, and mail or otherwise deliver such Letter of
Transmittal, or such facsimile, together with the
Bonds and any other required documentation to the
Exchange Agent (as defined) at the address set forth
herein. By executing the Letter of Transmittal, each
holder will represent to the Authority and the Credit
Enhancement Provider that, among other things, the
Exchange Bonds acquired pursuant to the Exchange
Offer are being obtained in the ordinary course of
business of the person receiving such Exchange Bonds,
whether or not such person is the holder, that
neither the holder nor any such other person has any
arrangement or understanding with any person to
participate in the distribution of such Exchange
Bonds and that neither the holder nor any such other
person is an "affiliate," as defined under Rule 405
of the Securities Act, of the Authority and the
Credit Enhancement Provider. See "The Exchange
Offer--Purpose and Effect of the Exchange Offer" and
"--Procedures for Tendering."
Untendered Bonds.................... Following the consummation of the Exchange Offer,
holders of Bonds eligible to participate but who do
not tender their Bonds will not have any further
exchange rights and such Bonds will continue to be
subject to certain restrictions on transfer.
Accordingly, the liquidity of the market for such
Bonds could be adversely affected.
Consequences of Failure to
Exchange.......................... Because of the Credit Enhancement, the Bonds that are
not exchanged pursuant to the Exchange Offer will
remain restricted securities. Accordingly, such Bonds
may be resold only (1) to the Authority, (ii)
pursuant to Rule 144A or Rule 144 under the
Securities Act or pursuant to some other exemption
under the Securities Act, (iii) outside the United
States to a foreign person pursuant to the
requirements of Rule 904 under the Securities Act, or
(iv) pursuant to an effective registration statement
under the Securities Act. See "The Exchange
Offer--Consequences of Failure to Exchange."
Special Procedures for Beneficial
Owners............................ Any beneficial owner whose Bonds are registered in
the name of a broker, dealer, commercial bank, trust
company or other nominee and who wishes to tender
should contact such registered holder promptly and
instruct such registered holder to tender on such
beneficial owner's behalf. If such beneficial owner
wishes to tender on such owner's own behalf, such
owner must, prior to completing and executing the
Letter of Transmittal and delivering its Bonds,
either
</TABLE>
5
<PAGE>
<TABLE>
<S> <C>
make appropriate arrangements to register ownership
of the Bonds in such owner's name or obtain a
properly completed bond power from the registered
holder. The transfer of registered ownership may take
considerable time. The Authority will keep the
Exchange Offer open for not less than twenty business
days in order to provide for the transfer of
registered ownership.
Guaranteed Delivery Procedures...... Holders of Bonds who wish to tender their Bonds and
whose Bonds are not immediately available or who
cannot deliver their Bonds, the Letter of Transmittal
or any other documents required by the Letter of
Transmittal to the Exchange Agent (or comply with the
procedures for book-entry transfer) prior to the
Expiration Date must tender their Bonds according to
the guaranteed delivery procedures set forth in "The
Exchange Offer--Guaranteed Delivery Procedures."
Use of Proceeds..................... There will be no cash proceeds to the Authority from
the exchange pursuant to the Exchange Offer.
Withdrawal Rights................... Tenders may be withdrawn at any time prior to 5:00
p.m., New York City time, on the Expiration Date.
Acceptance of Bonds and Delivery of
Exchange Bonds.................... The Authority will accept for exchange any and all
Bonds which are properly tendered in the Exchange
Offer prior to 5:00 p.m., New York City time, on the
Expiration Date. The Exchange Bonds issued pursuant
to the Exchange Offer will be delivered promptly
following the Expiration Date. See "The Exchange
Offer--Terms of the Exchange Offer."
Exchange Agent...................... SouthTrust Bank of Alabama, National Association, 100
Office Park Drive, Lower Level, Birmingham, Alabama
35223, attention Judy Miller, telephone number (205)
254-5000, fax (205) 254-4180.
Registration Rights Agreement....... Pursuant to the Purchase Agreement, the Authority,
the Credit Enhancement Provider and Lehmann Brothers
Inc. entered into a Registration Rights Agreement
dated as of March 1, 1996 (the "Registration Rights
Agreement"), which grants the holder of the Bonds
certain exchange and registration rights. The
Exchange Offer is intended to satisfy such exchange
rights which terminate upon the consummation of the
Exchange Offer.
Tax Consequences.................... Brownstein Hyatt Farber & Strickland, P.C., special
counsel to the Authority, has advised the Authority
that in its opinion, the exchange of the Bonds for
Exchange Bonds pursuant to the Exchange Offer will
not be treated as an "exchange" for federal income
tax purposes because the Exchange Bonds will not be
considered to differ materially in kind or extent
from the Bonds. Rather, the Exchange Bonds received
by a holder will be treated as a continuation of the
Bonds in the hands of such holder. As a result, there
will be no federal income tax
</TABLE>
6
<PAGE>
<TABLE>
<S> <C>
consequences to holders exchanging Bonds for Exchange
Bonds pursuant to the Exchange Offer.
Principal Documents................. "DEVELOPMENT AGREEMENT" between the Authority and
Douglas County Development Corporation, the owner of
approximately 75% of the taxable property in the
Districts, and certain other property owners to
provide an alternate source of revenue for payments
due on the Bonds. The Development Agreement provides
for a payment in lieu of taxes by such owners and all
subsequent owners of the property owned by such
owners in the Districts. The amount of such payment
will be equivalent to the amount which would be
generated by a mill levy against all of the taxable
real and personal property in the Districts pursuant
to the Operating Agreement and the Intergovernmental
Agreement. The payment obligations under the
Development Agreement are absolute and unconditional
and no conditions must be satisfied for the
Development Agreement to become effective. The
Authority has assigned its interests in the
Development Agreement to the Credit Enhancement
Provider and the Trustee, allowing the Credit
Enhancement Provider and the Trustee to accelerate
any amounts due but not paid under the Development
Agreement, and to foreclose on such property for
which payments have not been made, if necessary.
"RECREATIONAL FACILITIES AGREEMENT" between the
Authority and the District to provide for the
ownership and operation of the Project until the
Operating Agreement becomes effective. Pursuant to
the terms of the Recreational Facilities Agreement,
the Authority will be the owner of the Project and
the District will have no fee title thereto until
such time as a deed to all or any portion of the
Project is delivered to the District under the terms
of the Operating Agreement.
"REIMBURSEMENT AGREEMENT" between the Authority and
the Credit Enhancement Provider establishing the
terms and conditions of the payment by the Authority
to the Credit Enhancement Provider of any amounts
paid by it under the Credit Enhancement. In
accordance with the terms of the Reimbursement
Agreement, the Authority is required to pay to the
Credit Enhancement Provider all amounts paid by the
Credit Enhancement Provider under the Credit
Enhancement, together with interest on any amounts
not timely paid.
"THE DEED OF TRUST"--The Authority delivered the Deed
of Trust for the purpose of securing (i) repayment of
the indebtedness evidenced by the Bonds, the Note and
the Credit Enhancement Note; (ii) the payment of all
other sums, with interest thereon, advanced in
accordance with the Deed of Trust; (iii) the
performance of the covenants and
</TABLE>
7
<PAGE>
<TABLE>
<S> <C>
agreements of the Authority and the Indenture; and
(iv) the repayment of any future disbursements, with
interest thereon, made to the Authority by the
Trustee or the Credit Enhancement Provider. The Deed
of Trust irrevocably grants and conveys to the Public
Trustee of Douglas County, Colorado, in trust, with
power of sale, the interests of the Authority in the
Property, together with all buildings and
improvements, and fixtures or appurtenances, now and
hereafter erected thereon, construction material,
supplies and equipment intended to be incorporated
and installed therein or used in construction
thereon; all building permits, construction
contracts, claims and warranties under construction
contracts, tap fees, architectural plans and
specifications relating to construction of
improvements on the Real Estate and trademarks and
logos relating to marketing the Property and any and
all rents and leases (subject to the rights to
collect and apply such rents), profits, royalties,
claims to water, water rights, minerals, geothermal
resources, oil and gas rights and profits, easements
and access rights, less any of said property which
may be released from the Deed of Trust.
"COLLATERALIZED CREDIT ENHANCEMENT AGREEMENT" between
the Credit Enhancement Provider and the Trustee,
pursuant to which the Credit Enhancement Provider is
obligated to make payment of debt service on the
Bonds for the period commencing March 1, 1998, but
the Credit Enhancement Provider's liability is
limited to the Collateral pledged and assigned to the
Trustee consisting of the Series B REMIC Bonds and
the debt service payments on the Series B REMIC
Bonds, which will be payable effectively from certain
payments to be made by the U.S. Government under a
lease for space in a building in the District of
Columbia.
"INDENTURE"--Contract between the Authority and the
Trustee (representing the interests of Bondholders)
setting forth the duties and responsibilities of the
Trustee with respect to the Bonds. The Indenture
establishes the exact nature of the security of the
Bonds and the trust provisions.
</TABLE>
8
<PAGE>
THE EXCHANGE BONDS
<TABLE>
<S> <C>
General........................... The form and terms of the Exchange Bonds are the same as
the form and terms of the Bonds (which they replace)
except that (i) the Exchange Bonds bear a Series B
designation, (ii) the Credit Enhancement for the
Exchange Bonds has been registered under the Securities
Act and, therefore, the Exchange Bonds will not bear
legends restricting the transfer thereof, and (iii) the
holders of Exchange Bonds will not be entitled to
certain rights under the Registration Rights Agreement,
including the provisions providing for an increase in
the interest rate on the Bonds in certain circumstances
relating to the timing of the Exchange Offer, which
rights will terminate when the Exchange Offer is
consummated. See "The Exchange Offer- Purpose and Effect
of the Exchange Offer." The Exchange Bonds will evidence
the same debt as the Bonds and will be entitled to the
benefits of the Indenture. See "Description of Exchange
Bonds. The Bonds and the Exchange Bonds are referred to
herein collectively as the "Securities."
Securities Offered................ $66,975,000 aggregate principal amount of Public
Facilities Revenue Bonds, Series 1996 B.
</TABLE>
<TABLE>
<CAPTION>
Maturity Schedule and Interest Rate COUPON REOFFERING
Maturity Date............................. (DECEMBER 1) PAR AMOUNT RATE YIELD
--------------- ------------ --------- ---------
<S> <C> <C> <C> <C>
1999 $ 1,980,000 5.75% 4.75%
2000 2,095,000 5.75 4.95
2001 2,215,000 5.75 5.15
2002 2,340,000 5.75 5.30
2003 2,475,000 5.90 5.40
2004 2,620,000 6.00 5.50
2005 2,780,000 6.10 5.60
2006 2,950,000 5.70 5.70
2007 3,115,000 6.30 5.80
2008 3,310,000 6.40 5.90
2009 3,525,000 6.50 6.00
</TABLE>
<TABLE>
<S> <C>
$7,750,000 6.375% Term Bonds due December 1, 2011 at
6.15%
$29,820,000 6.25% Term Bonds due December 1, 2017 at
6.35%
</TABLE>
9
<PAGE>
<TABLE>
<S> <C>
"Reoffering Yield" means the prices and/or yields,
listed by maturity, at which the Exchange Bonds are
offered to the public by the initial purchaser of the
Exchange Bonds. The Reoffering Yield is the rate of
return to the investors earned from payments of
principal and interest, with interest compounded semi-
annually at the stated yield, presuming that the
Exchange Bonds remain outstanding until the maturity
date. The Reoffering Yield takes into account the amount
of the premium or discount, if any, and the time value
of the investment.
Interest Payment Dates............ June 1 and December 1, commencing December 1, 1996.
Optional Redemption............... The Exchange Bonds are not subject to redemption at the
option of the Authority.
Extraordinary Mandatory The Exchange Bonds are subject to extraordinary
Redemption...................... mandatory redemption in whole at a redemption price of
100% of the principal amount thereof plus accrued
interest to the date fixed for redemption from proceeds
of prepayment of the Collateral. In the event that the
Series B REMIC Bonds are prepaid in full while the
Exchange Bonds are outstanding, the proceeds of such
prepayment will be used to redeem the Exchange Bonds.
The Acquisition and Construction Notes (as defined
herein under "CREDIT ENHANCEMENT") permit optional
prepayments in full to be made on and after December 1,
2015. Under the REMIC Indenture, prepayments of the
Acquisition and Construction Notes requires prepayment
of the Series B REMIC Bonds. See "CREDIT ENHANCEMENT."
Credit Enhancement................ The Exchange Bonds will be credit enhanced by the Credit
Enhancement Provider. The Exchange Bonds are limited
obligations of the Authority, secured by a Deed of Trust
interest in the Property. See "DEFINITIONS OF CERTAIN
TERMS AND DESCRIPTIONS OF PRINCIPAL DOCUMENTS-- THE DEED
OF TRUST."
Collateral........................ The Collateral consists of $67,075,000 in principal
amount of Series B REMIC Bonds, which will effectively
be payable from certain payments to be made by the U.S.
Government under a lease for space in a building in the
District of Columbia.
</TABLE>
SELECTED FINANCIAL DATA-BFC GUARANTY CORP.
The income statement data set forth below for the period from March 29, 1996
to December 31, 1996 and the balance sheet data at December 31, 1996 have been
derived from the audited financial statements of BFC Guaranty Corp. The data
presented below for the four month period ended April 30, 1997 has been derived
from the unaudited financial statements of BFC Guaranty Corp. and, in the
opinion of BFC Guaranty Corp., reflects all adjustments (consisting only of
normal recurring adjustments) necessary for a fair presentation of the financial
position and results of operations of BFC Guaranty Corp. for such period.
10
<PAGE>
<TABLE>
<CAPTION>
PERIOD FROM
MARCH 29,
1996 TO FOUR MONTHS
DECEMBER 31, ENDED APRIL
1996 30, 1997
------------- -------------
<S> <C> <C>
Income Statement Data:
Revenues......................................................................... $ 3,484,999 $ 1,585,005
Provision for Income Taxes....................................................... 1,184,900 538,902
Net Income....................................................................... $ 2,300,099 $ 1,046,103
Weighted Average Common Shares Outstanding......................................... 1,500 1,500
Primary and Fully Diluted Earnings per Common Share.............................. $ 1,533.40 $ 697.40
Balance Sheet Data:
Cash............................................................................. $ 1,000 $ 1,000
Debt Securities.................................................................... $ 53,800,994 $ 55,203,858
Advances to Parent Company......................................................... $ 4,018,500 $ 4,018,500
------------- -------------
Total Assets................................................................... $ 59,405,685 $ 60,908,164
------------- -------------
------------- -------------
</TABLE>
SELECTED FINANCIAL DATA-BFC FINANCE CORP.
The income statement data set forth below for the period from March 29, 1996
to December 31, 1996 and the balance sheet data at December 31, 1996 have been
derived from the audited financial statements of BFC Finance Corp. The data
presented below for the four month period ended April 30, 1997 has been derived
from the unaudited financial statements of BFC Finance Corp. and, in the opinion
of BFC Finance Corp., reflects all adjustments (consisting only of normal
recurring adjustments) necessary for a fair presentation of the financial
position and results of operations of BFC Finance Corp. for such period.
<TABLE>
<CAPTION>
PERIOD FROM MARCH 29,
1996 FOUR MONTHS ENDED
TO DECEMBER 31, 1996 APRIL 30, 1997
------------------------- ------------------
<S> <C> <C>
Income Statement Data:
Interest Income................................................... $ 7,340,218 $ 3,339,248
Interest Expense.................................................. $ 7,226,258 $ 3,221,105
Amortization Expense.............................................. $ 76,548 $ 34,021
Provision for Income Taxes........................................ 12,720 28,600
Net Income........................................................ $ 24,692 $ 55,522
Weighted Average Common Shares Outstanding........................ 1,500 1,500
Primary and Fully Diluted Earnings per Common Share............... $ 16.40 $ 37.01
Balance Sheet Data:
Notes Receivable.................................................. $ 126,488,158 $ 129,827,406
Bond Issue Costs.................................................. $ 2,134,833 $ 2,100,812
Total Assets.................................................. $ 128,622,991 $ 129,617,911
Bonds Payable..................................................... $ 128,170,270 $ 129,617,911
Stockholders Equity............................................... $ 26,192 $ 81,714
</TABLE>
GRAPHICAL DEPICTION OF AFFILIATES
The following chart depicts the relationships between the various affiliates
of the Registrants.
<TABLE>
<S> <C> <C> <C> <C>
- ------------------------ FRANKLIN L. HANEY -
INDIVIDUAL(1)
FRANKLIN L. HANEY
COMPANY
A SOLE PROPRIETORSHIP(1)
------------------------
/
/
/
--------------------------------------------------------------------------------
/ / / /
/ / / /
/ / / /
- ------------------------ ------------------------ ------------------------ ------------------------ ------------------------
CASTLE ROCK RANCH DOUGLAS COUNTRY BUILDING FINANCE COMPANY TOWER ASSOCIATES, INC(5) TOWER ASSOCIATES II,
PUBLIC IMPROVEMENTS DEVELOPMENT OF TENNESSEE(4) INC.(6)
AUTHORITY(2) CORPORATION (DCDC)(3)
OWNERSHIP: OWNERSHIP: OWNERSHIP: OWNERSHIP:
NONE - GOVERNMENTAL OWNERSHIP: FRANKLIN L. HANEY 49% FRANKLIN L. HANEY FRANKLIN L. HANEY
ENTITY FRANKLIN L. HANEY 100% HERBERT OAKES 51% AND HIS FAMILY 100% AND HIS FAMILY 100%
- ------------------------ ------------------------ ------------------------ ------------------------ ------------------------
/ / / /
/ / / /
/ / / /
------------------------ ------------------------ ------------------------ ------------------------
DCDC II(7) BFC FINANCE CORP. PARCEL 49B LIMITED PARCEL, 49C LIMITED
(REMIC)(8) PARTNERSHIP(9) PARTNERSHIP(10)
OWNERSHIP: OWNERSHIP:
OWNERSHIP: OWNERSHIP: TOWER ASSOCIATES, TOWER ASSOCIATES,
FRANKLIN L. HANEY 21% BUILDING FINANCE COMPANY INC. 50% INC. 50%
DCDC 79% OF TENNESSEE, INC. 100% OTHER UNRELATED 50% OTHER UNRELATED 50%
------------------------ ------------------------ ------------------------ ------------------------
/
/
/
------------------------
BFC GUARANTY CORP.(11)
OWNERSHIP:
BUILDING FINANCE COMPANY
OF TENNESSEE, INC. 100%
------------------------
</TABLE>
(1) Party to the following principal documents: None
(2) Issuer of the Bonds and the Exchange Bonds; Party to the following
documents: Indenture of Trust; Operating Agreement; Reimbursement Agreement;
Development agreement; Deed of Trust: Recreational Facilities Agreement
(3) Party to the following principal documents: Development Agreement
(4) Party to the following principal documents: REMIC Trust Indenture; Loan
Agreement
(5) Party to the following principal documents: None
(6) Party to the following principal documents: None
(7) Party to the following principal documents: Assignment of Collateral and
Trust agreement; Deed of Trust with Assignment of Rents and Security
Agreement and Fixture Filing
(8) Issuer of REMIC Bonds; Party to the following principal documents: REMIC
Trust Indenture; Assignment of Collateral and Trust Agreement
(9) Party to the following principal documents: None
(10) Party to the following principal documents: the Lease; Instrument of
Assignment of Payments Under Government Contracts; Loan Agreement; Deed of
Trust, Security Agreement and Assignment of Rents
(11) Issuer of the Credit Enhancement; Party to the following principal
documents: Reimbursement Agreement; Collateralized Credit Enhancement
Agreement; Bond Pledge and Security Agreement
11
<PAGE>
RISK FACTORS
Prospective investors should carefully consider the following factors before
accepting the Exchange Offer.
APPROVALS NECESSARY FOR CONSTRUCTION OF THE PROJECT
The Authority intends to construct a 36-hole golf course on the Real Estate,
which will generate revenue that will be used to pay interest and the principal
on the Exchange Bonds. Construction will not commence until the requisite local
government approvals, including approvals of amendments to the Districts'
service plans, are granted. See "THE PROJECT" herein for a further discussion of
the necessary governmental approvals for construction of the Project. No
assurance can be given that the necessary approvals will be forthcoming, or that
such construction will be successful or completed on a timely basis. See "THE
PROJECT--Necessary Approvals."
RISK OF NON-COMPLETION OF THE PROJECT
The Authority may be unable to complete construction of the Project due to
(i) the failure of obtaining necessary governmental approvals; (ii) failure to
secure additional financing necessary to construct the golf course; (iii)
failure to successfully negotiate a golf course construction agreement; or (iv)
construction delays beyond the Authority's control. In such an event, revenues
from the Project may be insufficient to fund debt service on the Bonds and
operating expenses of the Project, in which case payments of such amounts would
be dependent on the Credit Enhancement (in the case of debt service payments on
the Bonds) and the Development Agreement. In such event, the Credit Enhancement
Provider might foreclose on the Project and convert it into a non-public
facility. Such a change in use could adversely affect the exclusion of interest
on the Bonds from gross income for federal income tax purposes. Consequently,
the Deed of Trust requires that, before the Credit Enhancement Provider can
foreclose on the Project, it must obtain an opinion of Special Tax Counsel
acceptable to the Trustee that such foreclosure will not adversely affect the
exclusion of interest on the Bonds from gross income for federal income tax
purposes. The rating and marketability of the Bonds might also likely be
adversely affected by the non-completion of the Project.
RISK OF NON-COMPLETION OF DAWSON RIDGE
The residential development of Dawson Ridge may not be completed as planned
due to (i) financial failure of Douglas County Development Corporation; (ii)
failure by Douglas County Development Corporation to secure necessary financing
to fund construction of the development; or (iii) the failure to obtain all
necessary zoning approvals. In such event, the amount of mill levy revenues
collected by the Districts together with the net revenues from operation could
be insufficient to make full payment of principal and interest on the Bonds,
although the Credit Enhancement will continue to be available for that purpose
(exclusive of Extra Payments). In such event, the Credit Enhancement Provider
might foreclose on the Project and convert it into a non-public facility. Such a
change in use could adversely affect the exclusion of interest on the Bonds from
gross income for federal income tax purposes. Consequently, the Deed of Trust
requires that, before the Credit Enhancement Provider can foreclose on the
Project, it must obtain an opinion of Special Tax Counsel acceptable to the
Trustee that such foreclosure will not adversely affect the exclusion of
interest on the Bonds from gross income for federal income tax purposes. The
bond rating and marketability of the Bonds might also likely be adversely
affected by the non-completion of Dawson Ridge.
LIMITED OBLIGATION OF THE AUTHORITY
The Bonds are limited obligations of the Authority, secured only by the
trust estate identified in the Indenture and payable solely from the funds held
under the Indenture (including capitalized interest
12
<PAGE>
deposited from the proceeds of the Bonds), revenues of the Authority and
payments made under the Credit Enhancement.
COMPETITIVE CONDITIONS
Although the Property is situated in one of the fastest growing counties in
the country, Douglas County, Colorado, there are a number of existing planned
unit developments in the immediate vicinity of the Property which will compete
with the Property if it is ever developed. In addition to such competing
developments, many more planned unit developments exist in the greater Denver
metropolitan area. This may adversely effect the success of the Project and the
ability of Dawson Ridge to attract people to live in this community.
RISKS RELATED TO RENT COMMENCEMENT
The Government is not obligated to pay rent on the Portals II office
building and parking garage until March 1, 1998. Until such date, debt service
on the Bonds is payable from the proceeds of the Bonds in the form of
capitalized interest. See "USE OF PROCEEDS" herein. Such capitalized interest
amount is on deposit with the Trustee and will be sufficient to make all
payments of interest on the Bonds through March 1, 1998 (but not Extra
Payments).
RISKS RELATED TO PAYMENT OF RENT
As is the case with most federal agencies, the government's access to funds
to make payments due under the Lease requires an annual appropriation by
Congress. The government's ability to make payments under the Lease requires
such an appropriation to the Federal Buildings Fund, the fund from which all the
government's long-term leases are paid. Counsel for the U.S. Government rendered
an opinion that the obligations of the government to pay rent under the Lease
constitutes an absolute and unconditional obligation of the government
irrespective of whether Congress makes the necessary appropriations for the
Lease. Accordingly, if Congress fails to make the necessary appropriation to the
Federal Buildings Fund or in the event any payments that are properly due and
owing under the Lease are not made for any other reason, the partnership or the
REMIC Trustee would still be entitled, in the opinion of the counsel for the
government, to enforce the payment of the obligations of the United States in
accordance with the terms of the Lease, or as otherwise may be available at law
or in equity. For a further description of the Lease, see "DEFINITIONS OF
CERTAIN TERMS AND DESCRIPTIONS OF PRINCIPAL DOCUMENTS--THE LEASE." In the event
the Lease is terminated as a result of casualty or condemnation, proceeds of
insurance policies or of any condemnation award would be used to redeem the
Series B REMIC Bonds and such redemption proceeds would be used to redeem the
Bonds. There can be no assurance that insurance or condemnation proceeds would
be received in amounts sufficient to redeem all or any of the Bonds. See "The
Bonds--Redemption Provisions--Extraordinary Mandatory Redemption."
ADDITIONAL BONDS
The Authority has the power to issue additional bonds which are subordinate
in right of payment to the Exchange Bonds. While this will not affect the
collateral securing the Exchange Bonds, the issuance of additional bonds could
dilute the revenue stream available to pay the principal and interest on the
Exchange Bonds as they become due.
LACK OF PUBLIC MARKET
The Bonds are currently owned by a relatively small number of beneficial
owners. Prior to the Exchange Offer, there has not been any public market for
the Bonds. The Bonds and the Credit Enhancement have not been registered under
the Securities Act and will be subject to restrictions on
13
<PAGE>
transferability to the extent that they are not exchanged for Exchange Bonds by
holders who are entitled to participate in this Exchange Offer. The Authority
does not intend to list the Exchange Bonds on any national securities exchange
or to seek the admission thereof to trading in the National Association of
Securities Dealers Automated Quotation System. Lehmann Brothers Inc. has advised
the Authority that they currently intend to make a market in the Exchange Bonds,
but they are not obligated to do so and may discontinue such market making at
any time. In addition, such market making activity will be subject to the limits
imposed by the Securities Act and the Securities Exchange Act of 1934, as
amended, and may be limited during the Exchange Offer (as defined herein) and
the pendency of the Shelf Registration Statement. Accordingly, no assurance can
be given that an active public or other market will develop for the Exchange
Bonds or as to the liquidity of the trading market for the Exchange Bonds. If a
trading market does not develop or is not maintained, holders of the Exchange
Bonds may experience difficulty in reselling the Exchange Bonds or may be unable
to sell them at all. If a market for the Exchange Bonds develops, any such
market may be discontinued at any time.
If a public trading market develops for the Exchange Bonds, future trading
prices for such securities will depend on many factors, including, among other
things, prevailing interest rates, the Authority's result of operations and the
market for similar securities. Depending on prevailing interest rates, the
market for similar securities and other factors, including the financial
condition of the Authority, or the Credit Enhancement Provider the Exchange
Bonds may trade at a discount from their principal amount.
Issuance of the Exchange Bonds in exchange for the Bonds pursuant to the
Exchange Offer will be made only after a timely receipt by the Authority of such
Bonds, a properly completed and duly executed Letter of Transmittal and all
other required documents. Therefore, holders of the Bonds desiring to tender
such Bonds in exchange for Exchange Bonds should allow sufficient time to ensure
timely delivery. The Authority is under no duty to give notification of defects
or irregularities with respect to the tenders of Bonds for exchange. Bonds that
are not tendered or are tendered but not accepted will, following the
consummation of the Exchange Offer, continue to be subject to the existing
restrictions upon transfer thereof, and upon consummation of the Exchange Offer
certain registration rights under the Registration Rights Agreement will
terminate. In addition, any holder of Bonds who tenders in the Exchange Offer
for a purpose of participating in a distribution of the Exchange Bonds may be
deemed to have received restricted securities and, if so, will be required to
comply with the registration and prospectus delivery requirements of the
Securities Act in connection with any resale transaction. Each broker-dealer
that receives Exchange Bonds for its own account in exchange for Bonds, where
such Bonds were acquired by such broker-dealer as a result of market-making
activities or other trading activities, must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Bonds. See "Plan of
Distribution." To the extent that Bonds are tendered and accepted in the
Exchange Offer, the trading market for untendered and tendered but unaccepted
Bonds could be adversely affected. See "The Exchange Offer."
RISKS RELATED TO CHANGE IN RATING
Standard & Poor's Ratings Services, a division of The McGraw-Hill Companies,
Inc. (the "Rating Agency"), has assigned a rating of "AAp" to the Bonds based on
an evaluation of the Credit Enhancement. The letter "p" indicates the rating is
provisional. The provisional rating assumes the successful completion of the
Portals II building which is the subject of the Lease and indicates that
sufficiency of the Credit Enhancement to pay debt service requirements of the
Bonds is largely or entirely dependent upon the successful timely completion of
such building. This rating, however, while addressing credit quality subsequent
to completion of such building, makes no comment on the likelihood of, or the
risk of default upon failure of such completion. There is no assurance that such
rating will be maintained for any given period of time or that it will not be
lowered or withdrawn entirely if, in the judgment of the Rating Agency,
circumstances so warrant. If the Portals II building is not timely completed,
the Exchange Bonds' rating
14
<PAGE>
may be revised downward or withdrawn altogether. Any such revision or withdrawal
of such a rating could have an adverse effect on the market price and
marketability of the Bonds.
TAXATION
The treatment of interest on the Exchange Bonds, as described herein under
"TAX EXEMPTION" assumes the accuracy of the certifications of the Authority, and
continuing compliance by the Authority with the requirements of the Internal
Revenue Code of 1986, as amended (the "Code"). If such certifications are not
accurate, or if the Authority fails to continue to comply with the Code
requirements, the treatment of interest on the Exchange Bonds could be adversely
affected as described below. Furthermore, ownership of the Bonds may result in
collateral federal income tax consequences to certain taxpayers, including,
without limitation, financial institutions, property and casualty insurance
companies, individual recipients of Social Security or Railroad Retirement
benefits, certain S corporations with "excess net passive income" and taxpayers
who may be deemed to have incurred or continued indebtedness to purchase or
carry the Exchange Bonds. Special Tax Counsel has expressed no opinion as to
such collateral tax consequences. Purchasers of the Bonds should consult their
own tax advisors as to collateral federal income tax consequences.
The Code sets forth certain requirements which must be met subsequent to the
issuance and delivery of the Bonds for interest thereon to remain excludable
from the gross income of the owners of the Bonds for federal income tax
purposes, including investment restrictions, periodic payments of arbitrage
profits to the United States, requirements regarding the proper use of bond
proceeds and the facilities financed therewith and certain other matters. The
Authority has covenanted to comply with such requirements. Noncompliance with
such requirements could cause the interest on the Bonds to be includable in the
gross income of the owners of the Bonds for federal income tax purposes,
retroactive to the date of issue of the Bonds.
PREPAYMENT
In addition to the mandatory sinking fund provisions of the Exchange Bonds,
the Exchange Bonds are subject to mandatory prepayment in full in the
circumstances described under "DESCRIPTION OF EXCHANGE BONDS--Redemption
Provisions." Therefore, under certain circumstances, Bondholders may not be able
to hold their Exchange Bonds to maturity.
CERTAIN CONSIDERATIONS RELATING TO BOOK-ENTRY-ONLY FORM OF EXCHANGE BONDS
Until and unless definitive Exchange Bonds are issued in exchange for the
Book-Entry-Only form of the Exchange Bonds, owners of the Book-Entry-Only form
of Exchange Bonds will not be considered owners or holders of any Exchange
Bonds. Cede & Co., as nominee of DTC, will be the sole registered owner and
holder of the Exchange Bonds. After payment to Cede & Co., as nominee of DTC,
neither the Trustee nor the Authority will have any responsibility or liability
for the payment of interest, principal or other amounts to DTC or to beneficial
owners of any Exchange Bonds. Accordingly, each person owning Book-Entry
interests in the Exchange Bonds must rely on the procedures of DTC and, if such
person is not a Participant in DTC, on the procedures of the Participant through
which such person owns its interest, to exercise any rights and obligations of a
registered owner under the Indenture. See "Description of Exchange
Bonds--Book-Entry-Only System."
Payment of principal, interest and other amounts owing on or in respect of
the Exchange Bonds will be made to Cede & Co., as nominee of DTC, and
thereafter, payments will be made to Participants (and then by the Participants
to Indirect Participants). Neither the Trustee nor the Authority will have any
responsibility or liability for any aspect of the records relating to, or
payment made on account of, such Book-Entry interests in the Exchange Bonds or
for maintaining, supervising or reviewing any records relating to such
Book-Entry interests in the Exchange Bonds.
15
<PAGE>
Owners of Book-Entry interests in the Exchange Bonds will not have the
direct rights to act upon solicitations by the Trustee of consents or requests
by the Trustee for waivers or other actions from registered owners of the
Exchange Bonds. Instead, an owner of Book-Entry interests in the Exchange Bonds
will be permitted to act only to the extent it has received appropriate proxies
to do so from DTC or, if applicable, from a Participant. There can be no
assurance that procedures implemented for the granting of such proxies will be
sufficient to enable owners of Book-Entry interests in the Exchange Bonds to
vote on any requested actions on a timely basis. Similarly, upon the occurrence
of an Event of Default (as defined) under the Indenture, unless and until
definitive Exchange Bonds are issued, owners of Book-Entry interests in the
Exchange Bonds will be restricted to acting through DTC. There can be no
assurance that the procedures to be implemented by DTC under such circumstances
will be adequate to ensure the timely exercise of remedies under the Exchange
Bonds. DTC, or its nominee, will be the only owner with the right to bring a
claim under the Indenture for nonpayment of principal and interest; therefore,
the holders must rely upon the procedures of the DTC, unless and until
definitive Exchange Bonds are issued. See "Description of Exchange
Bonds--Book-Entry-Only System."
ADEQUACY OF INSURANCE FOR THE PROJECT
The Registrants believe existing insurance coverage amounts are adequate for
the Property. However, as the Property is developed and becomes more valuable,
additional insurance may be necessary. There can be no assurance that such
additional insurance will be available on terms agreeable to the Authority.
Moreover, there is no assurance that the existing insurance coverage amounts
will be adequate under all possible circumstances.
USE OF PROCEEDS
This Exchange Offer is intended to satisfy certain of the Authority's
obligations under the Purchase Agreement and the Registration Rights Agreement.
The Authority will not receive any cash proceeds from the issuance of the
Exchange Bonds offered hereby. In consideration for issuing the Exchange Bonds
contemplated in this Prospectus, the Authority will receive Bonds in like
principal amount, the form and terms of which are the same as the form and terms
of the Exchange Bonds (which they replace), except as otherwise described
herein. The Bonds surrendered in exchange for Exchange Bonds will be retired and
canceled and cannot be reissued. Accordingly, issuance of the Exchange Bonds
will not result in any increase or decrease in the indebtedness of the
Authority.
The net proceeds from the Bonds in the initial offering were used (1) to
acquire the Property, (2) to pay capitalized interest, and (3) to pay certain
costs to issue the Bonds and provide credit enhancement. The following table
shows the estimated sources and uses of funds from the offering of the Bonds:
<TABLE>
<CAPTION>
<S> <C>
SOURCES:
Proceeds of Bonds (1)................................................. $ 67,760,621.05
Accrued Interest...................................................... 321,393.53
TOTAL SOURCES OF FUNDS............................................ $ 68,082,014.58
USES:
Project Fund Deposit.................................................. $ 54,550,000.00
Debt Service Fund Deposit (2)......................................... 7,729,585.70
Costs and Expenses of Issuance and Financing Fees (3)................. 5,802,428.88
----------------
TOTAL USES OF FUNDS............................................... $ 68,082,014.58
</TABLE>
- ------------------------
(1) Includes premium of $785,621.05.
(2) Represents capitalized interest to March 1, 1998 and accrued interest.
(3) Includes underwriter's discount, legal fees, initial, first and second
annual Trustee fee, rating fee, credit enhancement fee, printing and
miscellaneous expenses.
16
<PAGE>
CAPITALIZATION
The following table sets forth the historical capitalization of the
Registrants at December 31, 1996. This table should be read in conjunction with
the Selected Historical Financial Data included elsewhere in this Prospectus.
BFC Guaranty Corp.
<TABLE>
<CAPTION>
AS OF DECEMBER UNAUDITED AS OF
31, 1996 APRIL 30, 1997
----------------- ---------------
<S> <C> <C>
STOCKHOLDER'S EQUITY:
Common Stock, no par value, 1,500 shares authorized and issued................ $ 1,000 $ 1,000
Additional Paid-In Capital.................................................... 50,741,210 50,741,210
Retained Earnings............................................................. 3,346,202 2,300,099
----------------- ---------------
Total Stockholder's Equity and Capitalization............................... $ 54,088,412 $ 53,042,309
----------------- ---------------
----------------- ---------------
</TABLE>
BFC Finance Corp.
<TABLE>
<CAPTION>
AS OF DECEMBER UNAUDITED AS OF
31, 1996 APRIL 30, 1997
----------------- ---------------
<S> <C> <C>
Bonds Payable................................................................. $ 128,170,270 $ 129,617,911
STOCKHOLDER'S EQUITY:
Common Stock, no par value, 1,500 shares authorized and issued................ $ 1,500 $ 1,500
Retained Earnings............................................................. $ 24,692 $ 80,214
----------------- ---------------
Total Stockholder's Equity and Capitalization............................... $ 128,196,462 $ 129,699,625
----------------- ---------------
----------------- ---------------
</TABLE>
17
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following should be read in conjunction with the Financial Statements
and notes thereto included elsewhere in this Prospectus.
BFC GUARANTY CORP. MARCH 29, 1996 THROUGH DECEMBER 31, 1996.
The Credit Enhancement Provider is a special purpose entity formed solely to
provide credit enhancement for the Bonds. In connection with the issuance of the
Bonds, the Authority paid $4,018,500 to the Credit Enhancement Provider as a
commitment fee. The Credit Enhancement Provider advanced this fee to its parent,
the Building Finance Company of Tennessee. The Credit Enhancement Provider has
no other operations.
The Authority received $67,760,621 in net proceeds from the issuance of the
Bonds, of which $54,550,000 was used to acquire land and water rights from the
Douglas County Development Corporation. The Authority has no other operations.
BFC FINANCE CORP. MARCH 29, 1996 THROUGH DECEMBER 31, 1996.
BFC Finance Corp. is a special purpose entity formed solely to purchase
certain loans from its parent company, Building Finance Company of Tennessee,
and to issue its REMIC Lease-Backed Bonds Series 1996, Class A (the "Class A
REMIC Bonds" and, together with the Class B REMIC Bonds, the "REMIC BONDS") and
the Class B REMIC Bonds. BFC Finance Corp.'s operations commenced on March 29,
1996, with the issuance of $74,925,000 of Class A REMIC Bonds and the subsequent
exchange of certain proceeds from these bonds and placement of the Class B REMIC
Bonds with the Credit Enhancement Provider for notes receivable totaling
$126,087,367 from 49C Partnership that were held by Building Finance Company of
Tennessee. The notes receivable are providing financing for the construction of
the Portals II project. BFC Finance Corp. also loaned $9,310,689.07 to DCDC II,
Inc. and received a non-interest bearing Note Receivable secured by undeveloped
land in Castle Rock, Colorado. BFC Finance Corp.'s entire operations during 1996
consisted of interest income of $7,240,218 from the notes receivable, interest
expense of $7,226,258 on the REMIC Bonds, and amortization expense of $76,548
related to issuance costs of the REMIC Bonds. Actual interest payments received
on the notes receivable and made on the REMIC Bonds totaled $3,990,295. All
additional interest income and expense results from the discounting of the notes
receivable and REMIC Bonds to their net present values based on future cash
flows.
THE PROJECT
GENERAL
The proceeds of the Bonds were used for the acquisition from Douglas County
Development Corporation, an affiliate of The Franklin L. Haney Company, of the
Property. Douglas County Development Corporation is owned entirely by Franklin
L. Haney. See "CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS" herein. The
purchase price for this acquisition ($54,550,000) was not determined in an arm's
length negotiation, but rather is the appraised fair market value determined by
THK Associates, Inc., independent appraisers, in their February 26, 1996
appraisal. It is anticipated that the Authority will construct a 36-hole golf
course on the Real Estate, to be operated by the Authority as a municipal golf
course. No assurances, however, can be given that the contemplated golf course
will be ultimately constructed. The Authority has covenanted in the
Reimbursement Agreement to take all reasonable efforts and diligently proceed to
complete the Recreational Facilities, including the golf course. It is expected
that certain roadways will also be constructed on the Real Estate. In addition,
it is expected that tennis and other recreational facilities will be built at a
central golf course club house facility, which facilities will be open to the
public. The Bonds will be used solely for real estate and water rights
18
<PAGE>
acquisitions (and payment of cost of issuance, including the payment of fees and
expenses of the Credit Enhancement Provider in connection with providing the
Credit Enhancement). Following the completion of construction documentation and
the issuance of all the necessary government permits and approvals, the
Authority intends to issue one or more subsequent series of bonds in order to
finance the design, construction and completion of golf course and recreational
facility improvements and equipment, and for roadway construction (all such
acquisition and construction constituting the "Project").
THE APPRAISAL REPORT
THK Associates, Inc. was engaged by C. Roger Addlesperger, a director of the
Authority, to conduct an appraisal of the Property for the purpose of
establishing the fair market value. The investigation included a comprehensive
market analysis, examination of lot and parcel sales, review of development
costs, derivation of a discount rate, inquiry of water rights values, and
physical inspection of the site and surrounding area.
THK Associates, Inc., conducted a "Highest and Best Use Analysis" which is
the reasonably probable and legal use of vacant land or an improved property,
which is physically possible, appropriately supported, financially feasible, and
that results in the highest value. It was determined by THK Associates, Inc.
that there are no physical limitations, legal restrictions, or economic
limitations, and that the proposed and zoned uses offer the greatest potential
return to the Property. The highest and best use recommendation by THK
Associates, Inc. is for mixed use, residential, office, industrial, retail and
related uses. A discounted cash flow/subdivision approach was utilized as a
method of valuation, based upon the highest and best use being for current
development and the partial improvement of the site. The valuation of the
Property was determined to be $52,300,000, with excess water rights totalling
$2,250,000 for a combined value of $54,550,000. The appraisal report issued by
THK Associates, Inc, is subject to a number of assumptions and limiting
conditions, each of which are set forth in the appraisal. A copy of the
appraisal is available from the Exchange Agent.
THK Associates, Inc. was selected by the Authority to conduct the appraisal
analysis because of its nationally recognized expertise in golf course
feasibility and valuation. THK Associates, Inc. has prepared over 300 studies
for various types of golf courses and golf course real estate developments
across the country. For the period from January 1, 1993 through December 31,
1996, THK Associates, Inc. was paid $41,838 for its professional services
relating to the appraisal of the Property and feasibility study and land
development assistance with respect to the Project. During such time, THK
Associates, Inc has also performed other valuation and consulting services for
affiliates of BFC Guaranty Corp. and has been paid $53,854 for such services.
GOLF COURSE DESIGN WORK
The Authority engaged Global Golf Course Design, Inc. to produce a detailed
design and construction package based on a review of Real Estate suitability,
creation of a detailed golf course design, and overview of on-site construction
requirements. Global Golf Course Design, Inc. was founded by James J. Engh. Mr.
Engh has been involved with golf course design and construction since 1981.
Global Golf Course Design, Inc.'s current project list includes 13 golf courses
located primarily in the western United States although some are in Thailand and
China. Other golf courses designed by Mr. Engh and presently open include
facilities in Thailand, Austria, Italy, France, Germany, England, Ireland and
Belgium.
ESTIMATED COSTS TO COMPLETE THE PROJECT
The construction and completion of the golf course and other recreational
facility improvements currently estimated to cost $5,150,000. The Authority also
expects to incur approximately $25,000,000 of additional costs to complete
nonrevenue producing infrastructure, including roadways, which will be
transferred to the District on completion. Under the terms of the Indenture, any
additional bonds issued
19
<PAGE>
by the Authority will be issued on a subordinate basis. There can be no
assurance that the Authority will be able to issue any additional bonds or issue
them in amounts needed to finance construction of the golf course and other
recreational facility improvements and non-revenue producing infrastructure.
NECESSARY APPROVALS
Development of the Project will require that the Town of Castle Rock approve
amendments to each of the Districts service plans, as discussed in "THE
DISTRICTS--Service Plan" and "--Town of Castle Rock Agreements." At the present
time, the Town of Castle Rock is not accepting any applications for service plan
amendments until it finalizes new policies regarding the use and powers of
special districts located within its jurisdiction. These new policies are
expected to be in place in 1997. Once the new policies are in effect, the
Districts will submit their applications for service plan amendments to the Town
of Castle Rock. Such amendments to the Districts' service plans may also be a
condition to the effectiveness of the Operating Agreement and the
Intergovernmental Agreement, as described in "SECURITY AND SOURCE OF PAYMENT."
There can be no assurance that the Town of Castle Rock will approve the
amendments to the Districts' service plans. In addition, undertaking completion
of the Project will require various governmental permits and approvals
(including revisions of the previously approved Planned Unit Development ("PUD")
for the Dawson Ridge development). While the Districts and the Authority have
commenced initial conversations with Town of Castle Rock staff on the nature and
extent of such requirements, no formal PUD amendments will be submitted to the
Town of Castle Rock or the Town of Castle Rock Zoning Commission until the Town
of Castle Rock has approved the amendments to the Districts' service plans. Even
if the service plan amendments are approved by the Town of Castle Rock, no
assurance can be given that the requisite approvals for actual development of
the Project will be forthcoming or that they will be obtained in a timely
fashion. Once construction has commenced, it is anticipated that completion of
the golf course and other recreational improvements component of the Project
will occur within eighteen months of commencement of construction.
In the event that the design and construction of the golf course and
recreational facility improvements and equipment within the Project are not
completed, there will be no revenues from the operation of those facilities
available for payment of principal and interest on the Bonds, although property
tax revenues or fees in lieu thereof under the Development Agreement will
continue to be available for that purpose. If the golf course and recreational
facilities are built, but the residential development of Dawson Ridge is not
completed as planned, then the amount of property tax revenues and Development
Agreement revenues collected by the Districts together with the net revenues
from operation of the Project could be insufficient to make full payment of
principal and interest on the Bonds. In either such event, the Credit
Enhancement Provider must pay the debt service on the Bonds (exclusive of Extra
Payments), but the Credit Enhancement Provider might foreclose on the Project
and convert it into a non-public facility. Such a change in use could adversely
affect the exclusion of interest on the Bonds from gross income for federal
income tax purposes. Consequently, the Deed of Trust requires that, before the
Credit Enhancement Provider can foreclose on the Project, it must obtain an
opinion of Special Tax Counsel acceptable to the Trustee that such foreclosure
will not adversely affect the exclusion of interest on the Bonds from gross
income for federal income tax purposes. In addition, the Deed of Trust will be
terminated as to the Bondholders if the Credit Enhancement Provider forecloses
on it because of a default by the Authority under the Reimbursement Agreement.
COMPETITIVE CONDITIONS
Although the Property is situated in one of the fastest growing counties in
the country, Douglas County, Colorado, there are a number of existing planned
unit developments in the immediate vicinity of the Property which will compete
with the Property if it is ever developed. In addition to such competing
developments, many more planned unit developments exist in the greater Denver
metropolitan area.
20
<PAGE>
INSURANCE COVERAGE
The Property is currently covered by $2,000,000 of general liability
insurance. There are no physical improvements located on the Property at the
present time. In the opinion of the Registrants, the Property is adequately
covered by such insurance coverage amounts at the present time.
LIMITATIONS ON IMPOSITION OF MILL LEVY
On November 7, 1995, the voters of the District and the Related Districts
approved the execution and delivery of an Operating Agreement and an
Intergovernmental Agreement obligating the Related Districts to provide funds to
the District for payment to the Authority to the extent that revenues from the
Project are insufficient to fund debt service on the Bonds and operating
expenses of the Project, such funds to be derived from a mill levy not to exceed
35 mills on all of the taxable property within the Districts. The Operating
Agreement and the Intergovernmental Agreement will not become effective,
however, until one of two conditions (discussed in "SECURITY AND SOURCE OF
PAYMENT") for imposition of the mill levy are satisfied. In order to provide an
alternate source of revenue, the Authority has entered into a Development
Agreement dated as of March 1, 1996, with Douglas County Development
Corporation, the owner of approximately 75% of the taxable property in the
Districts, providing for a payment in lieu of taxes by Douglas County
Development Corporation and all subsequent owners of the property owned by
Douglas County Development Corporation in the Districts. See "DEFINITIONS OF
CERTAIN TERMS AND DESCRIPTIONS OF PRINCIPAL DOCUMENTS" herein for a more
complete description of the Operating Agreement, the Intergovernmental Agreement
and the Development Agreement.
EFFECT OF FORECLOSURE ON THE DEED OF TRUST
The Deed of Trust requires that, before the Credit Enhancement Provider can
foreclose on the Project, it must obtain an opinion of Special Tax Counsel
acceptable to the Trustee that such foreclosure will not adversely affect the
exclusion of interest on the Bonds from gross income for federal income tax
purposes. In addition, the Deed of Trust will be terminated as to the
Bondholders if the Credit Enhancement Provider forecloses on it because of a
default by the Authority under the Reimbursement Agreement. See "DEFINITIONS OF
CERTAIN TERMS AND DESCRIPTIONS OF PRINCIPAL DOCUMENTS--THE DEED OF TRUST"
herein.
THE AUTHORITY
The Authority was created in 1996 as a nonprofit corporation organized under
the laws of the State of Colorado, intended to be in general compliance with the
requirements of the Internal Revenue Service Revenue Procedure 82-26. Generally,
that revenue procedure provides that the Internal Revenue Service will
ordinarily rule that obligations issued by a nonprofit corporation are issued on
behalf of a governmental unit if the following requirements are met:
I. The corporation must engage in activities that are essentially
public in nature.
II. The corporation must not be organized for profit except to the
extent of retiring indebtedness.
III. The corporate income may not inure to any private person.
IV. The governmental unit must have a beneficial interest in the
corporation while the indebtedness remains outstanding.
V. The governmental unit must obtain full legal title to the property
of the corporation with respect to which the indebtedness was incurred upon
retirement of the indebtedness.
21
<PAGE>
VI. The governmental unit must approve both the nonprofit corporation
and the specific obligations to be issued by the corporation.
The District is a sponsoring governmental unit for purposes of the
requirements of Internal Revenue Service Revenue Procedure 82-26.
As a newly formed organization, the Authority has no other undertakings or
obligations other than with respect to the Bonds and the Project. Franklin L.
Haney and C. Roger Addlesperger are the members of the board of directors of the
Authority. Franklin L. Haney is one of the principals of Douglas County
Development Corporation, the owner of the Real Estate. See "CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS."
C. Roger Addlesperger, one of the directors for each of the Districts, has
consulted for the Franklin L. Haney Company and Douglas County Development
Corporation on matters pertaining to the real estate within Dawson Ridge and
other developments in the State of Colorado. In connection with such
consultation, Mr. Addlesperger has received compensation from The Franklin L.
Haney Company, and anticipates having a future relationship with The Franklin L.
Haney Company. Mr. Addlesperger is a Vice President of Douglas County
Development Corporation. Candace Addlesperger, who is also a director of each of
the Districts, is Mr. Addlesperger's wife. Each of the Districts currently has
three directors. See "District Management."
The Articles of Incorporation of the Authority provide that it is organized
and shall be operated exclusively on behalf of and for the benefit and in
furtherance of the purposes of Dawson Ridge Metropolitan District No. 5. The
Articles of Incorporation also provide that all monies realized by the Authority
will be used exclusively for the operation, maintenance and development of
property of the Authority, including payment of obligations of the Authority in
connection therewith, which property shall be used to provide public facilities.
Such property must be located within the District or have a substantial
connection therewith.
In furtherance of those purposes, the Authority has all powers that may now
or hereafter be exercised by a nonprofit corporation organized under the laws of
the State of Colorado.
Restrictions on the power of the Authority include a requirement that no
part of the net earnings of the Authority will inure to the benefit of any
private person, and no substantial part of the activities of the Authority shall
consist of carrying on propaganda activities or otherwise attempting to
influence legislation. All property of the Authority shall be owned for the
benefit of the District. Upon dissolution of the Authority, all of the
Authority's assets (remaining after payment of or provision for all its
liabilities) shall be paid to the District.
COMPLIANCE WITH REVENUE PROCEDURE 82-26
The following discussion addresses the Authority's compliance with Internal
Revenue Service Procedure 82-26.
I. ACTIVITIES ESSENTIALLY PUBLIC IN NATURE. The Authority is deemed to be
engaged in activities that are essentially public in nature if the activities
and purposes of the Authority are those permitted under the general nonprofit
corporation law of the State of Colorado and the property to be provided by the
Bonds is located within the geographical boundaries of or has a substantial
connection with the District. The Articles of Incorporation provide that the
Authority was organized and is operated exclusively on behalf of and for the
benefit and furtherance of the purposes of the District and the inhabitants
thereof and that the Authority has and may exercise all of the powers conferred
upon nonprofit corporations organized under the laws of Colorado.
II. NOT ORGANIZED FOR PROFIT. The Authority will be deemed not to be
organized for profit except to the extent of retiring indebtedness if the
Authority is organized under the general nonprofit corporation
22
<PAGE>
law of the State of Colorado and the Articles of Incorporation of the Authority
provide that the Authority is one that is not organized for profit. The
Authority is organized under the general nonprofit corporation law of the State
of Colorado and the Articles of Incorporation of the Authority provide that the
corporation at all times shall be one not organized for profit.
III. NO PRIVATE INUREMENT. The income of the Authority will be deemed to
not inure to any private person if the Articles of Incorporation provide that
the Authority's income will not inure to any private person and, in fact, the
Authority's income does not inure to any private person. The Articles of
Incorporation provide that no part of the net earnings or earnings of the
Authority shall inure to, or to the benefit of or be distributable to, any
private person.
IV. BENEFICIAL INTEREST BY GOVERNMENTAL UNIT. The District will be deemed
to have a beneficial interest in the Authority while the Bonds remain
outstanding if the District has the right at any time to obtain unencumbered fee
title and exclusive possession of the property financed by the Bonds, and any
additions to that property, by (1) placing into escrow an amount that will be
sufficient to defease the Bonds, and (2) paying reasonable costs incident to the
defeasance. The District, at any time before it defeases the Bonds, may not
agree or otherwise be obligated to convey any interest in the property to any
person for any period extending beyond or beginning after defeasance of the
Bonds. If the District exercises the right to obtain unencumbered fee title by
defeasing the Bonds, the Authority must, within a reasonable time, cancel all
encumbrances on the property, including leases and management contracts.
Additionally, the District must have an exclusive option to purchase the
property financed by the obligations in the event the Authority defaults in its
payments under the obligations. Pursuant to the terms of the Operating
Agreement, the above requirements are satisfied. See "DEFINITIONS OF CERTAIN
TERMS AND DESCRIPTIONS OF PRINCIPAL DOCUMENTS--THE OPERATING AGREEMENT."
V. GOVERNMENTAL UNIT TO OBTAIN FULL LEGAL TITLE. The requirement that the
District must obtain full legal title to the property of the Authority with
respect to which the Bonds were incurred upon retirement of the Bonds will be
met if (i) the Bonds of the Authority are issued on behalf of no more than one
governmental unit and unencumbered fee title the property will vest solely in
that governmental unit when the Bonds are discharged; (ii) all of the original
proceeds and investment proceeds of the Bonds are used to provide tangible real
or tangible personal property; (3) the District obtains upon discharge of the
Bonds unencumbered fee title and exclusive possession and use of the property
financed by the Bonds; (4) before the Bonds are issued, the District adopts a
resolution stating that it will accept title to the property financed by the
Bonds, including any additions to that property, when the Bonds are discharged;
(5) the indenture or other documents under which the Bonds are used to provide
the property state that any other obligations issued by the Authority either to
make improvements to the property or to refund a prior issue of the Authority's
obligations will be discharged no later than the latest maturity date of the
Bonds, and the maturity date of the Bonds, or any other obligations issued by
the Authority with respect to the property, may not be extended beyond the
latest maturity date of the original obligations; (6) the proceeds of fire or
other casualty insurance policies received in connection with damage to or
destruction of the property financed by the Bonds, including any additions to
the property, will, subject to the claims of the holders of the Bonds, be used
to reconstruct the property, regardless of whether the insurance proceeds are
sufficient to pay for the reconstruction or be remitted to the District; and (7)
a reasonable estimate of the fair market value of the property on the latest
maturity date of the Bonds, regardless of whether the Bonds are callable at an
earlier date, must equal at least 20% of the original cost of the property
financed by the Bonds determined without including in the value any addition to
the property or any increase or decrease for inflation or deflation during the
terms of Bonds, and a reasonable estimate of the remaining useful life of the
property on the latest maturity date of the Bonds must be the longer of one year
or 20% of the originally-estimated useful life of the property financed by the
Bonds.
The obligations of the Authority are issued only on behalf of the District
and unencumbered fee title to the property financed by the Bonds will vest
solely in the District when the Bonds are discharged. All of
23
<PAGE>
the original proceeds and investment proceeds of the Bonds were used to acquire
real property, including water rights. Assuming continuing compliance with the
requirements set forth in the Operating Agreement, the above requirements will
be satisfied.
VI. DISTRICT APPROVAL OF AUTHORITY AND BONDS. The District must approve
both the Authority and the Bonds to be issued by the Authority. The District
adopted a resolution approving the purposes and activities of the Authority and
the Bonds to be issued by the Authority.
Noncompliance with the requirements of Internal Revenue Service Revenue
Procedure 82-26 could cause the interest on the Bonds to be included in gross
income for Federal and state income tax purposes retroactive to the date of
issuance of the Bonds.
THE DISTRICTS
GENERAL
The Project is located in a proposed development generally referred to as
Dawson Ridge. Since the inception of planning for Dawson Ridge, it has been
proposed that Dawson Ridge be serviced by multiple special districts each
serving a portion of Dawson Ridge. Special districts are political subdivisions
of the State of Colorado and quasi-municipal corporations created pursuant to
Title 32, Colorado Revised Statutes, as amended (the "Act"). The five contiguous
special districts serving Dawson Ridge are referred to as Dawson Ridge
Metropolitan Districts Nos. 1 through 5 (the "Districts"). The purpose of
multiple metropolitan districts is to assure that residential infrastructure is
supported by the benefitted property, and that then-current residents and
taxpayers of an area are not unreasonably burdened by the cost of future
development.
The Districts were organized in 1985 for the purpose of providing certain
water, sewer, street, park and recreation and safety improvements for Dawson
Ridge, which is located entirely within the boundaries of the Town of Castle
Rock.
The Dawson Ridge development contains approximately 1,883 acres of which
approximately 876 acres are being acquired by the Authority with Bond proceeds
for use in the Project. There are presently no residents living in any of the
Districts and infrastructure development in the Districts (i.e., roads and
traffic signalization, traffic and street signage, street lighting, drainage
control, and sanitary sewer) has not yet begun pending approval of service plan
amendments by the Town of Castle Rock. See "THE PROJECT-- Necessary Approvals."
SERVICE PLAN
The preparation and approval of a service plan is a requirement under
Colorado Statutes for the organization of a special district. The service plans
for each District consisted of a financial survey and preliminary engineering
survey showing how the proposed services were to be provided and financed,
including a description, among other things, of facilities to be constructed. In
the preparation of the service plans, projections were utilized regarding
construction costs, amounts of revenues to each District proposing the service
plan, building rates and other matters. A separate service plan was prepared, in
substantially identical form, with respect to each of the five Districts.
Following preparation of the Districts' service plans, they were submitted to
the Town of Castle Rock and approved by the Town of Castle Rock and by a
majority of the electors within each District. The organization of each District
was then approved by the District Court for Douglas County, Colorado.
24
<PAGE>
Any material departure from a service plan may be enjoined by the District
Court for Douglas County on its own motion or upon motion by the Town of Castle
Rock, residents or property owners of the District or municipalities or special
districts within a radius of three miles of each District. To this extent, the
powers of the Districts may be considered limited by their respective service
plans. The Act permits amendments to existing service plans by a procedure
analogous to that required in the original approval, when required for changes
of a basic essential nature. Such a revision would require the approval of the
Town of Castle Rock. However, no further approval by the District Court is
required after revision approval by the Town of Castle Rock. In connection with
the expected development in the Districts, including development of the Project,
amendments to the service plan of each District will be required. No assurance
can be given regarding whether any such service plan amendments will be approved
or the timing thereof. See "SECURITY AND SOURCE OF PAYMENT" and "THE
DISTRICTS--Town of Castle Rock Agreements."
ORIGINAL DEVELOPMENT
The primary owner of the property within the geographic boundaries of the
development at the time of the organization of the Districts was Bellamah
Community Development, a New Mexico general partnership. Bellamah Community
Development was an affiliate of and controlled by Public Service Company of New
Mexico.
In April 1986, District No. 1 issued its general obligation bonds in the
original principal amount of $24,725,000 (the "1986 Bonds"), the payment of
which was secured in part by the pledge of taxes of District No. 1, service
charges and development fees. In connection with the issuance of the 1986 Bonds,
Bellamah Community Development entered into a Facilities Development Fee
Agreement (the "Fee Agreement") wherein it agreed to pay fees to District No. 1
in the total amount of $21,431,867 for the right to use facilities of District
No. 1.
Subsequent to the issuance of the 1986 Bonds, utility rate payers in
Albuquerque, New Mexico successfully challenged Public Service Company of New
Mexico's participation in real estate development activities, including those
related to Bellamah Community Development's activities with respect to the
property within the geographic boundaries of the Districts. These utility rate
payers convinced the New Mexico legislature to revoke Public Service Company of
New Mexico's authority to participate in real estate development activities. As
a result, Public Service Company of New Mexico ceased all financial support of
Bellamah Community Development.
In 1988, Bellamah Community Development defaulted on its payment obligations
under the Fee Agreement and District No. 1 initiated foreclosure of a lien
against Bellamah Community Development property arising under the Fee Agreement.
In June 1988, Bellamah Community Development filed a Chapter 11 bankruptcy
petition, and District No. 1 sought and received relief from the bankruptcy
court to enable it to attempt to foreclose on Bellamah Community Development's
property. Subsequently, Bellamah Community Development's Chapter 11 proceeding
was converted to a Chapter 7 liquidation.
The fees due to District No. 1 under the Fee Agreement were projected to be
the primary source of repayment of the 1986 Bonds until development produced
enough revenues to pay the debt service requirement from reasonable mill levies.
At the time of the Bellamah Community Development bankruptcy, no homes had been
constructed within the geographic boundaries of District No. 1, and, without the
collection of fees anticipated to be derived from Bellamah Community
Development's development, District No. 1 determined that a mill levy of
approximately 10,000 mills would have been necessary to pay 1991 debt service on
the 1986 Bonds, a level the board of directors of District No. 1 believed to be
uncollectible. Accordingly, on September 28, 1990, District No. 1 determined it
was insolvent and filed a Chapter 9 petition in bankruptcy.
Under District No. 1's plan of reorganization, holders of the 1986 Bonds
received (i) the pro rata distribution of the unexpended bond proceeds in the
amount of approximately $9,300,000 (which
25
<PAGE>
amounted to approximately $.356 per dollar of the creditor claims), and (ii) an
exchange refunding bond (the "1992 Bonds") for the remaining portion of such
claims. The total principal amount of the 1992 Bonds was $21,054,000
(representing the original principal amount of the 1986 Bonds, plus accrued
interest, less distribution of existing funds). The 1992 Bonds were additionally
secured by a Deed of Trust (the "1992 Deed of Trust") from District No. 1, with
respect to all property which it had obtained from Bellamah Community
Development in satisfaction of the Fee Agreement.
At substantially the same time as the issuance of the 1992 Bonds, Douglas
County Development Corporation, a Colorado corporation related to The Franklin
L. Haney Company, made a tender offer to purchase 1992 Bonds from the holders
thereof for the price of $.15 per dollar of principal amount of the 1986 Bonds
outstanding on the date of the filing of the Chapter 9 proceeding by the
District. A vote accepting or rejecting the plan of reorganization did not
constitute an acceptance or rejection of the offer of Douglas County Development
Corporation to purchase the 1992 Bonds. Douglas County Development Corporation
eventually purchased substantially all the 1992 Bonds, although in some
instances the purchase price paid was in excess of $.15 per dollar.
The 1992 Bonds were issued as limited tax obligations of District No. 1,
payable from a mill levy against property within the District not to exceed 35
mills, plus additional development fees paid by developers of property, plus a
pledge of the proceeds of the sale of the real estate encumbered by the 1992
Deed of Trust.
Subsequent to the bankruptcy of District No. 1, Douglas County Development
Corporation also offered to purchase from District No. 1 all of the property
pledged pursuant to the 1992 Deed of Trust and outstanding utility service taps
which had previously been delivered to Bellamah Community Development, but had
been recovered by the District, under the Fee Agreement. On June 1, 1993,
Douglas County Development Corporation purchased such property and utility
service taps from District No. 1 for a purchase price of $127,847,640. The
proceeds from the sale of the real estate and taps by District No. 1 to Douglas
County Development Corporation were deposited with the trustee for the 1992
Bonds and were applied to defease the 1992 Bonds under the original Indenture of
Trust pursuant to which the 1992 Bonds were issued, and no taxes, fees or other
revenues of District No. 1 will be required to be collected for the 1992 Bonds,
substantially all of which Douglas County Development Corporation has
subsequently sold.
If the amendment to District No. 1's service plan is approved, it will be
obligated to impose a mill levy not to exceed 35 mills upon all of the taxable
property located within District No. 1 pursuant to the terms of the
Intergovernmental Agreement. District No. 1's past bankruptcy will not affect
its obligation to impose the mill levy under the Intergovernmental Agreement.
DISTRICT MANAGEMENT
Each District is governed by an elected board of directors consisting of
three members. While the Act anticipates a five-member board of directors,
directors must be registered electors of the State of Colorado and they or their
spouse must either own taxable real or personal property within the District or
live within the District. At the present time, Douglas County Development
Corporation owns approximately 75% of the taxable property within the Districts.
Property interests within the Districts are also owned by C. Roger Addlesperger
and Joseph Knopinski. Mr. Knopinski, Mr. Addlesperger and Ms. Candace
Addlesperger are the members of the board of each of the five Districts.
C. Roger Addlesperger, one of the directors for each of the Districts, has
consulted for the Franklin L. Haney Company and Douglas County Development
Corporation on matters pertaining to the real estate within Dawson Ridge and
other developments in the State of Colorado. In connection with such
consultation, Mr. Addlesperger has received compensation from The Franklin L.
Haney Company, and anticipates having a future relationship with The Franklin L.
Haney Company. Mr. Addlesperger is a Vice President of Douglas County
Development Corporation. Candace Addlesperger, who is a director of the
District, is Mr. Addlesperger's wife.
26
<PAGE>
Pursuant to Colorado law, a director must disqualify himself or herself from
voting on any issue in which he or she has a conflict of interest unless he or
she has disclosed such conflict of interest in a certificate filed with the
Colorado Secretary of State and the board of directors at least 72 hours in
advance of any meeting in which such conflicts may arise. Each of the directors
believes that such laws have been complied with fully.
TOWN OF CASTLE ROCK AGREEMENTS
In order to provide for the orderly extension of certain public services of
the Districts, each District and the Town of Castle Rock entered into a separate
Intergovernmental Agreement dated August 15, 1985, as amended. Subsequently, in
connection with the bankruptcy of Bellamah Community Development, the Districts
and the Town of Castle Rock executed a Suspension Agreement pursuant to which it
was agreed that further development of the Districts would require the
submission to the Town of Castle Rock, and approval by the Town of Castle Rock,
of service plan amendments outlining the anticipated development of the
Districts. While the Districts have commenced discussions on revised service
plans with the Town of Castle Rock, the Town of Castle Rock will not formally
consider such amendments to the service plans until it has completed its own
revisions to the Town of Castle Rock's existing policies concerning special
districts located within its jurisdiction. See "THE PROJECT--Necessary
Approvals." No assurance can be given that the Town of Castle Rock will approve
such revisions to the Districts' service plans, and a failure to receive such
approval could interfere with development of each of the Districts, including
construction of the contemplated golf course and construction of residences.
DISTRICT POWERS
The operation and administration of each District are controlled by its
board of directors. The rights, powers, privileges, authority, functions and
duties of the District are established by the laws of the State of Colorado,
particularly the Act. Each District has the power, among other powers, to enter
into contracts and agreements; to sue and be sued, to incur indebtedness and
issue bonds following approval at an election or to refund any bonded
indebtedness of the District at lower interest rates without an election; to fix
rates, tolls or charges for services or facilities furnished by the District; to
adopt and enforce regulations promulgated by the board; to levy and collect
general ad valorem property taxes; to acquire, dispose of and encumber real and
personal property, to have the management, control and supervision of all the
business affairs of the District and the construction, installation, operation
and maintenance of District improvements; and to exercise the powers of eminent
domain for the condemnation of private property for public use.
DISTRICT LIABILITY
In the opinion of the board of directors of each District, the insurance
presently held by each District and public employee bonds coverage, together
with the provisions of the Colorado Governmental Immunity Act, Part 1 of Article
10 of Title 24, Colorado Revised Statutes, as amended (the "Immunity Act") will
provide adequate protection for each District and its board against the majority
of potential liability claims.
The Immunity Act states for political subdivisions of the State of Colorado,
that sovereign immunity acts as a bar to any action against a public entity,
such as any District, but only to the extent and subject to the conditions
provided therein. The Immunity Act generally provides that a District is immune
from liability resulting from claims for injury which lie in tort or those which
could lie in tort, except for specified actions for damages or injuries
resulting from: the operation of a motor vehicle of or on behalf of the
District; the operation of any public hospital, correctional facility or jail; a
dangerous condition of any public building of the District; a dangerous
condition caused by the District which interferes with the movement of traffic
on any public highway, road, street or sidewalk; a dangerous condition of any
public facility of the District; and the operation and maintenance of water and
sanitation facilities. The Immunity
27
<PAGE>
Act establishes a limitation on judgments for the above-described activities
such that the maximum allowed for one person is $150,000, and for an injury to
two or more persons, the maximum allowed is $150,000 per person or $600,000,
whichever is less. The Immunity Act also provides that in the event the District
is unable to pay a settlement or judgment due to a lack of available funds, the
District shall certify a general ad valorem tax to discharge such settlement or
judgment. In no case shall such tax exceed a total of ten mills per year of
assessment for all outstanding settlements or judgments. For injuries occurring
prior to July 1, 1986, sovereign immunity is deemed to be waived to the extent
that the District's insurance covers such injury. With regard to injuries
occurring on and after such date, a District may, by resolution, increase any
maximum amount that may be recovered from the District for the type of injury
described in the resolution. However, no District has adopted a resolution to
increase such maximum amounts. A District may not be held liable either directly
or by indemnification for punitive or exemplary damages.
A District may not be able to claim governmental immunity and, therefore,
may be subject to certain civil liabilities premised upon certain causes of
action founded in various federal laws. This could occur, for example, in suits
filed pursuant to 42 U.S.C. Section 1983 alleging the deprivation of the civil
rights of an individual, or suits alleging anti-competitive practices and
violation of the anti-trust laws by the District in the exercise of its
delegated powers. However, the Immunity Act provides that it applies to any
action against a public entity or public employee in any court of this state
having jurisdiction over any claim brought pursuant to any federal law, if such
action lies in tort or could lie in tort.
With the completion of the Project, the Districts may be subject to
increased claims for liability attendant to the operation of a public golf
course facility. However, such increased claims for liability may still be
subject to the limits imposed by the Immunity Act as discussed above.
BUDGETARY PROCESS
Each District is subject to the Local Government Budget Law of Colorado,
part 1 of article 1 of title 29, Colorado Revised Statutes, as amended. Under
this statute, the District's budget is required to be adopted before
certification of a mill levy for the forthcoming calendar year. The budget is
required to set forth all proposed expenditures for the administration,
operation, maintenance and debt service of the District, including all
expenditures for capital projects to be undertaken or executed in the fiscal
year. The budget must show the actual figures for the prior fiscal year,
estimated figures projected through the end of the current fiscal year,
including disclosure of all beginning and ending fund balances, and the
anticipated expenditures for the ensuing year. In addition, it must set forth
the anticipated revenues and other means of financing the proposed expenditures
for the ensuing year. After the proposed budget is prepared, a notice must be
published indicating that the budget is open for public inspection and that a
hearing will be held on the budget.
Before the beginning of the ensuing year, the board of each District must
enact resolutions making appropriations for that year. The amounts appropriated
may not exceed the amounts fixed in the budget as adopted by the board. Upon the
adoption of the budget, the board must file certified copies of the budget with
the Colorado Division of Local Government. In the event of some contingency
which could not have been reasonably foreseen at the time of adoption of the
budget, the board of the District may also authorize the expenditure of funds in
excess of the budget by a resolution adopted by a majority vote of the board at
a public meeting.
Through the preparation of the budget, and by taking into consideration all
sources of revenue, costs of constructing, operating and maintaining the
facilities of each District, the required tax levy is determined each year. Any
property tax levy which results in tax revenues for District operations (but not
principal and interest payments on District indebtedness, including the
obligations arising under the Operating Agreement and the Intergovernmental
Agreement) exceeding 105.5% of the amount raised in the previous year (but with
an exemption for increased valuation for assessment attributable to annexation
or inclusions, or increased valuation due to new construction) must be submitted
to the Colorado Division
28
<PAGE>
of Local Government for approval. If approval is not granted, such approval can
be obtained by vote of electors within the District. However, the provisions of
an amendment to the Constitution of the State of Colorado, approved in the
November 3, 1992 general election and commonly referred to as Amendment One
("Amendment One"), may result in a more restrictive increase (or a decrease) in
property tax revenues and spending for the Districts.
Since authorization for the execution of the Operating Agreement and the
Intergovernmental Agreement, including the imposition of a mill levy not to
exceed 35 mills upon all of the taxable property within the Districts, was
approved by the electors of each District on November 7, 1995, the requirements
of Amendment One have been complied with and will not affect the ability of the
Districts to impose taxes pursuant to the Operating Agreement and the
Intergovernmental Agreement. Moreover, since principal and interest payments on
District indebtedness, including the obligations arising under the Operating
Agreement and the Intergovernmental Agreement are not included in determining
whether approval of the Colorado Division of Local Government is necessary, no
further approvals other than approval by the Town of Castle Rock of a service
plan amendment and any necessary PUD approvals for the Project are required.
Once the service plan amendments are approved, the Districts may impose a mill
levy for the following year in accordance with the budgetary process set out
above.
FINANCIAL STATEMENTS
Under Colorado statutes, unless exempted (e.g., for insubstantial financial
activity) the board of each District is required to have the financial
statements of the District audited at least annually. The audited financial
statements must be filed with the board by July 1 of each year, and with the
State Auditor 30 days thereafter. If such audit is not filed as required by law,
the State Auditor may authorize the County Treasurer holding moneys of the
District generated pursuant to the taxing authority of the District to prohibit
the release of such moneys until the District complies with the audit law.
AMENDMENT ONE
Amendment One amended the Colorado Constitution to require voter approval
prior to: (1) imposition of a new tax, tax rate increase, mill levy increase,
valuation for assessment ratio increase, tax extension, or other change in
policy which results in a net gain of tax revenues; or (2) creation for more
than one fiscal year of any debt or other financial obligation, with limited
exceptions. Authorization for the execution of the Operating Agreement and the
Intergovernmental Agreement, including the imposition of a mill levy not to
exceed 35 mills upon all of the taxable property within the Districts, was
approved by the electors of each District in compliance with Amendment One on
November 7, 1995.
Amendment One also limits increases in property tax revenues, with certain
adjustments (including voter-approved revenue changes), (1) for local
governments, to the total of inflation plus the net percentage change in actual
value of all real property within the local government due to construction of
improvements and additional taxable real property; and (2) for school districts,
to the total of inflation plus the percentage change in student enrollment. In
addition, Amendment One limits percentage increases in spending, with certain
adjustments, (including voter-approved revenue changes) (1) for local
governments, to the total of inflation plus the net percentage change in actual
value of all real property within the local government due to construction of
improvements and additional taxable real property and (2) for school districts,
to a total of inflation plus the percentage change in student enrollment.
Revenues collected in excess of limits are required to be refunded unless voters
approve a revenue change as an offset.
However, Amendment One provides that the future creation of local government
debt shall increase (and retiring or refinancing debt shall lower) fiscal year
property tax revenue by the annual debt service so funded.
Amendment One also provides that if annual local government revenue is less
than the annual payments on general obligation bonds, pensions and final court
judgments, the election requirements and
29
<PAGE>
the limits for percentage changes in spending and property tax revenues will be
suspended to provide for the deficiency.
It is not possible to predict the effect of Amendment One on future
activities of the Districts, including their ability to raise taxes and other
funds to generate sufficient revenues for their general funds, to undertake
additional programs or to engage in any subsequent financing activities.
TAX EXEMPTION
GENERAL
Interest on the Bonds is excluded from gross income pursuant to Section
103(a) of the Internal Revenue Code of 1986 (the "Code"). Section 103(a)
excludes from gross income interest on all obligations of a state or political
subdivision thereof except those listed in Section 103(b). The Authority is an
instrumentality of Dawson Ridge Metropolitan District No. 5, which is a
political subdivision of the State of Colorado. Section 103(b) provides that
Section 103(a) does not apply to (1) private activity bonds which are not a
qualified bond within the meaning of Section 141 of the Code, (2) arbitrage
bonds, and (3) bonds not in registered form. The Bonds are not private activity
bonds since the proceeds were used to acquire land for public use and are in
registered form. The documents governing the Bonds contain requirements that
preclude them from being arbitrage bonds and the Authority has covenanted to
take all steps required to prevent the Bonds from becoming arbitrage bonds as
defined in Section 148 of the Code.
On the date of issuance of the Bonds, Jenner & Block, Special Tax Counsel
delivered its opinion to the effect that the interest on the Bonds is excludable
from gross income for purposes of federal income tax under existing laws as
enacted and construed on the date of such opinion, assuming the accuracy of the
certifications of the Issuer, and continuing compliance by the Issuer with the
requirements of the Code. Interest on the Bonds will not be an item of tax
preference for purposes of either individual or corporate alternative minimum
tax for individuals or corporations under the Code.
The alternative minimum tax for corporations is levied for taxable years
beginning after December 31, 1986 in addition to the corporate regular tax in
certain cases. The alternative minimum tax, if any, depends upon the
corporation's alternative minimum taxable income, which is the corporation's
taxable income with certain adjustments. One of the adjustment items used in
computing the alternative minimum taxable income of a corporation (excluding S
Corporations, Regulated Investment Companies, Real Estate Investment Trusts and
REMICs) is an amount equal to 75% of the excess of such corporation's "adjusted
current earnings" over an amount equal to its alternative minimum taxable income
(before such adjustment item and the alternative tax net operating loss
deduction). The term "adjusted current earnings" would include all tax-exempt
interest, including interest on the Bonds.
Under Section 884 of the Code, interest on the Bonds is to be taken into
account in the computation of the foreign branch profits tax.
Ownership of the Bonds may result in collateral federal income tax
consequences to certain taxpayers, including, without limitation, financial
institutions, property and casualty insurance companies, individual recipients
of Social Security or Railroad Retirement benefits, certain S corporations with
"excess net passive income" and taxpayers who may be deemed to have incurred or
continued indebtedness to purchase or carry the Bonds. Special Tax Counsel
expresses no opinion as to such collateral tax consequences. Purchasers of the
Bonds should consult their own tax advisors as to collateral federal income tax
consequences.
The Code sets forth certain requirements which must be met subsequent to the
issuance and delivery of the Bonds for interest thereon to remain excludable
from the gross income of the owners of the Bonds for federal income tax
purposes, including investment restrictions, periodic payments of arbitrage
profits to the United States, requirements regarding the proper use of bond
proceeds and the facilities financed therewith and certain other matters. The
Authority has covenanted to comply with such requirements.
30
<PAGE>
Noncompliance with such requirements could cause the interest on the Bonds to be
includable in the gross income of the owners of the Bonds for federal income tax
purposes, retroactive to the date of issue of the Bonds.
BOND PREMIUM
An investor may purchase a Bond at a price in excess of its stated principal
amount. Such excess is characterized as "bond premium" and must be amortized by
the investor on a constant yield basis over the remaining term of the Bond in a
manner that takes into account potential call dates and call prices. An investor
cannot deduct amortized bond premium relating to a tax-exempt bond for federal
income tax purposes. However, as bond premium is amortized, it reduces the
investor's basis in the Bond. Investors who purchase a Bond at a premium should
consult their own tax advisors regarding the amortization of bond premium and
its affect on the Bond's basis for purposes of computing gain or loss in
connection with the sale, exchange, redemption or early retirement of the Bond.
ORIGINAL ISSUE DISCOUNT
The initial offering price of one maturity of the Bonds was less than the
principal amount payable at maturity. The difference between the issue price of
such maturity of the Bonds and the amount payable at maturity is original issue
discount. The issue price (the "Issue Price") for such maturity of the Bonds was
the price at which a substantial amount of such maturity of the Bonds is first
sold to the public.
For an investor who purchased a Bond of such maturity in the initial
offering at the Issue Price for such maturity and who holds such Bond to its
stated maturity, subject to the condition that the Authority complies with the
covenants discussed under "TAX EXEMPTION--General" above, (a) the full amount of
original issue discount with respect to such Bond constitutes interest which is
not includable in the gross income of the owner thereof for federal income tax
purposes and (b) such owner will not realize taxable capital gain or market
discount upon payment of such Bond at its stated maturity; such interest is not
included as an item of tax preference in computing an adjustment used in
determining the alternative minimum tax for individuals and corporations under
the Code, but is taken into account in computing an adjustment used in
determining the alternative minimum tax for certain corporations under the Code,
as described above; and the accretion of original issue discount in each year
may result in an alternative minimum tax liability for corporations or certain
other collateral federal income tax consequences in each year even though a
corresponding cash payment may not be received until a later year.
Owners of Bonds who dispose of Bonds prior to the stated maturity (whether
by sale, redemption or otherwise), who purchase Bonds in the initial offering,
but at a price different from the Issue Price or who purchase Bonds subsequent
to the initial offering at a price other than the Bond's Issue Price plus
accreted original issue discount should consult their own tax advisors.
EXCHANGE BONDS
Brownstein Hyatt Farber & Strickland, P.C., special counsel to the
Authority, has advised the Authority that in its opinion, the exchange of the
Bonds for Exchange Bonds pursuant to the Exchange Offer will not be treated as
an "exchange" for federal income tax purposes because the Exchange Bonds will
not be considered to differ materially in kind or extent from the Bonds. Rather,
the Exchange Bonds received by a holder will be treated as a continuation of the
Bonds in the hands of such holder. As a result, there will be no federal income
tax consequences to holders exchanging Bonds for Exchange Bonds pursuant to the
Exchange Offer.
31
<PAGE>
DESCRIPTION OF EXCHANGE BONDS
GENERAL
The Exchange Bonds will be delivered to the purchasers thereof only as fully
registered bonds in the denominations of $100,000 and integral multiples of
$5,000 in excess thereof in book-entry only form as described below under the
subheading "Book-Entry-Only System" and as provided in the Indenture.
The Exchange Bonds will bear interest at the rates, and will mature, subject
to the right of redemption described below, in the principal amounts and on the
dates set forth on the cover page hereof. Interest on the Exchange Bonds from
the dated date thereof will be payable only on June 1, 1997 and semiannually
thereafter on each June 1 and December 1 (each, an "Interest Payment Date") and
until maturity or prior redemption.
Interest on the Exchange Bonds is payable in lawful money of the United
States of America by check mailed by first class mail on each Interest Payment
Date to the registered owner as of the close of business on the 15th day of the
calendar month immediately preceding such Interest Payment Date (whether or not
a business day) (the "Record Date"); provided, however, that any owners of
$1,000,000 or more of the principal amount of the Exchange Bonds may, at any
time prior to a Record Date, give to the Trustee written instructions for
payment of such interest on each succeeding Interest Payment Date by wire
transfer. The principal on the Exchange Bonds and premium, if any, thereon are
payable when due upon presentation thereof at the principal corporate trust
office of the Trustee in lawful money of the United States of America.
Any such interest not so timely paid or duly provided for shall cease to be
payable to the person who is the registered owner thereof on the Record Date and
shall be payable to the person who is the registered owner thereof at the close
of business on a special record date (the "Special Record Date") established for
the payment of the defaulted interest. Such Special Record Date shall be fixed
by the Trustee whenever moneys become available for payment of the defaulted
interest, and notice of the Special Record Date shall be given to the registered
owners of the Exchange Bonds not less than ten days prior to the Special Record
Date by first-class mail to each such registered owner as shown on the
registration books kept by the Trustee on a date selected by the Trustee. Such
notice shall state the date of the Special Record Date and the date fixed for
the payment of such defaulted interest.
REDEMPTION PROVISIONS
MANDATORY SINKING FUND REDEMPTION. The Exchange Bonds maturing December 1,
2011 and December 1, 2017 shall be subject to mandatory sinking fund redemption
at a redemption price of 100% of the principal amount thereof, plus accrued
interest to the date fixed for redemption, on December 1 of each of the years
and in the principal amounts set forth below:
<TABLE>
<CAPTION>
EXCHANGE BONDS MATURING EXCHANGE BONDS MATURING
DECEMBER 1, 2011 DECEMBER 1, 2017
- ----------------------- -----------------------
YEAR AMOUNT YEAR AMOUNT
- --------- ------------ --------- ------------
<S> <C> <C> <C>
2010 $ 3,755,000 2012 $ 4,250,000
2011 * 3,995,000 2013 4,515,000
2014 4,795,000
2015 5,095,000
2016 5,415,000
2017* 5,750,000
</TABLE>
- ------------------------
* Stated Maturity
The Exchange Bonds to be redeemed will be selected by the Trustee by lot, using
a computer system which randomly selects which bonds will be redeemed within the
maturity or maturities called for redemption.
32
<PAGE>
EXTRAORDINARY MANDATORY REDEMPTION. The Exchange Bonds are subject to
extraordinary mandatory redemption in whole at a redemption price of 100% of the
principal amount thereof plus accrued interest to the date fixed for redemption
from proceeds of prepayment of the Collateral. In the event that the Series B
REMIC Bonds (as defined herein under "CREDIT ENHANCEMENT") are prepaid in full
while the Exchange Bonds are outstanding, the proceeds of such prepayment will
be used to redeem the Exchange Bonds. The Acquisition and Construction Notes (as
defined herein under "CREDIT ENHANCEMENT") permit optional prepayments in full
to be made on and after December 1, 2015. Under the trust indenture for the
Series B REMIC Bonds, prepayments of the Acquisition and Construction Notes
requires prepayment of the Series B REMIC Bonds. See "CREDIT ENHANCEMENT."
BOOK-ENTRY-ONLY SYSTEM
A portion of the information contained in this section has been extracted
from a report from DTC entitled "Book-Entry-Only Municipals". No representation
is made by the Authority or the Credit Enhancement Provider as to the
completeness or the accuracy of such information or as to the absence of
material adverse changes in such information subsequent to the date hereof.
DTC will act as securities depository for the Exchange Bonds. The
ownership of one fully registered Exchange Bond for each maturity set
forth on the cover page hereof, each in the aggregate principal amount
of such maturity, will be registered in the name of CEDE & CO., as
nominee for DTC. DTC is a limited-purpose trust company organized under
the laws of the State of New York, a member of the Federal Reserve
System, a "clearing corporation" within the meaning of the New York
Uniform Commercial Code, and a "clearing agency" registered pursuant to
the provisions of Section 17A of the Securities Exchange Act of 1934, as
amended. DTC was created to hold securities of its participants (the
"Direct Participants") and to facilitate the clearance and settlement of
securities transactions among Direct Participants, thereby eliminating
the need for physical movement of securities certificates. Direct
Participants include securities brokers and dealers, banks, trust
companies, clearing corporations, and certain other organizations, some
of whom (and/or their representatives) own DTC. Access to the DTC system
is also available to others such as banks, brokers, dealers and trust
companies that clear through or maintain a custodial relationship with a
Direct Participant, either directly or indirectly ("Indirect
Participants"). The Rules applicable to DTC and the Direct Participants
and Indirect Participants are on file with the Securities and Exchange
Commission.
Purchases of Exchange Bonds under the DTC system must be made through
Direct Participants, who will receive a credit for the Bonds on DTC's
records. The ownership interest of each actual purchaser of each
Exchange Bond (each a "Beneficial Owner") will be recorded through the
records of the Direct Participants and Indirect Participants. Beneficial
Owners will not receive written confirmations of their purchase, but
Beneficial Owners are expected to receive written confirmations
providing details of the transaction, as well as periodic statements of
their holdings, from the Direct Participant or Indirect Participant
through which the Beneficial Owner entered into the transaction.
Transfers of ownership interests in the Bonds will be accomplished by
book entries made by DTC and by the Direct Participants and Indirect
Participants which act on behalf of the Beneficial Owners. Beneficial
Owners will not receive certificates representing their ownership
interest in the Bonds, except as specifically provided in the Indenture.
NEITHER THE AUTHORITY NOR THE TRUSTEE WILL HAVE ANY RESPONSIBILITY OR
OBLIGATION TO DIRECT PARTICIPANTS OR INDIRECT PARTICIPANTS OR THE
PERSONS FOR WHOM THEY ACT AS NOMINEES WITH RESPECT TO THE PAYMENTS TO,
OR THE PROVIDING OF NOTICE FOR, SUCH DIRECT PARTICIPANTS OR INDIRECT
PARTICIPANTS OR THE PERSONS FOR WHOM THEY ACT AS NOMINEES.
All notices that are to be given to owners of the Exchange Bonds by the
Trustee will be given only to DTC as registered owner. Conveyance of
notices and other communications by DTC to Direct
33
<PAGE>
Participants, by Direct Participants to Indirect Participants, and by
Direct Participants and Indirect Participants to Beneficial Owners will
be governed by arrangements among them, subject to any statutory or
regulatory requirements as may be in effect from time to time.
SO LONG AS CEDE & CO. IS THE REGISTERED OWNER OF THE EXCHANGE BONDS, AS
NOMINEE OF DTC, REFERENCES HEREIN TO THE BONDHOLDERS OR REGISTERED
OWNERS OF THE EXCHANGE BONDS SHALL MEAN CEDE & CO. AND SHALL NOT MEAN
THE BENEFICIAL OWNERS OF THE BONDS. BENEFICIAL OWNERS OF THE BONDS OR
INTERESTS IN THE BONDS WILL NOT RECEIVE OR HAVE THE RIGHT TO RECEIVE
PHYSICAL DELIVERY OF SUCH BONDS.
Under the Indenture, payment made by the Trustee to DTC or its nominee
shall satisfy the Authority's obligation under the Indenture to the
extent of such payments.
Principal, redemption price, if any, and interest payments on the
Exchange Bonds will be made to DTC or its nominee, CEDE & CO., as
registered owners of the Exchange Bonds. Upon receipt of moneys, DTC's
current practice is to credit immediately the accounts of the Direct
Participants in accordance with their respective holdings shown on the
records of DTC. Payments by Direct Participants and Indirect
Participants to Beneficial Owners will be governed by standing
instructions and customary practices, as is now the case with municipal
securities held for the accounts of customers in bearer form or
registered in "street name," and will be the responsibility of such
Direct Participants and Indirect Participants and not of DTC, the
Trustee or the Authority, subject to any statutory and regulatory
requirements as may be in effect from time to time.
For every transfer and exchange of the Exchange Bonds, the Beneficial
Owners may be charged a sum sufficient to cover any tax, fee or other
governmental charge that may be imposed in relation thereto.
DTC may determine to discontinue providing its services with respect to
the Exchange Bonds at any time by giving notice to the Authority and the
Trustee and discharging its responsibilities with respect thereto under
applicable law. Under such circumstances, bond certificates are required
to be delivered as described in the Indenture. Each Beneficial Owner,
upon registration of certificates held in such Beneficial Owner's name,
will become a Bondholder.
The Authority, in its reasonable discretion, may determine that
continuation of the system of book-entry transfers through DTC (or a
successor securities depository) is not in the best interests of the
Beneficial Owners. In such event, bond certificates will be delivered as
described in the Indenture.
In the event that the Book-Entry-Only System is discontinued, the
following provisions would apply to the Exchange Bonds. The Trustee
shall keep the registration books for the Exchange Bonds at its
principal corporate trust office. Subject to the further conditions
contained in the Indenture, the Exchange Bonds may be transferred or
exchanged for one or more Exchange Bonds of the same maturity in
different authorized denominations upon surrender thereof at the
principal corporate trust office of the Trustee by the registered owners
or their duly authorized attorneys; upon surrender of any Exchange Bonds
to be transferred or exchanged, the Trustee shall record the transfer or
exchange in its registration books and shall authenticate and deliver
new Exchange Bonds of the same maturity appropriately registered and in
appropriate authorized denominations; during the 15 days immediately
preceding the date of mailing of any notice of redemption or at any time
following the mailing of any notice of redemption, the Trustee shall not
be required to effect or register any transfer or exchange of any
Exchange Bond which has been selected for such redemption, except that
Exchange Bonds properly surrendered for partial redemption may be
exchanged for new Exchange Bonds of the same maturity in authorized
denominations equal in the aggregate to the unredeemed portion; the
Authority and the Trustee
34
<PAGE>
shall be entitled to treat the registered owners of the Exchange Bonds,
as their names appear in the registration books as of the appropriate
dates, as the owners of such Exchange Bonds for all purposes under the
Indenture. No transfer or exchange made other than as described above
and in the Indenture shall be valid or effective for any purposes under
the Indenture.
DEBT SERVICE REQUIREMENTS ON THE BONDS
The table below indicates total debt service on the Bonds for the periods
indicated.
<TABLE>
<CAPTION>
PERIOD ENDING DECEMBER 31
-------------------------------------------------------
TOTAL DEBT SERVICE
PRINCIPAL INTEREST REQUIREMENT
---------------- ---------------- -------------------
<S> <C> <C> <C>
1996.................................................... -- $ 3,099,151.88 $ 3,099,151.88
1997.................................................... -- 4,132,202.50 4,132,202.50
1998.................................................... -- 4,132,202.50 4,132,202.50
1999.................................................... $ 1,980,000.00 4,132,202.50 6,112,202.50
2000.................................................... 2,095,000.00 4,018,352.50 6,113,352.50
2001.................................................... 2,215,000.00 3,897,890.00 6,112,890.00
2002.................................................... 2,340,000.00 3,770,527.50 6,110,527.50
2003.................................................... 2,475,000.00 3,635,977.50 6,110,977.50
2004.................................................... 2,620,000.00 3,489,952.50 6,109,952.50
2005.................................................... 2,780,000.00 3,332,752.50 6,112,752.50
2006.................................................... 2,950,000.00 3,163,172.50 6,113,172.50
2007.................................................... 3,115,000.00 2,995,022.50 6,110,022.50
2008.................................................... 3,310,000.00 2,798,777.50 6,108,777.50
2009.................................................... 3,525,000.00 2,586,937.50 6,111,937.50
2010.................................................... 3,755,000.00 2,357,812.50 6,112,812.50
2011.................................................... 3,995,000.00 2,118,431.25 6,113,431.25
2012.................................................... 4,250,000.00 1,863,750.00 6,113,750.00
2013.................................................... 4,515,000.00 1,598,125.00 6,113,125.00
2014.................................................... 4,795,000.00 1,315,937.50 6,110,937.50
2015.................................................... 5,095,000.00 1,016,250.00 6,111,250.00
2016.................................................... 5,415,000.00 697,812.50 6,112,812.50
2017.................................................... 5,750,000.00 359,375.00 6,109,375.00
---------------- ---------------- -------------------
Total................................................... $ 66,975,000.00 $ 60,512,615.63 $ 127,487,615.63
---------------- ---------------- -------------------
---------------- ---------------- -------------------
</TABLE>
35
<PAGE>
SECURITY AND SOURCE OF PAYMENT
The Bonds are limited obligations of the Authority, secured only by the
trust estate identified in the Indenture and payable solely from the funds held
under the Indenture (including capitalized interest deposited from the proceeds
of the Bonds), Revenues of the Authority and payments made under the Credit
Enhancement.
Revenues of the Authority include, without limitation, all income, rents,
receipts and profits of the Authority (excluding certain payments for operation
and maintenance expenses and specifically restricted gifts, bequests and other
forms of contributions). Revenues will include income derived from operation of
the golf course and the swimming and tennis facilities which the Authority
intends to construct on the Real Estate. See "The Project." The Authority is
acting as an instrumentality of the District. On November 7, 1995, the voters of
the District and the Related Districts approved the execution and delivery of
the Operating Agreement and the Intergovernmental Agreement obligating the
Related Districts to provide funds to the District for payment to the Authority
to the extent that revenues from the Project are insufficient to fund debt
service on the Bonds and operating expenses of the Project. Such funds would be
derived from a mill levy that is subject to certain limitations, including a
35-mill limitation on taxable property within the District and the Related
Districts. The Operating Agreement and the Intergovernmental Agreement will not
become effective until an amendment to the Districts' service plans including
the mill levy is approved by the Town of Castle Rock, or the Districts receive
an acceptable opinion of counsel acceptable to the Districts that such mill levy
may be imposed without regard to any service plan amendment. Each of the
Districts has covenanted in the Recreational Facilities Agreement to take all
reasonable action necessary to effect such service plan amendment or to obtain
such opinion. At the present time, the Town of Castle Rock is not accepting any
applications for service plan amendments until it finalizes new policies
regarding the use and powers of special districts located within its
jurisdiction. These new policies are expected to be in place in 1997. Once the
new policies are in effect, the Districts will submit their applications for
service plan amendments to the Town of Castle Rock. There can be no assurance
that the Town of Castle Rock will approve the amendments to the Districts'
service plans. See "THE PROJECT--Necessary Approvals."
In order to provide an alternate source of revenue, the Authority entered
into a Development Agreement dated as of March 1, 1996 (the "Development
Agreement") with Douglas County Development Corporation, the owner of
approximately 75% of the taxable property in the Districts, and certain other
property owners providing for a payment in lieu of taxes by Douglas County
Development Corporation and all subsequent owners of the property owned by
Douglas County Development Corporation in the Districts. The amount of such
payment will be equivalent to the amount which would be generated by a mill levy
against all of the taxable real and personal property in the Districts pursuant
to the Operating Agreement and the Intergovernmental Agreement. The payment
obligations under the Development Agreement are absolute and unconditional and
no conditions must be satisfied for the Development Agreement to become
effective. Payment obligations under the Development Agreement are required to
be paid within fifteen days after any applicable payment date, as set forth in
the Development Agreement. The Authority has assigned its interests in the
Development Agreement to the Credit Enhancement Provider and the Trustee,
allowing the Credit Enhancement Provider and the Trustee to accelerate any
amounts due but not paid under the Development Agreement, and to foreclose on
such property for which payments have not been made, if necessary. Descriptions
of the material terms of the Operating Agreement, the Intergovernmental
Agreement, the Development Agreement and the Recreational Facilities Agreement
appear herein under the caption "DEFINITIONS OF CERTAIN TERMS AND DESCRIPTIONS
OF PRINCIPAL DOCUMENTS."
Debt service on the Bonds for the period prior to March 1, 1998 is payable
from the proceeds of the Bonds in the form of capitalized interest. See "USE OF
PROCEEDS" herein. Such capitalized interest amount is on deposit with the
Trustee and will be sufficient to make all payments of interest on the Bonds
36
<PAGE>
to March 1, 1998 (but not Extra Payments). As credit enhancement for the Bonds,
the Credit Enhancement Provider executed a Collateralized Credit Enhancement
Agreement for the benefit of the Trustee, pursuant to which the Credit
Enhancement Provider is obligated to make payment of debt service on the
Securities for the period commencing March 1, 1998, but the Credit Enhancement
Provider's liability is limited to the Collateral pledged and assigned to the
Trustee. The Collateral to be assigned by the Credit Enhancement Provider
consists of the Series B REMIC Bonds and the debt service payments on the Series
B REMIC Bonds, which will be payable effectively from certain payments to be
made by the U.S. Government under a lease for space in a building in the
District of Columbia. See "Credit Enhancement" and "DEFINITIONS OF CERTAIN TERMS
AND DESCRIPTIONS OF PRINCIPAL DOCUMENTS-- THE LEASE." The amounts required to be
paid on the Series B REMIC Bonds, if timely paid, will be sufficient to pay
principal of and interest on the Bonds when due for the period commencing March
1, 1998, but not to pay Extra Payments.
Pursuant to the Reimbursement Agreement between the Authority and the Credit
Enhancement Provider, monies applied by the Trustee from the proceeds of the
Series B REMIC Bonds to pay principal and interest on the Bonds are required to
be reimbursed to the Credit Enhancement Provider from operating revenues of the
Authority (which are currently expected to be primarily golf course revenues,
mill levy payments by the Districts and payments under the Development
Agreement). There is no assurance that such revenues will be sufficient to
enable the Authority to meet these obligations, and a failure to do so
constitutes a default under the Reimbursement Agreement. If such a default
occurs and the Credit Enhancement Provider is not in default under the
Collateralized Credit Enhancement Agreement, the Credit Enhancement Provider is
entitled to exercise various remedies, including foreclosing on the Deed of
Trust, thereby terminating the rights of the Bondholders in various security
(other than the Collateral), including the Authority's interest in the Project.
However, such foreclosure is permitted only if the Credit Enhancement Provider
obtains an opinion of Special Tax Counsel acceptable to the Trustee that such
foreclosure will not adversely affect the exclusion of interest on the Bonds
from gross income for federal income tax purposes. See "DEFINITIONS OF CERTAIN
TERMS AND DESCRIPTIONS OF PRINCIPAL DOCUMENTS--THE DEED OF TRUST,"
"--COLLATERALIZED CREDIT ENHANCEMENT AGREEMENT" and "--REIMBURSEMENT AGREEMENT."
CREDIT ENHANCEMENT
The Credit Enhancement Provider executed the Collateralized Credit
Enhancement Agreement for the benefit of the Trustee. Pursuant to the
Collateralized Credit Enhancement Agreement, the Credit Enhancement Provider has
agreed to provide to the Trustee amounts sufficient to provide for the due,
prompt and complete payment of the Bonds, including principal and interest
payable thereunder for the period commencing March 1, 1998 (but excluding
payments with respect to premium on the Bonds, interest on the Bonds in excess
of the pre-default rate thereon, Additional Interest and amounts due solely as a
result of acceleration or redemption of the Bonds (collectively, "Extra
Payments")) all of which shall be paid solely from payments on the Series B
REMIC Bonds.
In order to secure its obligations under the Collateralized Credit
Enhancement Agreement, the Credit Enhancement Provider has pledged and delivered
to the Trustee the Series B REMIC Bonds payable from an interest in the REMIC
Trust Estate under the REMIC Indenture, in accordance with the provisions of a
Bond Pledge and Security Agreement between the Credit Enhancement Provider, the
Trustee and the REMIC Trustee. An election was made to have the REMIC Trust
Estate treated as a "real estate mortgage investment conduit" for federal income
tax purposes.
The Series B REMIC Bonds will be payable on a parity with the Series A REMIC
Bonds from amounts paid on notes held in the REMIC Trust Estate, and such
payments will be pledged as Collateral and used to pay the debt service payments
on the Series A REMIC Bonds and Series B REMIC Bonds. Certain of the notes held
in the REMIC Trust Estate (the "Acquisition and Construction Notes") have been
issued by Parcel 49C Limited Partnership, a District of Columbia limited
partnership, in respect of
37
<PAGE>
loans to Parcel 49C Limited Partnership related to the acquisition and
construction by Parcel 49C Limited Partnership of an office building (with
parking garage) in the District of Columbia commonly referred to as Portals II.
Space in such office building has been leased by Parcel 49C Limited Partnership
to the U.S. Government pursuant to a lease agreement dated August 12, 1994, as
amended and supplemented (the "Lease"). Parcel 49C Limited Partnership assigned
the Lease and rent payable thereunder to Building Finance Company of Tennessee,
Inc., as collateral for amounts loaned by Building Finance Company of Tennessee,
Inc. to Parcel 49C Limited Partnership, which amounts are evidenced by the
Acquisition and Construction Notes. Building Finance Company of Tennessee, Inc.,
transferred the Acquisition and Construction Notes and the collateral therefor
to BFC Finance Corp. which then assigned all such assets to the REMIC Trustee as
security for the REMIC Bonds. Amounts payable on the Acquisition and
Construction Notes (and, in turn, amounts payable on the REMIC Bonds other than
certain initial interest on the Series A REMIC Bonds) are expected to come from
the portion of payments under the Lease which is not subject to set-aside by the
U.S. Government (the "Non Set-Off Lease Payments"). The Non Set-Off Lease
Payments received under the Lease are expected to be sufficient to pay principal
and interest on the REMIC Bonds when due. The amounts required to be paid as
principal and interest on the Series B REMIC Bonds (which amounts will be paid
to the Trustee), if timely paid, will be sufficient to pay principal and
interest on the Bonds when due for the period commencing March 1, 1998, but not
to pay Extra Payments. Nonpayment of Extra Payments, in and of itself, will not
constitute an Event of Default under the Indenture or give rise to the right to
foreclose under the Deed of Trust. See "DEFINITIONS OF CERTAIN TERMS AND
DESCRIPTIONS OF PRINCIPAL DOCUMENTS--THE DEED OF TRUST" and "--THE LEASE."
THE REMIC BONDS
Certain proceeds of the Series A REMIC Bonds were transferred by BFC Finance
Corp. to Building Finance Company of Tennessee, Inc. to enable that company,
using such proceeds and other funds at its disposal, to make (i) a loan of
$99,000,000 to Parcel 49C Limited Partnership in connection with the
partnership's construction of the Portals II office building and related parking
garage in the District of Columbia, and (ii) a $27,087,366.74 loan to the
partnership for costs to acquire and develop property on which the office
building is to be constructed.
Certain proceeds of the Series A REMIC Bonds were also used by BFC Finance
Corp. to lend $9,310,689.07 to DCDC II, Inc. for which BFC Finance Corp.
received a note in such principal amount (the "DCDC II Note"), secured by a deed
of trust on approximately 300 acres of undeveloped land in Castle Rock, Colorado
(the "DCDC II Mortgage") and a pledge of United States Government securities
pursuant to an Assignment of Collateral and Trust Agreement (the "Pledge
Agreement").
Pursuant to the REMIC Indenture, BFC Finance Corp. deposited with the REMIC
Trustee certain assets comprising the trust estate including all rights to
payments under the Acquisition and Construction Notes which accrue after January
31, 1998, deeds of trust on the Portals II property, an assignment of Lease, the
DCDC II Note, the DCDC II Mortgage and the Pledge Agreement.
The terms of the Acquisition and Construction Notes and the Lease are such
that amounts payable thereunder are expected to be sufficient to pay principal
of and interest on the REMIC Bonds as and when due from and after March 1, 1998.
The terms of the DCDC II Note and the collateral securing the DCDC II Note are
such that amounts payable thereunder are expected to be sufficient to pay
interest on the REMIC Bonds which accrues from March 1, 1996 through January 31,
1998. In addition, the REMIC Trustee will be a beneficiary of certain insurance
policies covering casualty risks related to the property which is the subject of
the Lease, both during construction and after completion of construction. Such
policies are to be in amounts which are anticipated to be sufficient to enable
payment of debt service on the REMIC Bonds during any period of Lease
interruption or, together with proceeds from the sale of the property, to redeem
the REMIC Bonds in the event the Lease is terminated as a result of a casualty.
38
<PAGE>
However, there can be no assurance that such proceeds will be sufficient to pay
such debt service or redemption price.
The REMIC Trustee is also to be the beneficiary of certain casualty
insurance policies which are to be purchased with respect to Portals II. In the
event the Lease is terminated as a result of casualty or condemnation, proceeds
of such insurance policies or of any condemnation award would be used to redeem
the Series B REMIC Bonds and such redemption proceeds would be used to redeem
the Bonds. There can be no assurance that insurance or condemnation proceeds
would be received in amounts sufficient to redeem all or any of the Bonds. See
"The Bonds-Redemption Provisions-Extraordinary Mandatory Redemption."
In the event that the Series B REMIC Bonds are prepaid in full while the
Securities are outstanding, the proceeds of such prepayment will be used to
redeem the Securities. The Acquisition and Construction Notes permit optional
prepayments in full to be made on and after December 1, 2015. Under the REMIC
Indenture, prepayments of the Acquisition and Construction Notes requires
prepayment of the Series B REMIC Bonds.
The Authority will be required to reimburse the Credit Enhancement Provider
for any payments made by the Credit Enhancement Provider to holders of Exchange
Bonds pursuant to the Reimbursement Agreement. See "DEFINITIONS OF CERTAIN TERMS
AND DESCRIPTIONS OF PRINCIPAL DOCUMENTS--REIMBURSEMENT AGREEMENT."
EVENTS OF DEFAULT: REMEDIES AVAILABLE TO BONDHOLDERS
Pursuant to the Collateralized Credit Enhancement Agreement and the Bond
Pledge and Security Agreement, the Trustee, for the benefit of the Bondholders,
has a valid and perfected first priority lien on and security interest in the
Credit Enhancement Provider's right, title and interest in, and to the
Collateral. Upon an event of default by the Credit Enhancement Provider, the
Trustee may foreclose on the Collateral and seek all other remedies available at
law and equity.
TAX TREATMENT OF REMIC TRUST ESTATE AND SERIES B REMIC BONDS
The REMIC Trustee has made an election to treat the segregated asset pool
comprising the REMIC Trust Estate as a "real estate mortgage investment conduit"
("REMIC") for federal income tax purposes. Qualification as a REMIC requires
ongoing compliance with certain conditions. Kutak Rock, Special Tax Counsel to
BFC Finance Corp., has advised the REMIC Trustee that, in the firm's opinion and
assuming (i) compliance with the procedural requirements for making a REMIC
election, (ii) compliance with the REMIC Indenture under which the REMIC Bonds
were issued, and (iii) continuing compliance with the applicable provisions of
the Code, the segregated asset pool comprising the REMIC Trust Estate will
qualify as a REMIC, and the Series B REMIC Bonds will be considered REMIC
"regular interests" in such REMIC.
In order for the segregated asset pool comprising the REMIC Trust Estate
to maintain qualification as a REMIC, there must be ongoing compliance with
certain requirements set forth in the Code. If the REMIC Trust Estate fails
to comply with the ongoing requirements during any taxable year, the Code
provides that it will not be treated as a REMIC for such year and thereafter.
In such event, the classification of the REMIC for federal income tax
purposes is uncertain. The Series B REMIC Bonds may continue to be treated as
debt instruments for federal income tax purposes, but it is also possible
that the segregated asset pool comprising the REMIC Trust Estate may be
treated as a separate association taxable as a corporation and the Series B
REMIC Bonds may be treated as equity interests therein. If such treatment
were to apply, the REMIC Trust Estate would be subject to corporate tax on
its income, thereby potentially reducing amounts payable to the Trustee, as
pledgee of the Series B REMIC Bonds. The Treasury Department is authorized to
issue regulations that would address situations where a failure to meet
requirements for REMIC status occurs inadvertently and in good faith and,
absent regulatory relief,
39
<PAGE>
disqualification of the REMIC may occur. However, the legislative history of the
REMIC provisions of the Code indicates that such regulatory relief may be
accompanied by sanctions, such as the imposition of corporate tax on all or a
portion of a REMIC's income for the period of time during which requirements for
REMIC status are not satisfied.
Except as indicated above, the Series B REMIC Bonds will generally be
treated for federal income tax purposes as debt instruments that are issued by
the REMIC Trust Estate on the date of issuance of the Series B REMIC Bonds and
not as ownership interests in the REMIC Trust Estate or the REMIC Trust Estate's
assets. Income with respect to such Bonds is required to be reported under the
accrual method of accounting, not the cash method. In general, stated interest,
original issue discount and market discount accrued on the Series B REMIC Bonds
will be ordinary income, and principal payments on the Series B REMIC Bonds will
be return of capital to the extent of the holder's basis in the Series B REMIC
Bonds allocable to such payments.
THE PORTALS II BUILDING
Construction of the Portals II office building and parking garage, which is
being leased to the U.S. government pursuant to the Lease, commenced in the
spring of 1996. Construction of the building and parking garage is progressing
according to the planned construction schedule, and is anticipated to be
completed in November 1997. In December of 1996, the U.S. Government exercised
its option to lease the remaining space in the building so that the U.S.
Government now has a lease for 100% of the net usable square footage of the
building. The U.S. Government must commence paying rent directly to the REMIC
Trustee, pursuant to the assignment of the Lease, on March 1, 1998.
The base rent payable under the Lease is based on an initial annual rental
rate of $38.85 per net usable square foot for the first 287,483 of net usable
square feet of space leased and $37.95 per net usable square foot for the
remaining 247,647 of net usable square feet leased for a total initial amount of
$20,566,918.20 per year or $1,713,909.85 per month. The U.S. Government may
deduct from the base rent during any year of the term of the Lease an amount
which will not exceed $8.50 per net usable square foot (which amount may be
increased each year in accordance with a formula set forth in the Lease using
the same methodology for calculating the increase in the rent for operating
costs set forth in the Lease) for the partnership's failure to perform its
obligations under the Lease, but the government has agreed pursuant to an
attornment agreement to give the REMIC Trustee notice of and an opportunity to
cure the partnership's failure to perform its obligations under the Lease prior
to deducting amounts from the base rent, unless the partnership's failure to
perform has caused a life or health-threatening condition. Consequently, the
total base rent not subject to set-off is $16,018,313.20 per year, or
$1,334,859.43 per month. Rent is payable in equal monthly installments in
arrears. It was a condition to issuance of the REMIC Bonds that counsel for the
government render an opinion that the obligations of the government to pay rent
under the Lease constitutes an absolute and unconditional obligation of the
government. As is the case with most federal agencies, the government's access
to funds requires an annual appropriation by Congress. The government's ability
to make payments under the Lease requires such an appropriation to the Federal
Buildings Fund, the fund from which all the government's long-term leases are
paid. In the event Congress fails to make such appropriation, or in the event
any payments that are properly due and owing the partnership under the Lease are
not made, the partnership or the REMIC Trustee would be entitled, in the opinion
of the counsel for the government, to enforce the payment obligations of the
United States in accordance with the terms of the Lease, or as otherwise may be
available at law or in equity. For a further description of the Lease, see
"DEFINITIONS OF CERTAIN TERMS AND DESCRIPTIONS OF PRINCIPAL DOCUMENTS--THE
LEASE."
REASONS FOR SELECTING THE TYPE OF CREDIT ENHANCEMENT AND THE PROVIDER THEREOF
Approximately 75% of the taxable property located within the Districts is
owned by Douglas County Development Corporation, a Colorado corporation related
to the Franklin L. Haney Corporation. DCDC
40
<PAGE>
II also owns certain taxable property within the Districts. As described under
"CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS," Franklin L. Haney owns 21%,
and Douglas County Development Corporation owns 79% of DCDC II, Inc. Franklin L.
Haney also owns Douglas County Development Corporation.
Franklin L. Haney also owns 16% and various members of his family own the
remaining 84%, of Tower Associates II, Inc., which is a general partner and a
limited partner of Parcel 49C Limited Partnership. Franklin L. Haney owns 49% of
Building Finance Company of Tennessee, Inc., which in turn owns BFC Guaranty
Corp. and BFC Finance Corp. Building Finance Company of Tennessee acquired the
Acquisition Note and the Construction Note which are now held in a trust estate
under an Indenture of Trust between the REMIC Trustee and BFC Finance Corp. As a
result, BFC Guaranty Corp., as owner of the Series B REMIC Bonds, has a right to
receive, through an Assignment of the GSA Lease payments, amounts payable by the
GSA to Parcel 49C Limited Partnership.
DCDC II, Inc. and Douglas County Development Corporations will be the
primary beneficiaries of the ultimate development of the Districts. As a result,
they will have a substantial benefit from the successful construction and
completion of the Project, which is anticipated to enhance greatly the value of
their holdings within the Districts. This type of credit enhancement was chosen
inasmuch as it permitted the Franklin L. Haney Company, through affiliates, to
provide readily available credit enhancement through related entities.
Utilization of credit enhancements is intended to substantially lower the
borrowing costs and permit more ready access by the Authority to the tax-exempt
municipal market.
Franklin L. Haney also owns 16% and various members of his family own the
remaining 84%, of Tower Associates II, Inc., which is a general partner and a
limited partner of Parcel 49C Limited Partnership. Franklin L. Haney owns 49% of
Building Finance Company of Tennessee, Inc., which in turn owns BFC Guaranty
Corp. and BFC Finance Corp. Building Finance Company of Tennessee acquired the
Acquisition Note and the Construction Note which are now held in a trust estate
under an Indenture of Trust between the REMIC Trustee and BFC Finance Corp. As a
result, BFC Guaranty Corp., as owner of the Series B REMIC Bonds, has a right to
receive, through an Assignment of the GSA Lease payments, amounts payable by the
GSA to Parcel 49C Limited Partnership.
DCDC II, Inc. and Douglas County Development Corporations will be the
primary beneficiaries of the ultimate development of the Districts. As a result,
they will have a substantial benefit from the successful construction and
completion of the Project, which is anticipated to enhance greatly the value of
their holdings within the Districts. This type of credit enhancement was chosen
inasmuch as it permitted the Franklin L. Haney Company, through affiliates, to
provide readily available credit enhancement through related entities.
Utilization of credit enhancements is intended to substantially lower the
borrowing costs and permit more ready access by the Authority to the tax-exempt
municipal market.
41
<PAGE>
DESCRIPTION OF SERIES B REMIC BONDS
GENERAL
The Series B REMIC Bonds are dated March 1, 1996, and will bear interest
from and including March 1, 1998, at the rates per annum, and will mature in the
principal amounts, as set forth on the "Maturity Schedule" below. Interest on
the Series B REMIC Bonds will be payable initially on June 1, 1998 and
semiannually thereafter on June 1 and December 1 of each year until maturity or
prior redemption (each a "REMIC Interest Payment Date"). The interest payable on
the Series B REMIC Bonds will be computed on the basis of a 360-day year of
twelve 30-day months. If any payment of the principal of or interest on the
Series B REMIC Bonds is due on a payment date that is not a business day, such
payment will be made on the next succeeding business day, and no interest will
accrue on the amount of such payment during the intervening period. The Series B
REMIC Bonds were issued in book-entry form only in authorized denominations of
$100,000 and multiples of $5,000 in excess thereof, and are registered in the
name of Cede & Co., as registered owner and nominee of The Depository Trust
Company, New York, New York. The sole beneficial owner of the Series B REMIC
Bonds is the Credit Enhancement Provider. Neither the holders or the Exchange
Bonds nor the Trustee own the Series B REMIC Bonds. They are merely pledged to
the Trustee as collateral security for the obligation of the Credit Enhancement
Provider under the Credit Enhancement.
MATURITY SCHEDULE
<TABLE>
<CAPTION>
ORIGINAL PRINCIPAL
STATED MATURITIES AMOUNT INTEREST RATE (PER ANNUM)
- ------------------------------------------------------------- ------------------------ ---------------------------
<S> <C> <C>
December 1, 1998............................................. $ 5,000 5.750%
December 1, 1999............................................. 1,985,000 5.750
December 1, 2000............................................. 2,100,000 5.750
December 1, 2001............................................. 2,220,000 5.750
December 1, 2002............................................. 2,345,000 5.750
December 1, 2003............................................. 2,480,000 5.900
December 1, 2004............................................. 2,625,000 6.000
December 1, 2005............................................. 2,785,000 6.100
December 1, 2006............................................. 2,955,000 5.700
December 1, 2007............................................. 3,120,000 6.300
December 1, 2008............................................. 3,315,000 6.400
December 1, 2009............................................. 3,530,000 6.500
December 1, 2010............................................. 3,760,000 6.375
December 1, 2011............................................. 4,000,000 6.375
December 1, 2012............................................. 4,255,000 6.250
December 1, 2013............................................. 4,520,000 6.250
December 1, 2014............................................. 4,800,000 6.250
December 1, 2015............................................. 5,100,000 6.250
December 1, 2016............................................. 5,420,000 6.250
December 1, 2017............................................. 5,755,000 6.250
</TABLE>
REDEMPTION PRIOR TO MATURITY
EXTRAORDINARY MANDATORY REDEMPTION
(1) The Series B REMIC Bonds maturing on or after December 1, 2016 are
subject to extraordinary mandatory redemption prior to maturity on or after
December 1, 2015, upon notice from BFC Finance Corp. to the REMIC Trustee of the
optional total prepayment of the Acquisition and Construction Notes by Parcel
49C Limited Partnership, as a whole on any REMIC Interest Payment Date set forth
below at the redemption prices (expressed as a percentage of the principal
amount redeemed) set forth below, plus accrued interest to the redemption date.
<TABLE>
<CAPTION>
REMIC INTEREST PAYMENT DATES REDEMPTION PRICE
- ---------------------------------------------------------------------------- -------------------
<S> <C>
December 1, 2015 and June 1, 2016........................................... 102%
December 1, 2016 and June 1, 2017........................................... 101%
</TABLE>
42
<PAGE>
(2) The Series B REMIC Bonds shall be subject to extraordinary mandatory
redemption from monies received by the REMIC Trustee constituting prepayments of
the Acquisition and Construction Notes, in whole or in part to the extent of
such monies received by the REMIC Trustee, upon notice from BFC Finance Corp. to
the REMIC Trustee that the Acquisition and Construction Notes have become
subject to mandatory prepayment as a whole due to casualty or condemnation with
respect to all or substantially all of the office building and related parking
garage in the District of Columbia, at a price equal to one hundred percent
(100%) of the principal amount thereof, plus accrued interest thereon to the
redemption date, on the REMIC Interest Payment Date for which notice can be
given and which next follows receipt by the REMIC Trustee of monies constituting
such Acquisition and Construction Note prepayments.
(3) If not all of the outstanding Series B REMIC Bonds can be redeemed from
monies received by the REMIC Trustee due to a mandatory prepayment of the
Acquisition and Construction Notes arising from casualty or condemnation as
described above, the REMIC Trustee shall apply all monies so received to redeem
the outstanding Series B REMIC Bonds in part, which redemption shall be made pro
rata among the holders of the outstanding Series B REMIC Bonds.
NOTICE OF REDEMPTION
Notice of any extraordinary mandatory redemption of the Series B REMIC Bonds
shall be given by the REMIC Trustee by certified mail, return receipt requested,
not less than 30 days nor more than 45 days prior to the applicable redemption
date to each holder in whose name a Series B REMIC Bond is registered on the
REMIC Record Date preceding the applicable redemption date, at such bondholder's
address appearing in the bond register. Prior to the REMIC Trustee giving any
notice of redemption, the REMIC Trustee is required to have on deposit in the
REMIC Redemption Fund the redemption price for the Series B REMIC Bonds to be
redeemed.
All notices of redemption shall state the amount of Series B REMIC Bonds
being redeemed, redemption date, redemption price, the place where the Series B
REMIC Bonds are to be surrendered for payment of the redemption price and that
no interest shall accrue on such Series B REMIC Bonds after such redemption
date. Any failure to give such notice, or any defect therein, shall not affect
the validity of any proceedings for the redemption of any other Series B REMIC
Bonds for which no such failure or defect occurs.
SERIES B REMIC BONDS DUE AND PAYABLE ON REDEMPTION DATE; INTEREST CEASES TO
ACCRUE
On any applicable redemption date, Series B REMIC Bonds subject to
redemption shall become due and payable and interest thereon, unless there is a
default in the payment of the redemption price, shall cease to accrue.
MUTILATED, DESTROYED, LOST OR STOLEN SERIES B REMIC BONDS
If any mutilated Series B REMIC Bond is surrendered to the REMIC Trustee or
the REMIC Trustee receives evidence to its satisfaction of the destruction, loss
or theft of any Series B REMIC Bond, and there is delivered to the REMIC Trustee
such security or indemnity as may be by the REMIC Trustee to save BFC Finance
Corp. and the REMIC Trustee harmless, BFC Finance Corp. shall execute and the
REMIC Trustee shall authenticate and deliver, in exchange for or in lieu of any
mutilated, destroyed, lost or stolen Series B REMIC Bond, a new bond of like
class, stated maturity, tenor and principal amount, bearing a number not
contemporaneously outstanding. If any such mutilated, destroyed, lost or stolen
Series B REMIC Bond shall have become due and payable, or shall have been called
for redemption, instead of issuing a new Series B REMIC Bond, BFC Finance Corp.
may pay such bond without surrender thereof, except that any mutilated Series B
REMIC Bond shall be surrendered.
43
<PAGE>
Upon the issuance of a new Series B REMIC Bond, BFC Finance Corp. or the
REMIC Trustee may require the payment by the bondholder of a sum sufficient to
cover any tax or other governmental charge that may be imposed and any other
reasonable expenses (including the fees and expenses of the REMIC Trustee)
related to such issuance.
TRANSFER AND EXCHANGE OF SERIES B REMIC BONDS
Upon surrender for registration of transfer or exchange of any Series B
REMIC Bond at the Corporate Trust Office, BFC Finance Corp. shall execute and
the REMIC Trustee shall authenticate and deliver in the name of the transferee
or transferees, a new Series B REMIC Bond of the same stated maturity and of
authorized denominations for the same class and then unpaid principal amount.
All Series B REMIC Bonds presented for any registration of transfer or exchange
shall be duly endorsed, or be accompanied by a written instrument of transfer,
in form and with guaranty of signature satisfactory to the REMIC Trustee, duly
executed by the registered owner or by an attorney duly authorized in writing.
BFC Finance Corp. and the REMIC Trustee shall not be required to register,
transfer or exchange any Series B REMIC Bonds selected, called or being called
for redemption, during any period from a REMIC Record Date to the immediately
succeeding REMIC Interest Payment Date. All Series B REMIC Bonds issued upon any
registration of transfer or exchange of Series B REMIC Bonds shall be valid
obligations of BFC Finance Corp., evidencing the same debt and entitled to all
of the security and benefits under the REMIC Indenture to the same extent as the
Series B REMIC Bonds surrendered.
In case of any registration of transfer or exchange, BFC Finance Corp. and
the REMIC Trustee may require payment of a sum sufficient to cover actual
expenses incurred in making such exchange or transfer and any tax or other
governmental charge that may be imposed in connection with any such registration
of transfer or exchange.
CREATION OF FUNDS AND ACCOUNTS TO BE HELD BY THE REMIC TRUSTEE
The REMIC Trustee holds the following Trust Funds under the REMIC Indenture:
(i) the Debt Service Fund; (ii) the Redemption Fund; (iii) the Trust Expense
Fund; and (iv) the Residual Fund.
DEBT SERVICE FUND
The REMIC Trustee shall deposit into the Debt Service Fund all monies
transferred from the Income Account held by the REMIC Trustee as Approved Bank
under the Loan Agreement which are payments made on account of the Acquisition
and Construction Notes pursuant to the Loan Agreement and all amounts received
from payments on the DCDC Note.
Moneys on deposit in the Debt Service Fund shall be used in the following
order and priority: (i) to transfer to the Trust Expense Fund on each REMIC
Interest Payment Date beginning June 1, 1998, the sum of $10,000 to cover fees
and expenses of the REMIC Trustee; (ii) to pay interest on the Series B REMIC
Bonds coming due on each REMIC Interest Payment Date; and (iii) to pay the
principal on the Series B REMIC Bonds as it becomes due or, if not then due on
such payment date, to serve a ratable portion of the principal due on the next
principal payment date. After making such payments on the Series B REMIC Bonds
or reserving such amounts as applicable, the REMIC Trustee will transfer to the
Trust Expense Fund from the Debt Service Fund the lesser of (A) the unpaid fees
and expenses of the Manager or (B) the balance on deposit in the Debt Service
Fund.
After making such transfer to the Trust Expense Fund, on each June 1 and
December 1 commencing December 1, 1998, the REMIC Trustee will transfer the
balance in the Debt Service Fund to the Residual Fund, provided no REMIC Event
of Default has occurred and is continuing.
Except for the transfers to the Trust Expense Fund and the Residual Fund
described above, the REMIC Trustee shall use moneys in the Debt Service Fund
solely for the payment of interest on the
44
<PAGE>
Series B REMIC Bonds when due and the payment of principal of and the premium
(if any) on the Series B REMIC Bonds as the same become due and payable at
maturity or upon earlier redemption or acceleration.
REDEMPTION FUND
BFC Finance Corp. shall cause to be deposited into the Redemption Fund for
the payment of principal, accrued interest to the redemption date, if any, and
premium, if any, upon extraordinary mandatory redemption of the Series B REMIC
Bonds, solely out of moneys received as prepayment on the Acquisition and
Construction Notes, an amount sufficient to pay, when due, the principal,
accrued interest to the redemption date, if any, and premium, if any, upon such
a redemption of the Series B REMIC Bonds. The REMIC Trustee shall use moneys in
the Redemption Fund solely for the payment of principal of, premium if any, and
accrued interest on the Series B REMIC Bonds to the redemption date in
connection with any extraordinary mandatory redemption thereof. See "DESCRIPTION
OF THE SERIES B REMIC BONDS--REDEMPTION PRIOR TO MATURITY."
TRUST EXPENSE FUND
Moneys shall be transferred into the Trust Expense Fund from the Debt
Service Fund at the times and as provided in of the REMIC Indenture. The REMIC
Trustee shall use moneys transferred into the Trust Expense Fund to pay the fees
and expenses of the REMIC Trustee and to pay the fees and expenses of the
Manager.
RESIDUAL FUND
Moneys shall be transferred into the Residual Fund from the Debt Service
Fund at the times and as provided in the REMIC Indenture. The REMIC Trustee
shall use moneys transferred into the Residual Fund solely to make payments on
the Certificates on each June 1 and December 1, commencing December 1, 1996.
DISCHARGE OF REMIC INDENTURE
Whenever the following conditions shall have been satisfied with respect to
the REMIC Bonds:
(a) either:
(i) all Series A REMIC Bonds and Series B REMIC Bonds theretofore
authenticated and delivered (other than those which have been mutilated,
destroyed, lost or stolen and which have been replaced or paid as provided in
the REMIC Indenture) have been delivered to the REMIC Trustee for cancellation;
or
(ii) all Series A REMIC Bonds and Series B REMIC Bonds not theretofore
delivered to the REMIC Trustee for cancellation have become due and payable and
there has been deposited with the REMIC Trustee, in trust for such purpose, an
amount of cash or certain non-callable Government Securities, the principal of
and interest on which is sufficient to pay and discharge the entire indebtedness
on such Series A REMIC Bonds and Series B REMIC Bonds not theretofore delivered
to the REMIC Trustee for cancellation;
(b) all other sums payable hereunder with respect to the REMIC Bonds
(including all REMIC Trustee fees and expenses) have been paid or provided for;
and
(c) the REMIC Trustee has received an opinion of counsel to the effect that
all conditions precedent herein provided for the satisfaction and discharge of
the REMIC Indenture with respect to the REMIC Bonds have been complied with;
then, at the direction of the residual holders, the REMIC Indenture and the
lien, rights and interests created thereby shall cease to be of further effect,
and the REMIC Trustee shall execute and deliver all
45
<PAGE>
such instruments as may be necessary to acknowledge the satisfaction and
discharge of the REMIC Indenture and shall pay, or assign or transfer and
deliver, to the residual holders all cash, securities and other property held by
the REMIC Trustee as part of the REMIC Trust Estate remaining after satisfaction
of the conditions set forth in (a) and (b) above.
EVENTS OF DEFAULT
Each of the following events constitute a REMIC Event of Default under the
REMIC Indenture:
(a) A default in any payment when and as due of interest on any REMIC bond;
or
(b) A default in any payment of principal of any REMIC Bond when and as due,
whether at the stated maturity thereof or when called for redemption; or
(c) A failure by BFC Finance Corp. to perform or observe any covenants of
BFC Finance Corp. other than such covenants relating to (a) or (b) above, or if
any representation made in the REMIC Indenture or in any certificate delivered
pursuant to the REMIC Indenture shall prove to be materially incorrect at the
time made, and failure to remedy the same within 90 days (subject to extension
to 180 days in certain circumstances as provided in the REMIC Indenture) after
notice thereof has been given pursuant to of the REMIC Indenture.
WAIVER, RESCISSION AND ANNULMENT OF REMEDY EVENT
The REMIC Trustee may waive any REMIC Event of Default which has been
remedied and its consequences. The REMIC Trustee shall waive any REMIC Event of
Default which has not been remedied upon the written request of the holders of a
majority of the aggregate outstanding amount of each class of REMIC Bonds
affected thereby.
REMEDIES
If a REMIC Event of Default shall have occurred and be continuing and its
consequences have not been rescinded or annulled, the REMIC Trustee may, subject
to the rights of the REMIC Bondholders to control remedies, do one or more of
the following:
(a) Institute proceedings for the collection of all amounts then payable on
the Acquisition and Construction Notes or DCDC Note, including all action
commercially reasonable to realize upon the collateral securing the Acquisition
and Construction Notes or DCDC Note (assuming an event of default exists with
respect to such notes pursuant to the terms thereof);
(b) Institute proceedings for the collection of all amounts then payable on
the REMIC Bonds or under the REMIC Indenture, enforce any judgment obtained and
collection from the REMIC Trust Estate securing the Series B REMIC Bonds moneys
adjudged due;
(c) Institute proceedings from time to time for the complete or partial
foreclosure of the REMIC Indenture with respect to the REMIC Trust Estate or to
enforce its rights thereunder;
(d) Exercise any remedies as a secured party under the UCC and take any
other appropriate action to protect and enforce the rights and remedies of the
REMIC Trustee or holders;
(e) Replace the Manager; and
(f) with respect to a payment default on the Series B REMIC Bonds which
remains uncured for a period of 120 days or more, accelerate and declare the
Series B REMIC Bonds immediately due and payable in full; provided at any time
there exists and is continuing a payment default on the Series B REMIC Bonds,
the REMIC Trustee shall accelerate and declare the Series B REMIC Bonds
immediately due and payable in full if directed to do so by a majority in
aggregate outstanding amount of the Series B REMIC Bonds.
46
<PAGE>
Notwithstanding the foregoing, no deficiency judgment shall be sought or
obtained against BFC Finance Corp. or the residual holders if the amounts
realizable from the REMIC Trust Estate under the REMIC Indenture are
insufficient to pay the obligations on the Series B REMIC Bonds.
APPLICATION OF MONEYS COLLECTED
All moneys received by the REMIC Trustee following a REMIC Event of Default
upon the exercise of any remedies available to it, after payment of the costs
and expenses of the proceedings resulting in the collection of such moneys and
of any amounts due and owing to the REMIC Trustee under the REMIC Indenture,
shall be deposited in the Debt Service Fund and all moneys in the Debt Service
Fund (other than moneys held for redemption of bonds duly called for redemption)
shall be applied to the extent permitted by law in the following order, at the
date or dates from time to time fixed by the REMIC Trustee, in the manner and
priority provided as follows until such REMIC Event of Default is cured:
First--To the payment to the persons entitled thereto of all installments of
interest then due on the REMIC Bonds, in the direct order of the maturity of the
installments of such interest and, if the amounts available shall not be
sufficient to pay in full any particular installment, then to the payment
ratably, according to the amounts due on such installment, to the persons
entitled thereto, without any discrimination or privilege; and
Second--To the payment to the persons entitled thereto of the unpaid
principal and premium, if any, on any of the REMIC Bonds, which shall have
become due (other than REMIC Bonds which have matured or otherwise become
payable before such REMIC Event of Default and moneys for the payment of which
are held in the Debt Service Fund or otherwise held by the REMIC Trustee), with
interest on such principal from the respective dates upon which the same became
due and, if the amount available shall not be sufficient to pay in full the
amount of principal, premium, if any, and the interest due on any particular
date, then to the payment ratably, according to the amount of principal due on
such date, to the persons entitled thereto, without any discrimination or
privilege.
To the extent funds remain after such payments, such funds shall be held by
the REMIC Trustee; provided that in no event shall Series B REMIC Bonds be
called for redemption in part so long as a REMIC Event of Default is outstanding
under the REMIC Indenture.
CONTROL BY THE REMIC BONDHOLDERS UNTIL NO OUTSTANDING SERIES B REMIC BONDS
Subject to the terms of the REMIC Indenture, holders of a majority in
aggregate outstanding amount of each class of REMIC Bonds shall have the right
at any time, by an instrument in writing executed and delivered to the REMIC
Trustee, to direct the time, method and place of conducting any proceeding for
any remedy available to the REMIC Trustee or exercising any trust or power
conferred on the REMIC Trustee with respect to the bonds provided that:
(a) such direction shall not be in conflict with any rule of law or with the
REMIC Indenture;
(b) the REMIC Trustee shall have been provided with indemnity reasonably
satisfactory to it;
(c) any direction to the REMIC Trustee to undertake a sale of the REMIC
Trust Estate shall be accompanied by a Non-Disqualification Opinion;
(d) the REMIC Trustee may take any other action deemed proper by the REMIC
Trustee which is not inconsistent with such direction; provided, however, that
the REMIC Trustee need not take any action which it determines would be unjustly
prejudicial to REMIC Bondholders not consenting.
Notwithstanding the foregoing, no holder of any REMIC Bond shall have the
right to institute any suit, action or proceeding in equity or at law with
respect to any remedy provided under the REMIC Indenture unless a REMIC Event of
Default of which the REMIC Trustee is deemed to have notice under the REMIC
Indenture has occurred, the requisite percentage of holders has directed the
REMIC Trustee
47
<PAGE>
to institute proceedings, indemnity has been provided the REMIC Trustee, and
thereafter the REMIC Trustee has failed to institute suit in its own name.
REMIC TRUSTEE RESIGNATION AND REMOVAL; SUCCESSOR REMIC TRUSTEE
The REMIC Trustee and any successor REMIC Trustee may at any time resign by
giving 30 days' prior written notice by registered or certified mail to BFC
Finance Corp., the Rating Agency and the Manager and by first-class mail
(postage prepaid) to the registered holder of each REMIC Bond and Certificate,
all at the REMIC Trustee's expense, and such resignation shall take effect only
upon the appointment and acceptance of a successor REMIC Trustee. If no
successor REMIC Trustee shall have been appointed and have accepted appointment
within 45 days of giving notice of removal or notice of resignation as
aforesaid, the resigning REMIC Trustee or any holder of REMIC Bonds (on behalf
of himself and all other holders) may petition any court of competent
jurisdiction for the appointment of a successor REMIC Trustee and such court may
thereupon, after such notice (if any) as it may deem proper, appoint such
successor REMIC Trustee.
The REMIC Trustee may be removed at any time by an instrument or concurrent
instruments in writing delivered to the REMIC Trustee, the Rating Agency, BFC
Finance Corp., the Manager and the residual holders and signed by the owners of
a majority of the aggregate outstanding amount of each class of bonds; provided,
however, that no removal shall become effective until a successor REMIC Trustee
has been appointed and has accepted the duties of the REMIC Trustee. In
addition, any REMIC Trustee may be removed at any time, (i) at the written
request of the Majority Residual Holders, for cause, including breach of the
trusts set forth in the REMIC Indenture and (ii) by BFC Finance Corp. with the
written approval of the Majority Residual Holders.
In case the REMIC Trustee shall resign or be removed, or be dissolved, or
shall be in course of dissolution or liquidation, or otherwise become incapable
of acting under the REMIC Indenture, or in case it shall be taken under the
control of any public officer or officers, or of a receiver appointed by a
court, a successor may be appointed by the owners of a majority of the aggregate
outstanding amount of each class of bonds, with the consent of the Majority
Residual Holders, by an instrument or concurrent instruments in writing signed
by such owners, or by their attorneys-in-fact duly authorized and a copy of
which shall be delivered personally or sent by registered mail to BFC Finance
Corp., the REMIC Trustee and the Manager. In addition, in case of such vacancy,
BFC Finance Corp., upon notice as provided in the REMIC Indenture may, with the
consent of the Majority Residual Holders, appoint a temporary REMIC Trustee to
fill such vacancy until a successor REMIC Trustee shall be appointed by the
owners of a majority of the aggregate outstanding amount of each class of bonds
in the manner above provided. Any REMIC Trustee appointed under the REMIC
Indenture (other than the initial REMIC Trustee thereunder) or appointed as a
successor to the REMIC Trustee shall be a trust company or bank in good
standing, duly authorized to exercise trust powers under the REMIC Indenture,
having trust assets of at least $500,000,000 and a combined capital and surplus
of at least $75,000,000, and subject to supervision or examination by federal or
state authority, provided there is such a bank or trust company willing or able
to serve in such capacity. In case at any time the successor REMIC Trustee shall
cease to be eligible in accordance with such provisions, the REMIC Trustee shall
resign immediately in the manner and with the effect specified in the REMIC
Indenture. Resignation or removal of the REMIC Trustee does not relieve such
resigning or removed REMIC Trustee from liability for its acts before the date
such removal or resignation is effective. If there is no qualified REMIC Trustee
willing to serve, the successor REMIC Trustee shall be selected by the Majority
Residual Holders.
48
<PAGE>
SUPPLEMENTAL REMIC INDENTURES WITHOUT CONSENT OF REMIC BONDHOLDERS
Without the consent of, or notice, to, any REMIC Bondholders, BFC Finance
Corp. (but only with the consent or direction of the Majority Residual Holders)
and the REMIC Trustee, at any time and from time to time, may enter into one or
more supplemental indentures for any of the following purposes:
(a) To cure any ambiguity, to correct or supplement any provision of the
REMIC Indenture or in any supplemental indenture which may be defective or
inconsistent with any other provision therein or in any supplemental indenture
or to make such other provisions in regard to matters or questions arising under
the REMIC Indenture or under any supplemental indenture, which shall not be
inconsistent with the provisions of the REMIC Indenture, as BFC Finance Corp.
may deem necessary or desirable and which do not adversely affect the interests
of the holders of any affected REMIC Bonds;
(b) To conform to any mandatory provisions of law;
(c) To modify, amend or supplement the REMIC Indenture in such manner as to
permit the qualification thereof under the Trust Indenture Act of 1939 or any
similar federal statute hereafter in effect or under any state securities laws
and to add to the REMIC Indenture such other provisions as may be expressly
required by the Trust Indenture Act of 1939;
(d) To correct or amplify the description of the REMIC Trust Estate or
better to assure, convey and confirm unto the REMIC Trustee the REMIC Trust
Estate, or to subject to the lien of the REMIC Indenture additional property;
(e) To modify, eliminate or add to the provisions of the REMIC Indenture to
such extent as shall be necessary to maintain the qualification of the REMIC
Trust Estate as a REMIC under the Code; or
(f) To maintain or improve the then current rating by the Rating Agency of
any class of REMIC Bonds (so long as the rating (if any) with respect to any
other class of REMIC Bonds is not adversely affected thereby).
SUPPLEMENTAL REMIC INDENTURES WITH CONSENT OF REMIC BONDHOLDERS
With the consent of the REMIC Bondholders of not less than two-thirds in
aggregate outstanding amount of the class of REMIC Bonds affected thereby, BFC
Finance Corp. (but only with the consent or direction of the Majority Residual
Holders) and the REMIC Trustee may enter into indentures supplemental thereto
for the purpose of adding any provisions to or changing in any manner or
eliminating any of the provisions of the REMIC Indenture or of modifying in any
manner the rights of REMIC Bondholders under the REMIC Indenture; provided,
however,
(a) that no such supplemental indenture shall, without the consent of REMIC
Bondholders of 100% in aggregate outstanding amount of REMIC Bonds affected
thereby, change the stated maturity of the principal of, or any installment of
principal or interest on, any REMIC Bond or reduce the principal amount thereof
or the interest rate thereon or the redemption price with respect thereto; and
(b) that no such supplemental indenture shall, without the consent of REMIC
Bondholders of 100% in aggregate outstanding amount of REMIC Bonds affected
thereby;
(i) reduce the percentage of aggregate amount of REMIC Bonds, holders of
which are specifically required under the REMIC Indenture (A) to direct the
REMIC Trustee to liquidate the REMIC Trust Estate, (B) consent to any
supplemental indenture or (C) for any waiver of compliance with certain
provisions of the REMIC Indenture or certain defaults thereunder and their
consequences provided for in the REMIC Indenture;
(ii) except as expressly provided in the REMIC Indenture, create any
lien having a priority over or a parity with the lien of the REMIC
Indenture, terminate the lien of the REMIC Indenture on the
49
<PAGE>
REMIC Trust Estate, or deprive any REMIC Bondholder of the security afforded
by the lien of the REMIC Indenture.
No supplemental indenture shall be adopted without the prior written consent
of the REMIC Trustee or the Manager if such supplemental indenture, as evidenced
by an opinion of counsel delivered by the REMIC Trustee or the Manager, would
impose additional duties or obligations upon the REMIC Trustee or the Manager.
Any supplemental indenture must be accompanied by an opinion of counsel to the
effect that the execution and delivery of such supplemental indenture will not,
when applicable, cause the REMIC Trust Estate to fail to qualify as a REMIC so
long as any Series B REMIC Bonds are outstanding.
AMENDMENTS TO THE NOTES AND LOAN DOCUMENTS WITHOUT CONSENT OF REMIC BONDHOLDERS
BFC Finance Corp., acting at the direction of the Majority Residual Holders,
and the REMIC Trustee may, without the consent of or notice to the REMIC
Bondholders, consent to any amendment of the Notes and Loan Documents (i) to
cure any ambiguity or to make minor corrections consistent with the terms
thereof, or (ii) to make any other change that does not materially adversely
affect the interests of the REMIC Bondholders provided in either case there is
delivered to the REMIC Trustee an opinion of counsel stating that such amendment
would not materially affect the interests of the REMIC Bondholders and that the
execution and delivery of any such amendment will not cause the REMIC Trust
Estate to fail to qualify as a REMIC so long as any REMIC Bonds are outstanding.
AMENDMENTS TO THE NOTES AND LOAN DOCUMENTS WITH CONSENT OF REMIC BONDHOLDERS
Except for amendments as provided for above, neither BFC Finance Corp. nor
the REMIC Trustee shall consent to any other amendment, change or modification
of the Notes and Loan Documents without the written consent of the holders of
not less than two-thirds of the aggregate outstanding amount of each class of
REMIC Bonds affected thereby and the Majority Residual Holders. Prior to any
such amendment, there must be delivered to the REMIC Trustee a
Non-Disqualification Opinion. Nothing contained in the REMIC Indenture shall
permit, or be construed as permitting, a reduction in the percentage of the
holders of any class of REMIC Bonds which are required to consent to any such
amendment, change or modification, or a reduction in, or a postponement of, the
payments under the Notes, without the consent of all holders and the Majority
Residual Holders.
THE MANAGER
The Manager, which is Building Finance Company of Tennessee, Inc., shall (i)
monitor the REMIC status of the REMIC Trust Estate and file tax returns and
reports required by the Code; (ii) advise the REMIC Trustee whether transactions
proposed by the REMIC Trustee or the holders of Certificates could jeopardize
the REMIC status of the REMIC Trust Estate or result in the imposition of tax on
the REMIC Trust Estate; and (iii) advise the REMIC Trustee and the holders of
Certificates with respect to any administrative or judicial proceedings relating
to an audit or examination by any governmental taxing authority regarding the
REMIC.
The Manager may be removed by the REMIC Trustee or the Majority Residual
Holders acting with the consent of the REMIC Trustee, if the Manager shall
default in the performance of its duties under the REMIC Indenture.
THE EXCHANGE OFFER
PURPOSE AND EFFECT OF THE EXCHANGE OFFER
The Bonds were originally sold by the Authority on March 27, 1996 to Lehmann
Brothers Inc. pursuant to the Purchase Agreement. Lehmann Brothers Inc.
subsequently resold the Bonds to qualified institutional buyers in reliance on
Rule 144A under the Securities Act and to an institutional accredited
50
<PAGE>
investor that agreed to comply with certain transfer restrictions and other
conditions. As a condition to the Purchase Agreement, the Authority and the
Credit Enhancement Provider entered into the Registration Rights Agreement with
Lehmann Brothers Inc. (the "Registration Rights Agreement"). The Registration
Rights Agreement provides that (i) the Authority and the Credit Enhancement
Provider will file an Exchange Offer Registration Statement with the Securities
and Exchange Commission on or prior to December 24, 1996, (ii) the Authority and
the Credit Enhancement Provider will use their best efforts to have the Exchange
Offer Registration Statement declared effective by the Securities and Exchange
Commission on or prior to March 23, 1997, and (iii) unless the Exchange Offer
would not be permitted by applicable law or Securities and Exchange Commission
policy, the Authority will commence the Exchange Offer and use its best efforts
to issue on or prior to 30 business days after the date on which the Exchange
Offer Registration Statement was declared effective by the Securities and
Exchange Commission, Exchange Bonds in exchange for all Bonds tendered prior
thereto in the Exchange Offer. If (a) the Authority and the Credit Enhancement
Provider fail to file any of the Registration Statements required by the
Registration Rights Agreement on or before the date specified for such filing,
(b) any of such Registration Statements is not declared effective by the
Securities and Exchange Commission on or prior to the date specified for such
effectiveness, or (c) the Authority fails to consummate the Exchange Offer
within 30 business days of the date specified for such effectiveness with
respect to the Exchange Offer Registration Statement, then the Authority will
pay to each holder of Securities ("Additional Interest"), additional interest
calculated at the rate of 1% per annum on the principal amount of Securities
held by such holder. Additional Interest, if any, shall be due and payable on
each Interest Payment Date; provided that (1) Additional Interest shall be paid
solely to the extent funds therefor are available from Revenues as provided for
in the Indenture, (2) no Additional Interest shall be paid while any installment
of interest (other than Additional Interest) or principal is due and payable
under the Indenture or (unless paid from Revenues received under the Development
Agreement) any amount is due to the Credit Enhancement Provider under the
Reimbursement Agreement, (3) the Bonds shall not accelerate as a result of
nonpayment of Additional Interest and (4) neither nonpayment of Additional
Interest nor any of the events referred to in clauses (a) through (c) above,
shall constitute an event of default under the Indenture. Following registration
under the Act of the Credit Enhancement for resale by the holders thereof, the
payment of Additional Interest will cease. Upon the Exchange Offer Registration
Statement being declared effective, the Authority will offer the Exchange Bonds
in exchange for surrender of the Bonds. The Authority will keep the Exchange
Offer open for not less than 20 business days (or longer if required by
applicable law) after the date on which notice of the Exchange Offer is mailed
to the holders of the Bonds. For each Bond surrendered to the Authority pursuant
to the Exchange Offer, the holder of such Bond will receive an Exchange Bond
having a principal amount equal to that of the surrendered Bond. Interest on
each Exchange Bond will accrue from the date of its original issue.
Under existing interpretations of the staff of the Securities and Exchange
Commission contained in several no-action letters to third parties, the Credit
Enhancement issued in connection with the Exchange Bonds would in general be
freely tradeable after the Exchange Offer without further registration under the
Securities Act. However, any purchaser of Bonds who is an "affiliate" of the
Authority or the Credit Enhancement Provider or who intends to participate in
the Exchange Offer for the purpose of distributing the Exchange Bonds (i) will
not be able to rely on the interpretation of the staff of the Securities and
Exchange Commission, (ii) will not be able to tender its Bonds in the Exchange
Offer and (iii) must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with any sale or transfer of
the Bonds, unless such sale or transfer is made pursuant to an exemption from
such requirements.
Each holder of the Bonds (other than certain specified holders) who wishes
to exchange the Bonds for Exchange Bonds in the Exchange Offer will be required
to represent in the Letter of Transmittal that (i) it is not an affiliate of the
Authority or the Credit Enhancement Provider, (ii) the Exchange Bonds to be
received by it were acquired in the ordinary course of its business and (iii) at
the time of commencement of the Exchange Offer, it has no arrangement with any
person to participate in the distribution (within the
51
<PAGE>
meaning of the Securities Act) of the Exchange Bonds. In addition, in connection
with any resales of Exchange Bonds, any Participating Broker-Dealer who acquired
the Bonds for its own account as a result of market making or other trading
activities must deliver a prospectus meeting the requirements of the Securities
Act. The Securities and Exchange Commission has taken the position that
Participating Broker-Dealers may fulfill their prospectus delivery requirements
with respect to the Exchange Bonds (other than a resale of an unsold allotment
from the original sale of the Bonds) with the prospectus contained in the
Exchange Offer Registration Statement. Under the Registration Rights Agreement,
the Authority is required to allow Participating Broker-Dealers and other
persons, if any, subject to similar prospectus delivery requirements to use the
prospectus contained in the Exchange Offer Registration Statement in connection
with the resale of such Exchange Bonds.
Holders of Bonds will be required to make certain representations to the
Authority (as described in the Registration Rights Agreement) in order to
participate in the Exchange Offer.
Following the consummation of the Exchange Offer, holders of the Bonds who
were eligible to participate in the Exchange Offer, but who did not tender their
Bonds will not have any further registration rights and such Bonds will continue
to be subject to certain restrictions on transfer. Accordingly, the liquidity of
the market for such Bonds could be adversely affected.
TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions set forth in this Prospectus
and in the Letter of Transmittal, the Authority will accept any and all Bonds
validly tendered and not withdrawn prior to 5:00 p.m., New York City time, on
the Expiration Date. The Authority will issue $5,000 principal amount of
Exchange Bonds in exchange for each $5,000 principal amount of outstanding Bonds
accepted in the Exchange Offer. Holders may tender some or all of their Bonds
pursuant to the Exchange Offer. However, Bonds may be tendered only in integral
multiples of $5,000.
The form and terms of the Exchange Bonds are the same as the form and terms
of the Bonds except that (i) the Exchange Bonds bear a Series B designation and
a different CUSIP Number from the Bonds, (ii) the Exchange Bonds will not bear
legends restricting the transfer thereof and (iii) the holders of the Exchange
Bonds will not be entitled to certain rights under the Registration Rights
Agreement, including the provisions providing for an increase in the interest
rate on the Bonds in certain circumstances relating to the timing of the
Exchange Offer, all of which rights will terminate when the Exchange Offer is
terminated. The Exchange Bonds will evidence the same debt as the Bonds and will
be entitled to the benefits of the Indenture.
As of the date of this Prospectus, $66,975,000 aggregate principal amount of
Bonds were outstanding. The Authority has fixed the close of business on
, 1997 as the record date for the Exchange Offer for purposes of
determining the persons to whom this Prospectus and the Letter of Transmittal
will be mailed initially.
Holders of Bonds do not have any appraisal or dissenters' rights under the
Indenture in connection with the Exchange Offer. The Authority intends to
conduct the Exchange Offer in accordance with the applicable requirements of the
Securities Exchange Act of 1934, as amended, and the rules and regulations of
the Securities and Exchange Commission thereunder.
The Authority shall be deemed to have accepted validly tendered Bonds when,
as and if the Authority has given oral or written notice thereof to the Exchange
Agent. The Exchange Agent will act as agent for the tendering holders for the
purpose of receiving the Exchange Bonds from the Authority.
If any tendered Bonds are not accepted for exchange because of an invalid
tender, the occurrence of certain other events set forth herein or otherwise,
the certificates for any such unaccepted Bonds will be returned, without
expense, to the tendering holder thereof as promptly as practicable after the
Expiration Date.
52
<PAGE>
Holders who tender Bonds in the Exchange Offer will not be required to pay
brokerage commissions or fees or, subject to the instructions in the Letter of
Transmittal, transfer taxes with respect to the exchange of Bonds pursuant to
the Exchange Offer. The Authority will pay all charges and expenses, other than
transfer taxes in certain circumstances, in connection with the Exchange Offer.
See "Fees and Expenses."
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The term "Expiration Date" shall mean 5:00 p.m., New York City time, on
1997, unless the Authority, in its reasonable discretion, extends the
Exchange Offer, in which case the term "Expiration Date" shall mean the latest
date and time to which the Exchange Offer is extended. Notwithstanding the
foregoing, the Authority will not extend the Expiration Date beyond ,
1997.
In order to extend the Exchange Offer, the Authority will notify the
Exchange Agent of any extension by oral or written notice and will mail to the
registered holders an announcement thereof, each prior to 9:00 a.m., New York
City time, on the next business day after the previously scheduled expiration
date.
The Authority reserves the right, in its reasonable discretion, (i) to delay
accepting any Bonds, to extend the Exchange Offer or to terminate the Exchange
Offer if any of the conditions set forth below under "--Conditions" shall not
have been satisfied, by giving oral or written notice of such delay, extension
or termination to the Exchange Agent or (ii) to amend the terms of the Exchange
Offer in any manner. Any such delay in acceptance, extension, termination or
amendment will be followed as promptly as practicable by oral or written notice
thereof to the registered holders.
INTEREST ON THE EXCHANGE BONDS
The Exchange Bonds will bear interest from their date of issuance. Holders
of Bonds that are accepted for exchange will receive, in cash, accrued interest
thereon to, but not including, the date of issuance of the Exchange Bonds. Such
interest will be paid with the first interest payment on the Exchange Bonds on
, 1997. Interest on the Bonds accepted for exchange will cease to
accrue upon issuance of the Exchange Bonds.
Interest on the Exchange Bonds is payable semi-annually on each June 1 and
December 1, commencing on December 1, 1997.
PROCEDURES FOR TENDERING
Only a holder of Bonds may tender such Bonds in the Exchange Offer. To
tender in the Exchange Offer, a holder must complete, sign and date the Letter
of Transmittal, or a facsimile thereof, have the signatures thereon guaranteed
if required by the Letter of Transmittal, and mail or otherwise deliver such
Letter of Transmittal or such facsimile, together with the Bonds and any other
required documents, to the Exchange Agent prior to 5:00 p.m., New York City
time, on the Expiration Date. To be tendered effectively, the Bonds, Letter of
Transmittal and other required documents must be completed and received by the
Exchange Agent at the address set forth below under "Exchange Agent" prior to
5:00 p.m., New York City time, on the Expiration Date. Delivery of the Bonds may
be made by book-entry transfer in accordance with the procedures described
below. Confirmation of such book-entry transfer must be received by the Exchange
Agent prior to the Expiration Date.
By executing the Letter of Transmittal, each holder will make to the
Authority the representations set forth above in the third paragraph under the
heading "Purpose and Effect of the Exchange Offer."
The tender by a holder and the acceptance thereof by the Authority will
constitute agreement between such holder and the Authority in accordance with
the terms and subject to the conditions set forth herein and in the Letter of
Transmittal.
53
<PAGE>
THE METHOD OF DELIVERY OF BONDS AND THE LETTER OF TRANSMITTAL AND ALL OTHER
REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND SOLE RISK OF THE
HOLDER. AS AN ALTERNATIVE TO DELIVERY BY MAIL, HOLDERS MAY WISH TO CONSIDER
OVERNIGHT OR HAND DELIVERY SERVICE. IN ALL CASES, SUFFICIENT TIME SHOULD BE
ALLOWED TO ASSURE DELIVERY TO THE EXCHANGE AGENT BEFORE THE EXPIRATION DATE. NO
LETTER OF TRANSMITTAL OR BONDS SHOULD BE SENT TO THE AUTHORITY. HOLDERS MAY
REQUEST THEIR RESPECTIVE BROKERS, DEALERS, COMMERCIAL BANKS, TRUST COMPANIES OR
NOMINEES TO EFFECT THE ABOVE TRANSACTIONS FOR SUCH HOLDERS.
Any beneficial owner whose Bonds are registered in the name of a broker,
dealer, commercial bank, trust company or other nominee and who wishes to tender
should contact the registered holder promptly and instruct such registered
holder to tender on such beneficial owner's behalf. See "Instruction to
Registered Holder and/or Book-Entry Transfer Facility Participant from Owner"
included with the Letter of Transmittal.
Signatures on a Letter of Transmittal or a notice of withdrawal, as the case
may be, must be guaranteed by a member firm of the Medallion System unless the
Bonds tendered pursuant thereto are tendered (i) by a registered holder who has
not completed the box entitled "Special Registration Instructions" or "Special
Delivery Instructions" on the Letter of Transmittal or (ii) for the account of a
member firm of the Medallion System. In the event that signatures on a Letter of
Transmittal or a notice of withdrawal, as the case may be, are required to be
guaranteed, such guarantee must be by a member firm of the Medallion System.
If the Letter of Transmittal is signed by a person other than the registered
holder of any Bonds listed therein, such Bonds must be endorsed or accompanied
by a properly completed bond power, signed by such registered holder as such
registered holder's name appears on such Bonds with the signature thereon
guaranteed by a member firm of the Medallion System.
If the Letter of Transmittal or any Bonds or bond powers are signed by
trustees, executors, administrators, guardians, attorneys-in-fact, officers of
corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing, and evidence satisfactory to the
Authority of their authority to so act must be submitted with the Letter of
Transmittal.
The Authority understands that the Exchange Agent will make a request
promptly after the date of this Prospectus to establish accounts with respect to
the Exchange Bonds at the book-entry transfer facility, The Depository Trust
Company, for the purpose of facilitating the Exchange Offer, and subject to the
establishment thereof, any financial institution that is a participant in The
Depository Trust Company's system may make book-entry delivery of Bonds by
causing such Book-Entry Transfer Facility to transfer such Bonds into the
Exchange Agent's account with respect to the Bonds in accordance with The
Depository Trust Company's procedures for such transfer. Though delivery of the
Bonds may be effected through book-entry transfer into the Exchange Agent's
account at The Depository Trust Company, an appropriate Letter of Transmittal
properly completed and duly executed with any required signature guarantee and
all other required documents must in each case be transmitted to and received or
confirmed by the Exchange Agent at its address set forth below on or prior to
the Expiration Date, or, if the guaranteed delivery procedures described below
are complied with, within the time period provided under such procedures.
Delivery of documents to The Depository Trust Company does not constitute
delivery to the Exchange Agent.
54
<PAGE>
All questions as to the validity, form, eligibility (including time of
receipt), acceptance of tendered Bonds and withdrawal of tendered Bonds will be
determined by the Authority in its reasonable discretion, which determination
will be final and binding. The Authority reserves the absolute night to reject
any and all Bonds not properly tendered or any Bonds the Authority's acceptance
of which would, in the opinion of counsel for the Authority, be unlawful. The
Authority also reserves the right in its reasonable discretion to waive any
defects, irregularities or conditions of tender as to particular Bonds. The
Authority's interpretation of the terms and conditions of the Exchange Offer
(including the instructions in the Letter of Transmittal) will be final and
binding on all parties. Unless waived, any defects or irregularities in
connection with tenders of Bonds must be cured within such time as the Authority
shall determine. Although the Authority intends to notify holders of defects or
irregularities with respect to tenders of Bonds, neither the Authority, the
Exchange Agent nor any other person shall incur any liability for failure to
give such notification. Tenders of Bonds will not be deemed to have been made
until such defects or irregularities have been cured or waived. Any Bonds
received by the Exchange Agent that are not properly tendered and as to which
the defects or irregularities have not been cured or waived will be returned by
the Exchange Agent to the tendering holders, unless otherwise provided in the
Letter of Transmittal, as soon as practicable following the Expiration Date.
GUARANTEED DELIVERY PROCEDURES
Holders who wish to tender their Bonds and (i) whose Bonds are not
immediately available, (ii) who cannot deliver their Bonds, the Letter of
Transmittal or any other required documents to the Exchange Agent or (iii) who
cannot complete the procedures for book-entry transfer, prior to the Expiration
Date, may effect a tender if:
(a) the tender is made through a member firm of the Medallion System;
(b) prior to the Expiration Date, the Exchange Agent receives from such
Eligible Institution a properly completed and duly executed Notice of Guaranteed
Delivery (by facsimile transmission, mail or hand delivery) setting forth the
name and address of the holder, the certificate number(s) of such Bonds and the
principal amount of Bonds tendered, stating that the tender is being made
thereby and guaranteeing that, within five New York Stock Exchange trading days
after the Expiration Date, the Letter of Transmittal (or facsimile thereof)
together with the certificate(s) representing the Bonds (or a confirmation of
book-entry transfer of such Bonds into the Exchange Agent's account at The
Depository Trust Company), and any other documents required by the Letter of
Transmittal will be deposited by the Eligible Institution with the Exchange
Agent; and
(c) such properly completed and executed Letter of Transmittal (or facsimile
thereof), as well as the certificate(s) representing all tendered Bonds in
proper form for transfer (or a confirmation of book-entry transfer of such Bonds
into the Exchange Agent's account at The Depository Trust Company), and all
other documents required by the Letter of Transmittal are received by the
Exchange Agent upon five New York Stock Exchange trading days after the
Expiration Date.
Upon request to the Exchange Agent, a Notice of Guaranteed Delivery will be
sent to holders who wish to tender their Bonds according to the guaranteed
delivery procedures set forth above.
WITHDRAWAL OF TENDERS
Except as otherwise provided herein, tenders of Bonds may be withdrawn at
any time prior to 5:00 p.m., New York City time, on the Expiration Date.
To withdraw a tender of Bonds in the Exchange Offer, a telegram, telex,
letter or facsimile transmission notice of withdrawal must be received by the
Exchange Agent at its address set forth herein prior to 5:00 p.m., New York City
time, on the Expiration Date. Any such notice of withdrawal must (i) specify the
name of the person having deposited the Bonds to be withdrawn, (ii) identify the
Bonds to be withdrawn
55
<PAGE>
(including the certificate number(s) and principal amount of such Bonds, or, in
the case of Bonds transferred by book-entry transfer, the name and number of the
account at The Depository Trust Company to be credited), (iii) be signed by the
holder in the same manner as the original signature on the Letter of Transmittal
by which such Bonds were tendered (including any required signature guarantees)
or be accompanied by documents of transfer sufficient to have the Trustee with
respect to the Bonds register the transfer of such Bonds into the name of the
person withdrawing the tender and (iv) specify the name in which any such Bonds
are to be registered, if different from that of the person having deposited the
Bonds to be withdrawn. All questions as to the validity, form and eligibility
(including time of receipt) of such notices will be determined by the Authority,
whose determination shall be final and binding on all parties. Any Bonds so
withdrawn will be deemed not to have been validly tendered for purposes of the
Exchange Offer and no Exchange Bonds will be issued with respect thereto unless
the Bonds so withdrawn are validly retendered. Any Bonds which have been
tendered but which are not accepted for exchange will be returned to the holder
thereof without cost to such holder as soon as practicable after withdrawal,
rejection of tender or termination of the Exchange Offer. Properly withdrawn
Bonds may be retendered by following one of the procedures described above under
"--Procedures for Tendering" at any time prior to the Expiration Date.
CONDITIONS
Notwithstanding any other term of the Exchange Offer, the Authority shall
not be required to accept for exchange, or issue Exchange Bonds for, any Bonds,
and may terminate or amend the Exchange Offer as provided herein before the
acceptance of such Bonds, if:
(a) any action or proceeding is instituted or threatened in any court or by
or before any governmental agency with respect to the Exchange Offer which, in
the reasonable judgment of the Authority, might materially impair the ability of
the Authority to proceed with the Exchange Offer or any material adverse
development has occurred in any existing action or proceeding with respect to
the Authority or any of its subsidiaries; or
(b) any law, statute, rule, regulation or interpretation by the staff of the
Securities and Exchange Commission is proposed, adopted or enacted, which, in
the reasonable judgment of the Authority, might materially impair the ability of
the Authority to proceed with the Exchange Offer or materially impair the
contemplated benefits of the Exchange Offer to the Authority; or
(c) any governmental approval has not been obtained, which approval the
Authority shall, in its reasonable discretion, deem necessary for the
consummation of the Exchange Offer as contemplated hereby.
If the Authority determines in its reasonable discretion that any of the
conditions are not satisfied, the Authority may (i) refuse to accept any Bonds
and return all tendered Bonds to the tendering holders, (ii) extend the Exchange
Offer and retain all Bonds tendered prior to the expiration of the Exchange
Offer, subject, however, to the rights of holders to withdraw such Bonds (see
"Withdrawal of Tenders") or (iii) waive such unsatisfied conditions with respect
to the Exchange Offer and accept all properly tendered Bonds which have not been
withdrawn.
All conditions to the Exchange Offer (with the exception of certain
governmental approvals) must be satisfied or waived prior to the Expiration
Date. The Authority shall not be required to accept for exchange, or issue
Exchange Bonds for, any Bonds, and may terminate or amend the Exchange Offer if
any of the specified conditions do not occur prior to the Expiration Date.
EXCHANGE AGENT
SouthTrust Bank of Alabama, N.A.
P.O. Box 2554
56
<PAGE>
Birmingham, Alabama 35290
Attention: Judy Miller
Telephone: (205) 254-5000
Fax: (205) 254-4180
Delivery to an address other than as set forth above will not constitute a
valid delivery.
FEES AND EXPENSES
The expenses of soliciting tenders will be born by the Authority. The
principal solicitation is being made by mail; however, additional solicitation
may be made by telegraph, telecopy, telephone or in person by officers and
regular employees of the Authority and its affiliates.
The Authority has not retained any dealer-manager in connection with the
Exchange Offer and will not make any payments to brokers, dealers, or others
soliciting acceptances of the Exchange Offer. The Authority, however, will pay
the Exchange Agent reasonable and customary fees for its services and will
reimburse it for its reasonable out-of-pocket expenses in connection therewith.
The cash expenses to be incurred in connection with the Exchange Offer will
be paid by the Authority. Such expenses include fees and expenses of the
Exchange Agent and Trustee, accounting and legal fees and printing costs, among
others.
ACCOUNTING TREATMENT
The Exchange Bonds will be recorded at the same carrying value as the Bonds,
which is face value, as reflected in the Authority's accounting records on the
date of exchange. Accordingly, no gain or loss for accounting purposes will be
recognized by the Authority. The expenses of the Exchange Offer will be expensed
over the term of the Exchange Bonds.
57
<PAGE>
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS OF BFC GUARANTY CORP. AND BFC FINANCE CORP.
Set forth below are the names, ages (as of September 30, 1996) and a brief
account of the business experience of each person who is a director or executive
officer of the Credit Enhancement Provider and BFC Finance Corp. (each such
person holds the same positions with each company).
<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------------- --- ----------------------------------------------------
<S> <C> <C>
Franklin L. Haney.............. 56 President and Director
Emeline W. Haney............... 49 Director
Chris E. Zahnd................. 55 Director
Roger D. Bailey................ 51 Secretary
</TABLE>
FRANKLIN L. HANEY. Mr Haney is a graduate of the University of Tennessee at
Knoxville and received his law degree from George Washington School of Law. Mr.
Haney is the founder and sole proprietor of the Franklin L. Haney Company which
was established in 1968. The Franklin L. Haney Company is engaged in real estate
development and finance brokering. Mr. Haney is married to Emeline W. Haney.
EMELINE W. HANEY. Mrs. Haney is a graduate of the University of Georgia.
Mrs. Haney has not been employed during the past five years, but is the mother
of five children and is active in many civic and community projects. She was
instrumental in establishing the Childrens Advocacy Center of Hamilton County,
the first such center in Tennessee and is currently working to establish Home
Safe, a Childrens Advocacy Center in Palm Beach, Florida. Mrs. Haney is also
active in the Franklin L. Haney Company. Mrs. Haney is married to Franklin L.
Haney.
CHRIS ZAHND. Mr. Zahnd is a graduate of the University of Tennessee at
Chattanooga. Mr. Zahnd has worked in the hotel industry for the past 16 years.
During more than the past five years, he has been the evening Manager of the
Holiday Inn Chattanooga Choo-Choo in Chattanooga, Tennessee, where he has been
responsible for all aspects of the evening operations of the hotel. Prior to
entering the inn keeping business, he was involved in the accounting and banking
industries.
ROGER D. BAILEY. Mr. Bailey is a former C.P.A. with Arthur Andersen & Co.
and has over 25 years experience in accounting and financial businesses. He is
currently Chief Financial Officer for the Franklin L. Haney Company, a position
he has held for more than the last five years. As Chief Financial Officer, Mr.
Bailey is responsible for the financial operations of the Franklin L. Haney
Company, including accounting, bookkeeping, auditing, tax matters and financial
reporting.
EXECUTIVE COMPENSATION
None of the officers or directors of the Authority or the Registrants
receives compensation from either the Authority or the Registrants for serving
as an officer or director, although certain of them are employed by Franklin L.
Haney Company, an entity affiliated with the Registrants. See "Management."
Franklin L. Haney, President and a Director of each of the Registrants and
Secretary and a Director of the Authority, has financial interests in some of
the transactions described in this Prospectus. See "Certain Relationships and
Related Transactions."
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Franklin L. Haney, the President and a Director of each of the Registrants,
is also the President and a Director of a number of other affiliated companies:
Tower Associates, Inc.; Tower Associates II, Inc.; Building Finance Company of
Tennessee, Inc.; Douglas County Development Corporation; and DCDC II, Inc. In
addition, Franklin L. Haney is the Secretary and a Director of Castle Rock
Public Improvement Authority. See "PROSPECTUS SUMMARY--Graphical Depiction of
Affiliates."
58
<PAGE>
OWNERSHIP OF THE AUTHORITY
The Authority is a nonprofit corporation organized under the laws of the
State of Colorado to be in general compliance with the requirements of Internal
Revenue Service Revenue Procedure 82-26, which provides that the Internal
Revenue Service will ordinarily rule that obligations issued by a nonprofit
corporation on behalf of a governmental unit in accordance with the requirements
of the revenue procedure meet the requirements of the revenue procedure. See
"THE AUTHORITY." The Authority has no members and no shareholders, but is
organized and operated exclusively on behalf of and for the benefit and in
furtherance of the purposes of Dawson Ridge Metropolitan District No. 5, which
is a municipal corporation and political subdivision of the State of Colorado.
59
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The following is a description of certain relationships and related-party
transactions.
SALE OF THE PROPERTY
Franklin L. Haney is a Director of the Authority, which recently acquired
the Property from DCDC for $54,550,000 cash. Franklin L. Haney owns Douglas
County Development Corporation. At the present time, DCDC owns approximately 75%
of the taxable property within the Districts.
THE CREDIT ENHANCEMENT
Franklin L. Haney also owns 49% of Building Finance Company of Tennessee,
Inc. ("BFCT"). BFCT owns the Registrants. The Series B REMIC Bonds are payable
from notes held in a trust estate (the "REMIC Trust Estate") under an indenture
of trust between the trustee and BFC Finance Corp.
The remaining 51% of BFCT is owned by Franklin L. Haney's father-in-law,
Herbert L. Oakes. Franklin L. Haney and his wife Emeline W. Haney are the
Directors and, respectively, the President and Secretary of BFCT.
REMIC TRUST ESTATE--OTHER ASSETS
In addition to the Series B REMIC Bonds securing the Credit Enhancement, the
REMIC Trust Estate contains assets resulting from other transactions between
BFCT and BFC Finance Corp., but that do not secure the Credit Enhancement. These
assets include (i) notes issued by DCDC II, Inc., a Colorado corporation,
representing a $9,310,689.07 loan originated by BFCT and (ii) notes issued by
Parcel 49C Limited Partnership, a limited partnership, representing a
$99,000,000 loan originated by BFCT. Franklin L. Haney owns 21%, and Douglas
County Development Corporation owns 79%, of DCDC II, Inc. Franklin L. Haney owns
16%, and various members of his family own the remaining 84%, of Tower
Associates II, Inc., which is a general partner and a limited partner of Parcel
49C Limited Partnership. (See "Credit Enhancement.")
OFFICERS AND DIRECTORS
The officers and directors of BFC Guaranty Corp., BFC Finance Corp., and
Tower Associates II, Inc., each of which is a Delaware Corporation, are
identical. (See "Management.")
C. Roger Addlesperger is a director for each of the Districts, as is his
wife, Candace Addlesperger. C. Roger Addlesperger has also served as a
consultant on matters relating to the real estate within the Dawson Ridge
development for Franklin L. Haney Company, a sole proprietorship owned by
Franklin L. Haney. Mr. Addlesperger has received approximately $363,267.33 from
Franklin L. Haney Company for his consulting services since the beginning of
Franklin L. Haney Company's last full fiscal year. Mr. Addlesperger has also
served as Vice President of Douglas County Development Corporation.
ABSENCE OF PREFERENTIAL TERMS
The Registrants believe that the transactions described herein are on no
more favorable terms than would have been achieved if each of the transactions
was between unrelated third parties.
PLAN OF DISTRIBUTION
Each Participating Broker-Dealer that receives Exchange Bonds for its own
account pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Bonds. This
Prospectus, as it may be amended or supplemented from time to time, may be used
by a Participating Broker-Dealer in connection with resales of Exchange Bonds
received in exchange for
60
<PAGE>
Bonds where such Bonds were acquired as a result of market-making activities or
other trading activities. The Authority has agreed that for a period of 180 days
after the Expiration Date, it will make this Prospectus, as amended or
supplemented, available to any Participating Broker-Dealer, all dealers
effecting transactions in the Exchange Bonds for use in connection with any such
resale. In addition, until the Exchange Bonds are registered, Participating
Broker-Dealers may be required to deliver a prospectus.
The Authority will not receive any proceeds from any sales of the Exchange
Bonds by Participating Broker-Dealers. Exchange Bonds received by Participating
Broker-Dealers for their own account pursuant to the Exchange Offer may be sold
from time to time in one or more transactions in the over-the-counter market, in
negotiated transactions, through the writing of options on the Exchange Bonds or
a combination of such methods of resale, at market prices prevailing at the time
of resale, at prices related to such prevailing market prices or negotiated
prices. Any such resale may be made directly to purchaser or to or through
brokers or dealers who may receive compensation in the form of commissions or
concessions from any such Participating Broker-Dealer and/or the purchasers of
any such Exchange Bonds. Any Participating Broker-Dealer that resells the
Exchange Bonds that were received by it for its own account pursuant to the
Exchange Offer and any broker or dealer that participates in a distribution of
such Exchange Bonds may be deemed to be an "underwriter" within the meaning of
the Securities Act and any profit on any such resale of Exchange Bonds and any
commissions or concessions received by any such persons may be deemed to be
underwriting compensation under the Securities Act. The Letter of Transmittal
states that by acknowledging that it will deliver and by delivering a
prospectus, a Participating Broker-Dealer will not be deemed to admit that it is
an "underwriter" within the meaning of the Securities Act.
For a period of 180 days after the Expiration Date the Authority will
promptly send additional copies of this Prospectus and any amendment or
supplement to this Prospectus to any Participating Broker-Dealer that requests
such documents in the Letter of Transmittal.
RATING
Standard & Poor's Ratings Services, a division of The McGraw-Hill Companies,
Inc. (the "Rating Agency"), has assigned a rating of "AAp" to the Bonds based on
an evaluation of the Credit Enhancement. The letter "p" indicates the rating is
provisional. The provisional rating assumes the successful completion of the
Portals II building which is the subject of the Lease and indicates that
sufficiency of the Credit Enhancement to pay debt service requirements of the
Bonds is largely or entirely dependent upon the successful timely completion of
such building. This rating, however, while addressing credit quality subsequent
to completion of such building, makes no comment on the likelihood of, or the
risk of default upon failure of such completion. The investor should exercise
his/her own judgment with respect to such likelihood and risk. Any explanation
of the significance of such rating may only be obtained from the Rating Agency.
There is no assurance that such rating will be maintained for any given period
of time or that it will not be lowered or withdrawn entirely if, in the judgment
of the Rating Agency, circumstances so warrant. Any such revision or withdrawal
of such a rating could have an adverse effect on the market price and
marketability of the Bonds.
LEGAL MATTERS
The validity of the issuance of the Exchange Bonds will be passed upon for
the Authority by Brownstein Hyatt Farber & Strickland, P.C., Denver, Colorado.
INDEPENDENT ACCOUNTANTS
The financial statements of Castle Rock Ranch Public Improvements Authority,
BFC Guaranty Corp. and BFC Finance Corp., as of December 31, 1996 included in
this Prospectus, have been so included in reliance on the report of Joseph
Decosimo & Company, LLP, independent accountants, given on the authority of said
firm as experts in auditing and accounting.
61
<PAGE>
DEFINITIONS OF CERTAIN TERMS AND DESCRIPTIONS OF PRINCIPAL DOCUMENTS
Capitalized terms used in this Prospectus, and not otherwise defined, are
used with the meanings assigned to such terms in the Indenture, the Operating
Agreement, the Intergovernmental Agreement, the Deed of Trust, the
Collateralized Credit Enhancement Agreement, the Reimbursement Agreement, the
Development Agreement, the Recreational Facilities Agreement and the Lease, as
applicable. The following definitions of such capitalized terms have been
modified as may be appropriate for use in this Prospectus. Descriptions of the
material terms of the Indenture, the Collateralized Credit Enhancement
Agreement, the Deed of Trust, the Operating Agreement, the Intergovernmental
Agreement, the Lease, the Development Agreement and the Recreational Facilities
Agreement are included in this Prospectus, but are qualified in their entirety
by reference to the actual documents being described. Copies of such documents
are available from the Exchange Agent.
DEFINITIONS OF CERTAIN TERMS
"1986 BONDS" shall mean the general obligation bonds in the original
principal amount of $24,725,000 issued by Dawson Ridge Metropolitan District No.
1.
"1992 BONDS" shall mean the exchange refunding bonds in the original
principal amount of $21,054,000 offered in connection with Dawson Ridge
Metropolitan District No. 1's plan of reorganization to holders of the 1986
Bonds.
"1992 DEED OF TRUST" shall mean the Deed of Trust securing the 1992 Bonds.
"ACCOUNTANT" shall mean a person or firm engaged in the practice of
accounting who is a nationally recognized certified public accountant acceptable
to the Trustee and who is independent of the entity whose accounts are being
audited.
"ACQUISITION AND CONSTRUCTION NOTES" shall mean those notes held in REMIC
Trust Estate issued by Parcel 49C Limited Partnership.
"ACT" shall mean Title 32 of the Colorado Revised Statutes, as amended.
"ACT OF BANKRUPTCY" shall mean the filing of a petition in bankruptcy (or
other commencement of a bankruptcy or similar proceeding) by or against the
Authority under any applicable bankruptcy, insolvency or similar law as now or
hereafter in effect.
"ADDITIONAL INTEREST" shall mean additional interest payable to each Holder
of Transfer Restricted Securities calculated at the rate of 1% per annum on the
principal amount of such Transfer Restricted Securities during the period (prior
to the registration of the Credit Enhancement) that any Nonregistration exists.
"AMENDMENT ONE" shall mean the provisions of an amendment to the
Constitution of the State of Colorado, approved in the November 3, 1992 general
election which may affect property tax revenues and spending for the Districts.
"AUTHORITY" shall mean Castle Rock Ranch Public Improvements Authority, a
corporate instrumentality of the District and a nonprofit corporation organized
and existing under and by virtue of the laws of the State of Colorado.
"AVAILABLE MONEYS" shall mean (a) proceeds of the Bonds received
contemporaneously with the issuance and sale of the Bonds and held by the
Trustee at all times since receipt of such proceeds in a separate and segregated
account in which only Available Monies were at any time held, and the proceeds
from the investment thereof, (b) monies paid by the Authority to the Trustee
which monies shall have been held by the Trustee for at least 126 days prior to
the date such monies are to be applied to the payment of principal or interest
on the Bonds, provided that no Act of Bankruptcy shall have occurred during such
126
62
<PAGE>
day period, (c) monies drawn under any Credit Enhancement which are either
applied directly to the payment of the principal of or interest on the Bonds or
which, if not so applied, are held in a separate and segregated subaccount under
the Indenture until so applied, (d) deposits with the Trustee as agent and
bailee of proceeds of the issuance of refunding obligations or obligations of
the Authority or the District if, in the written opinion of nationally
recognized counsel experienced in bankruptcy matters and acceptable to the
Trustee, the deposit and use of such proceeds will not constitute a voidable
preference under the Bankruptcy Code in the case of bankruptcy of the Authority
or the District, (e) any other money the application of which will not, in the
written opinion of nationally recognized counsel experienced in bankruptcy
matters and acceptable to the Trustee, constitute a voidable preference under
the Bankruptcy Code in the case of bankruptcy of the Authority or the District,
and (f) investment income derived from the investment of the foregoing types of
monies; provided that such proceeds, monies or income shall not be deemed to be
Available Monies or available for payment of the Bonds if, among other things,
an injunction, restraining order or stay is in effect preventing such proceeds,
monies or income from being applied to make such payment.
"BANKRUPTCY CODE" shall mean the Bankruptcy Reform Act of 1978, as amended.
"BENEFICIAL OWNER" shall mean each actual purchaser of each Bond or Exchange
Bond.
"BOND COUNSEL" shall mean any attorney at law or firm of attorneys selected
by the Authority, of nationally recognized standing in matters pertaining to the
validity of and federal tax exemption of interest on obligations issued by
states and political subdivisions, and duly admitted to practice law before the
highest court of any state of the United States of America.
"BONDS" shall mean the Authority's $66,975,000 aggregate principal amount of
Public Facilities Revenue Bonds, Series 1996, issued pursuant to the Indenture
and, after the exchange pursuant to the Registration Rights Agreement, shall
include the bonds issued in exchange therefor (all such bonds to have the same
rights and to be considered as one series for all purposes under the Indenture).
"CERTIFICATES" shall mean the certificates representing a fractional
undivided interest in the economic benefit to BFC Finance Corp. arising by,
through or under the REMIC Indenture.
"CODE" shall mean the Internal Revenue Code of 1986, as amended.
"COLLATERAL" shall mean the Series B REMIC Bonds, the payments on such Bonds
and any Federal Securities substituted therefor.
"CREDIT ENHANCEMENT" shall mean that Collateralized Credit Enhancement
Agreement from the Credit Enhancement Provider for the benefit of the Trustee,
together with the Collateral (which shall be pledged and assigned pursuant
thereto).
"CREDIT ENHANCEMENT PROVIDER" shall mean BFC Guaranty Corp., a Delaware
corporation.
"DEED OF TRUST" shall mean that certain Deed of Trust, Security Agreement,
Financing Statement and Assignment of Rents and Leases, dated March 1, 1996,
from the Authority for the benefit of the Trustee and the Credit Enhancement
Provider.
"DEVELOPMENT AGREEMENT" shall mean the Development Agreement, dated as of
March 1, 1996, between the Authority and Douglas County Development Corporation.
"DIRECT PARTICIPANTS" shall mean participants in the DTC and shall include
security brokers and dealers, banks, trust companies, clearing corporations and
certain other organizations.
"DISTRICT" shall mean generally the Dawson Ridge Metropolitan District No. 5
as the same is organized and existing under and by virtue of the laws of the
State of Colorado now in effect and as hereafter amended. "Districts" shall mean
the following Districts: Dawson Ridge Metropolitan District No. 1, Dawson Ridge
Metropolitan District No. 2, Dawson Ridge Metropolitan District No. 3, Dawson
63
<PAGE>
Ridge Metropolitan District No. 4 and Dawson Ridge Metropolitan District No. 5.
"RELATED DISTRICTS" shall mean Dawson Ridge Metropolitan District No. 1, Dawson
Ridge Metropolitan District No. 2, Dawson Ridge Metropolitan District No. 3 and
Dawson Ridge Metropolitan District No. 4.
"EVENT OF DEFAULT" shall have the meaning given to that term in the document
in which such term is being used.
"EXCHANGE BONDS" shall mean the Public Facilities Revenue Bonds, Series
1996B.
"EXCHANGE OFFER" shall mean the offer by the Authority to exchange $5,000
principal amount of the Exchange Bonds for each $5,000 principal amount of its
outstanding Bonds, of which $66,975,000 principal amount is outstanding.
"EXCHANGE OFFER REGISTRATION STATEMENT" shall mean the registration
statement filed in connection with the offering of the Exchange Bonds.
"EXPENSE OBLIGATION" shall mean the obligation of each District to pay its
Proportionate Share of Operations and Maintenance Expense pursuant to the
Intergovernmental Agreement.
"EXPIRATION DATE" shall mean 5:00 p.m., New York City time on ,
1997 unless the Exchange Offer is extended, in which case it shall mean the
latest date and time to which the Exchange Offer is extended.
"EXTRA PAYMENTS" shall mean payments with respect to premium, if any, on the
Bonds, interest on the Bonds in excess of the pre-default rate thereon,
Additional Interest and amounts due solely as a result of acceleration of the
Bonds.
"FEDERAL SECURITIES" shall mean securities of the type described in
paragraphs (a), (b) and (c)(v) of the definition of Investment Securities.
"FEE AGREEMENT" shall mean the Facilities Development Fee Agreement, dated
as of April 1986, between Bellamah Community Development and Dawson Ridge
Metropolitan District No. 1.
"FINANCING OBLIGATIONS" shall mean the obligations which arise pursuant to
the provisions of the Intergovernmental Agreement as evidenced by the execution
of the Intergovernmental Agreement by each District.
"HOLDER" or "BONDHOLDER" shall mean the person in whose name such Bond shall
be registered.
"IMMUNITY ACT" shall mean the Colorado Governmental Immunity Act, Part I of
Article 10 of Title 24, Colorado Revised Statutes, as amended.
"INDEBTEDNESS" shall mean any indebtedness or obligation of the Authority
which, in accordance with generally accepted accounting principles, is
classified as a liability on a balance sheet.
"INDENTURE" shall mean the Indenture of Trust, dated as of March 1, 1996,
between the Authority and the Trustee, together with any indentures supplemental
thereto made in conformity therewith.
"INDIRECT PARTICIPANTS" shall include banks, brokers, dealers and trust
companies that clear through or maintain a custodial relationship with a Direct
Participant, either directly or indirectly.
"INTEREST PAYMENT DATE" shall mean June 1 and December 1 of each year,
commencing with respect to the Bonds, on December 1, 1996.
"INTERGOVERNMENTAL AGREEMENT" shall mean the Intergovernmental Agreement,
dated as of March 1, 1996, among the Districts, and any amendments or
supplements thereto.
64
<PAGE>
"INVESTMENT SECURITIES" shall mean, and includes, any of the following
investments, to the extent permitted or authorized by applicable law at the time
purchased by the Trustee, bearing interest or issued at a discount to the extent
permitted by applicable law:
(a) direct obligations of, or obligations the principal of and interest on
which are unconditionally guaranteed by, the United States of America (including
obligations issued or held in book-entry form on the books of the Department of
the Treasury of the United States of America);
(b) bonds, debentures, notes or other evidence of indebtedness issued or
guaranteed by any of the following federal agencies and provided such
obligations are backed by the full faith and credit of the United States of
America (stripped securities are only permitted if they have been stripped by
the agency itself):
(i) U.S. Export-Import Bank (direct obligations or fully guaranteed
certificates of beneficial ownership);
(ii) Farmers Home Administration (certificates of beneficial ownership);
(iii) Federal Financing Bank;
(iv) General Services Administration participation certificates;
(v) Government National Mortgage Association ("GNMA") guaranteed
mortgage-backed bonds and pass through certificate obligations;
(vi) U.S. Maritime Administration guaranteed Title XI financing
obligations; or
(vii) U.S. Department of Housing and Urban Development (HUD) project
notes, local authority bonds, new communities debentures (U.S. guaranteed)
and U.S. public housing notes and bonds-- U.S. government guaranteed public
housing notes and bonds;
(c) bonds, debentures, notes or other evidence of indebtedness issued or
guaranteed by any of the following non-full faith and credit U.S. government
agencies (stripped securities are only permitted if they have been stripped by
the agency itself):
(i) Federal Home Loan Bank System senior debt obligations;
(ii) FHLMC senior debt obligations and participation certificates;
(iii) FNMA mortgage-backed securities and senior debt obligations;
(iv) Student Loan Marketing Association senior debt obligations; or
(v) Resolution Funding Corporation obligations; or
(d) money market mutual funds rated "AAAm" or "AAAm-G" by Standard & Poor's
Ratings Services, whose investments are limited to securities of the types
listed in (a)-(c) above.
"ISSUE PRICE" shall mean the price at which a substantial amount of one
maturity of the Bonds is first sold to the public.
"LEASE" shall mean that certain U.S. Government Lease for Real Property,
dated August 12, 1994, as supplemented by a Supplemental Lease Agreement No.1,
dated January 3, 1996, and a supplemental Lease Agreement No. 2, dated March 27,
1996, between the General Services Administration of the United States of
America and Parcel 49C Limited Partnership, a District of Columbia limited
partnership, as the same may be further supplemented or amended.
"LETTER OF TRANSMITTAL" shall mean the letter of transmittal accompanying
the Prospectus.
"LOAN AGREEMENT" shall mean the Loan Agreement dated as of March 1, 1996
between the Building Finance Company of Tennessee, Inc. and Parcel 49C Limited
Partnership.
65
<PAGE>
"MAJORITY RESIDUAL HOLDERS" shall mean the holders of a majority in interest
of Certificates.
"NON-DISQUALIFICATION OPINION" shall mean, with respect to any action
proposed to be under the REMIC Indenture, an opinion of counsel to the effect
that the taking of such action will not cause the REMIC Trust Estate to fail to
qualify as a REMIC at any time while any of the REMIC Bonds are outstanding and
will not result in the imposition of a tax pursuant to Section 860F(a) of the
Code or otherwise subject the REMIC Trust Estate to taxation.
"NON-RECOURSE INDEBTEDNESS" shall mean any indebtedness secured by a lien,
which is not a general obligation of the Authority and liability for which is
effectively limited to the property subject to such lien with no recourse to, or
lien upon, directly or indirectly, the Revenues or any other property of the
Authority.
"NON SET-OFF LEASE PAYMENTS" shall mean rental payments made pursuant to the
Lease that are not subject to set-off by reason of the failure of 49C to perform
its obligations thereunder.
"NOTES" shall mean the Acquisition Note, the Construction Note and a note
given by DCDC II, Inc. to BFC Finance Corp. in the principal amount of
$9,310,689.07 secured by various documents including a deed of trust on
approximately 300 acres of undeveloped land in Castle Rock, Colorado.
"OPERATING AGREEMENT" shall mean the Operating Agreement, dated as of March
1, 1996, by and between the Authority and the District.
"OPERATING AGREEMENT PAYMENTS" shall mean the Operating Agreement Payments
required to be made by the District under the Operating Agreement, as the same
shall be amended and supplemented from time to time in accordance with the
express provisions thereof.
"OPERATION AND MAINTENANCE EXPENSES" shall mean such reasonable and
necessary current expenses, paid or accrued, for operation, maintenance and
repair of the Recreational Facilities (as such term is defined in the Operating
Agreement) as may be determined by the Authority, and the term may also include
except as limited by contract or otherwise limited by law, without limiting the
generality of the foregoing:
(1) legal and overhead expenses of the Authority directly related and
reasonably allocable to the administration of the Recreational Facilities;
(2) all insurance premiums and premiums or fees for fidelity bonds
appertaining to or required for the Recreational Facilities or a reasonably
allocable share of a premium of any blanket bond or policy pertaining to the
Recreational Facilities;
(3) contractual services, professional services, salaries, administrative
expenses, and costs of labor appertaining to the Recreational Facilities;
(4) the costs incurred in the collection of all or any part of the Revenues
from Recreational Facilities;
(5) any costs of utility services furnished to the Recreational Facilities;
and
(6) payments of taxes, payments in lieu of taxes, assessments imposed by any
governmental unit or public corporation, or any monthly deposits to an escrow
established for any such purposes;
"OPERATION AND MAINTENANCE EXPENSES" does not include:
(a) any allowance for depreciation;
(b) any costs of Recreational Facilities renewals or replacements, major
repairs, reconstruction, improvements, extensions, or betterments;
(c) any accumulation of reserves for capital replacements;
(d) any reserves for operation, maintenance, or repair of the Recreational
Facilities;
66
<PAGE>
(e) any allowance for the redemption of the Bonds, or the payment of any
interest thereon;
(f) any liabilities incurred in the acquisition or improvement of any
properties comprising the Recreational Facilities or any combination thereof;
and
(g) any other ground of legal liability not based on contract.
"OPINION OF COUNSEL" shall mean a written opinion of counsel (who may be
counsel for the Authority) appointed by the Authority.
"OUTSTANDING" shall mean all Bonds (including, under certain circumstances,
pledged bonds) theretofore authenticated and delivered by the Trustee under the
Indenture except:
(a) Bonds theretofore cancelled by the Trustee or surrendered to the Trustee
for cancellation;
(b) Bonds for the payment or redemption of which Available Moneys in the
necessary amount shall have theretofore been deposited with the Trustee (whether
upon or prior to the maturity or the redemption date of such Bonds); provided
that, if such Bonds are to be redeemed prior to the maturity thereof, notice of
such redemption shall have been given as provided in the Indenture or provision
satisfactory to the Trustee shall have been made for the giving of such notice;
and
(c) Bonds in lieu of, or in substitution for, which other Bonds shall have
been authenticated and delivered by the Trustee pursuant to the Indenture.
"PARTICIPATING BROKER-DEALER" shall mean a broker-dealer that receives
Exchange Bonds for its own account pursuant to the Exchange Offer.
"PROJECT" shall mean the acquisition, construction, equipping and improving
of certain public improvements consisting of parks and recreational facilities.
"PROPERTY" means the Real Estate (upon which certain of the Project
facilities will be located) and water rights acquired with proceeds of the
Bonds.
"PROPORTIONATE SHARE" shall mean, for a District, the ratio of the estimated
assessed value of all taxable real and personal property in such District to the
total assessed value of all taxable real and personal property in all the
Districts.
"PROSPECTUS" shall mean the Prospectus relating to the initial offering of
the Exchange Bonds.
"PURCHASE AGREEMENT" shall mean the Purchase Agreement, dated as of March
26, 1996, between the Authority and Lehmann Brothers Inc.
"RATING AGENCY" shall mean Standard & Poor's Ratings Services or, if
Standard & Poor's Ratings Services is no longer rating the Bonds, any nationally
recognized statistical rating organization which is then rating the Bonds.
"REAL ESTATE" shall mean an approximately 876 acre portion of the Dawson
Ridge Development in the Town of Castle Rock, Colorado.
"RECORD DATE" shall mean the close of business on the 15th day of the
calendar month immediately preceding the Interest Payment Date.
"RECREATIONAL FACILITIES" shall mean parks and recreational facilities
located within or for the benefit of the District.
"RECREATIONAL FACILITIES AGREEMENT" shall mean the Recreational Facilities
Agreement, dated as of March 1, 1996, between the Authority and the District.
67
<PAGE>
"REGISTRATION RIGHTS AGREEMENT" shall mean the agreement among the
Authority, the Credit Enhancement Provider and the Underwriter, described more
fully under "THE BONDS--Registration Rights,-- Additional Interest."
"REIMBURSEMENT AGREEMENT" shall mean the Reimbursement Agreement, dated as
of March 1, 1996, between the Authority and the Credit Enhancement Provider, as
the same may be supplemented or amended.
"REMIC EVENT OF DEFAULT" shall mean any Event of Default under the REMIC
Indenture.
"REMIC INDENTURE" shall mean an indenture of trust between BFC Finance Corp.
and SouthTrust Bank of Alabama, National Association.
"REMIC INTEREST PAYMENT DATE" shall mean each June 1 and December 1,
commencing June 1, 1998.
"REMIC RECORD DATE" shall mean the 15th day preceding each REMIC Interest
Payment Date.
"REMIC REDEMPTION FUND" shall mean the Redemption Fund established pursuant
to the REMIC Indenture.
"REMIC TRUST ESTATE" shall mean a trust estate established under the REMIC
Indenture in accordance with the provisions of a Bond Pledge and Security
Agreement between the Credit Enhancement Provider, the Trustee and the REMIC
Trustee.
"REMIC TRUSTEE" shall mean the SouthTrust Bank of Alabama, National
Association.
"RESIDUAL HOLDER" shall mean the owner of a fractional undivided interest in
the economic benefit to BFC Finance Corp. arising by, through or under the REMIC
Indenture.
"REVENUE OBLIGATION" shall mean the obligation of the Districts under the
Intergovernmental Agreement to pay the deficiencies required to pay obligations
secured by the Deed of Trust.
"REVENUES" shall mean all proceeds, charges, income, rents, receipts,
profits, benefits and existing fund balances of the Authority, exclusive of (i)
payments for Operation and Maintenance Expenses paid by the District pursuant to
the Operating Agreement, (ii) any gifts, grants, bequests, donations and
contributions to the extent specifically restricted by the donor to a particular
purpose inconsistent with their use for Bond payments, and (iii) any payments
received by the Authority pursuant to the Development Agreement.
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended.
"SPECIAL RECORD DATE" shall mean a date fixed by the Trustee whenever moneys
become available for payment of defaulted interest.
"TRUSTEE" shall mean SouthTrust Bank of Alabama, National Association, a
national banking association organized and existing under and by virtue of the
laws of the United States of America having a corporate trust office in
Birmingham, Alabama, or its successor as Trustee under the Indenture.
"TRUST ESTATE" shall mean all of the property described in the granting
clauses of the Indenture or of any supplemental indenture.
"UNDERWRITER" shall mean Lehmann Brothers Inc.
68
<PAGE>
THE INDENTURE
The following describes the material provisions of the Indenture which are
not described elsewhere in the Prospectus. This description is subject in all
respects to the provisions of, and is qualified in its entirety by, reference to
the Indenture. Copies of the Indenture are available from the Trustee.
AUTHORIZED AMOUNT OF BONDS
The total principal amount of Bonds that may be issued under the Indenture
is expressly limited to $66,975,000. The Authority may issue Bonds under the
Indenture in exchange for the Bonds pursuant to the Registration Rights
Agreement.
ADDITIONAL BONDS AND SUBORDINATE INDEBTEDNESS
So long as any of the Bonds remain Outstanding, the Authority will not issue
any additional bonds or obligations payable from Revenues or having a lien upon
the Trust Estate having priority over, or on a parity with, the Bonds.
The Authority may incur any Indebtedness secured by a lien or encumbrance
which is expressly stated to be junior and subordinate to the lien and
encumbrance upon the Revenues created under the Indenture and to the Deed of
Trust except as otherwise provided in the Indenture. Subordinate Indebtedness
shall have no rights of acceleration or foreclosure. No such subordinate
Indebtedness shall be secured by the Credit Enhancement. No such subordinate
Indebtedness shall be issued without the consent of the Credit Enhancement
Provider.
ESTABLISHMENT OF FUNDS
Upon the issuance of the Bonds, the Authority and/or the Trustee will
establish and create the following funds and accounts:
(a) Project Fund; and within the Project Fund, the Costs of Issuance
Account.
(b) Revenue Fund.
(c) Collateralized Credit Fund.
(d) Interest Fund, and within the Interest Fund, the following accounts:
(i) Capitalized Interest Account
(ii) Collateralized Credit Interest Account
(iii) Revenue Interest Account
(e) Principal Fund, and within the Principal Fund, the following accounts:
(i) Collateralized Credit Principal Account
(ii) Revenue Principal Account
(iii) The Sinking Fund Accounts
(f) Redemption Fund, and within the Redemption Fund, the following accounts:
(i) Special Redemption Account
(ii) Redemption Holding Account
(g) Rebate Fund.
69
<PAGE>
PROJECT FUND
The Authority shall establish, maintain and hold a separate fund to be known
as the "Project Fund." The proceeds of the Bonds deposited in the Project Fund
shall be applied for the purpose of providing funds for the acquisition of the
Property and payment of expenses incident to the Project, including
architectural and engineering fees and expenses, tests and inspection, surveys,
land acquisition, the fees and expenses of the Trustee, costs of issuance and
all other expenses in connection with the preparation, issuance and delivery of
the Bonds of legal fees and expenses of counsel, and similar expenses.
Before any expenditure is made from the Project Fund, the Authority shall
determine that the entire sum of the expenditures then to be made and of all
other expenditures previously made from the Project Fund have been used to
finance the acquisition of the Property and expenses incident thereto, all of
which property other than land is of a character subject to the allowance for
depreciation under Section 167 of the Code.
REVENUE FUND
The Authority agrees that, so long as any of the Bonds remain Outstanding,
all of the Revenues of the Authority shall be deposited as soon as practicable
upon receipt in the Revenue Fund which the Authority shall establish and
maintain in an account to be held by the Trustee. Subject only to the provisions
of the Indenture permitting the application thereof for the purposes and on the
terms and conditions set forth therein, the Authority pledges and, to the extent
permitted by law, grants a security interest to the Trustee in the Revenue Fund
to secure the payment of the principal of, premium, if any, and interest on the
Bonds.
CREDIT ENHANCEMENT OF THE BONDS; ALLOCATION OF REVENUES
So long as the Credit Enhancement is in effect and no Event of a Default
exists thereunder, all payments of principal and interest on the Bonds (except
for interest for the period prior to March 1, 1998, Additional Interest, other
Extra Payments and amounts payable on redemption in the event of a taking of the
Project by eminent domain) shall be made from the proceeds of draws on the
Credit Enhancement which are to be deposited directly in the Collateralized
Credit Fund. Pursuant to the Bond Pledge and Security Agreement, all payments in
regard to the Collateral are to be made directly to the Trustee, and shall be
deposited in the Collateralized Credit Fund. To the extent that the amount in
the Collateralized Credit Fund is insufficient on any Interest Payment Date to
pay interest (other than interest for the period prior to March 1, 1998,
Additional Interest, any other interest constituting Extra Payments and Interest
due as a result of a redemption (described above) and principal due and payable
on the Bonds on such Interest Payment Date (other than amounts payable on such a
redemption) the Trustee shall demand that the Credit Enhancement Provider
immediately deposit the amount of such deficiency in the Collateralized Credit
Fund.
The Trustee shall have the obligation to hold and maintain the Credit
Enhancement for the benefit of the owners of Bonds in accordance with its terms.
If at any time during the term of the Credit Enhancement any successor Trustee
shall be appointed and qualified under the Indenture, the resigning Trustee
shall request that the provider of such Credit Enhancement transfer or cause the
transfer of the Credit Enhancement to the successor Trustee. If the resigning
Trustee fails to make this request, the successor Trustee shall do so before
accepting appointment.
On or before each Interest Payment Date, the Trustee shall transfer from the
Revenue Fund and deposit into the following respective accounts or transfer the
respective amount directly, as provided below, the following amounts, in the
following order of priority, the requirements of each such account (including
the making up of any deficiencies in any such account resulting from lack of
moneys sufficient to
70
<PAGE>
make any earlier required deposit) at the time of deposit to be satisfied before
any transfer is made to any account subsequent in priority:
(1) Available Moneys to the Revenue Interest Account, in an amount equal to
the aggregate amount of interest becoming due and payable on the next such
Interest Payment Date on all Bonds then Outstanding (other than Additional
Interest, interest constituting Excess Payments or payable as a result of
certain redemptions) less any amounts to be transferred to the Interest Fund
from the Capitalized Interest Account as capitalized interest and less any
transfers from the Collateralized Credit Interest Account for the payment of
such interest;
(2) Available Moneys to the Revenue Principal Account, in an amount equal to
the aggregate amount of principal, if any, becoming due and payable on the
Outstanding Bonds (including any mandatory sinking fund payments required to be
paid into the respective Sinking Fund Accounts for Outstanding Bonds) on the
next ensuing Interest Payment Date, less any transfers from the Collateralized
Credit Principal Account for the payment of such principal;
(3) To the Rebate Fund in accordance with the rebate instructions;
(4) To the Credit Enhancement Provider in an amount equal to amounts drawn
under the Credit Enhancement and applied to the payment of principal of or
interest on the Bonds, together with interest thereon as determined pursuant to
the Reimbursement Agreement, to the extent a request for the same has been
submitted to the Trustee by the Credit Enhancement Provider or otherwise
provided pursuant to the Credit Enhancement, and to the extent not previously
reimbursed to the Credit Enhancement Provider by the Trustee from Revenues,
unless a default by the Credit Enhancement Provider has occurred and is
continuing under the Credit Enhancement, in which event such amount shall remain
in the Revenue Fund until such default has been cured or otherwise waived by the
Trustee, at which time such amount shall be paid to the Credit Enhancement
Provider; provided that Revenues received under the Development Agreement shall
be used first for item (5) that follows;
(5) To the Revenue Interest Account to the extent necessary for the payment
of Additional Interest or any other interest constituting Extra Payments, to be
applied to pay such interest in the order in which it accrued;
(6) To the extent necessary to pay any other Extra Payments in the order in
which such Extra Payments become due and payable;
(7) To the extent necessary to pay any Trustee and other fees and expenses
then due and payable under the Indenture in the order that such amounts become
due and payable.
Any moneys remaining in the Revenue Fund after the foregoing transfers may
be used by the Authority for any lawful purpose.
REBATE FUND
The Indenture creates and establishes, with the Trustee, a Rebate Fund in
the name of the Authority which shall be expended in accordance with the
provisions of the Indenture and the Tax Certificate. The Trustee shall make
deposits to and disbursements from the Rebate Fund based upon the instructions
of the Authority pursuant to the Indenture and the Tax Certificate. The
Authority shall be responsible for making all such deposits in the Rebate Fund
as required in the Indenture. The Trustee shall invest the Rebate Fund at the
direction of the Authority subject to the restrictions set forth in the tax
certificate to be delivered at the time of issuance of the Bonds.
INVESTMENT OF FUNDS
Subject to the provisions of the Indenture regarding the deposit of and use
of moneys in the Rebate Fund, all moneys in any of the funds and accounts
established pursuant to the Indenture and held by the
71
<PAGE>
Trustee shall be invested by the Trustee as directed by the Authority in writing
solely in Investment Securities. Investment Securities may be purchased at such
prices determined by the Authority. The Authority shall direct such investment
so that all Investment Securities shall be acquired subject to the Authority's
tax covenants contained in the Indenture, the limitations as to maturities set
forth in the Indenture and such additional limitations or requirements
consistent with the foregoing as may be established by written request of the
Authority. Absent the direction of the Authority in the time and manner set
forth above, the Trustee shall invest only in Federal Securities.
All interest, profits and other income received from the investment of
moneys in the Project Fund shall be deposited to the Revenue Fund. All interest,
profits and other income received from the investment of moneys in any other
fund or account established pursuant to the Indenture shall be credited to the
fund or account for the credit of which such Investment Security was acquired.
DISCHARGE OF THE INDENTURE
When all Bonds secured by the Indenture shall be paid in accordance with
their terms (or payment of such Bonds has been provided for in the manner set
forth in the following paragraph) together with all other sums payable
thereunder, including, amounts due and payable to the Trustee, then the
Indenture and the Trust Estate and all rights granted thereunder (except for any
provisions which may continue to apply as described in the following paragraph)
shall thereupon cease, terminate and become void and be discharged and
satisfied. In such event the Trustee shall assign and transfer to the Authority
(or to the Credit Enhancement Provider if amounts are then due under the
Reimbursement Agreement or the Deed of Trust) all property then held by the
Trustee thereunder and shall execute such documents as may be reasonably
required by the Authority (or by the Credit Enhancement Provider if amounts are
then due under the Reimbursement Agreement or the Deed of Trust) or shall turn
over to the Authority (or to the Credit Enhancement Provider if amounts are then
due under the Reimbursement Agreement or the Deed of Trust) any surplus in any
fund, except the Rebate Fund.
Payment of any outstanding Bond prior to the maturity or redemption date
thereof shall be deemed to have been provided for if (i) in case said Bond is to
be redeemed on any date prior to its maturity, the Authority shall have given to
the Trustee in form satisfactory to it irrevocable instructions to give on a
date in accordance with the provisions of the Indenture notice of redemption of
such Bond on said redemption date, (ii) there shall have been deposited with the
Trustee either Available Moneys in an amount which shall be sufficient or
noncallable Federal Securities the principal of and the interest on which when
due, and without any reinvestment thereof, will provide moneys which, together
with the Available Moneys, if any, deposited with or held by the Trustee at the
same time and available therefor, shall be sufficient, as verified by an
Accountant's report, to pay when due the principal of, premium, if any, and
interest due and to become due on said Bond on and prior to the redemption date
or maturity date thereof, as the case may be, (iii) the Trustee shall have a
valid first priority security interest in such Federal Securities and all
proceeds thereof and distributions thereon and such Federal Securities shall be
in the name of the Trustee for the benefit of the Holders, (iv) the Trustee
shall have received an opinion of counsel to the effect that (1) the Federal
Securities have been duly and validly assigned and delivered to the Trustee for
the benefit of the Holders, and (2) the security interest of the Trustee for the
benefit of the Holders is a first priority security interest perfected to the
extent perfection is permissible under the laws of the state where the
collateral is located, (v) the Trustee will receive an opinion of bond counsel
to the effect that defeasance in accordance with the provisions of the Indenture
shall not adversely affect the exclusion from gross income of interest on the
Bonds for federal income tax purposes, (vi) the Trustee shall have received
written confirmation from the Rating Agency that the defeasance will not result
in a downgrade, withdrawal or qualification of the ratings then assigned to the
Bonds, and (vii) in the event said Bond is not by its terms subject to
redemption within the next 35 days, the Authority shall have given the Trustee
in form satisfactory to it irrevocable instructions to give, as soon as
practicable in the same manner as the notice of redemption is given pursuant
hereto, a notice to the registered owner of such Bond that the deposit
72
<PAGE>
required by (ii) above has been made with the Trustee and that payment of said
Bond has been provided for in accordance with the Indenture.
DISTRICT RIGHTS
The Authority covenants and agrees that all activities of the Authority
shall be undertaken for the benefit of the District. Upon termination of the
Indenture and discharge of the obligations of the Authority, the District shall
be entitled to acquire title to the Project without cost.
The District is granted the right to obtain, at any time, unencumbered fee
title and exclusive possession of property financed by obligations of the
Authority (including the Bonds), and any additions to such property by (1)
placing into escrow an amount that will be sufficient to defease such
obligations, (2) paying reasonable costs incident to the defeasance, (3) paying
any amount then due by the Authority to the Credit Enhancement Provider pursuant
to the Reimbursement Agreement and the Deed of Trust, and (4) paying or
defeasing any subordinate obligation issued or incurred pursuant to the
Indenture. The District, at any time before it defeases such obligations, shall
not agree or otherwise be obligated to convey any interest in the Project to any
person (including the United States of America or its agencies or
instrumentalities) for any period extending beyond or beginning after the
District defeases such obligations. In addition, the District shall not agree or
otherwise be obligated to convey a fee interest in the Project to any person who
was a user thereof (or a related person) before the defeasance within 90 days
after the District defeases such obligations.
The Authority shall immediately cancel all encumbrances on the Project,
including all leases and management agreements. Any lease, management contract,
or similar encumbrance on the Project will be considered immediately cancelled
if the lessee, management company, or other user vacates the Project within a
reasonable time, generally not to exceed 90 days, after the date the District
exercises its rights under the immediately preceding paragraph.
In addition to the foregoing, if the Authority defaults in its payment
obligations, the District is granted an exclusive option to purchase the Project
for the amount of the outstanding indebtedness and accrued interest to the date
of default. The Trustee shall provide notice to the District of any Event of
Default within 30 days of the occurrence thereof. The District shall have (a) 90
days from the date it is notified by the Trustee of the default in which to
exercise the option (which shall be exercised by giving written notice of such
exercise to the Trustee and the Authority), and (b) 90 days from the date it
exercises the option to purchase the Project.
Unencumbered fee title to the Project and any additions thereto and
exclusive possession and use thereof will vest in the District without demand or
further action on its part when all obligations issued under the Indenture
(including the Bonds) are discharged.
EVENTS OF DEFAULT
Each of the following is defined as and shall be deemed an "Event of
Default" under the Indenture:
a. Default shall be made in the due or punctual payment (other than Extra
Payments prior to the maturity of the Bonds) of the principal of, or premium (if
any) on, any Bond when and as the same shall become due and payable, whether at
maturity as therein expressed, by proceedings for redemption, by declaration or
otherwise;
b. Default shall be made in the due and punctual payment (other than Extra
Payments prior to the maturity of the Bonds) of any installment of interest on
any Bond, when and as such interest installment shall become due and payable;
c. Default shall be made by the Authority in the performance or observance
of any other of the covenants, agreements or conditions on its part in the
Indenture or in the Bonds contained, and such
73
<PAGE>
default shall have continued for a period of 45 days after written notice
thereof, specifying such default and requiring the same to be remedied, shall
have been given to the Authority and the Credit Enhancement Provider by the
Trustee, or to the Authority and the Trustee by the Credit Enhancement Provider;
d. The Authority shall (1) admit in writing its inability to pay its debts
generally as they become due, (2) file a petition in bankruptcy or to take
advantage of any insolvency act, (3) make an assignment for the benefit of its
creditors, (4) consent to the appointment of a receiver of itself or of the
whole or any substantial part of its property, or (5) on a petition in
bankruptcy filed against the Authority, be adjudicated a bankrupt;
e. The Authority shall file a petition or answer seeking reorganization or
arrangement under the federal bankruptcy laws or any other applicable law of the
United States of America or any State thereof;
f. A court of competent jurisdiction shall enter an order, judgment or
decree appointing, without the consent of the Authority, a receiver of the
Authority, or of the whole or any substantial part of its property, or approving
a petition filed against the Authority seeking reorganization of the Authority
under the federal bankruptcy laws or any other applicable law of the United
States of America or any State thereof, and such order, judgment or decree shall
not be vacated or set aside and stayed within 60 days from the date of the entry
thereof;
g. Under the provisions of any other law for the relief or aid of debtors,
any court of competent jurisdiction shall assume custody or control of the
Authority or of the whole or any substantial part of its property, and such
custody or control shall not be terminated or stayed within 60 days from the
date of assumption of such custody or control; or
h. There is a breach of a covenant or a material representation by the
Credit Enhancement Provider under the Credit Enhancement.
Notwithstanding the foregoing, so long as the Bondholders are being paid and
no default exists under the Credit Enhancement, the occurrences described in
paragraphs (c) through (h) above shall not be deemed to be Events of Default
unless and until the Credit Enhancement Provider has consented thereto.
ACCELERATION
Subject to certain rights of the District set forth in the Indenture, upon
the occurrence of any Event of Default, the Trustee, by notice in writing to the
Authority may, and upon written request of the Credit Enhancement Provider or
the Holders of not less than 25% in aggregate principal amount of the Bonds at
the time outstanding, shall, declare the principal of all the Bonds then
outstanding, and the interest accrued thereon, to be due and payable
immediately, and upon any such declaration the same shall become and shall be
immediately due and payable, but only if Available Money sufficient to pay such
Bonds shall be deposited with the Trustee on or before the date specified for
such acceleration. The foregoing is subject to the limitation that (i) no
acceleration shall occur without the consent of the Credit Enhancement Provider
while the Credit Enhancement Provider has continued to meet its obligations to
the Trustee pursuant to the Credit Enhancement and is otherwise not in breach of
a covenant or a material representation by the Credit Enhancement Provider under
the Credit Enhancement and (ii) neither the consent of the Credit Enhancement
Provider nor the deposit of Available Money shall be required for acceleration
if the Credit Enhancement Provider has failed to meet such obligations or is
otherwise in breach of a covenant or material representation by the Credit
Enhancement Provider under the Credit Enhancement.
74
<PAGE>
OTHER REMEDIES; RIGHTS OF BONDHOLDERS
Upon the happening and continuance of an Event of Default the Trustee may
pursue any available remedy to enforce the performance of or compliance with any
other obligation or requirement of the Indenture. Further, upon the happening of
an Event of Default resulting in acceleration, the Trustee shall have the right
to (a) foreclose on the mortgage created by the Deed of Trust through judicial
proceedings or through the exercise of a power of sale; and (b) by suit, action,
or proceeding in any court of competent jurisdiction cause possession of the
Project or any part thereof to be awarded to the Trustee or to obtain the
appointment of a receiver of the Project.
The Holders of a majority in aggregate principal amount of the Bonds at the
time outstanding shall have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee, or exercising
any trust or power conferred on the Trustee, under the Indenture. In the event
that the Trustee, upon the happening of an Event of Default, shall have taken
some action, by judicial proceedings or otherwise, pursuant to its duties under
the Indenture, whether upon its own discretion or upon the request of the Credit
Enhancement Provider and the Holders of 25% in aggregate principal amount of
Bonds then outstanding, it shall have full power, in the exercise of its
discretion for the best interests of the Bondholders, with the consent of the
Credit Enhancement Provider so long as there are no defaults under the Credit
Enhancement, with respect to the continuance, discontinuance, withdrawal,
compromise, settlement or other disposal of such action; provided, however, that
the Trustee shall not, unless there no longer continues an Event of Default,
discontinue, withdraw, compromise, settle or otherwise dispose of any litigation
pending at law or in equity, if at the time there has been filed with it a
written request signed by the Credit Enhancement Provider or the Holders of at
least a majority in aggregate principal amount of the Bonds at the time
outstanding opposing such discontinuance, withdrawal, compromise, settlement or
other disposal of such litigation.
LIMITATION ON BONDHOLDERS' RIGHT TO SUE
No Holder of any Bond issued under the Indenture shall have the right to
institute any suit, action or proceeding at law or in equity, for the execution
of any trust or power of the Indenture or for any other remedy under or upon the
Indenture, unless (a) such Holder shall have previously given to the Trustee and
the Credit Enhancement Provider written notice of the occurrence of an Event of
Default; (b) the Holders of at least 25% in aggregate principal amount of the
Bonds then outstanding shall have made written request to the Trustee to
exercise the powers hereinbefore granted or to institute such action, suit or
proceeding in its own name; (c) such Holder or said Holders shall have tendered
to the Trustee reasonable indemnity against the costs, expenses and liabilities
to be incurred in compliance with such request; and (d) the Trustee shall have
refused or omitted to comply with such request for a period of 30 days after
such written request shall have been received by, and said tender of indemnity
shall have been made to, the Trustee.
DISTRICT'S RIGHT TO PURCHASE PROJECT
Anything to the contrary in the Indenture notwithstanding, if an Event of
Default shall occur, the District shall have an exclusive option to purchase all
properties, equipment or other assets financed by the Bonds and any and all
additions to that property, equipment or assets for an amount equal to the
unpaid principal amount of all Bonds then outstanding and accrued interest
thereon to the date of the Event of Default.
SUPPLEMENTAL INDENTURES NOT REQUIRING CONSENT OF BONDHOLDERS
The Authority, when authorized by resolution of the District, and the
Trustee, from time to time and at any time, but with the consent of the Credit
Enhancement Provider (so long as the Credit Enhancement Provider is not in
default under the Credit Enhancement), subject to the conditions and
restrictions in the
75
<PAGE>
Indenture contained, may enter into an indenture or indentures supplemental
thereto, which indenture or indentures thereafter shall form a part thereof, for
any one or more or all of the following purposes:
a. to add to the covenants and agreements of the Authority in the Indenture
contained, other covenants and agreements thereafter to be observed, or to
surrender any right or power therein reserved to or conferred upon the
Authority, provided, that no such covenant, agreement or surrender shall
adversely affect the interests of the Holders of the Bonds;
b. to evidence the succession of another corporation to the Authority, or
successive successions, and the assumption by a successor corporation of the
covenants and obligations of the Authority in the Bonds and in the Indenture
contained;
c. to make such provisions for the purpose of curing any ambiguity, or of
curing, correcting or supplementing any defective provision contained in the
Indenture, or in regard to other matters or questions arising under the
Indenture, as the Authority may deem necessary or desirable and not inconsistent
with the Indenture and which shall not materially adversely affect the interests
of the Holders of the Bonds; or
d. to modify, amend or supplement the Indenture or any indenture
supplemental thereto in such manner as to permit the qualification thereof under
the Trust Indenture Act of 1939 or any similar federal statute hereafter in
effect, and, if they so determine, to add to the Indenture or any indenture
supplemental thereto such other terms, conditions and provisions as may be
permitted by said Trust Indenture Act of 1939 or similar federal statute, and
which shall not adversely affect the interests of the Holders of the Bonds.
Any Supplemental Indenture authorized by the provisions of this Section may
be executed by the Authority and the Trustee without the consent of the Holders
of any of the Bonds at the time outstanding but the Trustee shall not be
obligated to enter into any such Supplemental Indenture which affects the
Trustee's own rights, duties or immunities under the Indenture or otherwise.
SUPPLEMENTAL INDENTURES REQUIRING CONSENT OF BONDHOLDERS
With the consent of the Credit Enhancement Provider (so long as the Credit
Enhancement Provider is not in default under the Credit Enhancement) and the
Holders of not less than 60% in aggregate principal amount of the Bonds at the
time Outstanding, the Authority, when authorized by a resolution of the
District, and the Trustee may from time to time and at any time enter into an
indenture or indentures supplemental to the Indenture for the purpose of adding
any provisions to or changing in any manner or eliminating any of the provisions
of the Indenture or of any Supplemental Indenture; provided, however, that no
such Supplemental Indenture shall (1) extend the fixed maturities of the Bonds
or reduce the rate of interest thereon or extend the time of payment of
interest, or reduce the amount of the principal thereof, or reduce any premium
payable on the redemption thereof, without the consent of the Holder of each
Bond so affected, or (2) reduce the aforesaid percentage of Holders of Bonds
whose consent is required for the execution of any such Supplemental Indenture,
or permit the creation of any lien on the Trust Estate prior to or on a parity
with the lien of the Indenture or deprive the Holders of the Bonds of the lien
created by the Indenture upon the Trust Estate, without the consent of the
Holders of all of the Bonds then Outstanding and the Credit Enhancement
Provider. Upon receipt by the Trustee of a certified resolution authorizing the
execution of any such Supplemental Indenture, and upon the filing with the
Trustee of evidence of the consent of the Credit Enhancement Provider and
Bondholders, as aforesaid, the Trustee shall join with the Authority in the
execution of such Supplemental Indenture unless such Supplemental Indenture
affects the Trustee's own rights, duties or immunities under the Indenture or
otherwise, in which case the Trustee may in its discretion, but shall not be
obligated to, enter into such Supplemental Indenture.
76
<PAGE>
AMENDMENTS TO OPERATING AGREEMENT AND INTERGOVERNMENTAL AGREEMENT
The Operating Agreement and the Intergovernmental Agreement may be amended
only with the consent of the Trustee and the Credit Enhancement Provider (so
long as the Credit Enhancement Provider is not in default under the Credit
Enhancement). The Trustee shall consent to such amendments on the same basis as
it consents to amendments to the Indenture.
COLLATERALIZED CREDIT ENHANCEMENT AGREEMENT
In order to provide credit enhancement for the Bonds, the Credit Enhancement
Provider and the Trustee have entered into a Collateralized Credit Enhancement
Agreement dated as of March 1, 1996 (the "Collateralized Credit Enhancement
Agreement"). Under the Collateralized Credit Enhancement Agreement, the Credit
Enhancement Provider is required to provide the Trustee with all amounts
necessary to pay the principal of and interest on the Bonds when due (the
"Indebtedness"). The Indebtedness does not include any Extra Payments. This
obligation of the Credit Enhancement Provider has been secured by the pledge and
delivery to the Trustee of the Collateral. The obligation of the Credit
Enhancement Provider to pay principal of and interest on the Bonds as described
above continues until such time as the Indebtedness has been paid in full, but
the Credit Enhancement Provider's liability therefor is limited to the
Collateral.
Pursuant to the provisions of the Collateralized Credit Enhancement
Agreement, the Trustee may not, without the consent of the Credit Enhancement
Provider, change any of the terms of the Bonds contained in the Indenture,
modify or waive any of the terms of any agreement with the Authority with
respect to the Bonds or take and hold any security for the payment of the Bonds
or performance of the Credit Enhancement Provider's obligations thereunder.
Under the Collateralized Credit Enhancement Agreement, the obligations of
the Authority to the Credit Enhancement Provider or any other person controlled
by or owned in whole or in part by the Credit Enhancement Provider are
subordinated to the Authority's obligations on the Indebtedness during any
period that a default exists under the Indebtedness. The Collateralized Credit
Enhancement Agreement also provides that, without the prior written consent of
the Trustee, any such subordinated indebtedness may not be paid, nor may the
Credit Enhancement Provider accept or cause or permit any other person
controlled by or owned in whole or in part by it to accept any payment of such
subordinated indebtedness, at any time after default exists under the
Indebtedness.
REIMBURSEMENT AGREEMENT
In connection with the Credit Enhancement Provider providing the Credit
Enhancement to secure the payment of the principal of and interest on the Bonds,
the Authority and the Credit Enhancement Provider entered into a Reimbursement
Agreement dated as of March 1, 1996 ("Reimbursement Agreement") establishing the
terms and conditions of the payment by the Authority to the Credit Enhancement
Provider of any amounts paid by it under the Credit Enhancement. In accordance
with the Reimbursement Agreement, the Authority is required to pay to the Credit
Enhancement Provider all amounts paid by the Credit Enhancement Provider under
the Credit Enhancement. Such amounts are payable on the day on which such a
payment is made pursuant to the Credit Enhancement, together with interest on
any amounts not timely paid at the rate of 9% per annum. The Authority is not
obligated to pay interest on any payment under the Credit Enhancement if it has
deposited with the Trustee the total amount of the payment to be made pursuant
to the Credit Enhancement prior to the date of payment thereof. In addition, the
Authority has agreed to pay to the Credit Enhancement Provider, on the date of
the issuance of the Bonds, a commitment fee of 6% of the principal amount of the
Bonds.
The Authority is required under the Reimbursement Agreement to: comply with
all laws, ordinances, orders, rules and regulations applicable to it; take all
reasonable efforts and diligently proceed to complete the Recreational
Facilities (as defined in the Reimbursement Agreement), including the golf
course;
77
<PAGE>
maintain and preserve all of its properties; not amend, modify or supplement
certain documents related to the Credit Enhancement without the Credit
Enhancement Provider's prior consent; maintain its existence as a non-profit
corporation under the laws of the State of Colorado; and provide certain
financial information to the Credit Enhancement Provider, including the
Authority's annual budget, annual mill levy certifications of each of the
Districts and the assessed valuation of all property owned by the Authority. The
Authority has also agreed to charge and collect such rents, rates, fees or
charges for the use of the Project as will be sufficient, together with certain
other revenues, to produce Net Income Available for Debt Service (as defined in
the Indenture) equal to at least 1.30 times Aggregate Annual Debt Service (as
defined in the Indenture) on all Bonds Outstanding for the next fiscal year.
Under the Reimbursement Agreement, the following constitute Events of
Default:
1. If any representation or warranty is made by the Authority thereunder or
in any related document or in any other certificate or statement furnished by
the Authority thereunder or pursuant to any related document is false or untrue
or incomplete in any material respect when made;
2. If the Authority fails to observe or perform any of the covenants,
conditions or provisions of the Reimbursement Agreement, and such failure
continues for ten days after notice from the Credit Enhancement Provider to the
Authority;
3. If a default by the Authority occurs under the Indenture and continues
for a period of ten days, or a default by the Authority occurs and any
applicable grace period lapses under any other related documents to which the
Authority is a party;
4. If the Reimbursement Agreement or any other related document to which
the Authority is a party is no longer valid and binding on the Authority;
5. If the Authority becomes insolvent or bankrupt or certain other related
bankruptcy actions are taken by or with respect to the Authority; and
6. If the Authority fails to pay any amounts due and owing under the
Reimbursement Agreement.
If an Event of Default occurs under the Reimbursement Agreement, the Credit
Enhancement Provider may exercise any of the following remedies;
1. Foreclose on the Deed of Trust, subject to the limitations thereof;
2. Institute an action of mandamus or other proceeding to enforce its
rights under the Reimbursement Agreement;
3. Require the Authority to account for funds as if it were the trustee of
an express trust for the benefit of the Credit Enhancement Provider;
4. Institute an injunction action;
5. Declare all obligations of the Authority under the Reimbursement
Agreement to be immediately due and payable; and
6. Select whatever other action at law or equity is necessary to enforce
its rights under the Reimbursement Agreement or any related document.
To the extent permitted by law, the Authority has also agreed to indemnify
and hold harmless the Credit Enhancement Provider from and against certain
claims, damages, losses, liabilities and reasonable costs and expenses by reason
of, or in connection with, the execution and delivery of or payment or failure
to pay under the Credit Enhancement and the issuance and sale of the Bonds,
except for the willful misconduct or gross negligence of the Credit Enhancement
Provider.
78
<PAGE>
THE DEED OF TRUST
The following description of the Deed of Trust is subject in all respects to
the provisions of, and is qualified in its entirety by, reference to the Deed of
Trust, copies of which are available from the Trustee.
The Authority delivered the Deed of Trust for the purpose of securing (i)
repayment of the indebtedness evidenced by the Bonds, the Note (as defined
therein) and the Credit Enhancement Note (as defined therein) (collectively, the
"Indebtedness"); (ii) the payment of all other sums, with interest thereon,
advanced in accordance with the Deed of Trust; (iii) the performance of the
covenants and agreements of the Authority contained in the Deed of Trust, the
Note, the Credit Enhancement Note, the Reimbursement Agreement and the Indenture
(collectively, the "Secured Obligations"); and (iv) the repayment of any future
disbursements, with interest thereon, made to the Authority by the Trustee or
the Credit Enhancement Provider. The Deed of Trust irrevocably grants and
conveys to the Public Trustee of Douglas County, Colorado, in trust, with power
of sale, the interests of the Authority in the Property, together with all
buildings and improvements, and fixtures or appurtenances, now and hereafter
erected thereon, construction material, supplies and equipment intended to be
incorporated and installed therein or used in construction thereon; all building
permits, construction contracts, claims and warranties under construction
contracts, tap fees, architectural plans and specifications relating to
construction of improvements on the Real Estate and trademarks and logos
relating to marketing the Property and any and all rents and leases (subject to
the rights to collect and apply such rents), profits, royalties, claims to
water, water rights, minerals, geothermal resources, oil and gas rights and
profits, easements and access rights, less any of said property which may be
released from the Deed of Trust (together, the "Pledged Property").
COVENANTS OF THE AUTHORITY
The Authority covenants and agrees in the Deed of Trust to promptly pay the
Trustee and the Credit Enhancement Provider (collectively, the "Beneficiary")
all principal and interest and all other sums of money payable by virtue of the
Bonds, the Note, the Credit Enhancement Note, the Reimbursement Agreement, the
Indenture and the Deed of Trust, which the Trustee or the Credit Enhancement
Provider is entitled to receive, and to perform each and every covenant and
agreement in the Bonds, the Credit Enhancement Note, the Reimbursement
Agreement, the Deed of Trust, the Indenture, the Note or any other documents
relating to the loan represented by the Bonds or the Note.
The Authority covenants and agrees in the Deed of Trust to do all things
necessary to preserve and keep in full force and effect its existence under the
laws of the State of Colorado and to comply with all regulations, rules,
ordinances, statutes, orders and decrees of any governmental authority or court
applicable to the Authority or to the Pledged Property or any part thereof.
The Authority agrees to pay all taxes, assessments and other charges, fines
and impositions attributable to the Pledged Property as well as leasehold
payments or ground rents, if any, when due and payable, before they become
delinquent and before any interest attaches or any penalty is incurred. If any
tax, assessment or other charge, fine or imposition becomes of record, the
Authority agrees that such shall be satisfied and discharged of record within
thirty days of becoming of record, and a certified copy of the official document
evidencing such satisfaction and discharge shall be sent to the Beneficiary
within ten days after such discharge. However, the Authority shall not be
required to discharge any lien if (a) the Authority shall, in good faith,
contest such lien by, or defend enforcement of such lien in, legal proceedings
which operate to prevent the enforcement of the lien or forfeiture of the
Pledged Property or any part thereof and (b) the Authority shall give the
Beneficiary notice of such contest and the Beneficiary is provided with an
opinion of competent counsel that the failure to discharge the lien will not
have a materially detrimental effect on the security provided by the Deed of
Trust.
The Authority agrees to procure and maintain, or cause to be procured and
maintained, continuously in effect until the Bonds are paid in full, insurance
as provided for in the Indenture. The Authority covenants to maintain the
Pledged Property in good repair as provided in the Indenture.
79
<PAGE>
If the Authority fails to perform the covenants and agreements contained in
the Deed of Trust, or if any action or proceeding is commenced which materially
affects, or may materially affect, the Beneficiary's respective interests in the
Project, then the Beneficiary, at the Beneficiary's option, may make such
appearances, disburse such sums and take such actions as the Beneficiary
determines are necessary to protect its respective interest and the interest of
the holders of the Bonds, including, but not limited to, disbursement for
reasonable attorney's fees and entry upon the Project to make repairs. Any
amounts disbursed pursuant to this paragraph, together with interest thereon,
shall become additional indebtedness of the Authority, secured by the Deed of
Trust. Unless the Authority and the Beneficiary agree in writing to other terms
of payment, such amounts shall be payable upon notice to the Authority
requesting payment thereof. Nothing contained in this paragraph shall require
the Beneficiary to incur any expense or take any action. The Beneficiary, on
making good and performing following any default or defaults on the part of the
Authority, shall be thereby subrogated to any and all rights of the person or
persons to whom payment is made by the Beneficiary. The rights of the
Beneficiary shall be exercised by the Credit Enhancement Provider so long as the
Credit Enhancement Provider is not in default of its obligations under the
Credit Enhancement.
EVENTS OF DEFAULT; ACCELERATION; POWER OF SALE; UCC REMEDIES
The following shall constitute "Events of Default" under the Deed of Trust:
(a) A default or breach of the terms, conditions and provisions of the Deed
of Trust (other than as provided in (b), (c) or (d) below) for a period of 60
days after written notice, specifying such default and requesting that it be
remedied, is given to the Authority by the Beneficiary, unless the Beneficiary
shall agree in writing to an extension of such time period prior to its
expiration, or such longer period as may be reasonably necessary to remedy such
default, provided that the Authority is proceeding with reasonable diligence to
remedy the same;
(b) An Event of Default as such term is defined in the Indenture shall occur
and be continuing;
(c) Any Indebtedness which is not promptly and fully paid when due and such
default continues for 10 days (except that no default under the Deed of Trust
shall occur on the failure to make any payment under the Note or the Indenture
where such failure is not an Event of Default under the Indenture); or
(d) If the Authority shall:
(i) admit in writing its inability to pay its debts generally as they
become due; or
(ii) file a petition in bankruptcy to be adjudicated a voluntary
bankrupt or file a similar petition under any insolvency act, or approve or
consent to any such petition filed against it; or
(iii) make an assignment for the benefit of its creditors; or
(iv) consent to the appointment of a receiver of itself or of the whole
or any substantial part of its property; or
(v) on a petition in bankruptcy filed against it, be adjudicated
bankrupt or if a court of competent jurisdiction shall enter an order or
decree appointing a receiver or trustee of the Authority or of the whole or
substantially all of its property, and such adjudication, order or decree
shall not be vacated or set aside or stayed within 90 days from the date of
the entry thereof.
Following an Event of Default, the Beneficiary may declare all of the sums
secured by the Deed of Trust to be immediately due and payable and may invoke
the power of sale and any other remedies permitted by applicable law. The
Beneficiary shall be entitled to collect all reasonable costs and expenses
incurred in pursuing any remedies, including, but not limited to, reasonable
attorney's fees.
Following an Event of Default, the Beneficiary may exercise any rights and
remedies of a secured party under the Colorado Uniform Commercial Code or other
applicable laws and require the Authority
80
<PAGE>
to assemble any collateral covered by the Deed of Trust and constituting
personal property at a place to be designated by the Beneficiary which is
reasonably convenient to both parties.
Notwithstanding the foregoing, foreclosure of the Deed of Trust shall not be
permitted unless the Beneficiary shall have received an opinion of Special Tax
Counsel that such foreclosure shall not adversely affect the exclusion of
interest on the Bonds from gross income for federal income tax purposes, and the
Credit Enhancement Provider shall not be entitled to foreclose on the Deed of
Trust or accelerate the Indebtedness secured thereby following the occurrence
and continuance of a default by the Credit Enhancement Provider under the Credit
Enhancement.
ASSIGNMENT OF RENTS; APPOINTMENT OF RECEIVER
As additional security under the Deed of Trust, the Authority assigns to the
Beneficiary the rents, issues and profits of the Project, provided that until a
default under the Deed of Trust occurs, the Authority shall have the right to
collect and retain such rents, issues and profits as they become due and
payable, except to the extent otherwise provided in the Indenture. In the event
of default under the Deed of Trust, the Beneficiary shall be entitled to enter
upon, take possession of and manage the Project and to collect the rents, issues
and profits of the Project, including those past due. All rents collected by the
Beneficiary shall be applied first to payment of the costs of management of the
Project and collection of rents and then to the sums secured by the Deed of
Trust.
In the Event of Default under the Deed of Trust, the Beneficiary may apply
for and obtain, either in its own name, or through the Trustee, ex parte and
without notice (notice being expressly waived), the appointment of a receiver
for the Pledged Property and for the rents, issues and profits therefrom and may
have such receiver appointed as a matter of right without regard to the solvency
of the Authority or any other person or corporation, or the adequacy of any
security or the existence of waste. The Beneficiary may have sums received by
such receiver, after deduction and payment of the costs and expenses of the
receivership, including the Beneficiary's attorney's fees, applied to the sums
secured by the Deed of Trust in such manner and order as specified by the
Beneficiary; provided that following the occurrence and continuance of a default
by the Credit Enhancement Provider under the Credit Enhancement, such amounts
shall be applied as provided in the Indenture.
NONRECOURSE
Notwithstanding any other agreement or instrument relating to the Bonds, the
Note or the Project, neither the Authority, its officers or directors, employees
and agents, nor its or their heirs, successors or assigns, shall have any
liability for payment or performance of the covenants or obligations set forth
in the Indenture, in the Reimbursement Agreement or in any other agreement or
instrument securing the indebtedness and obligations created or secured under
the Deed of Trust, except from Revenues described and pledged under the
Indenture, Pledged Property, other money derived from the foreclosure of the
Project, and moneys in the Funds created under the Indenture, and the
Beneficiary and the Bondholders may not then assert or claim a deficiency or
other personal money judgment against the Authority, its officers or directors,
employees and agents of the Authority, or its or their heirs, successors or
assigns, but rather agree to look absolutely, strictly and solely to the Project
(including any proceeds from any foreclosure thereof), the Revenues and the
moneys in the Funds under the Indenture, for payment of the principal of and
interest on all indebtedness and obligations secured by the Deed of Trust and to
any other of the Authority's property, rights, accounts, general intangibles,
leases, rents, issues, profits, income, insurance premiums, awards, payments and
consideration conveyed, mortgaged, assigned or pledged under the Deed of Trust
or under any other instrument which secures the indebtedness secured by the Deed
of Trust or in which a security interest has been granted to or for the benefit
of the Beneficiary to secure the Bonds or the Note. The foregoing shall not be
deemed or construed to be a release of the indebtedness secured by the Deed of
Trust or in any way to impair, limit or otherwise affect the lien of the
Indenture or of the Deed of Trust or of any such other instrument on the
property, funds or rights covered thereby as
81
<PAGE>
security for the payment of the indebtedness secured by the Deed of Trust and
for the performance of the covenants in the Indenture or in the Deed of Trust,
or prevent the Beneficiary from naming the Authority as a defendant in any
action to enforce any remedy for a default, so long as no monetary judgment or
other judgment is sought or entered therein against the Authority, its officers
or directors, employees and agents, or its heirs, successors or assigns, or
against any property of the Authority other than the Revenues, the Trust Estate
described in the Indenture and all other property described in the foregoing
sentence. Notwithstanding the foregoing, it is expressly understood and agreed
that the aforesaid limitation on liability shall in no way affect or apply to
the Authority's continued liability for the payment to the Beneficiary arising
while the Project is owned by the Authority of (a) any rents, issues, profits
and income actually collected by the Authority from the Project after an Event
of Default not applied to the operation of the Project; (b) security deposits
made by tenants of the Project; or (c) insurance proceeds and condemnation
awards, payments and consideration which the Authority actually receives and to
which the Beneficiary is entitled pursuant to the Deed of Trust or the
Indenture. It is further expressly understood and agreed that the aforesaid
limitation on liability shall in no way affect or apply to the Authority's
continued liability throughout and after its ownership of the Project to the
Beneficiary for payment, indemnification, and reimbursement of all obligations
and liabilities, whether legal or equitable, arising under any federal, state,
or local environmental law, statute, regulation, ordinance, order, by-law, code,
requirement, or directive or under common law regarding the presence,
generation, use, management, transport, treatment, release, discharge, emission
or disposal of any Hazardous Substances to, at or from the Project, to the
extent caused by the Authority, all as further set forth in the Indenture.
RELEASE
Upon payment of all sums secured by the Deed of Trust and upon full
performance thereof by the Authority, the Beneficiary shall promptly, after
written notice from the Authority, execute and deliver to the Authority a
request for the release of the Deed of Trust directed to the Beneficiary. The
Authority shall, however, pay all costs and expenses in connection with the
recordation and execution of said release. In addition, property subject to the
Deed of Trust may be released from the Deed of Trust upon the mutual agreement
of the Borrower and the Beneficiary or as provided in the Indenture.
THE OPERATING AGREEMENT
The following description of the Operating Agreement is subject in all
respects to the provisions of, and is qualified in its entirety by, reference to
the Operating Agreement, copies of which are available from the Trustee.
The Authority will be the owner of the Project and the District will have no
fee title thereto until such time as a deed to all or any portion of the
property and the Project is delivered to the District. The Authority will be
responsible for the acquisition, construction and completion of the Project.
PROJECT CONTRACTS
The Authority has executed or shall execute, or has awarded or shall award,
all contracts and purchase orders needed to complete the Project.
TERM
The Operating Agreement term shall commence as of the date that either (i)
the Town of Castle Rock, Colorado shall have approved an amendment to the
service plan of the District specifically authorizing the mill levy imposition
described below under "Operating Agreement Payments", or (ii) the District shall
have received an opinion acceptable to the District of counsel acceptable to the
District that such mill levy may be imposed without regard to any service plan
amendment. Each of the Districts has covenanted in the Recreational Facilities
Agreement to take all reasonable action necessary to effect such
82
<PAGE>
service plan amendment or to obtain such opinion. The Operating Agreement shall
terminate on payment of all obligations secured by the Deed of Trust.
OPERATING AGREEMENT PAYMENTS
(a) The District covenants to pay to the Authority, its successors and
assigns, the following Operating Agreement Payments: (i) all Operations and
Maintenance Expenses to the extent not paid from Revenue, and (ii) any
deficiencies of Revenue required to pay obligations secured by the Deed of
Trust, subject to the limitations in (c) below.
(b) Overdue Operating Agreement Payments shall continue as an obligation of
the District until the amount in default has been fully paid and shall bear
interest at the rate of 15% per annum.
(c) The provisions of (a) and (b) above are limited to amounts (i) collected
from a mill levy against taxable real and personal property within the District
not to exceed 35 mills, and subject to other limitations specified in the
questions voted upon by the election of the District on November 7, 1995; and
(ii) amounts collected by the District from the Related Districts pursuant to
the Intergovernmental Agreement. See "DEFINITIONS OF CERTAIN TERMS AND
DESCRIPTIONS OF PRINCIPAL DOCUMENTS--THE INTERGOVERNMENTAL AGREEMENT--Payments
and Nature of Obligations" herein. In the event amounts collected from such
sources shall be insufficient in any year, the amount of such deficiency shall
nevertheless be a continuing obligation of the District payable from such
sources in subsequent years. The District agrees to include in its annual
certification to the Board of County Commissioners of Douglas County, Colorado,
a mill levy sufficient, when combined with other revenues reasonably anticipated
to be available, to satisfy its obligations under the Operating Agreement.
(d) Notwithstanding the foregoing, the District will be under no obligation
to pay Operating Agreement Payments unless and until the date that either (i)
the Town of Castle Rock, Colorado shall have approved an amendment to the
service plan of the District specifically authorizing the mill levy imposition
described in (c) above, or (ii) the District shall have received an opinion
acceptable to the District of counsel acceptable to the District that such mill
levy may be imposed without regard to any service plan amendment. Each of the
Districts has covenanted in the Recreational Facilities Agreement to take all
reasonable action necessary to effect such service plan amendment or to obtain
such opinion.
TITLE
During the term of the Operating Agreement, the Authority shall hold title
to and ownership of each of the Project facilities and any and all additions
thereto which comprise repairs, replacements, modifications, improvements and
substitutions until such Project facility is transferred to the District. The
District agrees that any damage to the Project that would materially impact the
operation of the Project and that is occasioned by the removal of fixtures and
improvements shall be promptly repaired. Notwithstanding anything to the
contrary in the Operating Agreement, it is understood that title to personal
property permanently attached to the Project by the District or any other
entity, instrumentality, authority or department of the District shall become a
part of the Project.
MAINTENANCE, UTILITIES AND TAXES
The Authority and the District each agree that during the term of the
Operating Agreement it will itself at its own expense or will cause others to
(a) keep the Project facilities which it owns in as reasonably safe condition as
its operations will reasonably permit, and (b) keep the Project facilities which
it owns in good repair and in good operating condition, making from time to time
all necessary repairs thereto and renewals and replacements thereof, which may
be necessary for this purpose, so that the Project facilities which it owns will
remain suitable and efficient for use of the character described in and
contemplated by the Indenture.
83
<PAGE>
Throughout the term of the Operating Agreement all improvement, repair and
maintenance of the Project facilities shall be the responsibility of the party
owning such facilities, and such party shall pay for or otherwise arrange for
the payment of all utility services supplied to such facilities, which may
include (without limitation) cleaning services, maintenance, security, power and
electricity, gas, telecommunications and radio equipment and all utilities and
services supplied to or in connection with the Project, and shall pay for or
otherwise arrange for the payment of the cost of the repair and replacement of
such facilities or any part thereof resulting from ordinary wear and tear.
Each party shall also pay or cause to be paid, without abatement, deduction
or offset, all property taxes and general and special assessments (collectively,
"property taxes") of any type or nature levied, assessed or charged by an
authorized governmental authority to and against the Project facilities which it
owns, the improvements thereto from time to time and the respective interests or
estates therein; provided that with respect to special assessments or other
governmental charges that may lawfully be paid in installments over a period of
years, each party shall be obligated to pay only such installments as are
required to be paid during the term of the Operating Agreement as and when the
same become due.
The foregoing provisions are not a limitation on the obligations of the
District to pay Operating Agreement Payments to the Authority.
Each party may, at its expense and in its name, in good faith contest any
such taxes, assessments, utility and other charges and, in the event of any such
contest, may permit the taxes, assessments or other charges so contested to
remain unpaid during the period of such contest and any appeal therefrom unless,
by nonpayment of any such items, the Project or any part thereof will be subject
to loss or forfeiture, in which event the responsible party shall promptly pay
such taxes, assessments or charges or provide full security against any loss
which may result from nonpayment, in form satisfactory to the Credit Enhancement
Provider and the Trustee.
Any payments by the Authority of the foregoing amounts with respect to
Recreational Facilities shall be considered Operating Agreement Payments due
from the District under the Operating Agreement.
DAMAGE, DESTRUCTION AND CONDEMNATION
Unless the District shall have exercised its option to terminate the
Operating Agreement (see "Option to Terminate" below), if prior to full payment
of the Bonds (or provisions for payment thereof having been made in accordance
with the provisions of the Indenture) (i) the Project or any portion thereof is
damaged or destroyed (in whole or in part) by fire or other casualty or (ii)
title to, or the temporary use of, the Project or any part thereof shall be
taken under the exercise of the power of eminent domain by any governmental body
or by any person, firm or corporation acting under governmental authority, the
District shall be obligated to continue to pay all Operating Agreement Payments
with no abatement or reduction in such amounts whatsoever.
The proceeds of any award resulting from any damage to or destruction or
condemnation of the Project shall be deposited with the Trustee, as described
and provided for in the Indenture. See "THE INDENTURE."
The amount of Operating Agreement Payments for the Project shall not be
abated or diminished during any period in which by reason of damage or
destruction there is substantial interference with the use by the District of
the Project, or any portion thereof or for any other reason whatsoever;
provided, however, that if any insurance proceeds shall be deposited with the
Trustee under the Indenture, they shall be treated as Revenues and credited
against Operating Agreement Payments due and payable under the Operating
Agreement to the extent applied to the payment of principal of or interest on
the Bonds or to reimburse the Credit Enhancement Provider with respect to
amounts paid under the Credit Enhancement and so applied. In the event of any
such damage or destruction, the Operating Agreement shall
84
<PAGE>
nonetheless continue in full force and effect and the District waives any right
to terminate the Operating Agreement by virtue of any such damage and
destruction.
ASSIGNMENT
The Authority's rights under the Operating Agreement (except for certain of
the Authority's indemnification rights and rights to attorney's fees and
expenses), including the right to receive and enforce payment of the Operating
Agreement Payments to be made by the District under the Operating Agreement, may
be assigned by the Authority to the Trustee or the Credit Enhancement Provider
without the consent of the District.
The Operating Agreement may be assigned as a whole or in part, by the
District with the written consent of the Authority, the Credit Enhancement
Provider and the Trustee (which consents shall not be unreasonably withheld),
subject, however, to each of the following conditions:
(a) No assignment shall relieve the District from primary liability for any
obligations under the Operating Agreement, and in the event of any such
assignment the District shall continue to remain primarily liable for payment of
the amounts specified in the Operating Agreement and for performance and
observance of each of the other agreements to be performed and observed by the
District to the same extent as though no assignment had been made.
(b) In the case of an assignment, the assignee shall assume the obligations
of the District under the Operating Agreement to the extent of the interest
assigned.
(c) The District shall, within 30 days after the delivery thereof, furnish
or cause to be furnished to the Authority and the Trustee a true and complete
copy of each such assumption or assignment as the case may be.
(d) No such assignment by the District shall cause the Project to be used
for a purpose other than as may be authorized under applicable law and under the
Indenture and the Reimbursement Agreement.
AMENDMENT OF OPERATING AGREEMENT
The Operating Agreement may not be effectively changed, amended or modified
except with the written consent of the Trustee and the Credit Enhancement
Provider.
EVENTS OF DEFAULT
Each of the following shall be and constitute an "Event of Default" by the
District and a breach of the Operating Agreement:
(a) Failure by the District to pay any Operating Agreement Payment when due
and payable, and the continuation of any such failure for a period of 3 Business
Days after any such payment is due, unless such failure occurs as the result of
the application of clause (c) above under the subheading "Operating Agreement
Payments";
85
<PAGE>
(b) Failure by the District to pay when due any other amounts required to be
paid by the District under the Operating Agreement, unless such failure occurs
as the result of the application of clauses (c) and (d) above under "Operating
Agreement Payments", or to observe and perform any covenant, condition,
agreement or provision (other than as specified in paragraph (a) above or this
paragraph (b)) contained in the Operating Agreement or in documents executed in
connection therewith on the part of the District to be observed or performed,
which failure shall continue for a period of 30 days after written notice
thereof, specifying such failure and requesting that it be remedied, shall have
been given to the District by the Authority, the Trustee or the Credit
Enhancement Provider by first class mail or hand delivery, any of which may give
such notice in their discretion, unless the Person giving such notice shall
agree in writing to an extension of such thirty day period prior to expiration;
provided, however, that the Authority, the Trustee and the Credit Enhancement
Provider, as the case may be, shall be deemed to have agreed to an extension of
such period if corrective action is initiated by the District within such
period, is being diligently pursued, and can be continued and completed in such
manner as to not adversely affect the rights of the Owners of the Bonds, the
Credit Enhancement Provider or the normal operations of the Project or the use
thereof for the purposes for which such operations are and were originally
intended;
(c) The District shall (i) apply for or consent to the appointment of or
taking of possession by a receiver, trustee, custodian, liquidator or other
similar official of itself or of all or a substantial part of its properties or
assets, (ii) admit in writing its inability to pay its debts as they become due
or generally become unable to pay its debts as they become due, (iii) make a
general assignment for the benefit of creditors, or (iv) commence a voluntary
case as debtor under the federal bankruptcy laws (whether under any Title of the
United States Code or otherwise under any federal law) as now or hereafter
constituted or file a petition seeking to take advantage of any other law
relating to bankruptcy, reorganization, insolvency, winding up, or composition
or adjustment of debts, or acquiesce in writing to, or fail to controvert in a
timely manner, a petition filed against it in any involuntary case under such
federal bankruptcy laws, as the case may be, or any action shall be taken by it
for the purpose of effecting any of the foregoing;
(d) A case or proceeding shall be commenced, without the application or
consent of the District in any court of competent jurisdiction, seeking the
liquidation, reorganization, dissolution, winding up, or composition or
readjustment of debts, of the District, or the appointment of a receiver,
trustee, custodian, liquidator or any similar official of the District or of all
or a substantial part of the assets of the District, or similar relief with
respect to the District under any federal laws relating to bankruptcy (including
under any Title of the United States Code or otherwise under any federal law),
insolvency, liquidation, reorganization, winding up, or composition or
adjustment of debts, shall be commenced against the District and such case or
proceeding shall continue undismissed or unstayed and in effect for any period
of 60 consecutive days, or an order for relief against the District shall be
entered in an involuntary case under such federal or other bankruptcy laws;
(e) If (i) the District is adjudged insolvent by a court of competent
jurisdiction, or (ii) an order, judgment or decree is entered by any court of
competent jurisdiction appointing, without the consent of the District, a
receiver, trustee or custodian of the District or of the whole or any part of
its property and any of the aforesaid adjudications, orders, judgments or
decrees shall not be vacated or set aside or stayed within 60 days from the date
of entry thereof;
(f) If, under the provisions of any other law for the relief or aid of
debtors, any court of competent jurisdiction shall assume custody or control of
the District or of the whole or any substantial part of the property of the
District and such custody or control shall not be terminated within 60 days from
the date of assumption of such custody or control; or
(g) Any warranty, representation or other statement of the District
contained in the Operating Agreement or in any instrument furnished in
compliance with or in reference to the Operating Agreement shall prove to have
been false or misleading in any material respect on the date as of which it was
made.
86
<PAGE>
In case the Authority (or the Credit Enhancement Provider, as the assignee
of the Authority) shall have proceeded to enforce any right under the Operating
Agreement and such proceedings shall have been discontinued or abandoned for any
reason or shall have been determined adversely to the Authority or the Trustee,
then and in every such case the District, the Authority, the Trustee and the
Credit Enhancement Provider shall be restored to their respective positions and
rights thereunder, and all rights, remedies and powers of the District, the
Authority, the Trustee and the Credit Enhancement Provider shall continue as
though no such proceeding had been taken, but subject to the limitations of any
such adverse determination.
REMEDIES
Whenever any Event of Default referred to above shall have happened and be
continuing the Authority, the Trustee and the Credit Enhancement Provider shall
have the right (a) to inspect, examine and make copies of the books and records
and any and all accounts, data and income tax and other tax returns of the
District during regular business hours of the District if reasonably necessary
in the opinion of the Trustee, the Credit Enhancement Provider, or the
Authority, and (b) to take whatever action at law or in equity may appear
necessary or desirable to collect the amounts then due and thereafter to become
due, or to enforce performance and observance of any obligation, agreement or
covenant of the District under the Operating Agreement.
In case the District shall fail forthwith to pay such amounts upon such
demand, the Credit Enhancement Provider shall be entitled, following payment of
the Bonds or provision therefor, as provided in the Indenture, to liquidate and
sell investments held by the Credit Enhancement Provider or the Trustee in any
account within the Bond Fund and apply the proceeds thereof to payment of such
amounts and the Credit Enhancement Provider shall further be entitled and
empowered to otherwise institute any actions or proceedings at law or in equity
for the collection of the sums so due and unpaid, and may prosecute any such
action or proceeding to judgment or final decree, and may enforce any such
judgment or final decree against the District and collect in the manner provided
by law out of the property of the District the moneys adjudged or decreed to be
payable.
Any amounts collected pursuant to action taken under the above provisions
shall be applied in accordance with the provisions of the Indenture and the
Reimbursement Agreement.
The foregoing provisions are subject to the limitation that, except for the
rights specified in clause (a) of the third preceding paragraph, the Trustee
shall be entitled to exercise its rights under the Operating Agreement only if
the Credit Enhancement Provider has failed to provide payments to the Trustee
pursuant to the Credit Enhancement, or if the Trustee's failure to exercise such
rights could be anticipated to materially adversely effect the holders of the
Bonds.
RIGHT TO ACQUIRE PROJECT
The District is granted the right to obtain, at any time, unencumbered fee
title and exclusive possession of property (including the Project) financed by
obligations of the Authority (including the Bonds and obligations arising under
the Reimbursement Agreement), and any additions to such property, by (1) placing
into escrow an amount that will be sufficient to defease such obligations, and
(2) paying reasonable costs incident to the defeasance, in the manner provided
in the Operating Agreement and the Indenture. The District, at any time before
it defeases such obligations, shall not agree or otherwise be obligated to
convey any interest in such property to any person (including the United States
of America or its agencies or instrumentalities) for any period extending beyond
or beginning after the District defeases such obligations. In addition, the
District shall not agree or otherwise be obligated to convey a fee interest in
such property to any person who was a user thereof (or a related person) before
the defeasance within 90 days after the District defeases such obligations.
87
<PAGE>
DEFAULT RIGHTS
In addition to the foregoing, if the Authority defaults in its payments
under obligations described in the Indenture, the District is granted an
exclusive option to purchase the property financed thereby (including the
Project) for the amount of the outstanding indebtedness of the Authority and
accrued interest to the date of default. The District shall have (a) not less
than 90 days from the date it is notified by the Authority of the default in
which to exercise the option, and (b) not less than 90 days from the date it
exercises the option to purchase the property.
INDENTURE RIGHTS
The Authority covenants that it will take no action to amend or supplement
the Indenture in any manner which would materially affect the obligations of the
District under the Operating Agreement without obtaining the prior written
consent of the District to such amendment or supplement.
OPTION TO TERMINATE
The District shall have the following options to terminate the Operating
Agreement:
(i) At any time prior to full payment of the Bonds, the District may make
provision for payment of the Bonds in accordance with the provisions of the
Indenture (see "THE INDENTURE"), and the District may terminate the Operating
Agreement, regardless of whether the Bonds are then subject to optional
redemption, (A) by paying to Trustee an amount which, when added to all amounts
then on deposit in the Bond Fund, will be sufficient to pay, retire and redeem
all the Outstanding Bonds in accordance with the provisions of the Indenture
(including, without limiting the generality of the foregoing, principal of the
Outstanding Bonds and interest to maturity or earliest applicable redemption
date, as the case may be, and premium, if any, expenses of redemption and all
fees and expenses of the Trustee and the District) and, in case of redemption,
by giving notice and making arrangements satisfactory to the Trustee for the
giving of the required notice of redemption under the Indenture, (B) by giving
the Authority, the Trustee and the Credit Enhancement Provider notice in writing
of such termination, and (C) by paying all amounts unpaid under the
Reimbursement Agreement and the Deed of Trust, and such termination shall
forthwith become effective.
(ii) After full payment of the Bonds (or provision for payment thereof
having been made in accordance with the provisions of the Indenture), and after
payment of all amounts arising under the Reimbursement Agreement and the Deed of
Trust, the District may terminate the Operating Agreement by giving the
Authority, the Trustee and the Credit Enhancement Provider notice in writing of
such termination and such termination shall forthwith become effective.
The prepayment amount payable by the District in the event of any prepayment
to be made pursuant to paragraphs (i) or (ii) above shall be the sum of the
following:
(1) An amount of money which, when added to amounts then on deposit in the
Bond Fund, will be sufficient to retire and redeem all the then Outstanding
Bonds in the manner required by the Indenture and on the earliest possible date
after notice of redemption is given as provided in the Indenture, whether or not
such date is an Interest Payment Date, including, without limitation, the
principal amount thereof, all interest to accrue to said redemption date, the
applicable redemption premium and expenses, if any, plus
(2) An amount of money equal to the administrative fees and expenses of the
Trustee and the Authority accrued and to accrue until such final payment and
redemption or purchase of the Bonds, plus
(3) An amount equal to all amounts then accrued and to accrue until such
final payment and redemption or purchase of the Bonds, plus
88
<PAGE>
(4) An amount of money equal to all sums then due the Authority under the
Operating Agreement, plus
(5) To the extent not included in the foregoing, an amount sufficient to pay
all obligations under the Reimbursement Agreement and the Indenture.
The District shall have the extraordinary option to terminate the Operating
Agreement and prepay the amounts sufficient to provide for the full payment of
the Bonds (or to make provision for such payment in accordance with the
provisions of the Indenture) and all amounts due under the Reimbursement
Agreement and the Deed of Trust, upon damage, destruction or condemnation of the
Project.
THE INTERGOVERNMENTAL AGREEMENT
The following description of the Intergovernmental Agreement is subject in
all respects to the provisions of, and is qualified in its entirety by,
reference to the Intergovernmental Agreement, copies of which are available from
the Trustee.
GENERAL INTENT
It is the purpose and intent of the Districts to coordinate and assist in
the financing of the acquisition of the property, and to coordinate all related
activities and to affirmatively cooperate with each other in order to best
accomplish the goals stated in the Intergovernmental Agreement.
TERM
The Intergovernmental Agreement shall not be effective as to any District
until either (A) the Town of Castle Rock, Colorado, has approved the amendment
to the service plan of such District specifically authorizing the imposition of
the mill levy described below under "Limitation on Obligations" by such District
or (B) such District shall have received an opinion acceptable to the District
of counsel acceptable to the District that such mill levy may be imposed without
regard to any service plan amendment. Each of the Districts has covenanted in
the Recreational Facilities Agreement to take all reasonable action necessary to
effect such service plan amendment or to obtain such opinion. Once effective as
to any District, the Intergovernmental Agreement shall continue in effect as to
such District until all of the Operating Agreement Payments have been satisfied;
provided that if such Operating Agreement Payments shall be satisfied pursuant
to a refinancing of the Bonds or the refinancing or discharge of the obligations
under the Reimbursement Agreement, the obligation of the Authority with respect
to any such refinancing or discharge shall be considered Operating Agreement
Payments for purposes of the Intergovernmental Agreement.
ASSESSMENT OF FEES AND CHARGES
Each District shall, subject to limitations of any other agreement
theretofore or thereafter executed by such District, be free to assess
facilities development fees, service charge surcharges, and other fees, rates,
tolls, charges, and taxes in amounts determined to be required by each such
District in order to meet its Financing Obligations under the Intergovernmental
Agreement.
PAYMENTS
Each Related District promises to pay to the District all of its Expense
Obligations and Revenue Obligations in accordance with the terms of the
Intergovernmental Agreement. With respect to any particular District, the
Revenue Obligation of such District evidenced thereby shall be general
obligation indebtedness to which such District pledges its full faith and
credit, subject to the provisions described in "Limitation on Obligations"
below, and shall be incurred and exist from and after the effective date of the
Intergovernmental Agreement. Notwithstanding anything contained in the
Intergovernmental Agreement
89
<PAGE>
to the contrary, in compliance with the limitations imposed by the November 7,
1995 resolutions adopted by the voters of the Districts, the maximum principal
amount of the general obligation represented by the Intergovernmental Agreement
shall not exceed $100,000,000 in principal amount or $500,000,000 in maximum
debt service, subject to the limitations described below under "Limitations on
Obligations". The Revenue Obligations and indebtedness incurred shall be payable
only in accordance with the terms of the Intergovernmental Agreement. Interest
shall be paid by each District on the principal amount of its Revenue
Obligation, which interest shall also be a Revenue Obligation. The maximum net
effective interest rate accruing on any particular District's indebtedness shall
be 45%.
NATURE OF OBLIGATIONS
It is recognized by the Districts that the Revenue Obligations imposed upon
the Districts under the Intergovernmental Agreement constitute "indebtedness"
within the meaning of the Constitution of the State of Colorado. At duly called
and noticed elections held for each District on November 7, 1995, the electorate
of each District authorized the incurrence of indebtedness by each District of
an amount sufficient to fund the various Revenue Obligations expressed in the
Intergovernmental Agreement, and also approved execution of the
Intergovernmental Agreement by each District. In addition, it is recognized by
the District that the Expense Obligations constitute a multiple fiscal year
obligation as to which each District is obligated to increase taxes in an amount
not to exceed $1,500,000 annually, in compliance with the limitations imposed by
the November 7, 1995 resolutions adopted by the voters of the Districts. In no
event shall any commitment, covenant, promise or other obligation under the
Intergovernmental Agreement require the issuance or incurrence of the
indebtedness by the Districts in excess of their respective voted indebtedness
authorization.
PROPORTIONATE SHARE OF REVENUE OBLIGATIONS
The Proportionate Share of the total Revenue Obligations for each District
shall be determined by the District in the preparation of an annual budget for
each year. The "Proportionate Share" for each District shall be the ratio of the
estimated assessed value of all taxable real and personal property in such
District to the total assessed value of all taxable real and personal property
in all of the Districts.
LIMITATION ON OBLIGATIONS
Notwithstanding any provision of the Intergovernmental Agreement to the
contrary, the obligation of a District to pay any or all amounts thereunder in
any year shall be limited to amounts collected under a maximum mill levy
imposition of 35 mills. Any Proportionate Share in excess of the amounts
collected pursuant to such mill levy limit shall continue to be due from such
District, and shall bear interest at the rate of 15% per annum, subject to the
provisions described above under "Payments" and "Nature of Obligations", until
the end of the term of the Intergovernmental Agreement, and shall thereupon be
forgiven. In the event the method for determining assessed value or mill levies
for the State of Colorado is hereafter amended, the District shall provide a
statement of revised procedures to each of the Related Districts so the amounts
collected under such revised method shall equal as closely as reasonably
possible the amounts which would have been collected absent such revision. In
addition, no District shall have any obligation to pay its Proportionate Share
until either (A) the Town of Castle Rock, Colorado, has approved the amendment
to the service plan of such District specifically authorizing the imposition of
such mill levy, or (B) such District shall have received an opinion acceptable
to such District of counsel acceptable to such District that such mill levy may
be imposed without regard to any service plan amendment. Each of the Districts
has covenanted in the Recreational Facilities Agreement to take all reasonable
action necessary to effect such service plan amendment or to obtain such
opinion.
90
<PAGE>
BUDGET AND APPROPRIATIONS
On or before September 1 of each year, the District shall prepare a proposed
Project budget, specifying the anticipated Proportionate Share to be paid in the
ensuing fiscal year by each of the Related Districts. On or before September 10
of each year, the Related Districts shall either approve budget documents
prepared by the District or propose to the District, in writing, additions to
and/or deletions from the proposed budgets. Absent receipt by the District of a
written proposal for additions and/or deletions by September 15 of such year,
the Related Districts shall be deemed to have approved the items included in the
proposed budgets. In the event the Related Districts propose additions and/or
deletions to the proposed budgets for consideration by the District and for
inclusion in the budget documents prepared by the District, and if such
additions and/or deletions are not agreed to by the District, the issue shall be
submitted to the Arbitrator (as defined in the Intergovernmental Agreement) who
shall accept and/or reject such proposed additions and/or deletions pursuant to
the provisions of the Intergovernmental Agreement. Following the Arbitrator's
decision, the District shall approve its budget for the next ensuing year.
Each Related District shall adopt budgets, and make appropriations therefor,
sufficient to pay its Proportionate Share of Revenue Obligations as required
under the Intergovernmental Agreement, subject to the provisions described above
under "Limitation on Obligations." Each District shall include such amounts in
its budget for the ensuing year, and shall certify an ad valorem tax levy in an
amount sufficient, together with other revenues of such District, to pay the
full amounts required under the Intergovernmental Agreement, subject to the
provisions described above under "Limitation on Obligations."
BREACH OF INTERGOVERNMENTAL AGREEMENT
The Districts agree that no breach of the Intergovernmental Agreement shall
justify or permit termination of the continuing obligations under the
Intergovernmental Agreement.
In addition to any other available remedies, in the event of a breach of the
Intergovernmental Agreement, any District may ask a court of competent
jurisdiction to enter a writ of mandamus to compel the board of directors of the
breaching District to perform its duties under the Intergovernmental Agreement,
and any District may seek from a court of competent jurisdiction temporary
and/or permanent restraining orders, or orders of specific performance, to
compel the other to perform in accordance with the obligations set forth under
the Intergovernmental Agreement.
ASSIGNMENT
Neither the Intergovernmental Agreement, nor any of any District's rights,
obligations, duties or authorities thereunder may be assigned in whole or in
part without the prior written consent of each of the other Districts and the
Trustee. Any purported attempt to assign the Intergovernmental Agreement or any
rights thereunder shall be void and of no force and effect. Consent to one
assignment shall not be consent to any subsequent assignment. The foregoing is
subject to the limitation that the District has assigned or shall be entitled to
assign all or any portion of its rights thereunder to the Authority (which may
similarly assign its rights to the Trustee) or the Trustee, or any successor to
the foregoing, or to any other party without the consent of the Related
Districts.
AMENDMENT
The Intergovernmental Agreement may not be modified, amended, changed or
terminated, in whole or in part, except by an agreement in writing duly
authorized and executed by each of the Districts and consented to in writing by
the Authority, the Trustee and the Credit Enhancement Provider.
91
<PAGE>
THE LEASE
The following description of the Lease is subject in all respects to the
provisions of, and is qualified in its entirety by, reference to the Lease,
copies of which are available from the Trustee.
GENERAL
Parcel 49C Limited Partnership (the "Partnership") has entered into a lease
(the "Lease") with the United States Government, acting by and through the
General Services Administration (the "Government"), pursuant to which the
Government has agreed to lease all of the net usable square feet (535,130) of
space in the Project. Rent payments under the Lease will commence on March 1,
1998.
LEASE PAYMENT OBLIGATIONS
The base rent payable under the Lease shall be based on an initial annual
rental rate of $38.85 per net usable square foot for the first 287,483 of net
usable square feet of space leased and $37.95 per net usable square foot for the
remaining 162,376 of net usable square feet leased for a total initial amount of
$17,330,883.75 per year or $1,444,240.31 per month. The Government may deduct
from the base rent during any year of the term of the Lease an amount which will
not exceed $8.50 per net usable square foot (which amount may be increased each
year in accordance with a formula set forth in the Lease using the same
methodology for calculating the increase in the rent for operating costs set
forth in the Lease) for the Lessor's failure to perform its obligations under
the Lease, but the Government has agreed pursuant to an attornment agreement
(the "Attornment Agreement") to give the REMIC Trustee notice of and an
opportunity to cure the Partnership's failure to perform its obligations under
the Lease prior to deducting amounts from the base rent, unless the
Partnership's failure to perform has caused a life or health-threatening
condition. Consequently, the total base rent not subject to set-off is
$13,507,082.22 per year, or $1,125,590.19 per month. Rent is payable in equal
monthly installments in arrears. Counsel for the Government rendered an opinion
that the obligations of the Government to pay rent under the Lease constitutes
an absolute and unconditional obligation of the Government. As is the case with
most federal agencies, the Government's access to funds requires an annual
appropriation by Congress. The Government's ability to make payments under the
Lease requires such an appropriation to the Federal Buildings Fund, the fund
from which all the Government's long-term leases are paid. In the event Congress
fails to make such appropriation, or in the event any payments that are properly
due and owing the Partnership under the Lease are not made, the Partnership or
the Trustee would be entitled, in the opinion of the counsel for the Government,
to enforce the payment obligations of the United States in accordance with the
terms of the Lease, or as otherwise may be available at law or in equity.
COMPLETION OF CONSTRUCTION
In the event that the space rented to the Government is not completed as
scheduled (which is to occur in six phases) and the delay is attributable to the
Partnership, rather than an adjustment to the rent commencement date or any
other provisions for liquidated damages, the Partnership is required to pay the
Government liquidated damages equal to the rent payable with respect to each
phase for the period of time from the applicable rent commencement date until
the phase has been determined to be substantially complete. The imposition of
such liquidated damages does not relieve the Government of its obligation to pay
rent or in any way affect the assignment of such rent to the REMIC Trustee.
CASUALTY OR CONDEMNATION
If the premises leased to the Government are totally destroyed by fire or
other casualty, the Government will have the right to terminate the Lease by
providing written notice to the Partnership within 120 days after the occurrence
of such event. In case of partial destruction or damage, so as to render all or
a portion of the premises unrentable, as reasonably determined by the
Government, the rent will be
92
<PAGE>
reduced proportionately from the date of such partial destruction or damage. The
Government may not terminate the Lease as a result of such partial destruction
or damage so long as the Partnership diligently commences and pursues the repair
and restoration of the premises. Although not specifically covered by the Lease,
in the event of a condemnation of the building, the Government may have the
right to terminate the Lease.
PARTNERSHIP RESPONSIBILITIES
The Partnership has various obligations under the Lease, including
obligations regarding hazardous waste, asbestos, illegal activities, kickbacks
and compliance with certain statutes regarding contractors' employment
practices. Failure of the Partnership to comply with such obligations may give
the Government valid claims against the Partnership, but the Government has
agreed pursuant to the Attornment Agreement not to terminate the Lease for such
failure. The Lease also requires that the Partnership as lessor to certify that
it has no knowledge of any illegal or improper activity in the procurement of
the Lease. The Partnership delivered such a certificate at the date of issuance
of the REMIC Bonds. If the Government determines that such a violation exists,
the Government may elect to (i) reduce the amount of its monthly rent payments
by five percent for each month of the remaining term of the Lease, including any
option periods, and recover up to five percent of the rent already paid; (ii)
reduce payments for alterations not included in monthly rental payments by five
percent of the amount of the alterations agreement; or (iii) reduce the rent
payments for violations by the Partnership's subcontractor by an amount not
exceeding the amount of profit or fee reflected in the subcontract at the time
the subcontract was placed.
The Lease also provides that if any price negotiated in connection with any
construction contract of the Partnership relating to the Project is increased by
any significant amount because the Partnership or a subcontractor furnished cost
or pricing data that was not complete, accurate and current, the price or cost
shall be reduced accordingly and the contract shall be modified to reflect such
reduction. The Lease also provides that the Government may seek a reduction in
the contract price if defective cost or pricing data previously submitted
indicates that the price or cost should be reduced accordingly and that the
Lease should be modified.
OPTIONS TO LEASE ADDITIONAL SPACE
The Government was granted three options to lease additional space,
aggregating an additional 85,271 of net usable square feet, at an annual rental
rate of $37.95 per net usable square foot, upon the same terms and conditions
set forth in the Lease. The deadline for the Government's exercise of these
options was December 31, 1996, which deadline was met by the Government and the
Government has exercised its options to lease the additional space. See "CREDIT
ENHANCEMENT--The Portals II Building."
THE DEVELOPMENT AGREEMENT
The following description of the Development Agreement does not purport to
be complete and is subject in all respects to the provisions of, and is
qualified in its entirety by, reference to the Development Agreement, copies of
which are available from the Trustee.
GENERAL
Until the mill levy described in the Operating Agreement and the
Intergovernmental Agreement is imposed, certain charges (payments in lieu of
taxes) will be assessed pursuant to the Development Agreement upon the property
owned by Douglas County Development Corporation ("DCDC") and certain others
located within the Districts (such charges are referred to as the "Development
Charges") and subsequent owners of such property, in an amount equivalent to
that which would be generated by a
93
<PAGE>
mill levy against all of the taxable real and personal property in the Districts
pursuant to the Operating Agreement and the Intergovernmental Agreement.
Under the Development Agreement, DCDC has granted to the Authority, for the
purpose of providing security for the payment of the Development Charges, a good
and sufficient lien upon the property, subject to no encumbrances other than the
permitted encumbrances described in the Development Agreement.
ESTABLISHMENT AND ACCEPTANCE OF THE DEVELOPMENT CHARGE OBLIGATION
Each parcel, lot or tract constituting a portion of the property shall have
a Development Charge obligation under the Development Agreement equal to the
amount of the Development Charges payable in respect of such parcel, lot or
tract in accordance with the terms of the Development Agreement, which
obligation shall be secured by the Development Charge lien created under the
Development Agreement. DCDC for and on behalf of itself, its successors and
assigns, accepts and acknowledges the Development Charge obligation with respect
to the property, and agrees that the property and each such parcel, lot or tract
shall be bound thereby.
GRANT AND RELEASE OF DEVELOPMENT CHARGE LIEN
In consideration of the Authority's issuance of the Bonds and undertaking
the financial obligations set forth therein relating to the Project which will
benefit the property and the owners, residents, tenants and occupants thereof,
and to secure the payment of the Development Charge obligation in accordance
with the Development Agreement and the performance of any and all other
covenants, agreements, warranties and conditions of DCDC contained in the
Development Agreement, DCDC has, under the terms of the Development Agreement,
encumbered and mortgaged unto the Authority, its successors and assigns, the
property, together with all improvements, fixtures and other property, real and
personal, owned by DCDC, which may belong to, or be or thereafter become a part
thereof; subject, however, to the condition that the Development Charge lien
thereby granted shall automatically cease, terminate and be released upon the
occurrence of any of the following events: (i) the Bonds are no longer
outstanding and the Credit Enhancement Provider has consented to the release of
the Development Charge lien; (ii) the Credit Enhancement Provider has consented
to the release of the Development Charge lien and if, in the opinion of
nationally recognized bond counsel, the release of the Development Charge lien
will not cause interest on the Bonds to be includable in gross income for
federal income tax purposes, (iii) the amendment to the Districts' service plan
authorizing the imposition of the mill levy provided for in the Operating
Agreement and the Intergovernmental Agreement has been formally approved by the
Town; or (iv) if, in the opinion acceptable to the District of counsel
acceptable to the District, the imposition of the mill levy as described in the
Operating Agreement and the Intergovernmental Agreement is otherwise valid and
enforceable without regard to such service plan amendment. Upon the cessation of
the Development Charge lien, the Authority or its assigns shall execute and
record all documents necessary to evidence the release of the Development Charge
lien of record.
DEVELOPMENT CHARGES
Until such time as the Development Charge lien is released, the Authority
shall be entitled to collect the Development Charges payable in respect of the
property or any parcel, lot or tract constituting a portion of the property,
which charges are to be assessed and paid within fifteen (15) days after any
applicable payment date.
Development Charges shall be assessed by the Authority against the property
in an annual amount equivalent to the amount the District or a Related District
would collect if it were to impose a mill levy not to exceed 35 mills against
the property. In the event of a change in the method for determining assessed
value or the ratio of valuation for assessment, the maximum mill levy shall be
adjusted to account for such
94
<PAGE>
revision so that the Development Charges imposed by the Authority shall be
determined as if such change had not occurred. The total Development Charges to
be imposed in any year by the Authority against the property shall be determined
by its Board of Directors.
In the event that additional parcels, lots or tracts of land become a part
of the property by amendment or supplement to the Development Agreement, the
Development Charge obligation shall be assessed against each parcel, lot or
tract relative to all Included property served by the Project.
Each owner of the property or any parcel, lot or tract constituting a
portion of the property shall pay its allocable share (as determined by the
District) of the Development Charge within fifteen (15) days after the
applicable payment date. The Authority shall cause billings to be sent to each
owner of the property or any parcel, lot or tract constituting a portion of the
property, setting forth the amount of the Development Charges required to be
paid and the applicable payment date.
SALE OR LEASE OF THE PROPERTY
The Development Charge lien will remain a lien upon each parcel of the
property, subject to no encumbrances or lease of such parcel of the property to
any third party except the permitted encumbrances, whether such transaction is
by lease, deed, contract for deed or other conveyance.
LIMITATIONS ON DEVELOPMENT CHARGE OBLIGATIONS
The Authority covenants, agrees and consents that if at any time the
property is comprised of more than one parcel, lot or tract, then each parcel,
lot or tract constituting a portion of the property shall be security for, and
subject to a Development Charge lien with respect to, only the Development
Charges attributable to such parcel, lot or tract constituting a portion of the
property. The Authority further covenants, agrees and consents that the
Development Charges collected by the Authority shall be used solely in a manner
which would satisfy the financial obligations of the District under the
Operating Agreement and the Intergovernmental Agreement.
DEFAULTS BY ANY OWNER OF THE PROPERTY AND REMEDIES OF THE AUTHORITY
Any one or more of the following shall be deemed to be a default with
respect to any portion of the property to which the same is applicable:
any default in the payment or satisfaction of the Development Charges or any
part thereof with respect to such portion of the property;
the attachment of, seizure of or levy upon such portion of the property that
is then subject to the Development Charge lien pursuant to any legal
process, if the same is not cured within thirty (30) days, except to the
extent the Development Charge lien is prior to the lien giving rise to such
attachment, seizure or levy; or
a failure by any owner of such portion of the property to pay, prior to
delinquency, all taxes, assessments, whether general or special,
governmental charges, utility charges, and all other charges of any kind
whatsoever that may at any time be lawfully charged, assessed or levied with
respect to such portion of the property then owned by such Person, and which
are secured by any prior lien or encumbrance thereon, or any portion
thereof, or which may result in the creation of a prior lien or encumbrance
upon such portion of the property, in the event of nonpayment thereof
(collectively, "Charges"); provided, however, that such failure shall not
constitute a default while such owner is contesting in good faith such
Charges and takes such action as may be reasonably necessary to prevent
issuance of a county treasurer's deed or other action that would defeat the
Development Charge lien.
95
<PAGE>
Upon the occurrence of any one or more of the foregoing defaults, the
Authority may exercise certain remedies under the Development Agreement,
including but not limited to, the right to foreclose upon the portion of the
property in default.
THE RECREATIONAL FACILITIES AGREEMENT
The following description of the Recreational Facilities Agreement does not
purport to be complete and is subject in all respects to the provisions of, and
is qualified in its entirety by, reference to the Recreational Facilities
Agreement, copies of which are available from the Trustee.
To provide for the ownership and operation of the Project until the
Operating Agreement becomes effective, the Authority and the District will enter
into the Recreational Facilities Agreement. Pursuant to the terms of the
Recreational Facilities Agreement, the Authority will be the owner of the
Project and the District will have no fee title thereto until such time as a
deed to all or any portion of the Project is delivered to the District.
The Recreational Facilities Agreement will be replaced (except to the extent
provided therein) by the Operating Agreement and the Intergovernmental Agreement
when such agreements become effective pursuant to their respective terms. See
"THE OPERATING AGREEMENT" and "THE INTERGOVERNMENTAL AGREEMENT" above.
During the Term of the Recreational Facilities Agreement, the Authority
shall hold title to and ownership of each of the Project facilities and any and
all additions thereto which comprise repairs, replacements, modifications,
improvements and substitutions until such Project facility is transferred to the
District. The District agrees that any damage to the Project that would
materially impact the operation of the Project that is occasioned by the
District's removal of fixtures and improvements shall be promptly repaired by
the District. Notwithstanding anything to the contrary in the Recreational
Facilities Agreement, it is understood that title to personal property
permanently attached to the Project by the District or any other entity,
instrumentality, authority or department of the District shall become a part of
the Project.
96
<PAGE>
CASTLE ROCK RANCH PUBLIC IMPROVEMENTS AUTHORITY
FINANCIAL STATEMENTS AND AUDIT REPORT
DECEMBER 31, 1996
<PAGE>
CASTLE ROCK RANCH PUBLIC IMPROVEMENTS AUTHORITY
CONTENTS
- -----------------------------------------------------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS 1
BALANCE SHEET 2
STATEMENT OF REVENUES, EXPENSES AND
CHANGES IN FUND DEFICIT 3
STATEMENT OF CASH FLOWS 4
NOTES TO FINANCIAL STATEMENTS 5/8
<PAGE>
A TENNESSEE REGISTERED LIMITED LIABILITY PARTNERSHIP
- -------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
PRIVATE COMPANIES PRACTICE SECTION MEMBER AICPA DIVISION FOR CPA FIRMS SEC PRACTICE SECTION
</TABLE>
REPORT OF INDEPENDENT ACCOUNTANTS
Board of Directors
Castle Rock Ranch Public Improvements Authority
Castle Rock, Colorado
We have audited the accompanying financial statements of Castle Rock Ranch
Public Improvements Authority as of December 31, 1996, and for the period from
March 29, 1996 (date operations commenced) to December 31, 1996. These
financial statements are the responsibility of Castle Rock Ranch Public
Improvements Authority's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards
and generally accepted government auditing standards issued by the Comptroller
General of the United States and Office of Management and Budget (OMB) Circular
A-128, "Audits of State and Local Governments." Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.
The financial statements present only Castle Rock Ranch Public Improvements
Authority and are not intended to present fairly the financial position of the
Dawson Ridge Metropolitan Districts and the results of operations and cash flows
of its fund types in conformity with generally accepted accounting principles.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Castle Rock Ranch Public
Improvements Authority as of December 31, 1996, and the results of its
operations and cash flows for the period from March 29, 1996 to December 31,
1996, in conformity with generally accepted accounting principles.
Chattanooga, Tennessee
February 18, 1997, except
for the subsequent events
note as to which the date
is February 24, 1997
1
<PAGE>
CASTLE ROCK RANCH PUBLIC IMPROVEMENTS AUTHORITY
BALANCE SHEET
DECEMBER 31, 1996
- -------------------------------------------------------------------------------
ASSETS
LAND AND WATER RIGHTS $ 54,550,000
------------
OTHER ASSETS
Restricted Cash and Investments 4,917,238
Accrued Interest - Restricted Investments 23,228
Deferred Commitment Fee - Related Party -
less accumulated amortization of $153,965 3,864,535
Deferred Bond Issuance Costs - less accumulated
amortization of $61,751 1,722,178
------------
Total Other Assets 10,527,179
------------
TOTAL ASSETS $ 65,077,179
------------
------------
LIABILITIES AND FUND DEFICIT
LIABILITIES
Bonds Payable, plus unamortized
bond premium of $691,820 $ 67,666,820
Accrued Interest Payable 344,350
------------
Total Liabilities 68,011,170
FUND DEFICIT ( 2,933,991)
------------
TOTAL LIABILITIES AND FUND DEFICIT $ 65,077,179
------------
------------
The accompanying notes are an integral part of the financial statements.
2
<PAGE>
CASTLE ROCK RANCH PUBLIC IMPROVEMENTS AUTHORITY
STATEMENT OF REVENUES, EXPENSES AND CHANGES IN FUND DEFICIT
PERIOD FROM MARCH 29, 1996 TO DECEMBER 31, 1996
- -------------------------------------------------------------------------------
OPERATING EXPENSES
Amortization of Bond Issuance Costs $ (61,751)
Amortization of Deferred Commitment Fee - Related Party (153,965)
------------
OPERATING LOSS (215,716)
------------
NONOPERATING REVENUE (EXPENSE)
Interest Income 310,033
Interest Expense (3,028,308)
------------
(2,718,275)
------------
NET LOSS (2,933,991)
FUND DEFICIT - beginning of period -
------------
FUND DEFICIT - end of period $(2,933,991)
------------
------------
The accompanying notes are an integral part of the financial statements.
3
<PAGE>
CASTLE ROCK RANCH PUBLIC IMPROVEMENTS AUTHORITY
STATEMENT OF CASH FLOWS
PERIOD FROM MARCH 29, 1996 TO DECEMBER 31, 1996
- -------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Operating Loss $ (215,716)
Amortization of Bond Issuance Costs 61,751
Amortization of Deferred Commitment Fee - Related Party 153,965
-------------
NET CASH PROVIDED BY OPERATING ACTIVITIES -
-------------
CASH FLOWS FROM CAPITAL AND RELATED
FINANCING ACTIVITIES
Capital Expenditures (54,550,000)
Issuance of Bonds, plus accrued interest sold 68,082,015
Commitment Fee Paid (4,018,500)
Deposit to Restricted Cash (7,729,586)
Decrease in Restricted Cash 2,790,658
Payment of Debt Issuance Costs (1,783,929)
Interest Paid (3,099,152)
-------------
NET CASH USED BY CAPITAL AND RELATED
FINANCING ACTIVITIES (308,494)
-------------
CASH FLOWS FROM INVESTING ACTIVITIES
Interest Received 308,494
-------------
NET INCREASE IN CASH -
CASH - beginning of period -
-------------
CASH - end of period $ -
-------------
-------------
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
CASTLE ROCK RANCH PUBLIC IMPROVEMENTS AUTHORITY
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
- -------------------------------------------------------------------------------
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The significant accounting policies and practices followed by Castle Rock
Ranch Public Improvements Authority are as follows:
REPORTING ENTITY - Castle Rock Ranch Public Improvements Authority (the
Authority) is a Colorado nonprofit corporation created March 11, 1996, to be
operated as an instrumentality of Dawson Ridge Metropolitan District No. 5
(the District). The Authority was created to issue Guaranteed Public
Facilities Revenue Bonds Series 1996 (the Bonds) to purchase certain land and
water rights in the Dawson Ridge development of Castle Rock, Douglas County,
Colorado and to pay the debt service on the bonds. Operations of the
Authority commenced March 29, 1996.
The District appoints all board members and is primarily responsible for
retirement of the bonds recorded as a liability of the Authority. The
Authority is considered to be a discrete component unit of the District.
The accounting policies of the Authority conform to the generally accepted
accounting principles applicable to governmental entities. The more
significant accounting policies of the Authority are summarized as follows:
BASIS OF ACCOUNTING - The financial statements of the Authority have been
prepared on the accrual basis of accounting. Accordingly, revenues are
recognized when earned and expenses are recognized when they are incurred.
BUDGETS - The Authority has established no formal budget procedures as its
primary function is as a debt service fund for the District.
LAND AND WATER RIGHTS - Land and water rights are recorded at cost. When the
bonds are paid off or mature, title to the land and water rights transfers to
the District.
BOND ISSUANCE COSTS - Bond issuance costs are amortized on a straight-line
basis over the term of the Bonds.
DEFERRED COMMITMENT FEE - The deferred commitment fee is recognized on a
straight-line basis over the term of the Bonds.
RESTRICTED INVESTMENTS - Restricted investments are considered
held-to-maturity and are recorded at cost adjusted for the amortization of
premiums and accretion of discounts, which are recognized as adjustments to
interest income using the interest method.
5
<PAGE>
CASTLE ROCK RANCH PUBLIC IMPROVEMENTS AUTHORITY
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
- -------------------------------------------------------------------------------
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued
BOND PREMIUM - The premium recorded on issuance of the Bonds is recorded as
an adjustment to the par value of the Bonds and is amortized over the term of
the Bonds and recognized as an adjustment to interest expense using the
interest method.
INCOME TAXES - As a nonprofit corporation and instrumentality of the
District, the Authority is exempt from federal and state income taxes.
ESTIMATES AND UNCERTAINTIES - The preparation of financial statements in
conformity with generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
RESTRICTED CASH AND INVESTMENTS
Restricted cash and investments as of December 31, 1996, consist of the
following:
BOOK VALUE FAIR VALUE
5.375% - 6.125% United States Treasury Notes -
maturing at various dates from May 31, 1997
through May 31, 1998 $4,911,822 $4,904,743
Money Market Fund 5,416 5,416
---------- ----------
$4,917,238 $4,910,159
---------- ----------
---------- ----------
BONDS PAYABLE
The Bonds were issued March 29, 1996, at coupon rates ranging from 5.7% to
6.5% and maturing at varying amounts beginning December 1, 1999 and ending
December 1, 2017. Par value of the Bonds is $66,975,000 and the proceeds
from issuance were $67,760,621 plus accrued interest of $321,394. The
proceeds were used to acquire 876 acres of real property and 900 acre feet of
water rights in Dawson Ridge development in the town of Castle Rock, Douglas
County, Colorado. The land and water rights were purchased from a related
party, Douglas County Development Corporation (DCDC), an affiliate of The
Franklin L. Haney Company. Mr. Haney is a director of the Authority. The
land acquired will be used to develop a golf course and other recreational
facilities for the benefit of the Dawson Ridge Metropolitan Districts. The
Bonds have a debt service reserve retained from the proceeds from their
issuance sufficient to fund interest payments on the Bonds until March 1,
1998.
6
<PAGE>
CASTLE ROCK RANCH PUBLIC IMPROVEMENTS AUTHORITY
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
- -------------------------------------------------------------------------------
BONDS PAYABLE - continued
BFC Guaranty Corp., a related company controlled by Mr. Haney, entered into a
collateralized credit enhancement agreement for the benefit of the Trustee of
the Bonds. Under the terms of the agreement, BFC Guaranty Corp. will
guarantee complete payment of the Bonds for the period commencing March 1,
1998, until the Bonds are redeemed or mature.
In order to secure its obligations under the Collateralized Credit
Enhancement Agreement, BFC Guaranty Corp. has pledged and delivered to the
Trustee, Series B REMIC Bonds with a par value of $67,075,000, and coupon
rates ranging from 5.7% to 6.5%. The Series B REMIC Bonds mature at varying
amounts beginning December 1, 1998 and ending December 1, 2017. The Series B
REMIC Bonds will be issued to BFC Guaranty Corp. on March 1, 1998, at no cost.
The Series B REMIC Bonds, along with another series of bonds representing a
regular interest in the REMIC Trust Estate (the "Series A REMIC Bonds"), were
issued under an indenture of trust between BFC Finance Corp. and SouthTrust
Bank of Alabama. The proceeds from the Series A REMIC Bonds will be used to
fund the acquisition and construction of an office building in the District
of Columbia to be leased by the U.S. Government. Scheduled lease payments
will be sufficient to retire all principal and interest payments on the
Series A and Series B REMIC Bonds.
Debt service requirements and sinking fund requirements as of December 31,
1996, are as follows:
PRINCIPAL INTEREST
YEAR ENDING
December 31, 1997 $ - $ 4,132,203
December 31, 1998 - 4,132,203
December 31, 1999 1,980,000 4,132,203
December 31, 2000 2,095,000 4,018,353
December 31, 2001 2,215,000 3,897,890
Later Years 60,685,000 37,100,612
----------- -----------
Total $66,975,000 $57,413,464
----------- -----------
----------- -----------
The fair value of the bonds payable approximates book value.
REIMBURSEMENT AGREEMENT
The Authority also entered into a Reimbursement Agreement with BFC Guaranty
Corp. that requires the Authority to reimburse BFC Guaranty Corp. for any
principal and interest payments made by BFC Guaranty Corp. under the
provisions of the Collateralized Credit Enhancement Agreement. Interest at
the rate of 9% will be charged on the payments. In addition, the Authority
paid BFC Guaranty Corp. a commitment fee of 6% of the Bond proceeds which
totaled $4,018,500.
7
<PAGE>
CASTLE ROCK RANCH PUBLIC IMPROVEMENTS AUTHORITY
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
- -------------------------------------------------------------------------------
OPERATING AND DEVELOPMENT AGREEMENTS
The Authority has entered into an operating agreement obligating the Dawson
Ridge Metropolitan Districts to provide funds to the extent that revenues
from the golf course and recreational facilities are insufficient to fund the
debt service on the Bonds. Such funds would be derived from a mill levy on
taxable property in the Dawson Ridge districts. The levy would be subject to
certain limitations including a 35-mill limitation. In order to provide an
alternate source of revenue, the Authority entered into a development
agreement with DCDC providing for a payment in lieu of taxes by DCDC in an
amount equivalent to the amount which would be generated by the mill levy
pursuant to the operating agreement. DCDC owns approximately 75% of the
taxable property in the Dawson Ridge districts. As of December 31, 1996,
there were no obligations owed to the Authority pursuant to the development
agreement.
SUBSEQUENT EVENT
On February 24, 1997, the Authority filed an amended Registration Statement
on Form S-4 with the Securities and Exchange Commission offering to exchange
the entire issue of Guaranteed Public Facilities Revenue Bonds, (Series 1996)
for an identical issue of Guaranteed Public Facilities Bonds, (Series 1996B).
The Series 1996B Bonds and the Credit Enhancement of BFC Guaranty Corp. will
be registered under the Securities Act of 1933 and as a result, the Series
1996B Bonds will not be subject to the transfer restrictions associated with
the Series 1996 Bonds. No gain or loss will be recognized for financial
statement purposes on the exchange.
8
<PAGE>
BFC GUARANTY CORP.
FINANCIAL STATEMENTS AND AUDIT REPORT
DECEMBER 31, 1996
<PAGE>
BFC GUARANTY CORP.
CONTENTS
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS 1
BALANCE SHEET 2
STATEMENT OF INCOME AND RETAINED EARNINGS 3
STATEMENT OF CASH FLOWS 4
NOTES TO FINANCIAL STATEMENTS 5/8
<PAGE>
A TENNESSEE REGISTERED LIMITED LIABILITY PARTNERSHIP
<TABLE>
<S> <C>
- ---------------------------------------------------------------------------------------------------
PRIVATE COMPANIES PRACTICE SECTION MEMBER AICPA DIVISION FOR CPA FIRMS SEC PRACTICE SECTION
</TABLE>
REPORT OF INDEPENDENT ACCOUNTANTS
Board of Directors and Stockholder
BFC Guaranty Corp.
Washington, D.C.
We have audited the accompanying balance sheet of BFC Guaranty Corp. as of
December 31, 1996, and the related statements of income and retained earnings
and cash flows for the period from March 29, 1996 (date operations commenced)
to December 31, 1996. These financial statements are the responsibility of
the company's management. Our responsibility is to express an opinion on
these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of BFC Guaranty Corp. as of
December 31, 1996, and the results of its operations and its cash flows for
the period from March 29, 1996 to December 31, 1996, in conformity with
generally accepted accounting principles.
Chattanooga, Tennessee
February 18, 1997, except for the
Subsequent Events note as to which
the date is February 24, 1997
1
<PAGE>
BFC GUARANTY CORP.
BALANCE SHEET
December 31, 1996
- --------------------------------------------------------------------------------
ASSETS
Cash $ 1,000
Advances to Parent Company 4,018,500
Accrued Interest on Advances to Parent Company 271,249
Deferred Tax Asset 1,313,942
----------
TOTAL ASSETS $5,604,691
----------
----------
LIABILITIES AND STOCKHOLDER'S EQUITY
LIABILITIES
Income Taxes Payable $1,458,515
Deferred Income - Related Party 3,864,535
----------
Total Liabilities 5,323,050
----------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDER'S EQUITY
Common Stock - no par value - 1,500 shares
authorized and issued 1,000
Retained Earnings 280,641
----------
Total Stockholder's Equity 281,641
----------
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY $5,604,691
----------
----------
The accompanying notes are an integral part of the financial statements.
2
<PAGE>
BFC GUARANTY CORP.
STATEMENT OF INCOME AND RETAINED EARNINGS
PERIOD FROM MARCH 29, 1996 TO DECEMBER 31, 1996
- --------------------------------------------------------------------------------
INCOME
Commitment Fee Income - Related Party $153,965
Interest Income - Related Party 271,249
--------
INCOME BEFORE PROVISION FOR INCOME TAXES 425,214
Provision for Income Taxes 144,573
--------
NET INCOME 280,641
RETAINED EARNINGS - beginning of period -
--------
RETAINED EARNINGS - end of period $280,641
--------
--------
PRIMARY AND FULLY DILUTED EARNINGS
PER COMMON SHARE $ 187.09
--------
--------
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 1,500
--------
--------
The accompanying notes are an integral part of the financial statements.
3
<PAGE>
BFC GUARANTY CORP.
STATEMENT OF CASH FLOWS
PERIOD FROM MARCH 29, 1996 TO DECEMBER 31, 1996
- --------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $ 280,641
Deferred Income Taxes (1,313,942)
Increase in Deferred Income 3,864,535
Increase in Accrued Interest - Related Party ( 271,249)
Increase in Income Taxes Payable 1,458,515
-----------
NET CASH PROVIDED BY OPERATING ACTIVITIES 4,018,500
CASH FLOWS FROM INVESTING ACTIVITIES
Advances to Parent Company (4,018,500)
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of Common Stock 1,000
-----------
NET INCREASE IN CASH 1,000
CASH - beginning of period -
-----------
CASH - end of period $ 1,000
-----------
-----------
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
BFC GUARANTY CORP.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
- -------------------------------------------------------------------------------
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The significant accounting policies and practices followed by the company are
as follows:
DESCRIPTION OF BUSINESS - The company was organized on March 21, 1996, as a
wholly-owned subsidiary of Building Finance Company of Tennessee. The
company was formed solely to provide credit enhancement for the Castle Rock
Ranch Public Improvement Authority Guaranteed Public Facilities Revenue
Bonds, Series 1996 (the "Castle Rock Bonds"), acquire assets in connection
with the provision of credit enhancement for the Castle Rock Bonds and enter
into agreements related thereto. Operations of the company commenced March 29,
1996, with the issuance of 1,500 shares of no par value common stock to
BFC Finance Company of Tennessee for $1,000.
DEBT SECURITIES - Debt securities are considered held-to-maturity and are
stated at cost in accordance with Statement of Financial Accounting Standards
Number 115.
DEFERRED INCOME - Deferred income is recognized on a straight-line basis over
the term of the Castle Rock Bonds and Collateralized Credit Enhancement
Agreement.
INCOME TAXES - Deferred tax assets and liabilities are recognized for the
future tax effects attributed to temporary differences between book and tax
bases of assets and liabilities. The measurement of current and deferred tax
assets and liabilities is based on enacted tax law.
ESTIMATES AND UNCERTAINTIES - The preparation of financial statements in
conformity with generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
EARNINGS PER COMMON SHARE - Earnings per common share is computed by dividing
the net income for the period by the weighted average number of common shares
outstanding during the period.
DEBT SECURITIES
Debt securities consist of $67,075,000 par value REMIC Federal Lease-Backed
Bonds (Series 1996, Class B) issued by a related party, BFC Finance Corp.
The bonds are currently pledged as collateral for the Castle Rock Bonds and
are held in trust by the Bond Trustee. The bonds will be issued on March 1,
1998, to the company at no cost.
5
<PAGE>
BFC GUARANTY CORP.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
- -------------------------------------------------------------------------------
DEBT SECURITIES - continued
The bonds will be issued with varying maturity dates at an aggregate discount
of $5,738,773 and accrued interest of $1,034,574. Aggregate maturities and
cash payments to be received by the company are as follows:
COUPON PRINCIPAL INTEREST
RATE PAYMENTS PAYMENTS
Within 1 Year - $ - $ -
1 Year through 5 Years 5.75% 6,310,000 15,168,726
After 5 Years through
10 Years 5.7% - 6.1% 13,190,000 17,414,168
After 10 Years 6.25% - 6.5% 47,575,000 19,728,970
----------- -----------
$67,075,000 $52,311,864
----------- -----------
----------- -----------
The fair value of the bonds as of December 31, 1996, approximates
$67,600,000, the carrying value of the Castle Rock Bonds as of December 31,
1996.
COLLATERALIZED CREDIT ENHANCEMENT AGREEMENT
The company has entered into a collateralized credit enhancement agreement
for the benefit of the Trustee of the Castle Rock Bonds. Under the terms of
the agreement, the company will guarantee complete payment of the Castle Rock
Bonds for the period commencing March 1, 1998, until the Bonds are redeemed
or mature.
The Castle Rock Bonds were issued March 29, 1996, by Castle Rock Ranch Public
Improvements Authority (the Authority) at coupon rates ranging from 5.7% to
6.5% and maturing at varying amounts beginning December 1, 1999 and ending
December 1, 2017. Par value of the Castle Rock Bonds is $66,975,000 and the
proceeds from issuance were $67,760,621. The proceeds were used to acquire
real property and water rights in Dawson Ridge development in the town of
Castle Rock, Douglas County, Colorado. The land and water rights were
purchased from a related party, Douglas County Development Corporation
(DCDC), an affiliate of The Franklin L. Haney Company. Mr. Haney is the
President of BFC Guaranty Corp. The land acquired will be used to develop a
golf course and other recreational facilities for the benefit of the Dawson
Ridge Metropolitan Districts. The Castle Rock Bonds have a debt service
reserve retained from the proceeds from their issuance sufficient to fund
interest payments on the Bonds until March 1, 1998.
6
<PAGE>
BFC GUARANTY CORP.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
- -------------------------------------------------------------------------------
COLLATERALIZED CREDIT ENHANCEMENT AGREEMENT - continued
In order to secure its obligations under the Collateralized Credit
Enhancement Agreement, the company has pledged and delivered to the Trustee
Series B REMIC Bonds with a par value of $67,075,000, and coupon rates
ranging from 5.7% to 6.5%. The Series B REMIC Bonds mature at varying
amounts beginning December 1, 1998 and ending December 1, 2017. The Series B
REMIC Bonds will be issued to the company on March 1, 1998, at no cost.
The Series B REMIC Bonds, along with another series of bonds representing a
regular interest in the REMIC Trust Estate (the "Series A REMIC Bonds"), were
issued under an indenture of trust between BFC Finance Corp. and SouthTrust
Bank of Alabama. The proceeds from the Series A REMIC Bonds will be used to
fund the acquisition and construction of an office building in the District
of Columbia to be leased by the U.S. Government. Scheduled lease payments
will be sufficient to retire all principal and interest payments on the
Series A and Series B REMIC Bonds.
REIMBURSEMENT AGREEMENT
In conjunction with the Collateralized Credit Enhancement Agreement, the
company also entered into a Reimbursement Agreement with Castle Rock Ranch
Public Improvements Authority that requires the Authority to reimburse the
company for any principal and interest payments made by the company under the
provisions of the Collateralized Credit Enhancement Agreement. Interest at
the rate of 9% will be charged on the payments. In addition, the Authority
paid the company a commitment fee of 6% of the Castle Rock Bond proceeds
which totaled $4,018,500. The company advanced the fee to its parent company,
Building Finance Corporation of Tennessee.
The Authority has entered into an operating agreement obligating the Dawson
Ridge Metropolitan Districts to provide funds to the extent that revenues
from the golf course and recreational facilities are insufficient to fund the
debt service on the Castle Rock Bonds. Such funds would be derived from a
mill levy on taxable property in the Dawson Ridge districts. The levy would
include a 35 mill limitation. In order to provide an alternate source of
revenue, the Authority entered into a development agreement with DCDC
providing for a payment in lieu of taxes by DCDC in an amount equivalent to
the amount which would be generated by the mill levy pursuant to the
operating agreement. DCDC owns approximately 75% of the taxable property in
the Dawson Ridge districts.
7
<PAGE>
BFC GUARANTY CORP.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
- -------------------------------------------------------------------------------
INCOME TAXES
The provision for income taxes is as follows:
Current Provision $ 1,458,515
Deferred Provision (1,313,942)
-----------
$ 144,573
-----------
-----------
The deferred tax provision and the related deferred tax asset result from
income recognized when received for tax purposes, but deferred for financial
statement purposes.
SUBSEQUENT EVENT
On February 24, 1997, the Authority filed an amended Registration Statement
on Form S-4 with the Securities and Exchange Commission offering to exchange
the entire issue of Guaranteed Public Facilities Revenue Bonds, (Series 1996)
for an identical issue of Guaranteed Public Facilities Bonds, (Series 1996B).
The Series 1996B Bonds and the Credit Enhancement of the company will be
registered under the Securities Act of 1933 and as a result, the Series 1996B
Bonds will not be subject to the transfer restrictions associated with the
Series 1996 Bonds. No gain or loss will be recognized for financial
statement purposes by the Authority on the exchange.
8
<PAGE>
BFC FINANCE CORP.
FINANCIAL STATEMENTS AND AUDIT REPORT
December 31, 1996
<PAGE>
BFC FINANCE CORP.
CONTENTS
- -------------------------------------------------------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS 1
BALANCE SHEETS 2
STATEMENTS OF INCOME AND RETAINED EARNINGS 3
STATEMENTS OF CASH FLOWS 4
NOTES TO FINANCIAL STATEMENTS 5/9
<PAGE>
<TABLE>
A TENNESSEE REGISTERED LIMITED LIABILITY PARTNERSHIP
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
Private Companies Practice Section Member AICPA Division for CPA Firms SEC Practice Section
</TABLE>
REPORT OF INDEPENDENT ACCOUNTANTS
Board of Directors and Stockholder
BFC Finance Corp.
Washington, D.C.
We have audited the accompanying balance sheet of BFC Finance Corp. as of
December 31, 1996, and the related statements of income and retained earnings
and cash flows for the period from March 29, 1996 (date operations commenced) to
December 31, 1996. These financial statements are the responsibility of the
company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of BFC Finance Corp. as of
December 31, 1996, and the results of its operations and its cash flows for the
period from March 29, 1996 to December 31, 1996, in conformity with generally
accepted accounting principles.
Chattanooga, Tennessee
May 9, 1997
1
<PAGE>
BFC FINANCE CORP.
BALANCE SHEETS
- -------------------------------------------------------------------------------
DECEMBER 31, APRIL 30,
1996 1997
(UNAUDITED)
ASSETS
Notes Receivable from Related Parties, net of
unearned discount of $4,919,602 as of
December 31, 1996 and $1,580,355 (unaudited)
as of April 30, 1997 $ 126,488,158 $ 129,827,406
Bond Issue Costs, net of accumulated
amortization of $76,548 as of December 31,
1996 and $110,569 (unaudited) as of
April 30, 1997 2,134,833 2,100,812
------------- -------------
TOTAL ASSETS $ 128,622,991 $ 131,928,218
------------- -------------
------------- -------------
LIABILITIES AND STOCKHOLDER'S EQUITY
LIABILITIES
Bonds Payable, net of unearned discount of
$13,829,730 as of December 31, 1996 and
$12,382,089 (unaudited) as of April 30, 1997 $ 128,170,270 $ 129,617,911
Accrued Interest Payable 413,809 2,187,273
Income Taxes Payable to Parent 12,720 41,320
------------- -------------
Total Liabilities 128,596,799 131,846,504
------------- -------------
STOCKHOLDER'S EQUITY
Common Stock - no par value - 1,500 shares
authorized and issued 1,500 1,500
Retained Earnings 24,692 80,214
------------- -------------
Total Stockholder's Equity 26,192 81,714
------------- -------------
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY $ 128,622,991 $ 131,928,218
------------- -------------
------------- -------------
The accompanying notes are an integral part of the financial statements.
2
<PAGE>
BFC FINANCE CORP.
STATEMENTS OF INCOME AND RETAINED EARNINGS
- ------------------------------------------------------------------------------
PERIOD FROM
MARCH 29, 1996 FOUR MONTHS
TO DECEMBER 31, ENDED APRIL 30,
1996 1997
(UNAUDITED)
INCOME
Interest Income - Related Parties $ 7,340,218 $ 3,339,248
----------- -----------
EXPENSES
Interest Expense 7,226,258 3,221,105
Amortization Expense 76,548 34,021
----------- -----------
7,302,806 3,255,126
----------- -----------
INCOME BEFORE PROVISION FOR
INCOME TAXES 37,412 84,122
Provision for Income Taxes 12,720 28,600
----------- -----------
NET INCOME 24,692 55,522
RETAINED EARNINGS - beginning of period - 24,692
----------- -----------
RETAINED EARNINGS - end of period $ 24,692 $ 80,214
----------- -----------
----------- -----------
PRIMARY AND FULLY DILUTED
INCOME PER COMMON SHARE $ 16.46 $ 37.01
----------- -----------
----------- -----------
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING 1,500 1,500
----------- -----------
----------- -----------
The accompanying notes are an integral part of the financial statements.
3
<PAGE>
BFC FINANCE CORP.
STATEMENTS OF CASH FLOWS
- ------------------------------------------------------------------------------
<TABLE>
PERIOD FROM
MARCH 29, 1996 FOUR MONTHS
TO DECEMBER 31, ENDED APRIL 30,
1996 1997
(UNAUDITED)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $ 24,692 $ 55,522
Adjustments to Reconcile Net Income to
Net Cash Provided by Operating Activities -
Interest Expense 7,226,258 1,447,641
Interest Income (7,340,218) ( 3,339,248)
Amortization Expense 76,548 34,021
Proceeds from Issuance of Bonds Payable 72,395,525 -
Increase in Accrued Interest Payable - 1,773,464
Increase in Income Taxes Payable
to Parent Company 12,720 28,600
------------- ------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 72,395,525 -
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of Notes Receivable (72,397,025) -
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of Common Stock 1,500 -
------------- ------------
NET INCREASE IN CASH - -
CASH - beginning of period - -
------------- ------------
CASH - end of period $ - $ -
------------- ------------
------------- ------------
SUPPLEMENTAL SCHEDULE OF NONCASH
INVESTING AND FINANCING ACTIVITIES
Payments from Notes Receivable Used to
Pay Interest Expense on Bonds Payable $ 3,990,295 $ -
Bonds Issued in Exchange for Notes Receivable $ 67,075,000 $ -
</TABLE>
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
BFC FINANCE CORP.
NOTES TO FINANCIAL STATEMENTS
- ------------------------------------------------------------------------------
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The significant accounting policies and practices followed by the company are as
follows:
DESCRIPTION OF BUSINESS - The company was organized on March 21, 1996, as a
wholly-owned subsidiary of Building Finance Company of Tennessee. The company
was formed to purchase certain loans from its parent pursuant to a Sale
Agreement dated March 1, 1996, and to assign such loans, pledged securities,
mortgages and other assets delivered in connection with the Sale Agreement to
SouthTrust Bank of Alabama, N.A. as trustee in connection with the issuance of
the company's REMIC Lease-Backed Bonds, Series 1996, Classes A and B.
Operations commenced on March 29, 1996, with the issuance of $74,925,000 par
value Class A REMIC Bonds and the subsequent exchange of certain proceeds from
these bonds, all of the outstanding and issued shares of common stock of the
company and the placement of the Class B REMIC Bonds with a related company for
notes receivable totaling $126,087,367 from a related partnership.
DISCOUNT ON FINANCIAL INSTRUMENTS - The discount recorded on loans assigned to
the company by its parent and on bonds payable issued by the company is recorded
as an adjustment to the par value of the instruments and is accreted or
amortized over the term of the instruments as income or expense using the
interest method.
BOND ISSUANCE COSTS - Bond issuance costs are amortized on a straight-line basis
over the term of the bonds.
ESTIMATES AND UNCERTAINTIES - The preparation of financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
EARNINGS PER COMMON SHARE - Earnings per common share is computed by dividing
the net income for the period by the weighted average number of common shares
outstanding during the period.
INCOME TAXES - The provision for income taxes is computed under the provisions
of Statement of Financial Accounting Standards Number 109 (SFAS 109). Under
SFAS 109, deferred tax assets and liabilities are recognized for the future tax
effects attributed to temporary differences between book and tax bases of assets
and liabilities. The measurement of current and deferred tax assets and
liabilities is based on enacted tax law. The company files a consolidated
federal tax return with its parent company, Building Finance Company of
Tennessee.
INTERIM FINANCIAL STATEMENTS - The unaudited balance sheet presented as of April
30, 1997, and the unaudited statements of income and retained earnings and cash
flows for the period then ended contain all adjustments that, in the opinion of
management, are necessary to provide a fair statement of the results for the
interim period presented. All such adjustments are considered of a normal and
recurring nature.
5
<PAGE>
BFC FINANCE CORP.
NOTES TO FINANCIAL STATEMENTS
- ------------------------------------------------------------------------------
NOTES RECEIVABLE
Notes receivable consist of the following:
<TABLE>
DECEMBER 31, APRIL 30,
1996 1997
(UNAUDITED)
<S> <C> <C>
8.5% Note Receivable from a Related Partnership -
principal and interest payments of $863,305
per month beginning March 1, 1998. Maturity date
December 1, 2017. Unearned discount $1,868,916
as of December 31, 1996, and unamortized
premium of $627,731 (unaudited) as of April 30,
1997. Collateralized by an assignment of lease
payments from the related partnership. $ 97,131,084 $ 99,627,731
9% Note Receivable from a Related Partnership -
principal and interest payments of $244,820 per
month beginning March 1, 1998. Maturity date
December 1, 2017. Unearned discount of $2,863,767
as of December 31, 1996 and $2,114,026 (unaudited)
as of April 30, 1997. Collateralized by an
assignment of lease payments from the related
partnership. 24,223,600 24,973,341
0% Note Receivable from a Related Company - principal
payments of $3,990,295, $2,660,197 and $2,660,197
due December 1, 1996, June 1, 1997 and December 1,
1997, respectively. Unearned discount of $186,919
as of December 31, 1996 and $94,059 (unaudited)
as of April 30, 1997. Collateralized by real
estate and U.S. Government securities. 5,133,474 5,226,334
------------- -------------
$ 126,488,158 $ 129,827,406
------------- -------------
------------- -------------
</TABLE>
The 8.5% and 9% notes were assigned to the company by its parent, Building
Finance Company of Tennessee, in exchange for certain proceeds from the Class A
REMIC Bonds, all of the company's issued and outstanding common stock and the
placement of the Class B REMIC Bonds with a related company, BFC Guaranty Corp.
BFC Guaranty Corp. issued all of its issued and outstanding shares of common
stock as consideration for the Class B REMIC Bonds. Interest on the notes for
the period from April 1, 1996, the issuance date, through February 1, 1998, was
prepaid at 4% and 9%, respectively, and retained by Building Finance Company of
Tennessee. Payments beginning March 1, 1998, will be received from lease
payments received by 49C Partnership (the Partnership). The Partnership is
using the proceeds from these notes to construct an office building in
Washington, D.C. that will be leased by the United States government. Minimum
lease payments over the term of the lease are sufficient to cover the scheduled
payments on the notes. The notes are pledged as collateral for the Class A and
B REMIC Bonds issued by the company.
6
<PAGE>
BFC FINANCE CORP.
NOTES TO FINANCIAL STATEMENTS
- ------------------------------------------------------------------------------
NOTES RECEIVABLE - continued
The 0% note was received from a related company, DCDC II, Inc. (DCDC II), in
consideration for the sale and assignment to DCDC II of the capitalized interest
reserve of $8,780,284 on the Class A REMIC Bonds. The capitalized interest
reserve covers interest payments on the bonds for the period from March 1, 1996
through December 1, 1997. All future principal and interest payments on the
Class A REMIC Bonds will be paid from the payments received on the 8.5% and 9%
notes. This note is also pledged as collateral for the Class A and B REMIC
Bonds.
Future principal and interest payments on the notes receivable as of December
31, 1996, are as follows:
PRINCIPAL INTEREST
YEAR ENDING
December 31, 1997 $ 8,780,284 $ -
December 31, 1998 2,104,187 8,977,063
December 31, 1999 2,731,689 10,565,811
December 31, 2000 2,976,187 10,321,313
December 31, 2001 3,242,581 10,054,919
Later Years 115,032,723 96,619,151
------------- -------------
$ 134,867,651 $ 136,538,257
------------- -------------
------------- -------------
BONDS PAYABLE
Bonds payable consist of the following:
<TABLE>
DECEMBER 31, APRIL 30,
1996 1997
(UNAUDITED)
<S> <C> <C>
6.125% - 7.375% Class A, Series 1996 REMIC
Leased-Backed Bonds, Par Value $74,925,000 -
interest payments are made semiannually
beginning December 1, 1996 and ending
December 1, 2017. Principal payments are made
serially beginning December 1, 1998 and ending
December 1, 2017. Unamortized discount $555,724
as of December 31, 1996 and $510,947 (unaudited)
as of April 30, 1997. Collateralized by the
company's notes receivable. $ 74,369,276 $ 74,414,053
5.7% - 6.5% Class B, Series 1996 REMIC Leased-
Backed Bonds, Par Value $67,075,000 - interest
payments made semiannually beginning June 1,
1998 and ending December 1, 2017. Principal
payments are made serially beginning December 1,
1998 and ending December 1, 2017. Unamortized
discount $13,274,006 as of December 31, 1996 and
$11,871,142 (unaudited) as of April 30, 1997.
Collateralized by the company's notes receivable. 53,800,994 55,203,858
------------- -------------
$ 128,170,270 $ 129,617,911
------------- -------------
------------- -------------
</TABLE>
7
<PAGE>
BFC FINANCE CORP.
NOTES TO FINANCIAL STATEMENTS
- ------------------------------------------------------------------------------
BONDS PAYABLE - continued
The Class A REMIC Bonds were sold in a public offering effective March 29, 1996.
The Class B REMIC Bonds were placed with a related company, BFC Guaranty Corp.,
as partial consideration for the acquisition of the notes receivable from
Building Finance Company of Tennessee. The Class B REMIC Bonds are held in
trust and pledged as collateral for bonds issued by Castle Rock Ranch Public
Improvement Authority.
Debt service requirements as of December 31, 1996, are as follows:
PRINCIPAL INTEREST
YEAR ENDING
December 31, 1997 $ - $ 5,320,394
December 31, 1998 2,635,000 8,424,117
December 31, 1999 3,975,000 9,297,316
December 31, 2000 4,215,000 9,058,804
December 31, 2001 4,470,000 8,803,223
Later Years 126,705,000 84,562,184
------------- -------------
$ 142,000,000 $ 125,466,038
------------- -------------
------------- -------------
FAIR VALUE OF FINANCIAL INSTRUMENTS
The estimated fair values of the company's financial instruments are as follows:
<TABLE>
DECEMBER 31, 1996 APRIL 30, 1997
CARRYING AMOUNT FAIR VALUE CARRYING AMOUNT FAIR VALUE
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
FINANCIAL ASSETS
Notes Receivable $ 126,488,158 $ 126,488,158 $ 129,827,406 $ 129,827,406
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
FINANCIAL LIABILITIES
Bonds Payable $ 128,170,270 $ 129,850,459 $ 129,617,911 $ 131,265,934
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
</TABLE>
The following methods and assumptions were used to estimate the fair value of
each class of financial instruments:
NOTES RECEIVABLE - The carrying amount is based on proceeds received from
issuance adjusted for amortization of premium or accretion of discount at
implicit rates. The fair value is estimated by discounting future cash flows at
current rates. Current rates are not materially different from the implicit
rates of the instruments.
BONDS PAYABLE - The carrying amount is based on proceeds received from issuance
adjusted for amortization of premium or accretion of discount at implicit rates.
The fair value is estimated by discounting future cash flows at current rates.
Current rates are not materially different from the implicit rates of the
instruments.
8
<PAGE>
BFC FINANCE CORP.
NOTES TO FINANCIAL STATEMENTS
- ------------------------------------------------------------------------------
PROVISION FOR INCOME TAXES
The provision for income taxes consists of the following:
DECEMBER 31, APRIL 30,
1996 1997
(UNAUDITED)
Current Provision $ 12,720 $ 28,600
--------- ---------
--------- ---------
CONCENTRATION
The company's sole source of cash to make principal and interest payments on the
bonds payable is from the collection of the 8.5% and 9% notes receivable from
49C Partnership. Collection of these notes receivable is dependent on the
collection of lease payments from the United States government by 49C
Partnership.
SUBSEQUENT EVENT
Subsequent to December 31, 1996, Castle Rock Ranch Public Improvement Authority
filed a Registration Statement on Form S-4 with the Securities and Exchange
Commission offering to exchange its entire issue of Guaranteed Public Facilities
Revenue Bonds, (Series 1996) for an identical issue of Guaranteed Public
Facilities Bonds, (Series 1996B). The Series 1996B Bonds, the credit
enhancement of the bonds and the Class A and B REMIC Bonds will be registered
under the Securities Act of 1933. The Class B REMIC Bonds serve as collateral
for the Series 1996 and Series 1996B Bonds.
9
<PAGE>
CASTLE ROCK RANCH PUBLIC IMPROVEMENTS AUTHORITY
FINANCIAL STATEMENTS AND AUDIT REPORT
December 31, 1996
<PAGE>
CASTLE ROCK RANCH PUBLIC IMPROVEMENTS AUTHORITY
CONTENTS
- ------------------------------------------------------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS 1
BALANCE SHEETS 2
STATEMENTS OF REVENUES, EXPENSES AND
CHANGES IN FUND DEFICIT 3
STATEMENTS OF CASH FLOWS 4
NOTES TO FINANCIAL STATEMENTS 5/8
<PAGE>
A TENNESSEE REGISTERED LIMITED LIABILITY PARTNERSHIP
- ------------------------------------------------------------------------------
Private Companies Practice Section SEC Practice Section
Member AICPA Division for CPA Firms
REPORT OF INDEPENDENT ACCOUNTANTS
Board of Directors
Castle Rock Ranch Public Improvements Authority
Castle Rock, Colorado
We have audited the accompanying financial statements of Castle Rock Ranch
Public Improvements Authority as of December 31, 1996, and for the period from
March 29, 1996 (date operations commenced) to December 31, 1996. These
financial statements are the responsibility of Castle Rock Ranch Public
Improvements Authority's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards
and generally accepted government auditing standards issued by the Comptroller
General of the United States and Office of Management and Budget (OMB) Circular
A-128, "Audits of State and Local Governments." Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.
The financial statements present only Castle Rock Ranch Public Improvements
Authority and are not intended to present fairly the financial position of the
Dawson Ridge Metropolitan Districts and the results of operations and cash flows
of its fund types in conformity with generally accepted accounting principles.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Castle Rock Ranch Public
Improvements Authority as of December 31, 1996, and the results of its
operations and cash flows for the period from March 29, 1996 to December 31,
1996, in conformity with generally accepted accounting principles.
Chattanooga, Tennessee
February 18, 1997
1
<PAGE>
CASTLE ROCK RANCH PUBLIC IMPROVEMENTS AUTHORITY
BALANCE SHEETS
- ------------------------------------------------------------------------------
DECEMBER 31, APRIL 30,
1996 1997
(UNAUDITED)
ASSETS
LAND AND WATER RIGHTS $54,550,000 $54,550,000
----------- -----------
OTHER ASSETS
Restricted Cash and Investments 4,917,238 4,916,384
Accrued Interest - Restricted Investments 23,228 116,142
Deferred Commitment Fee - Related Party -
less accumulated amortization of $153,965 as
of December 31, 1996 and $215,552 (unaudited)
as of April 30, 1997 3,864,535 3,802,948
Deferred Bond Issuance Costs - less accumulated
amortization of $61,751 as of December 31,
1996 and $89,197 (unaudited) as of April 30,
1997 1,722,178 1,694,732
----------- -----------
Total Other Assets 10,527,179 10,530,206
----------- -----------
TOTAL ASSETS $65,077,179 $65,080,206
=========== ===========
LIABILITIES AND FUND DEFICIT
LIABILITIES
Bonds Payable, plus unamortized
bond premium of $691,820 as of December 31,
1996 and $658,526 (unaudited) as of April 30,
1997 $67,666,820 $67,633,526
Accrued Interest Payable 344,350 1,721,751
----------- -----------
Total Liabilities 68,011,170 69,355,277
FUND DEFICIT (2,933,991) (4,275,071)
----------- -----------
TOTAL LIABILITIES AND FUND DEFICIT $65,077,179 $65,080,206
=========== ===========
The accompanying notes are an integral part of the financial statements.
2
<PAGE>
CASTLE ROCK RANCH PUBLIC IMPROVEMENTS AUTHORITY
STATEMENTS OF REVENUES, EXPENSES AND CHANGES IN FUND DEFICIT
- -------------------------------------------------------------------------------
<TABLE>
PERIOD FROM
MARCH 29, 1996 FOUR MONTHS
TO ENDED
DECEMBER 31, APRIL 30,
1996 1997
(UNAUDITED)
<S> <C> <C>
OPERATING EXPENSES
Amortization of Bond Issuance Costs $( 61,751) $( 27,446)
Amortization of Deferred Commitment Fee -
Related Party ( 153,965) ( 61,587)
------------ ------------
OPERATING LOSS ( 215,716) ( 89,033)
------------ ------------
NONOPERATING REVENUE (EXPENSE)
Interest Income 310,033 92,059
Interest Expense (3,028,308) (1,344,106)
------------ ------------
(2,718,275) (1,252,047)
------------ ------------
NET LOSS (2,933,991) (1,341,080)
FUND DEFICIT - beginning of period - (2,933,991)
------------ ------------
FUND DEFICIT - end of period $(2,933,991) $(4,275,071)
------------ ------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
3
<PAGE>
CASTLE ROCK RANCH PUBLIC IMPROVEMENTS AUTHORITY
STATEMENTS OF CASH FLOWS
- -------------------------------------------------------------------------------
<TABLE>
PERIOD FROM
MARCH 29, 1996 FOUR MONTHS
TO ENDED
DECEMBER 31, APRIL 30,
1996 1997
(UNAUDITED)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Operating Loss $( 215,716) $( 89,033)
Amortization of Bond Issuance Costs 61,751 27,446
Amortization of Deferred Commitment Fee -
Related Party 153,965 61,587
------------ ------------
NET CASH PROVIDED BY OPERATING ACTIVITIES - -
------------ ------------
CASH FLOWS FROM CAPITAL AND RELATED
FINANCING ACTIVITIES
Capital Expenditures (54,550,000) -
Issuance of Bonds, plus accrued interest sold 68,082,015 -
Commitment Fee Paid ( 4,018,500) -
Deposit to Restricted Cash ( 7,729,586) -
Decrease (Increase) in Restricted Cash 2,790,658 ( 117)
Payment of Debt Issuance Costs ( 1,783,929) -
Interest Paid ( 3,099,152) -
------------ ------------
NET CASH USED BY CAPITAL AND RELATED
FINANCING ACTIVITIES ( 308,494) ( 117)
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Interest Received 308,494 117
------------ ------------
NET INCREASE IN CASH - -
CASH - beginning of period - -
------------ ------------
CASH - end of period $ - $ -
------------ ------------
------------ ------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
CASTLE ROCK RANCH PUBLIC IMPROVEMENTS AUTHORITY
NOTES TO FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The significant accounting policies and practices followed by Castle Rock Ranch
Public Improvements Authority are as follows:
REPORTING ENTITY - Castle Rock Ranch Public Improvements Authority (the
Authority) is a Colorado nonprofit corporation created March 11, 1996, to be
operated as an instrumentality of Dawson Ridge Metropolitan District No. 5 (the
District). The Authority was created to issue Guaranteed Public Facilities
Revenue Bonds Series 1996 (the Bonds) to purchase certain land and water rights
in the Dawson Ridge development of Castle Rock, Douglas County, Colorado and to
pay the debt service on the bonds. Operations of the Authority commenced March
29, 1996.
The District appoints all board members and is primarily responsible for
retirement of the bonds recorded as a liability of the Authority. The Authority
is considered to be a discrete component unit of the District.
The accounting policies of the Authority conform to the generally accepted
accounting principles applicable to governmental entities. The more significant
accounting policies of the Authority are summarized as follows:
BASIS OF ACCOUNTING - The financial statements of the Authority have been
prepared on the accrual basis of accounting. Accordingly, revenues are
recognized when earned and expenses are recognized when they are incurred.
BUDGETS - The Authority has established no formal budget procedures as its
primary function is as a debt service fund for the District.
LAND AND WATER RIGHTS - Land and water rights are recorded at cost. When the
bonds are paid off or mature, title to the land and water rights transfers to
the District.
BOND ISSUANCE COSTS - Bond issuance costs are amortized on a straight-line basis
over the term of the Bonds.
DEFERRED COMMITMENT FEE - The deferred commitment fee is recognized on a
straight-line basis over the term of the Bonds.
RESTRICTED INVESTMENTS - Restricted investments are considered held-to-maturity
and are recorded at cost adjusted for the amortization of premiums and accretion
of discounts, which are recognized as adjustments to interest income using the
interest method.
5
<PAGE>
CASTLE ROCK RANCH PUBLIC IMPROVEMENTS AUTHORITY
NOTES TO FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued
BOND PREMIUM - The premium recorded on issuance of the Bonds is recorded as an
adjustment to the par value of the Bonds and is amortized over the term of the
Bonds and recognized as an adjustment to interest expense using the interest
method.
INCOME TAXES - As a nonprofit corporation and instrumentality of the District,
the Authority is exempt from federal and state income taxes.
ESTIMATES AND UNCERTAINTIES - The preparation of financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
INTERIM FINANCIAL STATEMENTS - The unaudited balance sheet presented as of April
30, 1997, and the unaudited statements of revenues, expenses and changes in fund
deficit and cash flows for the period then ended contain all adjustments that,
in the opinion of management, are necessary to provide a fair statement of the
results for the interim period presented. All such adjustments are considered
of a normal and recurring nature.
RESTRICTED CASH AND INVESTMENTS
Restricted cash and investments consist of the following:
DECEMBER 31, 1996 APRIL 30, 1997
(UNAUDITED)
BOOK VALUE FAIR VALUE BOOK VALUE FAIR VALUE
---------- ---------- ---------- ----------
5.375% - 6.125% United States
Treasury Notes - maturing at
various dates from May 31,
1997 through May 31, 1998 $4,911,822 $4,904,743 $4,910,851 $4,904,182
Money Market Fund 5,416 5,416 5,533 5,533
---------- ---------- ---------- ----------
$4,917,238 $4,910,159 $4,916,384 $4,909,715
========== ========== ========== ==========
BONDS PAYABLE
The Bonds were issued March 29, 1996, at coupon rates ranging from 5.7% to 6.5%
and maturing at varying amounts beginning December 1, 1999 and ending December
1, 2017. Par value of the Bonds is $66,975,000 and the proceeds from issuance
were $67,760,621 plus accrued interest of $321,394. The proceeds were used to
acquire 876 acres of real property and 900 acre feet of water rights in Dawson
Ridge development in the town of Castle Rock, Douglas County, Colorado. The
land and water rights were purchased from a related party, Douglas County
Development Corporation (DCDC), an affiliate of The Franklin L. Haney Company.
Mr. Haney is a director of the Authority. The land acquired will be used to
develop a golf course and other recreational facilities for the benefit of the
Dawson Ridge Metropolitan Districts. The Bonds have a debt service reserve
retained from the proceeds from their issuance sufficient to fund interest
payments on the Bonds until March 1, 1998.
6
<PAGE>
CASTLE ROCK RANCH PUBLIC IMPROVEMENTS AUTHORITY
NOTES TO FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
BONDS PAYABLE - continued
BFC Guaranty Corp., a related company controlled by Mr. Haney, entered into a
collateralized credit enhancement agreement for the benefit of the Trustee of
the Bonds. Under the terms of the agreement, BFC Guaranty Corp. will guarantee
complete payment of the Bonds for the period commencing March 1, 1998, until the
Bonds are redeemed or mature.
In order to secure its obligations under the Collateralized Credit Enhancement
Agreement, BFC Guaranty Corp. has pledged and delivered to the Trustee, Series B
REMIC Bonds with a par value of $67,075,000, and coupon rates ranging from 5.7%
to 6.5%. The Series B REMIC Bonds mature at varying amounts beginning December
1, 1998 and ending December 1, 2017. The Series B REMIC Bonds were issued to
BFC Guaranty Corp. along with $1,000 on March 29, 1996, in exchange for all of
BFC Guaranty Corp.'s authorized and issued shares of no par value stock.
The Series B REMIC Bonds, along with another series of bonds representing a
regular interest in the REMIC Trust Estate (the "Series A REMIC Bonds"), were
issued under an indenture of trust between BFC Finance Corp. and SouthTrust Bank
of Alabama. The proceeds from the Series A REMIC Bonds will be used to fund the
acquisition and construction of an office building in the District of Columbia
to be leased by the U.S. Government. Scheduled lease payments will be
sufficient to retire all principal and interest payments on the Series A and
Series B REMIC Bonds.
Debt service requirements and sinking fund requirements as of December 31, 1996,
are as follows:
PRINCIPAL INTEREST
----------- -----------
YEAR ENDING
December 31, 1997 $ - $ 4,132,203
December 31, 1998 - 4,132,203
December 31, 1999 1,980,000 4,132,203
December 31, 2000 2,095,000 4,018,353
December 31, 2001 2,215,000 3,897,890
Later Years 60,685,000 37,100,612
----------- -----------
Total $66,975,000 $57,413,464
=========== ===========
The fair value of the bonds payable approximates book value.
REIMBURSEMENT AGREEMENT
The Authority also entered into a Reimbursement Agreement with BFC Guaranty
Corp. that requires the Authority to reimburse BFC Guaranty Corp. for any
principal and interest payments made by BFC Guaranty Corp. under the provisions
of the Collateralized Credit Enhancement Agreement. Interest at the rate of 9%
will be charged on the payments. In addition, the Authority paid BFC Guaranty
Corp. a commitment fee of 6% of the Bond proceeds which totaled $4,018,500.
7
<PAGE>
CASTLE ROCK RANCH PUBLIC IMPROVEMENTS AUTHORITY
NOTES TO FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
OPERATING AND DEVELOPMENT AGREEMENTS
The Authority has entered into an operating agreement obligating the Dawson
Ridge Metropolitan Districts to provide funds to the extent that revenues from
the golf course and recreational facilities are insufficient to fund the debt
service on the Bonds. Such funds would be derived from a mill levy on taxable
property in the Dawson Ridge districts. The levy would be subject to certain
limitations including a 35-mill limitation. In order to provide an alternate
source of revenue, the Authority entered into a development agreement with DCDC
providing for a payment in lieu of taxes by DCDC in an amount equivalent to the
amount which would be generated by the mill levy pursuant to the operating
agreement. DCDC owns approximately 75% of the taxable property in the Dawson
Ridge districts. As of December 31, 1996, there were no obligations owed to the
Authority pursuant to the development agreement.
CONCENTRATION
The credit enhancement for the Authority's bonds payable is dependent on
collection of lease payments by a related partnership from the United States
Government.
SUBSEQUENT EVENT
Subsequent to December 31, 1996, the Authority filed a Registration Statement on
Form S-4 with the Securities and Exchange Commission offering to exchange the
entire issue of Guaranteed Public Facilities Revenue Bonds, (Series 1996) for an
identical issue of Guaranteed Public Facilities Bonds, (Series 1996B). The
Series 1996B Bonds, Credit Enhancement of BFC Guaranty Corp. and the Class A and
B REMIC Bonds will be registered under the Securities Act of 1933 and as a
result, the Series 1996B Bonds will not be subject to the transfer restrictions
associated with the Series 1996 Bonds. No gain or loss will be recognized for
financial statement purposes on the exchange.
8
<PAGE>
BFC GUARANTY CORP.
FINANCIAL STATEMENTS AND AUDIT REPORT
December 31, 1996
<PAGE>
BFC GUARANTY CORP.
CONTENTS
- -------------------------------------------------------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS 1
BALANCE SHEETS 2
STATEMENTS OF INCOME AND RETAINED EARNINGS 3
STATEMENTS OF CASH FLOWS 4
NOTES TO FINANCIAL STATEMENTS 5/8
<PAGE>
<TABLE>
A TENNESSEE REGISTERED LIMITED LIABILITY PARTNERSHIP
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
Private Companies Practice Section Member AICPA Division for CPA Firms SEC Practice Section
</TABLE>
REPORT OF INDEPENDENT ACCOUNTANTS
Board of Directors and Stockholder
BFC Guaranty Corp.
Washington, D.C.
We have audited the accompanying balance sheet of BFC Guaranty Corp. as of
December 31, 1996, and the related statements of income and retained earnings
and cash flows for the period from March 29, 1996 (date operations commenced) to
December 31, 1996. These financial statements are the responsibility of the
company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of BFC Guaranty Corp. as of
December 31, 1996, and the results of its operations and its cash flows for the
period from March 29, 1996 to December 31, 1996, in conformity with generally
accepted accounting principles.
Chattanooga, Tennessee
April 9, 1997
1
<PAGE>
BFC GUARANTY CORP.
BALANCE SHEETS
- -------------------------------------------------------------------------------
DECEMBER 31, APRIL 30,
1996 1997
(UNAUDITED)
ASSETS
Cash $ 1,000 $ 1,000
Debt Securities - less unamortized bond
discount of $13,274,006 as of December 31,
1996 and $11,871,142 (unaudited) as of
April 30, 1997 53,800,994 55,203,858
Advances to Parent Company 4,018,500 4,018,500
Accrued Interest on Advances to Parent Company 271,249 391,804
Deferred Tax Asset 1,313,942 1,293,002
------------ ------------
TOTAL ASSETS $ 59,405,685 $ 60,908,164
------------ ------------
------------ ------------
LIABILITIES AND STOCKHOLDER'S EQUITY
LIABILITIES
Income Taxes Payable $ 2,498,841 $ 3,016,804
Deferred Income - Related Party 3,864,535 3,802,948
------------ ------------
Total Liabilities 6,363,376 6,819,752
------------ ------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDER'S EQUITY
Common Stock - no par value - 1,500 shares
authorized and issued 1,000 1,000
Additional Paid-In Capital 50,741,210 50,741,210
Retained Earnings 2,300,099 3,346,202
------------ ------------
Total Stockholder's Equity 53,042,309 54,088,412
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY $ 59,405,685 $ 60,908,164
------------ ------------
------------ ------------
The accompanying notes are an integral part of the financial statements.
2
<PAGE>
BFC GUARANTY CORP.
STATEMENTS OF INCOME AND RETAINED EARNINGS
- ------------------------------------------------------------------------------
<TABLE>
PERIOD FROM
MARCH 29, 1996 FOUR MONTHS
TO DECEMBER 31, ENDED APRIL 30,
1996 1997
(UNAUDITED)
<S> <C> <C>
INCOME
Commitment Fee Income - Related Party $ 153,966 $ 61,586
Interest Income - Related Party 271,249 120,555
Accretion of Discount on Debt Securities 3,059,784 1,402,864
----------- ----------
INCOME BEFORE PROVISION FOR INCOME TAXES 3,484,999 1,585,005
Provision for Income Taxes 1,184,900 538,902
----------- ----------
NET INCOME 2,300,099 1,046,103
RETAINED EARNINGS - beginning of period - 2,300,099
----------- ----------
RETAINED EARNINGS - end of period $ 2,300,099 $ 3,346,202
----------- ----------
----------- ----------
PRIMARY AND FULLY DILUTED EARNINGS
PER COMMON SHARE $ 1,533.40 $ 697.40
----------- ----------
----------- ----------
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 1,500 1,500
----------- ----------
----------- ----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
3
<PAGE>
BFC GUARANTY CORP.
STATEMENTS OF CASH FLOWS
- ------------------------------------------------------------------------------
<TABLE>
PERIOD FROM
MARCH 29, 1996 FOUR MONTHS
TO DECEMBER 31, ENDED APRIL 30,
1996 1997
(UNAUDITED)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $ 2,300,099 $ 1,046,103
Adjustments to Reconcile Net Income to
Net Cash Provided by Operating Activities -
Deferred Income Taxes ( 1,313,942) 20,939
Accretion of Discount on Debt Securities ( 3,059,784) (1,402,864)
Increase (Decrease) in Deferred Income 3,864,535 ( 61,586)
Increase in Accrued Interest - Related Party ( 271,249) ( 120,555)
Increase in Income Taxes Payable 2,498,841 517,963
------------- -------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 4,018,500 -
CASH FLOWS FROM INVESTING ACTIVITIES
Advances to Parent Company ( 4,018,500) -
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of Common Stock 1,000 -
------------- -------------
NET INCREASE IN CASH 1,000 -
CASH - beginning of period - 1,000
------------- -------------
CASH - end of period $ 1,000 $ 1,000
------------- -------------
------------- -------------
SUPPLEMENTAL SCHEDULE OF NONCASH
INVESTING AND FINANCING ACTIVITIES
Issuance of Common Stock for Debt Securities $ 50,741,210 $ -
</TABLE>
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
BFC GUARANTY CORP.
NOTES TO FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The significant accounting policies and practices followed by the company are as
follows:
DESCRIPTION OF BUSINESS - The company was organized on March 21, 1996, as a
wholly-owned subsidiary of Building Finance Company of Tennessee. The company
was formed solely to provide credit enhancement for the Castle Rock Ranch Public
Improvement Authority Guaranteed Public Facilities Revenue Bonds, Series 1996
(the "Castle Rock Bonds"), acquire assets in connection with the provision of
credit enhancement for the Castle Rock Bonds and enter into agreements related
thereto. Operations of the company commenced March 29, 1996, with the issuance
of 1,500 shares of no par value common stock to BFC Finance Company of Tennessee
for $1,000 plus $67,075,000 par value REMIC Federal Lease-Backed Bonds (Series
1996, Class B).
DEBT SECURITIES - Debt securities consist of $67,075,000 par value REMIC Federal
Lease-Backed Bonds (Series 1996, Class B), and were originally recorded at the
cost basis of its parent company and the original holder of the bonds, Building
Finance Company of Tennessee.
DISCOUNT ON DEBT SECURITIES - The discount recorded on issuance of the debt
securities is recorded as an adjustment to the par value of the securities and
is accreted over the term of the securities and recognized as income using the
interest method.
DEFERRED INCOME - Deferred income is recognized on a straight-line basis over
the term of the Castle Rock Bonds and Collateralized Credit Enhancement
Agreement.
INCOME TAXES - Deferred tax assets and liabilities are recognized for the future
tax effects attributed to temporary differences between book and tax bases of
assets and liabilities. The measurement of current and deferred tax assets and
liabilities is based on enacted tax law.
ESTIMATES AND UNCERTAINTIES - The preparation of financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
EARNINGS PER COMMON SHARE - Earnings per common share is computed by dividing
the net income for the period by the weighted average number of common shares
outstanding during the period.
INTERIM FINANCIAL STATEMENTS - The unaudited balance sheet presented as of April
30, 1997, and the unaudited statements of income and retained earnings and cash
flows for the period then ended contain all adjustments that, in the opinion of
management, are necessary to provide a fair statement of the results for the
interim period presented. All such adjustments are considered of a normal and
recurring nature.
5
<PAGE>
BFC GUARANTY CORP.
NOTES TO FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
DEBT SECURITIES
Debt securities consist of $67,075,000 par value REMIC Federal Lease-Backed
Bonds (Series 1996, Class B) issued by a related party, BFC Finance Corp. The
bonds are currently pledged as collateral for the Castle Rock Bonds and are held
in trust by the Bond Trustee.
Aggregate maturities and cash payments to be received by the company are as
follows:
COUPON PRINCIPAL INTEREST
RATE PAYMENTS PAYMENTS
Within 1 Year - $ - $ -
1 Year through 5 Years 5.75% 6,310,000 15,168,726
After 5 Years through
10 Years 5.7% - 6.1% 13,190,000 17,414,168
After 10 Years 6.25% - 6.5% 47,575,000 19,728,970
------------ ------------
$ 67,075,000 $ 52,311,864
------------ ------------
------------ ------------
The fair value of the Class B REMIC Bonds calculated as the net present value of
future cash flows using current interest rates is estimated to be $55,481,000 as
of December 31, 1996, and $56,852,000 (unaudited) as of April 30, 1997.
COLLATERALIZED CREDIT ENHANCEMENT AGREEMENT
The company has entered into a collateralized credit enhancement agreement for
the benefit of the Trustee of the Castle Rock Bonds. Under the terms of the
agreement, the company will guarantee complete payment of the Castle Rock Bonds
for the period commencing March 1, 1998, until the Bonds are redeemed or mature.
The Castle Rock Bonds were issued March 29, 1996, by Castle Rock Ranch Public
Improvements Authority (the Authority) at coupon rates ranging from 5.7% to
6.5% and maturing at varying amounts beginning December 1, 1999 and ending
December 1, 2017. Par value of the Castle Rock Bonds is $66,975,000 and the
proceeds from issuance were $67,760,621. The proceeds were used to acquire
real property and water rights in Dawson Ridge development in the town of
Castle Rock, Douglas County, Colorado. The land and water rights were
purchased from a related party, Douglas County Development Corporation
(DCDC), an affiliate of The Franklin L. Haney Company. Mr. Haney is the
President of BFC Guaranty Corp. The land acquired will be used to develop a
golf course and other recreational facilities for the benefit of the Dawson
Ridge Metropolitan Districts. The Castle Rock Bonds have a debt service
reserve retained from the proceeds from their issuance sufficient to fund
interest payments on the Bonds until March 1, 1998.
6
<PAGE>
BFC GUARANTY CORP.
NOTES TO FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
COLLATERALIZED CREDIT ENHANCEMENT AGREEMENT - continued
In order to secure its obligations under the Collateralized Credit Enhancement
Agreement, the company has pledged and delivered to the Trustee Series B REMIC
Bonds with a par value of $67,075,000, and coupon rates ranging from 5.7% to
6.5%. The Series B REMIC Bonds mature at varying amounts beginning December 1,
1998 and ending December 1, 2017. The Series B REMIC Bonds were issued to the
company along with $1,000 on March 29, 1996, in exchange for all of the
company's authorized and issued shares of no par value common stock.
The Series B REMIC Bonds, along with another series of bonds representing a
regular interest in the REMIC Trust Estate (the "Series A REMIC Bonds"), were
issued under an indenture of trust between BFC Finance Corp. and SouthTrust Bank
of Alabama. The proceeds from the Series A REMIC Bonds will be used to fund the
acquisition and construction of an office building in the District of Columbia
to be leased by the U.S. Government. Scheduled lease payments will be
sufficient to retire all principal and interest payments on the Series A and
Series B REMIC Bonds.
REIMBURSEMENT AGREEMENT
In conjunction with the Collateralized Credit Enhancement Agreement, the company
also entered into a Reimbursement Agreement with Castle Rock Ranch Public
Improvements Authority that requires the Authority to reimburse the company for
any principal and interest payments made by the company under the provisions of
the Collateralized Credit Enhancement Agreement. Interest at the rate of 9%
will be charged on the payments. In addition, the Authority paid the company a
commitment fee of 6% of the Castle Rock Bond proceeds which totaled $4,018,500.
The company advanced the fee to its parent company, Building Finance Corporation
of Tennessee.
The Authority has entered into an operating agreement obligating the Dawson
Ridge Metropolitan Districts to provide funds to the extent that revenues from
the golf course and recreational facilities are insufficient to fund the debt
service on the Castle Rock Bonds. Such funds would be derived from a mill levy
on taxable property in the Dawson Ridge districts. The levy would include a 35
mill limitation. In order to provide an alternate source of revenue, the
Authority entered into a development agreement with DCDC providing for a payment
in lieu of taxes by DCDC in an amount equivalent to the amount which would be
generated by the mill levy pursuant to the operating agreement. DCDC owns
approximately 75% of the taxable property in the Dawson Ridge districts.
7
<PAGE>
BFC GUARANTY CORP.
NOTES TO FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
INCOME TAXES
The provision for income taxes is as follows:
PERIOD FROM
MARCH 29, 1996 FOUR MONTHS
TO DECEMBER 31, ENDED
1996 APRIL 30, 1997
(UNAUDITED)
Current Provision $ 2,498,842 $ 517,963
Deferred Provision (1,313,942) 20,939
----------- -----------
$ 1,184,900 $ 538,902
----------- -----------
----------- -----------
The deferred tax provision and the related deferred tax asset result from income
recognized when received for tax purposes, but deferred for financial statement
purposes.
CONCENTRATION
Collection of the company's debt securities is dependent on collection of lease
payments by a related partnership from the United States government.
SUBSEQUENT EVENT
Subsequent to December 31, 1996, the Authority filed a Registration Statement on
Form S-4 with the Securities and Exchange Commission offering to exchange the
entire issue of Guaranteed Public Facilities Revenue Bonds, (Series 1996) for an
identical issue of Guaranteed Public Facilities Bonds, (Series 1996B). The
Series 1996B Bonds, the Credit Enhancement of the company and the Class A and B
REMIC Bonds will be registered under the Securities Act of 1933 and as a result,
the Series 1996B Bonds will not be subject to the transfer restrictions
associated with the Series 1996 Bonds. No gain or loss will be recognized for
financial statement purposes by the Authority on the exchange.
8
<PAGE>
- -------------------------------------------
-------------------------------------------
- -------------------------------------------
-------------------------------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES TO
WHICH IT RELATES OR AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY SUCH
SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER
ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE CREDIT ENHANCEMENT PROVIDER SINCE THE DATE HEREOF OR THAT THE
INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
AVAILABLE INFORMATION..................................................... iv
PROSPECTUS SUMMARY........................................................ 1
RISK FACTORS.............................................................. 12
USE OF PROCEEDS........................................................... 16
CAPITALIZATION............................................................ 17
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS.............................................................. 18
THE PROJECT............................................................... 18
THE AUTHORITY............................................................. 21
THE DISTRICTS............................................................. 24
TAX EXEMPTION............................................................. 30
DESCRIPTION OF EXCHANGE BONDS............................................. 32
SECURITY AND SOURCE OF PAYMENT............................................ 36
CREDIT ENHANCEMENT........................................................ 37
DESCRIPTION OF SERIES B REMIC BONDS....................................... 42
THE EXCHANGE OFFER........................................................ 50
MANAGEMENT................................................................ 58
OWNERSHIP OF THE AUTHORITY................................................ 59
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS............................ 60
PLAN OF DISTRIBUTION...................................................... 60
RATING.................................................................... 61
LEGAL MATTERS............................................................. 61
INDEPENDENT ACCOUNTANTS................................................... 61
DEFINITIONS OF CERTAIN TERMS AND DESCRIPTIONS OF PRINCIPAL DOCUMENTS...... 62
THE INDENTURE............................................................. 69
COLLATERALIZED CREDIT ENHANCEMENT AGREEMENT............................... 77
REIMBURSEMENT AGREEMENT................................................... 77
THE DEED OF TRUST......................................................... 79
THE OPERATING AGREEMENT................................................... 82
THE INTERGOVERNMENTAL AGREEMENT........................................... 89
THE LEASE................................................................. 92
THE DEVELOPMENT AGREEMENT................................................. 93
THE RECREATIONAL FACILITIES AGREEMENT..................................... 96
INDEX TO FINANCIAL STATEMENTS............................................. F-1
</TABLE>
CASTLE ROCK RANCH
PUBLIC IMPROVEMENTS AUTHORITY
---------------------
PROSPECTUS
---------------------
OFFER TO EXCHANGE ITS PUBLIC FACILITIES REVENUE BONDS, SERIES 1996 B FOR ANY AND
ALL OF ITS OUTSTANDING PUBLIC FACILITIES REVENUE BONDS, SERIES 1996
- -------------------------------------------
-------------------------------------------
- -------------------------------------------
-------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) EXHIBITS.
1.1 Purchase Agreement dated as of March 26, 1996, between Castle Rock Ranch
Public Improvements Authority (the "Authority") and Lehmann Brothers, Inc.*
3.1 Certificate of Incorporation of BFC Guaranty Corp.*
3.2 By-laws of BFC Guaranty Corp.*
3.3 Certificate of Incorporation of Castle Rock Ranch Public Improvements
Authority (the "Authority").*
3.4 Bylaws of the Authority.*
3.5 Certificate of Incorporation of BFC Finance Corp.**
3.6 Bylaws of BFC Finance Corp.**
4.1 Indenture of Trust dated as of March 1, 1996 between the Authority and
SouthTrust Bank of Alabama, National Association, as Trustee (the
"Trustee").*
4.2 Indenture of Trust dated as of March 1, 1996 between BFC Finance Corp. and
SouthTrust Bank of Alabama, National Association, as Trustee (the
"Trustee").**
5.1 Opinion and consent of Brownstein Hyatt Farber & Strickland, P.C.**
8.1 Opinion and consent of Brownstein Hyatt Farber & Strickland, P.C.**
10.1 Collateralized Credit Enhancement Agreement dated as of March 1, 1996, from
the Registrant for the benefit of the Trustee.*
10.2 Reimbursement Agreement dated as of March 1, 1996 between the Authority and
the Registrant.*
10.3 Bond Pledge and Security Agreement dated as of March 1, 1996 between the
Registrant and the Trustee.*
10.4 Agreement for Purchase and Sale of Real Property dated as of March 1, 1996
between Douglas County Development Corporation (the "DCDC") and the
Authority.*
<PAGE>
10.5 Intergovernmental Agreement dated as of March 1, 1996 between Dawson Ridge
Metropolitan Districts No. 1, No. 2, No. 3, No. 4 and No. 5.*
10.6 Development Agreement dated as of March 1, 1996 between the Authority and
the DCDC.*
10.7 Operating Agreement dated as of March 1, 1996 between the Authority and
Dawson Ridge Metropolitan District No. 5.*
10.8 Recreational Facilities Agreement dated as of March 1, 1996 between the
Authority and Dawson Ridge Metropolitan District No. 5.*
10.9 General Services Administration Lease No. GS-11B-40155, GSA Supplemental
Lease Agreement No. 1 and GSA Supplemental Lease Agreement No. 2, each
between the United States Government acting through the General Services
Administration and Parcel 49C Limited Partnership.*
10.10 Memorandum of Agreement by and between Building Finance Company of
Tennessee, Inc., BFC Finance Corp. And BFC Guaranty Corp., dated April
9, 1997.**
12.1 Statements of Computation of Ratios.**
21.1 Subsidiaries of the Registrants. The Registrants have no subsidiaries.
23.1 Consent of Joseph DeCosimo & Co.**
23.2 Consent of Brownstein Hyatt Farber & Strickland, P.C. (included in
Exhibits 5.1 and 8.1).**
24.1 Power of Attorney for BFC Guaranty Corp.*
24.2 Power of Attorney for BFC Finance Corp. (included in signature page).**
25.1 Statement of Eligibility of Exchange Bonds Trustee on Form T-1.*
25.2 Statement of Eligibility of Series B REMIC Bonds Trustee on Form T-1.**
27.1 Financial Data Schedule for BFC Guaranty Corp.**
27.2 Financial Data Schedule for BFC Finance Corp.**
27.3 Financial Data Schedule for Castle Rock Ranch Public Improvements
Authority.**
99.1 Form of Letter of Transmittal.**
99.2 Form of Notice of Guaranteed Delivery.**
99.3 Form of Tender Instructions.**
- -------------
* Previously filed
** Filed with Amendment No. 2
<PAGE>
(B) FINANCIAL STATEMENT SCHEDULES.
Not Applicable.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, BFC Guaranty Corp.
has duly caused this Amendment to Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of
Chattanooga, State of Tennessee, on June 25, 1997.
BFC GUARANTY CORP.
By: /s/ Franklin L. Haney
------------------------------
Franklin L. Haney
President
Pursuant to the requirements of the Securities Act, this Amendment to
Registration Statement has been signed on June 25, 1997 by the following
persons in the capacities indicated.
SIGNATURE CAPACITY
/s/ Franklin L. Haney President and Director
- ------------------------ (Principal Executive Officer)
Franklin L. Haney
/s/ Roger D. Bailey* (Principal Financial Officer and
- ------------------------ Principal Accounting Officer)
Roger D. Bailey
/s/ Emeline W. Haney* Director
- ------------------------
Emeline W. Haney
/s/ Chris E. Zahnd* Director
- ------------------------
Chris E. Zahnd
* By: /s/ Franklin L. Haney
------------------------
Attorney in Fact
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, BFC Finance Corp.
has duly caused this Amendment to Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of
Chattanooga, State of Tennessee, on June 25, 1997.
BFC FINANCE CORP.
By: /s/ Franklin L. Haney
-------------------------------
Franklin L. Haney
President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Franklin L. Haney his true and lawful
attorney-in-fact, with full power of substitution and revocation, for him and
in his name, place and stead, in any and all capacities to sign any and all
amendments (including post-effective amendments) to this Registration
Statement, and to file the same with all exhibits thereto, and other
documents in connection therewith, with the Securities and Exchange
Commission, granting unto such attorney-in-fact full power and authority to
do and perform each and every act and thing requisite and necessary to be
done as fully to all intents and purposes as such person might or could do in
person, hereby ratifying and confirming all that such attorney-in-fact or his
substitute may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act, this Amendment to
Registration Statement and Power of Attorney have been signed on June 25,
1997 by the following persons in the capacities indicated.
SIGNATURE CAPACITY
/s/ Franklin L. Haney President and Director
- ------------------------- (Principal Executive Officer)
Franklin L. Haney
/s/ Roger D. Bailey (Principal Financial Officer and
- ------------------------- Principal Accounting Officer)
Roger D. Bailey
/s/ Emeline W. Haney Director
- -------------------------
Emeline W. Haney
/s/ Chris E. Zahnd Director
- -------------------------
Chris E. Zahnd
<PAGE>
CERTIFICATE OF INCORPORATION
OF
BFC FINANCE CORP.
FIRST: The name of the corporation is BFC Finance Corp.
SECOND: The address of its registered office in the State of Delaware is
1209 Orange Street, Wilmington, County of New Castle, Delaware 19801. The
name of its registered agent at such address is The Corporation Trust Company.
THIRD: The nature of the business of the Corporation and the purposes to
be promoted or carried on by it are as follows:
To engage solely in the following activities:
(a) entering into and acting as sponsor under a trust indenture
providing for the issuance of the Corporation's (i) REMIC Lease-Backed
Bonds, Series 1996 (the "Bonds") and (ii) Series 1996 REMIC Residual
Certificates, and acquiring certain notes, mortgages and originating
mortgage loans and related documents securing or related to such loans
in connection with the grant of the trust estate (the "Trust Estate")
pledged to the Bonds, arranging for the servicing of the assets comprising
the Trust Estate and participating in the offer and sale of the Bonds and
the Certificates; and
(b) any lawful act or activity for which corporations may be organized
under the General Corporation Law of the State of Delaware, so long as the
same are necessary, appropriate, suitable or convenient to accomplish the
objects or purposes specified in subparagraph (a) of this Article THIRD.
FOURTH: The total number of shares of all classes of stock that the
Corporation is authorized to issue is 1,500 shares of Common Stock, all of
which are without par value.
FIFTH: The name and address of the incorporator is as follows:
Name Address
---- -------
A. S. Gardner 1209 Orange Street
Wilmington, Delaware 19801
SIXTH: The number of directors constituting the initial Board of Directors
is three (3), and the names of the persons who are to serve as directors until
the first annual meeting of the shareholders or until their successors are
elected and qualified are:
<PAGE>
Directors
---------
Franklin L. Haney 605 Chestnut Street, Suite 200, Chattanooga, TN 37450
Emeline W. Haney 605 Chestnut Street, Suite 200, Chattanooga, TN 37450
Chris E. Zahnd 611 North Bragg Avenue, Lookout Mountain, TN 37350
The number of the directors of the Corporation shall be fixed by the bylaws,
but in the absence of a bylaw fixing the number of directors, then the number of
the directors of the Corporation shall be three (3). The board of directors
is expressly authorized to adopt, amend or repeal the by-laws of the
Corporation.
SEVENTH: Elections of directors need not be by written ballot unless the
by-laws of the Corporation shall so provide.
EIGHTH: The books of the Corporation may be kept at such place within or
without the State of Delaware as the by-laws of the Corporation may provide or
as may be designated from time to time by the board of directors.
NINTH: Meetings of stockholders may be held within or without the State of
Delaware, as the by-laws may provide.
TENTH: So long as any Bonds of the Corporation, but excluding any
indebtedness described in the exception clause at the end of Article ELEVENTH,
are outstanding and for a period of 367 days immediately following such time
as no Bonds are outstanding (any such period, a "Preference Period"), the
Corporation shall have not less than one Independent Director. An Independent
Director shall be an individual who is not at the time of such individual's
appointment as director of the Corporation, and has not been at any time during
the preceding five years, and does not become subsequently while a Director, (a)
a direct or indirect legal or beneficial owner in such entity or any of its
affiliates, (b) a creditor, supplier, employee, officer, director (other than
during such individual's tenure as director of the relevant entity), family
member, manager or contractor of such entity or any of its affiliates, or (c) a
person who controls (whether directly, indirectly or otherwise) such entity or
its affiliates or any creditor, supplier, employee, officer, director, manager
or contractor of such entity or its affiliates. As used herein, the term
"affiliate" means any person controlling, under common control with, or
controlled by the person in question, and the term "control" means the
possession, directly or indirectly, of the power to direct or the cause the
direction of the management and policies of a person, whether through ownership
or voting securities, by contract or otherwise. If an Independent Director
resigns, dies or becomes incapacitated, or such position is otherwise vacant and
there is then no Independent Director, no action requiring the unanimous
affirmative vote of the board of directors shall be taken until a successor
Independent Director is elected and qualified and approves such action. In the
event of the death, incapacity, or resignation of the Independent Director, or a
vacancy for any other reason, a successor, Independent Director shall be
appointed by the remaining directors. Chris E. Zahnd shall serve as the initial
Independent Director.
2
<PAGE>
ELEVENTH: So long as any Bonds remain outstanding and for a Preference
Period immediately following such time as no Bonds are outstanding, the
Corporation shall not incur any indebtedness, except indebtedness represented
by an invoice, statement of account, check, work request, purchase order or
other similar document representing expenses relating to activities of the
Corporation undertaken in accordance with the THIRD Article of this
Certificate of Incorporation.
TWELFTH: So long as any Bonds remain outstanding and for a Preference
Period immediately following such time as no Bonds are outstanding, the
Corporation shall not transfer to any person or entity any assets of the
Corporation, except that the Corporation may pay expenses that arise in the
ordinary course of its business undertaken in accordance with the THIRD
Article of this Certificate of Incorporation and may declare and pay cash
dividends to its stockholders in accordance with the General Corporation Law
of the State of Delaware to the extent that unencumbered funds are available
therefor.
THIRTEENTH: So long as any Bonds remain outstanding and for a Preference
Period immediately following such time as no Bonds are outstanding, the
Corporation shall not take any action to dissolve or liquidate the
Corporation.
FOURTEENTH: So long as any Bonds remain outstanding and for a Preference
Period immediately following such time as no Bonds are outstanding the
Corporation shall not amend, alter or repeal any provision of this
Certificate of Incorporation.
FIFTEENTH: So long as any Bonds remain outstanding and for a Preference
Period immediately following such time as no Bonds are outstanding: (a) the
fiduciary duty of the directors of the Corporation shall not include a duty
to: (i) institute proceedings to have the Corporation adjudicated a bankrupt
or insolvent; (ii) consent to the institution of bankruptcy or insolvency
proceedings against the Corporation; (iii) file a petition or consent to a
petition seeking reorganization or relief on behalf of the Corporation under
any applicable federal or state law relating to bankruptcy; (iv) consent to
the appointment of a receiver, liquidator, assignee, trustee, sequestrator
(or any similar official) of the Corporation or a substantial portion of its
property; (v) make any assignment for the benefit of the Corporation's
creditors; (vi) cause the Corporation to admit in writing its inability to
pay its debts generally as they become due; or (vii) take any action, or
cause the Corporation to take any action, in furtherance of any of the
foregoing (any of the above foregoing actions, a "Bankruptcy Action"); and
(b) the Corporation shall not take any Bankruptcy Action without the
unanimous affirmative vote of the board of directors. No director or officer
of the Corporation shall be liable to the Corporation or any stockholder on
account of such director's or officer's good faith reliance on the provisions
of this Article FIFTEENTH and neither the Corporation nor any stockholder of
the Corporation shall have any claim for breach of fiduciary duty or
otherwise against any director or officer for failing to take any Bankruptcy
Action.
SIXTEENTH: So long as any Bonds remain outstanding and for a Preference
Period immediately following such time as no Bonds are outstanding, the
Corporation shall not
3
<PAGE>
consolidate, merger or enter into any form of combination with or into any
other entity, nor convey, transfer or lease its assets substantially as an
entirety to any entity, nor permit any entity to consolidate, merger or enter
into any form of combination with or into the Corporation, nor convey,
transfer or lease its assets substantially as an entirety to any person.
SEVENTEENTH: So long as any Bonds remain outstanding and for a
Preference Period immediately following such time as no Bonds are outstanding,
(a) The Corporation shall not commingle its funds and other assets
with those of any other individual, corporation, estate, partnership, joint
venture, association, joint stock company, trust, unincorporated
organization, or government or any agency or political subdivision thereof;
(b) The Corporation shall not guarantee or become obligated for the
debts of any other entity and shall not hold itself out as being liable for
the debts of any other party;
(c) The Corporation shall not form, or cause to be formed, any
subsidiaries or acquire any interest as a general or limited partner in any
partnership;
(d) The Corporation shall act solely in its corporate name and through
its duly authorized officers or agents in the conduct of its business, and
shall conduct its business so as not to mislead others as to the identity of
the entity with which they are concerned, and correct any known
misunderstanding regarding its separate identity;
(e) The Corporation shall maintain corporate records and books of
account and shall not commingle its corporate records and books of account
with the corporate records and books of account of any other corporation;
(f) The Corporation shall maintain a separate business office and
telephone number from each of its affiliates;
(g) The Corporation shall maintain its accounts separate from any
other person or entity;
(h) Other than as provided herein in Article THIRD, the Corporation
will not pledge its assets for the benefit of any other entity or make any
loans or advances to any entity;
(i) The Corporation shall maintain an arm's-length relationship with
its affiliates;
(j) The Corporation shall pay the salaries of its own employees and
maintain a sufficient number of employees in light of its contemplated
business operations;
4
<PAGE>
(k) The Corporation shall not acquire obligations or securities of
its partners, members or shareholders;
(l) The Corporation shall allocate fairly and reasonably any overhead
for shared office space;
(m) The Corporation shall use separate stationery, invoices and check;
(n) The Corporation shall hold itself out as a separate entity;
(o) The Corporation shall maintain adequate capital in light of its
contemplated business operations; and
(p) The Corporation shall maintain separate financial statements.
EIGHTEENTH: A director of the Corporation shall not be personally liable
to the Corporation or its stockholders of monetary damages for breach of
fiduciary duty as a director, except for liability (a) for any breach of the
director's duty of loyalty to the Corporation or its stockholders, (b) for
acts or omissions not in good faith or which involve intentional misconduct
or a knowing violation of law, (c) under Section 174 of the General
Corporation Law of Delaware, or (d) for any transaction from which the
director derived an improper personal benefit. In addition to and not in
limitation of the foregoing, a director of the Corporation shall not be
liable to the Corporation or its stockholders for monetary damages for breach
of fiduciary duty as a director to the fullest extent provided by the General
Corporation Law of Delaware as the same may hereafter be amended.
NINETEENTH: The Directors of the Corporation are required to consider
the interests of the creditors of the Corporation, including the Bondholder,
in connection with all corporate actions.
TWENTIETH: The duration of the Corporation shall be perpetual.
5
<PAGE>
IN WITNESS HEREOF, the undersigned, being the incorporator herein before
named, has executed, signed and acknowledged this Certificate of
Incorporation for BFC Finance Corp. on the date set forth below.
Date: March 19, 1996
-------------------
By: /s/ A. S. Gardner
--------------------------
A. S. Gardner
Incorporator
<PAGE>
BYLAWS OF
BFC FINANCE CORP.
ARTICLE I
OFFICES
The principal office of the Corporation shall be established and maintained
at 1455 Pennsylvania Avenue, N.W., Suite 230, Washington, D.C. 20004. The
Corporation may also have offices at such places within or without the State of
Delaware as the Board of Directors (the "Board") may from time to time
establish.
ARTICLE II
STOCKHOLDERS
1. PLACE OF MEETINGS
Meetings of the stockholders shall be held at the principal office of the
Corporation or at such place within or without the State of Delaware as the
Board shall authorize.
2. ANNUAL MEETING
The annual meeting of stockholders shall be held on the 30th day of March,
at 2:00 p.m. in each year; however, if such day falls on a Sunday or a legal
holiday, then on the next business day following at the same time, the
stockholders shall elect a Board and transact such other business as may
properly come before the meeting.
3. SPECIAL MEETINGS
Special meetings of the stockholders may be called by the Board or by the
president or at the written request of stockholders owning a majority of the
stock entitled to vote at such meeting. A meeting requested by the
stockholders shall be called for a date not less than ten nor more than sixty
days after a request is made. The secretary shall issue the call for the
meeting unless the president, the Board or the stockholders shall designate
another to make said call.
4. NOTICE OF MEETINGS
Written Notice of each meeting of stockholders shall state the purpose of
the meeting and the time and place of the meeting. Notice shall be mailed to
each stockholder having the right and entitled to vote at such meetings, at his
last address as it appears on the records of the
<PAGE>
Corporation, not less than ten nor more than sixty days before the date set for
such meeting. Such notice shall be sufficient for the meeting and any
adjournment thereof. If any stockholder shall transfer his stock after notice,
it shall not be necessary to notify the transferee. Any stockholder may waive
notice of any meeting either before, during or after the meeting.
5. RECORD DATE
The Board may fix a record date which shall not be more than sixty days and
not less than ten days prior to the date set for a meeting of stockholders as
the date as of which the stockholders of record who have the right to and are
entitled to notice of and to vote at such meeting and any adjournment thereof
shall be determined. Notice that such date has been fixed may be published in
the city, town or country where the principal office of the Corporation is
located and in each city or town where a transfer agent of the stock of the
Corporation is located.
6. VOTING
Every stockholder shall be entitled at each meeting and upon each proposal
presented at each meeting to one vote for each share of voting stock recorded in
his name on the books of the Corporation on the record date as fixed by the
Board. If no record date was fixed, on the date of the meeting the book of
records of stockholders shall be produced at the meeting upon the request of any
stockholder. Upon demand of any stockholder, the vote for Directors and the
vote upon any question before the meeting shall be by ballot. All elections for
Directors shall be decided by plurality vote; all other questions shall be
decided by majority vote.
7. QUORUM
The presence, in person or by proxy, of stockholders holding a majority of
the stock of the Corporation entitled to vote shall constitute a quorum at all
meetings of the stockholders. In case a quorum shall not be present at any
meeting, a majority in interest of the stockholders entitled to vote thereat
present in person or by proxy shall have power to adjourn the meeting from time
to time, without notice other than announcement at the meeting, until the
requisite amount of stock entitled to vote shall be present. At any such
adjourned meeting at which the requisite amount of stock entitled to vote be
represented, any business may be transacted which might have been transacted at
the meeting as originally noticed; but only those stockholders entitled to vote
at the meeting as originally noticed shall be entitled to vote at any
adjournment or adjournments thereof.
8. PROXIES
At any stockholders' meeting or any adjournment thereof, any stockholder of
record having the right and entitled to vote thereat may be represented and vote
by proxy appointed in a written instrument. No such proxy shall be voted after
three years from the date of the instrument unless the instrument provides for a
longer period. In the event that any such
2
<PAGE>
instrument provides for two or more persons to act as proxies, a majority of
such persons present at the meeting, or if only one be present, that one, shall
have all the powers conferred by the instrument upon all persons so designated
unless the instrument shall otherwise provide.
9. STOCKHOLDER LIST
After fixing a record date for a meeting, the Corporation shall prepare an
alphabetical list of the names of all its shareholders who are entitled to
notice of a shareholders' meeting. Such list shall be arranged by voting group
with the names and addresses of, and the number and class and series if any, of
shares held by each. This list shall be available for inspection by any
shareholder for a period of ten days prior to the meeting.
ARTICLE III
DIRECTORS
1. BOARD
The business of the Corporation shall be managed and its corporate powers
exercised by a Board of three Directors each of whom shall be of full age. It
shall not be necessary for Directors to be stockholders.
2. ELECTION AND TERM OF DIRECTORS
Directors shall be elected at the annual meeting of stockholders and each
Director elected shall hold office until his successor has been elected and
qualified, or until the Director's prior resignation or removal.
3. VACANCIES
If the office of any Director, member of a committee or other office
becomes vacant, the remaining Directors in office, by a majority vote, may
appoint any qualified person to fill such vacancy, who shall hold office for the
unexpired term and until a successor shall be duly chosen.
4. REMOVAL OF DIRECTORS
Any or all of the Directors may be removed with or without cause by vote of
a majority of all the stock outstanding and entitled to vote at a special
meeting of stockholders called for that purpose.
5. NEWLY CREATED DIRECTORSHIPS
The number of Directors may be increased by amendment of these Bylaws by
the affirmative vote of a majority of the Directors, though less than a quorum,
or by the affirmative
3
<PAGE>
vote of a majority in interest of the stockholders, at the annual meeting or at
a special meeting called for that purpose, and by like vote the additional
Directors may be chosen at such meeting to hold office until the next annual
election and until their successors are elected and qualify.
6. RESIGNATION
A Director may resign at any time by giving written notice to the Board,
the president or the secretary of the Corporation. Unless otherwise specified
in the notice, the resignation shall take effect upon receipt thereof by the
Board or such officer, and the acceptance of the resignation shall not be
necessary to make it effective.
7. QUORUM OF DIRECTORS
A majority of the Directors shall constitute a quorum for the transaction
of business. If at any meeting of the Board there shall be less than a quorum
present, a majority of those present may adjourn the meeting until a quorum is
obtained and no further notice thereof need be given other than by announcement
at the meeting which shall be so adjourned.
8. PLACE AND TIME OF BOARD MEETINGS
The Board may hold its meetings at the office of the Corporation or at such
other places either within or without the State of Delaware as it may from time
to time determine.
9. REGULAR ANNUAL MEETING
A regular annual meeting of the Board shall be held immediately following
the annual meeting of the stockholders at the place of such annual meeting of
stockholders.
10. NOTICE OF MEETINGS OF THE BOARD
Regular meetings of the Board may be held without notice at such time and
place as it shall from time to time determine. Special meetings of the Board
shall be held upon notice to the Directors and may be called by the president
upon three days' notice to each Director either personally or by mail or by
wire; special meetings shall be called by the president or by the secretary in a
like manner on written request of two Directors. Notice of a meeting need not
be given to any Director who submits a Waiver of Notice whether before or after
the meeting or who attends the meeting without protesting, prior thereto or at
its commencement, the lack of notice to him.
11. EXECUTIVE AND OTHER COMMITTEES
The Board, by resolution, may designate two or more of their number to one
or more committees, which, to the extent provided in said resolution or these
Bylaws, may exercise the powers of the Board in the management of the business
of the Corporation.
4
<PAGE>
12. COMPENSATION
No compensation shall be paid to Directors as such for their services,
but by resolution of the Board a fixed sum and expenses for actual attendance
at each regular or special meeting of the Board may be authorized. Nothing
herein contained shall be construed to preclude any Director from serving the
Corporation in any other capacity and receiving compensation therefor.
ARTICLE IV
OFFICERS
1. OFFICERS, ELECTION AND TERM
A. The Board may elect or appoint a chairman, a president, one or more
vice-presidents, a secretary, an assistant secretary, a treasurer and an
assistant treasurer and such other officers as it may determine who shall have
duties and powers as hereinafter provided.
B. All officers shall be elected or appointed to hold office until the
meeting of the Board following the next annual meeting of stockholders and until
their successors have been elected or appointed and qualified.
2. REMOVAL, RESIGNATION, SALARY, ETC.
A. Any officer elected or appointed by the Board may be removed by the
Board with or without cause.
B. In the event of the death, resignation or removal of an officer, the
Board in its discretion may elect or appoint a successor to fill the unexpired
term.
C. Any two or more offices may be held by the same person.
D. The salaries of all officers shall be fixed by the Board.
E. The Directors may require any officer to give security for the
faithful performance of his duties.
3. CHAIRMAN
The chairman of the Board, if one be elected, shall preside at all meetings
of the Board and shall have and perform such other duties from time to time as
may be assigned to him or her by the Board or the executive committee.
5
<PAGE>
4. PRESIDENT
The president shall be the chief executive officer of the Corporation and
shall have the general powers and duties of supervision and management usually
vested in the office of the president of the Corporation. The president shall
preside at all meetings of the stockholders if present thereat, and in the
absence of non-election of the chairman of the Board, at all meetings of the
Board, and shall have general supervision, direction and control of the business
of the Corporation. Except as the Board shall authorize the execution thereof
in some other manner, the president shall execute bonds, mortgages and other
contracts on behalf of the Corporation and shall cause the seal to be affixed to
any instrument requiring it and when so affixed, the seal shall be attested by
the signature of the secretary or the treasurer or an assistant secretary or an
assistant treasurer.
5. VICE-PRESIDENTS
During the absence of disability of the president, the vice-president, or
if there be more than one, the executive vice-president, shall have all the
powers and functions of the president. Each vice-president shall perform such
other duties as the Board shall prescribe.
6. SECRETARY
The secretary shall attend all meetings of the Board and of the
stockholders, record all votes and minutes of all proceedings in a book to be
kept for that purpose, give or cause to be given notice of all meetings of
stockholders and of meetings and special meetings of the Board, keep in safe
custody the seal of the Corporation and affix it to any instrument when
authorized by the Board or the president, when required, prepare or cause to be
prepared and available at each meeting of stockholders a certified list in
alphabetical order of the names of stockholders entitled to vote thereat,
indicating the number of shares of each respective class held by each, keep all
the documents and records of the Corporation as required by law or otherwise in
a proper and safe manner, and perform such other duties as may be prescribed by
the Board or assigned by the president.
7. ASSISTANT-SECRETARIES
During the absence of disability of the secretary, the assistant-secretary,
or if there are more than one, the one so designated by the secretary or by the
Board, shall have all the powers and functions of the secretary.
8. TREASURER
The treasurer shall have the custody of the corporate funds and securities,
keep full and accurate accounts of receipts and disbursements in the corporate
books, deposit all money and other valuables in the name and to the credit of
the Corporation in such depositories as may be designated by the Board, disburse
the funds of the Corporation as may be ordered or authorized
6
<PAGE>
by the Board and preserve proper vouchers for such disbursements, and render to
the president and Board at the regular meetings of the Board, or whenever they
require it, an account of all the transactions made as treasurer and of the
financial condition of the Corporation. The treasurer shall also render a full
financial report at the annual meeting of the stockholders if so requested, be
furnished by all corporate officers and agents if requested with such reports
and statements as may be required as to all financial transactions of the
Corporation, and perform such other duties as are designated by these Bylaws or
as from time to time are assigned by the Board.
9. ASSISTANT-TREASURERS
During the absence or disability of the treasurer, the assistant-treasurer,
or if there be more than one, the one so designated by the treasurer or the
Board, shall have all the powers and functions of the treasurer.
10. SURETIES AND BONDS
In case the Board shall so require, any officer or agent of the Corporation
shall execute to the Corporation a bond in such sum and with such surety or
sureties as the Board may direct, conditioned upon the faithful performance of
duties to the Corporation and including responsibility for negligence and for
the accounting of all property, funds or securities of the Corporation which the
officer or agent may be responsible for.
ARTICLE V
CERTIFICATES FOR SHARES
1. CERTIFICATES
The shares of the Corporation shall be represented by certificates. They
shall be numbered and entered in the books of the Corporation as they are
issued. They shall exhibit the holder's name, the number of shares and shall be
signed by the president and secretary and shall bear the corporate seal. When
such certificates are signed by the transfer agent or an assistant transfer
agent or by a transfer clerk acting on behalf of the Corporation and a
registrar, the signatures of such officers may be facsimiles.
2. LOST OR DESTROYED CERTIFICATES
The Board may direct a new certificate or certificates to be issued in
place of any certificates theretofore issued by the Corporation alleged to have
been lost or destroyed, upon the making of an affidavit of that fact by the
person claiming the certificate to be lost or destroyed. When authorizing such
issue of a new certificate or certificates, the Board may, in its discretion as
a condition preceding the issuance thereof, require the owner of such lost or
destroyed certificate or certificates, or the owner's legal representative, to
advertise the same
7
<PAGE>
in such manner as it shall require and/or give the Corporation a bond in such
sum and with such surety or sureties as it may direct as indemnity against any
claim that may be made against the Corporation with respect to the certificate
alleged to have been lost or destroyed.
3. TRANSFER OF SHARES
Upon surrender to the Corporation or the transfer agent of the Corporation
of a certificate for shares duly endorsed or accompanied by proper evidence of
succession, assignment or authority to transfer, it shall be the duty of the
Corporation to issue a new certificate to the person entitled thereto, and
cancel the old certificate; every such transfer shall be entered on the transfer
book of the Corporation which shall be kept at its principal office. Whenever a
transfer shall be made for collateral security, and not absolutely, it shall be
so expressed in the entry of the transfer ledger. No transfer shall be made
within ten days next preceding the annual meeting of the stockholders.
4. CLOSING TRANSFER BOOKS
The Board shall have the power to close the share transfer books of the
Corporation for a period of not more than ten days during the thirty-day period
immediately preceding (a) any stockholder's meeting, or (b) any date upon which
stockholders shall be called upon to or have a right to take action without a
meeting, or (c) any date fixed for the payment of a dividend or any other form
of distribution, and only those stockholders of record at the time the transfer
books are closed shall be recognized as such for the purpose of (a) receiving
notice of or voting at such meeting or (b) allowing them to take appropriate
action, or (c) entitling them to receive any dividend or other form of
distribution.
ARTICLE VI
DIVIDENDS
The Board may out of funds legally available, at any regular or special
meeting, declare dividends upon the capital stock of the Corporation as and when
it deems expedient. Before declaring any dividend there may be set apart out of
any funds of the Corporation available for dividends such sum or sums as the
Board from time to time in its discretion deems proper for working capital or as
a reserve fund to meet contingencies or for equalizing dividends or for such
other purposes as the Board shall deem conducive to the interest of the
Corporation.
ARTICLE VII
CORPORATE SEAL
The seal of the corporation shall be circular in form and bear the name of
the Corporation, the year of its organization and the words "CORPORATE SEAL,
DELAWARE". The seal may be used by causing it to be impressed directly on the
instrument or writing to be
8
<PAGE>
sealed, or upon an adhesive substance affixed thereto. The seal on the
certificates for shares or on any corporate obligation for the payment of money
may be facsimile, engraved or printed.
ARTICLE VIII
EXECUTION OF INSTRUMENTS
All corporate instruments and documents shall be signed or countersigned,
executed, verified or acknowledged by such officer or officers or other person
or persons as the Board may from time to time designate.
All checks, drafts or other orders for the payment of money, notes or other
evidences of indebtedness issued in the name of the Corporation shall be signed
by such officer or officers, agent or agents of the Corporation, and in such
manner as shall be determined from time to time by resolution of the Board.
ARTICLE IX
FISCAL YEAR
The fiscal year shall begin on the first day of each calendar year.
ARTICLE X
NOTICE AND WAIVER OF NOTICE
Whenever any notice is required by these Bylaws to be given, personal
notice is not meant unless expressly so stated, and any notice so required shall
be deemed to be sufficient if given by depositing the same in a post office box
in a sealed postage-paid wrapper, addressed to the person entitled thereto at
the last known post office address, and such notice shall be deemed to have been
given on the day of such mailing. Stockholders not entitled to vote shall not
be entitled to receive notice of any meetings except as otherwise provided by
Statue.
Whenever any notice whatever is required to be given under the provisions
of any law, or under the provisions of the Certificate of Incorporation of the
Corporation or these Bylaws, a waiver thereof in writing, signed by the person
or persons entitled to said notice, whether before or after the time stated
therein, shall be deemed equivalent thereto.
ARTICLE XI
CONSTRUCTION
Whenever a conflict arises between the language of these Bylaws and the
Certificate of Incorporation, the Certificate of Incorporation shall govern.
9
<PAGE>
ARTICLE XII
CLOSE CORPORATION
1. CONDUCT OF BUSINESS WITHOUT MEETINGS
Any action of the stockholders, Directors or committee may be taken without
a meeting if consent in writing, setting forth the action so taken, shall be
signed by all persons who would be entitled to vote on such action at a meeting
and filed with the secretary of the Corporation as part of the proceedings of
the stockholders, Directors or committees, as the case may be.
2. MANAGEMENT BY STOCKHOLDERS
In the event the stockholders are named in the Certificate of Incorporation
and are empowered therein to manage the affairs of the Corporation in lieu of
Directors, the stockholders of the Corporation shall be deemed Directors for the
purposes of these Bylaws and wherever the words "Directors" or "Board" appear in
these Bylaws those words shall be taken to mean stockholders.
The stockholders may, by majority vote, create a Board to manage the
business of the Corporation and exercise its corporate powers.
ARTICLE XIII
AMENDMENTS
These Bylaws may be altered or repealed and bylaws may be made at any
annual meeting of the stockholders or at any special meeting thereof if notice
of the proposed alteration or repeal to be made contained in the notice of such
special meeting, by the affirmative vote of a majority of the stock issued and
outstanding and entitled to vote thereat, or by the affirmative vote of a
majority of the Board at any regular meeting of the Board or at any special
meeting of the Board if notice of the proposed alteration or repeal to be made
is contained in the notice of such special meeting.
ARTICLE XIV
EMERGENCY BYLAWS
1. CONDUCT OF BUSINESS WITHOUT MEETINGS
Pursuant to Chapter 1 of Title 8 of Delaware Code, Annotated, the
Corporation adopts the following Bylaws, which shall be effective only if a
quorum of the Directors of the Corporation cannot be readily assembled because
of some catastrophic event.
10
<PAGE>
2. CALLING A MEETING
In the event of such catastrophic event, any member of the Board shall be
authorized to call a meeting of the Board. Such member calling an emergency
meeting shall use any means of communication at his disposal to notify all other
members of the Board of such meeting.
3. QUORUM
Any one member of the Board shall constitute a quorum of the Board. The
members of the Board meeting during such an emergency may select any person or
persons as additional Board members, officers or agents of the Corporation.
4. INDEMNIFICATION
The members of such emergency Board are authorized to utilize any means at
their disposal to preserve and protect the assets of the Corporation. Any
action taken in good faith and acted upon in accordance with these Bylaws shall
bind the Corporation; and the Corporation shall hold harmless any Director,
officer, employee or agent who undertakes an action pursuant to these Bylaws.
5. TERMINATION OF EMERGENCY BYLAWS
These emergency Bylaws shall not be effective at the end of the emergency
period.
11
<PAGE>
______________________________________________________________________
TRUST INDENTURE
Dated as of March 1, 1996
By and Between
BFC FINANCE CORP.,
as Sponsor
and
SOUTHTRUST BANK OF ALABAMA, NATIONAL ASSOCIATION,
as Trustee, Paying Agent
and Bond Registrar
__________________________________________________________________
$142,000,000
BFC FINANCE CORP.
REMIC LEASE-BACKED BONDS
SERIES 1996
Federal Lease-Backed Class A
Federal Lease-Backed Class B
__________________________________________________________________
<PAGE>
TRUST INDENTURE
TABLE OF CONTENTS
PAGE
----
PARTIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
PREAMBLES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE I
DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
ARTICLE II
THE BONDS AND PAYMENTS ON THE BONDS
Section 2.01. Authorized Amount of Bonds. . . . . . . . . . . . . . . . . . .16
Section 2.02. Issuance of and Payments on Bonds . . . . . . . . . . . . . . .16
Section 2.03. Execution; Limited Obligation . . . . . . . . . . . . . . . . .18
Section 2.04. Authentication. . . . . . . . . . . . . . . . . . . . . . . . .19
Section 2.05. Forms of Bonds; Incorporation of Provisions . . . . . . . . . .19
Section 2.06. Delivery of Bonds . . . . . . . . . . . . . . . . . . . . . . .20
Section 2.07. Mutilated, Destroyed, Lost or Stolen Bonds. . . . . . . . . . .21
Section 2.08. Registration and Exchange of Bonds; Persons Treated as Owners .22
Section 2.09. Destruction of Bonds. . . . . . . . . . . . . . . . . . . . . .24
Section 2.10. Reserved. . . . . . . . . . . . . . . . . . . . . . . . . . . .24
Section 2.11. Temporary Bonds . . . . . . . . . . . . . . . . . . . . . . . .25
Section 2.12. Reserved. . . . . . . . . . . . . . . . . . . . . . . . . . . .25
Section 2.13. Nonpresentment of Bonds . . . . . . . . . . . . . . . . . . . .25
Section 2.14. Termination of Book-Entry System. . . . . . . . . . . . . . . .25
Section 2.15. Redemption Prior to Maturity. . . . . . . . . . . . . . . . . .26
Section 2.16. Notice of Redemption. . . . . . . . . . . . . . . . . . . . . .28
ARTICLE III
REMIC STATUS
Section 3.01. REMIC Election. . . . . . . . . . . . . . . . . . . . . . . . .30
Section 3.02. Tax Compliance. . . . . . . . . . . . . . . . . . . . . . . . .31
Section 3.03. Termination of the REMIC Upon Redemption of the Bonds . . . . .33
Section 3.04. [Reserved]. . . . . . . . . . . . . . . . . . . . . . . . . . .34
Section 3.05. REMIC Taxes . . . . . . . . . . . . . . . . . . . . . . . . . .34
Section 3.06. Limitation of Liability . . . . . . . . . . . . . . . . . . . .34
i
<PAGE>
ARTICLE IV
GENERAL COVENANTS; REPRESENTATIONS AND WARRANTIES
Section 4.01. Payment of Principal and Interest . . . . . . . . . . . . . . .35
Section 4.02. Performance of Covenants. . . . . . . . . . . . . . . . . . . .35
Section 4.03. Instruments of Further Assurance. . . . . . . . . . . . . . . .35
Section 4.04. Recording and Filing. . . . . . . . . . . . . . . . . . . . . .36
Section 4.05. Rights Under the Notes and Loan Documents . . . . . . . . . . .36
Section 4.06. Creation of Liens; Sale of Notes. . . . . . . . . . . . . . . .37
Section 4.07. Books and Funds . . . . . . . . . . . . . . . . . . . . . . . .37
Section 4.08. Covenants Regarding the Residual Holders. . . . . . . . . . . .37
Section 4.09. Duties and Responsibilities of the Sponsor; Indemnification . .38
Section 4.10. List of Bondholders . . . . . . . . . . . . . . . . . . . . . .38
Section 4.11. Maintenance of Casualty Insurance Policy. . . . . . . . . . . .38
Section 4.12. Withholding Taxes . . . . . . . . . . . . . . . . . . . . . . .38
Section 4.13. Direction of Residual Holders for Certain Actions . . . . . . .38
Section 4.14. Moneys to Be Held in Trust. . . . . . . . . . . . . . . . . . .39
Section 4.15. General Representations and Warranties of Sponsor . . . . . . .39
Section 4.16. Special Purpose Representations and Covenants of the Sponsor. .40
Section 4.17 Sponsor Representations and Warranties Regarding Trust Estate .42
ARTICLE V
REVENUES AND TRUST FUNDS
Section 5.01. Creation of Funds and Accounts to be Held by the Trustee. . . .43
Section 5.02. Sponsor Contribution. . . . . . . . . . . . . . . . . . . . . .43
Section 5.03. Debt Service Fund . . . . . . . . . . . . . . . . . . . . . . .43
Section 5.04. The Redemption Fund . . . . . . . . . . . . . . . . . . . . . .44
Section 5.05. The Trust Expense Fund. . . . . . . . . . . . . . . . . . . . .44
Section 5.06. The Residual Fund . . . . . . . . . . . . . . . . . . . . . . .45
Section 5.07. Amounts Remaining in Funds. . . . . . . . . . . . . . . . . . .45
ARTICLE VI
INVESTMENT OF MONEYS . . . . . . . . . . . . . . . . . . . . . . . . . . . . .46
ARTICLE VII
DISCHARGE OF INDENTURE . . . . . . . . . . . . . . . . . . . . . . . . . . . .48
ii
<PAGE>
ARTICLE VIII
EVENTS OF DEFAULT; REMEDIES
Section 8.01. Events of Default . . . . . . . . . . . . . . . . . . . . . . .50
Section 8.02. Waiver, Rescission and Annulment of Remedy Event. . . . . . . .50
Section 8.03. Collection of Indebtedness and Suits for Enforcement by
Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . .50
Section 8.04. Remedies. . . . . . . . . . . . . . . . . . . . . . . . . . . .51
Section 8.05. Trustee May Enforce Claims Without Possession of Bonds. . . . .52
Section 8.06. Application of Moneys Collected . . . . . . . . . . . . . . . .52
Section 8.07. Limitation on Suits . . . . . . . . . . . . . . . . . . . . . .53
Section 8.08. Unconditional Rights of Bondholders to Receive Principal and
Interest. . . . . . . . . . . . . . . . . . . . . . . . . . .53
Section 8.09. Restoration of Rights and Remedies. . . . . . . . . . . . . . .54
Section 8.10. Rights and Remedies Cumulative. . . . . . . . . . . . . . . . .54
Section 8.11. Delay or Omission Not Waiver. . . . . . . . . . . . . . . . . .54
Section 8.12. Control by the Bondholders Until There Are No Outstanding
Bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . .54
Section 8.13. Undertaking for Costs . . . . . . . . . . . . . . . . . . . . .55
Section 8.14. Sale of Trust Estate. . . . . . . . . . . . . . . . . . . . . .55
Section 8.15. Action on Bonds . . . . . . . . . . . . . . . . . . . . . . . .56
Section 8.16. Receiver. . . . . . . . . . . . . . . . . . . . . . . . . . . .56
Section 8.17. Notice of Defaults Under Section 8.01(c); Opportunity of
Sponsor and the Residual Holders to Cure Such Defaults. . . .56
ARTICLE IX
TRUSTEE
Section 9.01. Representations and Warranties of the Trustee; Acceptance
of the Trusts . . . . . . . . . . . . . . . . . . . . . . . .58
Section 9.02. Fees, Charges and Expenses of Trustee . . . . . . . . . . . . .62
Section 9.03. Notice of Default . . . . . . . . . . . . . . . . . . . . . . .63
Section 9.04. Intervention by Trustee . . . . . . . . . . . . . . . . . . . .63
Section 9.05. Successor Trustee . . . . . . . . . . . . . . . . . . . . . . .63
Section 9.06. Resignation by Trustee. . . . . . . . . . . . . . . . . . . . .63
Section 9.07. Removal of Trustee. . . . . . . . . . . . . . . . . . . . . . .64
Section 9.08. Appointment of Successor Trustee; Temporary Trustee . . . . . .64
Section 9.09. Concerning Any Successor Trustee. . . . . . . . . . . . . . . .65
Section 9.10. Designation and Succession of Paying Agents . . . . . . . . . .65
iii
<PAGE>
ARTICLE X
SUPPLEMENTAL INDENTURES
Section 10.01. Supplemental Indentures Without Consent of Bondholders. . . . .67
Section 10.02. Supplemental Indentures With Consent of Bondholders . . . . . .68
Section 10.03. Consent of the Trustee or the Manager . . . . . . . . . . . . .69
Section 10.04. Execution of Supplemental Indentures. . . . . . . . . . . . . .69
Section 10.05. Effect of Supplemental Indentures . . . . . . . . . . . . . . .70
Section 10.06. Reference in Bonds and Certificates to Supplemental Indentures.70
ARTICLE XI
AMENDMENT OF NOTES; LOAN DOCUMENTS
Section 11.01. Amendments to Notes and Loan Documents Without Consent
of Bondholders. . . . . . . . . . . . . . . . . . . . . . . .71
Section 11.02. Amendments to Notes and Loan Documents With Consent of
Bondholders . . . . . . . . . . . . . . . . . . . . . . . . .71
Section 11.03. Execution of Amendments . . . . . . . . . . . . . . . . . . . .71
ARTICLE XII
CERTIFICATES OF RESIDUAL INTEREST
Section 12.01. Creation of Residual Interest; Limited Rights of Sponsor;
Form and Execution of Certificates. . . . . . . . . . . . . .73
Section 12.02. Registration, Transfer and Exchange of Certificates . . . . . .73
Section 12.03. Lost, Stolen, Destroyed or Mutilated Certificates . . . . . . .76
Section 12.04. Communications With Other Residual Holders. . . . . . . . . . .77
Section 12.05. Initial Issuance of Certificates. . . . . . . . . . . . . . . .77
Section 12.06. Payments, Distributions and Reports . . . . . . . . . . . . . .77
Section 12.07. [Reserved]. . . . . . . . . . . . . . . . . . . . . . . . . . .78
Section 12.08. Covenants of Residual Holders . . . . . . . . . . . . . . . . .78
Section 12.09. [RESERVED]. . . . . . . . . . . . . . . . . . . . . . . . . . .79
Section 12.10. Liability for Unclaimed Moneys Under the Indenture. . . . . . .79
Section 12.11. Appointment of the Manager. . . . . . . . . . . . . . . . . . .79
Section 12.12. Duties of the Manager . . . . . . . . . . . . . . . . . . . . .79
Section 12.13. Other Duties of the Manager . . . . . . . . . . . . . . . . . .80
Section 12.14. Cooperation of Parties; Furnishing of Information . . . . . . .81
Section 12.15. Manager Compensation. . . . . . . . . . . . . . . . . . . . . .81
Section 12.16. Covenants of the Manager. . . . . . . . . . . . . . . . . . . .82
Section 12.17. Manager May Seek Instructions . . . . . . . . . . . . . . . . .82
Section 12.18. Obligations of Residual Holders . . . . . . . . . . . . . . . .83
Section 12.19. Indemnification . . . . . . . . . . . . . . . . . . . . . . . .83
iv
<PAGE>
Section 12.20. Independence of the Manager . . . . . . . . . . . . . . . . . .84
Section 12.21. Termination of the Manager. . . . . . . . . . . . . . . . . . .84
Section 12.22. Limitation of Liability of the Manager. . . . . . . . . . . . .85
ARTICLE XIII
MISCELLANEOUS
Section 13.01. Compliance Certificates and Opinions. . . . . . . . . . . . . .87
Section 13.02. Form of Documents Delivered to Trustee. . . . . . . . . . . . .87
Section 13.03. Acts of Bondholders . . . . . . . . . . . . . . . . . . . . . .88
Section 13.04. Notices to Holders; Waiver. . . . . . . . . . . . . . . . . . .88
Section 13.05. Legal Holidays. . . . . . . . . . . . . . . . . . . . . . . . .89
Section 13.06. Nature of Interest in Trust Estate. . . . . . . . . . . . . . .89
Section 13.07. Severability. . . . . . . . . . . . . . . . . . . . . . . . . .90
Section 13.08. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . .90
Section 13.09. Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . .90
Section 13.10. Applicable Provisions of Law. . . . . . . . . . . . . . . . . .90
Section 13.11. Captions; References in Indenture . . . . . . . . . . . . . . .90
Section 13.12. Parties Interested Herein . . . . . . . . . . . . . . . . . . .91
TESTIMONIUM
SIGNATURES
EXHIBIT A CLASS A BOND FORM
EXHIBIT B CLASS B BOND FORM
EXHIBIT C RESIDUAL CERTIFICATE FORM
EXHIBIT D CERTIFICATE TRANSFER AFFIDAVIT
EXHIBIT E CERTIFICATE TRANSFEREE'S AGREEMENT FORM
EXHIBIT F LOAN DOCUMENTS
EXHIBIT G SCHEDULE OF AMOUNTS TO BE RESERVED AGAINST FUTURE BOND
PRINCIPAL PAYMENTS
EXHIBIT H CERTIFICATE TO BE DELIVERED UPON EXCHANGE OR REGISTRATION
OF TRANSFER OF BONDS FORM
v
<PAGE>
TRUST INDENTURE
This TRUST INDENTURE is made and entered into as of March 1, 1996 (the
"Indenture") by and between BFC FINANCE CORP., a Delaware corporation (together
with any successor to its rights, duties and obligations hereunder, the
"Sponsor"), and SOUTHTRUST BANK OF ALABAMA, NATIONAL ASSOCIATION, a national
banking association duly organized and existing under the laws of the United
States of America, as trustee, bond registrar and paying agent (together with
any successor hereunder, the "Trustee"). CAPITALIZED TERMS HEREIN, UNLESS
OTHERWISE DEFINED, SHALL HAVE THE MEANINGS SET FORTH IN ARTICLE I.
R E C I T A L S :
1. Parcel 49C Limited Partnership, a District of Columbia limited
partnership ("49C"), has acquired fee simple title to certain real property in
the District of Columbia located at 445 12th Street, S.W. and proposes to
construct thereon an office building to be known as Portals II, containing an
aggregate of approximately 545,000 square feet of net usable area, a detached
parking garage and certain other related facilities (such real estate and the
improvements to be constructed thereon, the "Project"). 49C has entered into a
lease (Lease No. GS-11B-40155, effective January 3, 1996, the "GSA Lease") with
the United States of America acting through the General Services Administration
(the "GSA") for a total of 449,859 net usable square feet of office and related
space to be located within such office building and constructed, owned and
managed by 49C (the "GSA Leased Space"). Following construction, the GSA Leased
Space is expected to be used initially by the Federal Communications Commission.
2. In connection with the refinancing of the acquisition of the real
estate related to the Project, 49C has executed and delivered an amended and
restated promissory note evidencing an acquisition loan in the amount of
$27,087,366.74 (the "Acquisition Loan") to Building Finance Company of
Tennessee, Inc. (the "Lender").
3. To finance the construction of the improvements related to the
Project, 49C has entered into a Loan Agreement dated as of March 1, 1996 with
the Lender (the "Loan Agreement"), pursuant to which 49C has borrowed the sum of
$99,000,000 from the Lender.
4. To evidence the Acquisition Loan, 49C has executed and delivered a
note in the amount of $27,087,366.74 (the "Acquisition Note"). To secure its
obligations under the Acquisition Note, 49C has executed and delivered various
documents specified therein (collectively and as further described on Exhibit F,
the "Acquisition Loan Documents"). Pursuant to the Construction Loan Agreement,
49C has executed and delivered to the Lender a note in the amount of $99,000,000
(the "Construction Note," and together with the Acquisition Note, the "49C
Notes") to memorialize its obligations thereunder and various other documents
specified therein securing or relating to the indebtedness evidenced by the
Construction Note (collectively and as further described on Exhibit F, the
"Construction Loan Documents," and
<PAGE>
together with the Acquisition Loan Documents, the "49C Loan Documents"). The
49C Notes are primarily secured by deeds of trust (collectively, the "Deed of
Trust") on the Project and by an assignment of the lease payments to be made
under the GSA Lease.
5. The base rent payable under the GSA Lease is based on an initial
annual rental rate of $38.85 per net usable square foot for the first 287,483 of
net usable square feet of space leased and $37.95 per net usable square foot for
the remaining 162,376 of net usable square feet leased for a total initial
amount of $17,330,883.75 per year, or $1,444,240.31 per month. The Government
may deduct from the base rent during any year of the term of the GSA Lease an
amount which will not exceed $8.50 per net usable square foot (which amount may
be increased each year in accordance with a formula set forth in the GSA Lease
using the same methodology for calculating the increase in the rent for
operating costs set forth in the GSA Lease) for 49C's failure to perform its
obligations under the GSA Lease. Consequently, the total base rent not subject
to set-off is $13,507,082.22 per year, or $1,125,590.19 per month. Full rent is
payable in equal monthly installments in arrears commencing March 1, 1998.
6. To finance the loans to 49C, the Lender has formed the Sponsor as a
special purpose entity and absolutely sold and assigned to the Sponsor all of
its rights, title and interest in and to the 49C Notes and the 49C Loan
Documents pursuant to a Sale Agreement dated as of March 1, 1996 between the
Lender and the Sponsor (the "Sale Agreement") (excluding scheduled interest
payments on the 49C Notes for interest which accrues through January 31, 1998
and certain other rights with respect to construction of the Project as therein
described).
7. Concurrently with such absolute sale and assignment, the Sponsor is
lending to DCDC II, Inc., a Colorado corporation ("DCDC II"), the sum of
$9,310,689.07, in exchange for which the Sponsor will receive from DCDC II a
note in such principal amount (the "DCDC II Note"). The DCDC II Note will be
secured by various documents specified therein, including a deed of trust on
approximately 300 acres of undeveloped land in Castle Rock, Colorado (the "DCDC
II Deed of Trust") and a collateral pledge agreement (such documents
collectively and as further described on Exhibit F, the "DCDC II Loan
Documents").
8. The Sponsor now desires to deposit the 49C Notes, the DCDC II Note
(collectively, the "Notes"), the 49C Loan Documents and the DCDC II Loan
Documents (collectively, the "Loan Documents") into the trust created hereby and
to issue various classes of debt secured by the Notes, the payments thereon
(excluding scheduled interest payments on the 49C Notes for interest which
accrues through January 31, 1998) (the "Note Payments"), the Loan Documents and
the other security constituting the Trust Estate.
9. 49C shall make Note Payments from the sources (primarily payments on
the GSA Lease) and in the manner provided in the Loan Agreement. To facilitate
such payments, SouthTrust Bank of Alabama, National Association shall establish,
hold and administer the Income Account and the Cash Flow Account specified in
the Loan Agreement as Approved Bank under the Loan Agreement and not in its
capacity as Trustee hereunder.
2
<PAGE>
10. The Sponsor has determined (i) to issue and sell $142,000,000
aggregate original principal amount REMIC Lease-Backed Bonds, Series 1996 (the
"Bonds") in two classes as hereafter described and (ii) to cause to be issued,
concurrent with issuance and sale of the Bonds, the Series 1996 REMIC Residual
Certificates (the "Certificates") evidencing ownership of all of the Residual.
The initial Holder of all the Certificates shall be the Sponsor.
11. The Bonds shall be issued in two classes. The Class A Bonds shall be
issued in the total original principal amount of $74,925,000 and the Class B
Bonds (collectively with the Class A Bonds, the "Bonds") shall be issued in the
total original principal amount of $67,075,000. The Class A Bonds shall be sold
in a public offering and the Class B Bonds shall be placed with BFC Guaranty
Corp., as assignee of the Lender.
12. The Class A Bonds, Class B Bonds and the Certificates shall be in
substantially the forms set forth in Exhibits A, B and C to this Indenture, with
necessary and appropriate variations, omissions and insertions as permitted or
required by this Indenture.
13. All things necessary to make the Bonds, when authenticated by the
Trustee and issued as in this Indenture provided, the valid, binding and legal
special and limited obligations of the Sponsor according to the import thereof,
and to constitute this Indenture a valid assignment and Grant of the Trust
Estate; and for the creation, execution and delivery of this Indenture, and the
issuance of the Bonds and the Certificates, subject to the terms hereof, have in
all respects been duly authorized.
NOW, THEREFORE, THIS TRUST INDENTURE WITNESSETH:
GRANTING CLAUSES
The Sponsor, in consideration of the premises and the acceptance by the
Trustee of the trusts hereby created and of the acceptance of the Bonds and the
Certificates by the owners thereof, and for other good and valuable
consideration, the receipt of which is hereby acknowledged, in order to secure
the payment of the principal of and interest on the Bonds according to their
tenor and effect, to provide for the Grant of the Residual and to secure the
performance and observance by the Sponsor of all the covenants expressed herein
and in the Bonds, does hereby irrevocably Grant to the Trustee, and its
successors in trust and assigns forever, all of the Sponsor's right, title and
interest in and to (a) the Notes and the Note Payments, (b) the Loan Documents,
(c) all moneys, securities and investments deposited with the Trustee on the
Closing Date or thereafter and held in all Trust Funds created hereunder,
(d) the Casualty Insurance Policy, (e) its security interest in the Income
Account and the Cash Flow Account, (f) all proceeds of the foregoing, including,
without limitation, all proceeds of the conversion, voluntary or involuntary, of
any of the foregoing into cash or other liquid property, tangible and
intangible, and (g) all other property, tangible and intangible, from time to
time deposited with or pledged to the Trustee in accordance with this Indenture
(collectively, the "Trust Estate").
3
<PAGE>
TO HAVE AND TO HOLD all and singular the Trust Estate, whether now owned or
hereafter acquired, unto the Trustee and its successors in trust and assigns
forever;
IN TRUST NEVERTHELESS, upon the terms and trusts herein set forth for the
benefit and security of all present and future owners of the Bonds, as their
respective interests may appear, without preference of any Bond over any other
except for the availability of certain different remedies among the Holders of
the Class A Bonds and the Class B Bonds, and for enforcement of the payment of
the Bonds in accordance with their terms, and all other sums payable hereunder
or on the Bonds and for the performance of and compliance with the obligations,
covenants and conditions of this Indenture, as if all the Bonds at any time
Outstanding had been authenticated, executed and delivered simultaneously with
the execution and delivery of this Indenture, all as herein set forth;
PROVIDED, HOWEVER, that, if the Residual Holders shall cause to be paid the
principal of and interest on the Bonds due thereon, at the times and in the
manner mentioned in such Bonds according to the true intent and meaning thereof,
and shall cause the payments to be made as required under the provisions of this
Indenture, or shall provide, as provided for in Article VII of this Indenture,
for the payment thereof, and there shall have been well and truly kept,
performed and observed all the covenants and conditions pursuant to the terms of
this Indenture, and there shall have been paid or caused to be paid to the
Trustee and any Paying Agent all sums of money due or to become due in
accordance with the terms and provisions hereof, then, upon the last to occur of
such events, this Indenture and the rights hereby Granted with respect to the
Bonds shall cease, determine and be void, otherwise this Indenture to be and
remain in full force and effect.
AND, PROVIDED, FURTHER, the Sponsor irrevocably Grants, subject to the
rights specifically reserved to the Sponsor under this Indenture, all of its
rights, titles and interests in the Residual to the Residual Holders.
Notwithstanding anything herein to the contrary, such irrevocable sale,
transfer, assignment and Grant shall at all times be subject and subordinate to
the rights of the Trustee and the Bondholders in and to the Trust Estate as
provided in this Indenture. In no event shall the Sponsor be entitled to retain
any economic benefits from the exercise of any rights, duties and obligations
under this Indenture other than its rights, if any, to indemnification.
AND, PROVIDED, FURTHER, the Trustee agrees to accept receipt of the Trust
Estate and the Grants and assignments referred to herein, and declares that it
holds and will hold, the same for the sole benefit of Bondholders and the
Residual Holders, as their respective interests may appear.
THIS TRUST INDENTURE FURTHER WITNESSETH, and it is expressly declared, that
all the Bonds and Certificates issued and secured hereunder are to be issued,
authenticated and delivered, and all said property, rights and interests,
including, without limitation, the amounts hereby assigned and Granted, are to
be dealt with and disposed of, under, upon and subject to the terms, conditions,
stipulations, covenants, agreements, trusts, uses and purposes
4
<PAGE>
hereinafter expressed, and the Sponsor has agreed and covenanted, and does
hereby agree and covenant, with the Trustee, the respective owners of the
Bonds and the Residual Holders from time to time, as follows (subject,
however, to the provisions of Section 2.03):
5
<PAGE>
ARTICLE I
DEFINITIONS
Except as otherwise specified or as the context may otherwise require, the
following terms have the respective meanings set forth below for all purposes of
this Indenture, and the definitions of such terms are applicable to the singular
as well as to the plural forms of such terms and to the masculine as well as to
the feminine and neuter genders of such terms.
"ACCOUNTANT" shall mean a person or firm engaged in the practice of
accounting who is a nationally recognized certified public accountant approved
by the Trustee and who (except when this Indenture provides that an Accountant
must be Independent) may be employed by the Sponsor, the Trustee or the Residual
Holders.
"ACQUISITION LOAN" shall have the meaning set forth in the Recitals.
"ACQUISITION LOAN DOCUMENTS" shall mean those documents specified as such
on Exhibit F hereto.
"ACQUISITION NOTE" shall have the meaning set forth in the Recitals.
"AUTHORIZED OFFICER" shall mean, with respect to the Sponsor, the
President, the Vice President or the Secretary of the Sponsor or any other
Persons authorized by resolution of the Sponsor to perform an act or sign a
document.
"BENEFICIAL OWNER" shall mean any purchaser of a Bond and others who
acquire beneficial ownership interest in a Bond held by the Securities
Depository. In determining the Beneficial Owner of any Bond, the Trustee may
rely exclusively upon written representations made, and information given, to
the Trustee by the Securities Depository or its Participants through the
Securities Depository with respect to any Bond held by the Securities Depository
in which a beneficial ownership interest is claimed.
"BONDHOLDER" or "HOLDER" shall mean the Person in whose name a Bond is
registered in the Bond Register.
"BOND PAYMENT DATE" shall mean any Interest Payment Date and any other date
on which the principal, premium (if any) or interest on the Bonds to be paid to
the Owners thereof (whether at maturity thereof, or upon prior redemption or
acceleration).
"BOND REGISTER" shall mean the register for the registration of the Bonds
established by the Trustee pursuant to Section 2.08 hereof.
"BOND REGISTRAR" shall mean the Trustee or any other entity subsequently
appointed to serve in such capacity.
6
<PAGE>
"BONDS" shall mean the $142,000,000 aggregate initial principal amount of
REMIC Lease-Backed Bonds, Series 1996, issued pursuant to this Indenture,
consisting of the Class A Bonds and the Class B Bonds.
"BUSINESS DAY" shall mean any day that is not a Saturday or Sunday or other
day on which banking institutions in the city in which the Corporate Trust
Office is located or in New York, New York, are authorized or obligated by law
or executive order to be closed or any day on which the payment system of the
Federal Reserve is not operational.
"CASH FLOW ACCOUNT" shall mean the Cash Flow Account specified in the Loan
Agreement and held by SouthTrust Bank of Alabama, National Association as
Approved Bank thereunder.
"CASTLE ROCK PLEDGE AGREEMENT" shall mean the Bond Pledge and Security
Agreement dated as of March 1, 1996 among BFC Guaranty Corp., the Trustee and
SouthTrust Bank of Alabama, National Association, in its capacity as trustee for
the Castle Rock Ranch Public Improvements Authority Public Facilities Revenue
Bonds, Series 1996.
"CASUALTY INSURANCE POLICY" shall mean the casualty insurance policy in the
amount of $151,000,000 issued by USF&G to insure the Project with respect to
certain casualty events and rental interruption events described therein and
naming the Trustee as insured thereunder, and any replacement policy delivered
to the Trustee pursuant to Section 4.11.
"CERTIFICATE OF RESIDUAL INTEREST" or "CERTIFICATE" shall mean each
certificate representing a fractional undivided beneficial ownership interest in
the Residual in substantially the form attached hereto as Exhibit C.
"CERTIFICATE REGISTER" shall mean the register for the registration of the
Certificates established by the Trustee pursuant to Section 12.02(a) hereof.
"CLASS" shall mean any of the 2 classes (A or B) designated for issuance of
the Bonds pursuant to Section 2.02.
"CLASS A BONDS" shall mean the Bonds designated as such authorized pursuant
to Section 2.02.
"CLASS B BONDS" shall mean the Bonds designated as such authorized pursuant
to Section 2.02.
"CLOSING DATE" shall mean March 29, 1996, the date on which the Bonds and
the Certificates are first executed, authenticated and delivered.
"CODE" shall mean the Internal Revenue Code of 1986, as amended, together
with corresponding and applicable final, temporary or proposed regulations and
revenue rulings issued
7
<PAGE>
or amended with respect thereto by the Treasury Department or the Internal
Revenue Service of the United States, to the extent applicable to the Bonds
or the REMIC election.
"CONSTRUCTION LOAN DOCUMENTS" shall mean those documents specified as such
on Exhibit F hereto.
"CONSTRUCTION NOTE" shall have the meaning set forth in the Recitals.
"CORPORATE TRUST OFFICE" shall mean the principal corporate trust office of
the Trustee, located at Post Office Box 2554, 100 Office Park Drive, Lower
Level, Birmingham, Alabama 35290; Attention: Corporate Trust Department, or such
other address as the Trustee may designate from time to time by notice to the
Bondholders, the Residual Holders and the Sponsor, or the principal corporate
trust office of any successor Trustee.
"DCDC II" shall mean DCDC II, Inc., a Colorado corporation, its successors
and assigns.
"DCDC II DEED OF TRUST" shall have the meaning set forth in the Recitals.
"DCDC II LOAN DOCUMENTS" shall mean those documents specified as such on
Exhibit F hereto.
"DCDC II NOTE" shall have the meaning set forth in the Recitals.
"DEBT SERVICE FUND" shall mean the fund of that name established pursuant
to Section 5.01.
"DEFAULT" shall mean any occurrence which is, or, with notice or lapse of
time or both, would become, an Event of Default.
"DISQUALIFIED ORGANIZATION" shall mean either (i) the United States, any
State or political subdivision thereof, any foreign government, any
international organization, or any agency or instrumentality of any of the
foregoing, (ii) any organization (other than a cooperative described in Section
521 of the Code) which is exempt from the tax imposed by Chapter 1 of the Code
unless such organization is subject to the tax imposed by Section 511 of the
Code or (iii) any organization described in Section 1381(a)(2)(C) of the Code. A
corporation will not be treated as an instrumentality of the United States or of
any State or political subdivision thereof if all of its activities are subject
to tax, and, with the exception of the FHLMC, a majority of its board of
directors is not selected by such governmental unit.
"DTC REPRESENTATION LETTER" shall mean the agreement among the Sponsor, the
Trustee and the Securities Depository with respect to the deposit of Bonds
therewith.
8
<PAGE>
"ELIGIBLE ACCOUNT" shall mean a segregated trust account maintained with
the corporate trust department of a federal depository institution or state-
chartered depository institution subject to regulations regarding fiduciary
funds on deposit similar to Title 12 of the Code of Federal Regulations Section
9.10(b) which has corporate trust powers, acting in its fiduciary capacity.
"ERISA" shall mean the provisions of the Employee Retirement Income
Security Act of 1974 and the related provisions of Code Section 4975, as amended
from time to time, and any applicable rule, regulation or order promulgated
thereunder.
"EVENT OF DEFAULT" shall mean any event specified in Section 8.01.
"FHLMC" shall mean the Federal Home Loan Mortgage Corporation, a
corporation organized and existing under the laws of the United States of
America, and its successors.
"49C" shall mean Parcel 49C Limited Partnership, its successors and
assigns.
"GOVERNMENT SECURITIES" shall mean, and includes, any of the following
investments, to the extent permitted or authorized by the laws of the State at
the time purchased by the Trustee:
(a) direct obligations of, or obligations the principal of and
interest on which are unconditionally guaranteed by, the United States of
America (including obligations issued or held in book-entry form on the
books of the Department of the Treasury of the United States of America);
(b) bonds, debentures, notes or other evidence of indebtedness issued
or guaranteed by any of the following federal agencies and provided such
obligations are backed by the full faith and credit of the United States of
America (stripped securities are only permitted if they have been stripped
by the agency itself):
(i) U.S. Export-Import Bank (direct obligations or fully
guaranteed certificates of beneficial ownership);
(ii) Farmers Home Administration (certificates of beneficial
ownership);
(iii) Federal Financing Bank;
(iv) General Services Administration participation certificates;
(v) Government National Mortgage Association ("GNMA") guaranteed
mortgage-backed bonds and pass through certificate obligations;
(vi) U.S. Maritime Administration guaranteed Title XI financing
obligations; or
9
<PAGE>
(vii) U.S. Department of Housing and Urban Development (HUD)
project notes, local authority bonds, new communities debentures (U.S.
guaranteed) and U.S. public housing notes and bonds -- U.S. government
guaranteed public housing notes and bonds; and
(c) any money market fund which invests solely in the types of
securities described in clauses (a) and (b) above, provided such fund is
rated AAAm or AAAmG by the Rating Agency.
"GRANT" shall mean to grant, bargain, sell, warrant, alienate, demise,
release, convey, assign, transfer, mortgage, pledge, create and grant a security
interest or ownership in and right of setoff against, deposit, set over and
confirm. A Grant of the Sponsor's rights with respect to the Trust Estate and
the Residual hereunder and in and to amounts released from the lien of this
Indenture or any other instruments shall include all rights, powers and options
thereof.
"GSA LEASE" shall have the meaning set forth in the Recitals.
"HOLDER" shall mean a Bondholder, a Residual Holder, or both, as the
context requires.
"INCOME ACCOUNT" shall mean the Income Account specified in the Loan
Agreement to be held by SouthTrust Bank of Alabama, National Association as
Approved Bank thereunder.
"INDENTURE" shall mean this instrument as originally executed and, if from
time to time supplemented or amended by one or more indentures supplemental
hereto entered into pursuant to the applicable provisions hereof, as so
supplemented or amended.
"INDEPENDENT" shall mean, when used with respect to any specified Person,
such a Person who (i) is in fact independent of the Sponsor, the Trustee, any
Residual Holder or the Manager or any affiliate thereof, (ii) does not have any
direct or any material indirect financial interest in the Sponsor, the Trustee,
any Residual Holder or the Manager or in an affiliate thereof, and (iii) is not
connected with the Sponsor, the Trustee, any Residual Holder or the Manager as
an officer, employee, promoter, underwriter, trustee, partner, director or
person performing similar functions. Whenever it is herein provided that any
Independent Person's opinion or certificate shall be furnished to the Trustee,
such Person shall be designated or appointed in an Officer's Certificate and
approved by the Trustee in the exercise of reasonable due care and such opinion
or certificate shall state that the signer has read this definition and that the
signer is Independent within the meaning hereof.
"INDEPENDENT DIRECTOR" shall mean, with respect to the Sponsor, an
individual who is not at the time of such individual's appointment as a director
of the Sponsor, and has not been at any time during the preceding five years,
and does not become subsequently, (a) a direct or indirect legal or beneficial
owner in the Sponsor or any of its affiliates, (b) a creditor, supplier,
employee, officer, director (other than during such individual's tenure as
director of the Sponsor) family member, manager or contractor of the Sponsor or
any of its affiliates, or (c) a person
10
<PAGE>
who controls (whether directly, indirectly or otherwise) the Sponsor or its
affiliates or any creditor, supplier, employee, officer, director, manager or
contractor of the Sponsor or its affiliates.
"INTEREST PAYMENT DATE" shall mean, with respect to the Class A Bonds, each
June 1 and December 1, commencing December 1, 1996, and with respect to the
Class B Bonds, each June 1 and December 1, commencing June 1, 1998.
"INVESTMENT AGREEMENT" means each agreement between the Trustee and each
Investment Agreement provider, providing for the deposit and investment of
monies held under the Indenture, including the Debt Service Deposit Agreement
dated as of March 29, 1996 among the Trustee, the Sponsor and Lehman Brothers
Special Financing Inc., a Delaware corporation, as to the monies deposited in
the Debt Service Fund, or any substituted agreement which shall be in
substantially the same form as the initial Debt Service Deposit Agreement and
shall have no adverse impact on the Rating Agency's rating on the Bonds as
determined by written confirmation of the Rating Agency.
"LENDER" shall mean Building Finance Company of Tennessee, Inc., a
Tennessee corporation, its successors and assigns.
"LOAN AGREEMENT" shall have the meaning set forth in the Recitals.
"LOAN DOCUMENTS" shall mean the documents specified on Exhibit F hereto as
the same may be amended or supplemented in accordance with Article XI.
"MAJORITY RESIDUAL HOLDERS" shall mean the Holders of a majority in
interest of Certificates.
"MANAGER" shall mean, initially, the Lender and any successor entity
assuming the duties of the Manager specified in Article XII hereof.
"1933 ACT" shall mean the Securities Act of 1933, as amended.
"NON-DISQUALIFICATION OPINION" shall mean, with respect to any action
proposed to be taken under this Indenture, an Opinion of Counsel to the effect
that the taking of such action will not cause the Trust Estate to fail to
qualify as a REMIC at any time while any Bonds are Outstanding and will not
result in the imposition of a tax pursuant to Section 860F(a) of the Code or
otherwise subject the Trust Estate to taxation.
"NOTE PAYMENT" shall have the meaning set forth in the Recitals.
"NOTES" shall mean the Acquisition Note, the Construction Note and the
DCDC II Note.
11
<PAGE>
"NOTICE ADDRESS" shall mean:
(a) As to the Sponsor:
BFC Finance Corp.
1455 Pennsylvania Avenue, N.W.
Suite 230
Washington, D.C. 20004
Attention: President
(b) As to the Trustee:
SouthTrust Bank of Alabama, National Association
Post Office Box 2554
100 Office Park Drive
Lower Level
Birmingham, AL 35290
Attention: Corporate Trust Office
(c) As to the Rating Agency:
Standard & Poor's Ratings Services
25 Broadway
New York, New York 10004
Attention: Public Finance Group
(d) As to the Manager:
Building Finance Company of Tennessee, Inc.
1455 Pennsylvania Avenue, N.W.
Suite 230
Washington, D.C. 20004
Attention: President
The Sponsor, the Rating Agency, the Manager or the Trustee may, by notice given
to the parties hereto and to the Manager and the Rating Agency, designate any
further or different addresses to which subsequent notices, certificates or
other communications shall be sent.
"OFFICER'S CERTIFICATE" shall mean a certificate executed by an Authorized
Officer.
"OPINION OF COUNSEL" shall mean a written opinion signed by any attorney or
firm of attorneys (who may be employed by or of counsel to the Sponsor, the
Trustee, a Residual Holder or the Manager or an attorney or firm of attorneys
retained by any of them in connection with other matters) licensed to practice
in the state in which such attorney or firm maintains an office (and, if the
opinion is with respect to an interpretation of federal tax laws or regulations
12
<PAGE>
or any pledge under or amendment of this Indenture, is also a nationally
recognized Independent attorney or firm of attorneys experienced in such
matters), selected by or employed on behalf of the Sponsor, the Trustee, a
Residual Holder or the Manager and who shall be reasonably satisfactory to the
Trustee. Whenever an Opinion of Counsel is required hereunder, such opinion may
rely on the opinions of other counsel who are so admitted.
"OUTSTANDING" shall mean, with respect to all Bonds, as of the date of
determination, all Bonds theretofore authenticated and delivered under this
Indenture, except:
(a) Bonds theretofore cancelled by the Bond Registrar or delivered to
the Bond Registrar for cancellation;
(b) Bonds for the payment or redemption of which cash funds or
direct, noncallable Government Securities of the type described in (a) or
(b) of the definition of "GOVERNMENT SECURITIES" or any combination thereof
in the necessary amount shall have been deposited with the Trustee or any
Paying Agent (whether upon or prior to the stated maturity or redemption
date of any such Bonds) as provided in Article VII; provided that, if such
Bonds are to be redeemed prior to the stated maturity thereof, notice of
such redemption shall have been given or arrangements satisfactory to the
Trustee shall have been made therefor, or waiver of such notice
satisfactory in form to the Trustee shall have been filed with the Trustee;
and
(c) Bonds in exchange for or in lieu of which other Bonds have been
authenticated and delivered pursuant to this Indenture.
"PARTICIPANTS" shall mean brokers, dealers, banks and other financial
institutions and other Persons for whom, from time to time, the Securities
Depository effects book-entry transfers and pledges of securities deposited with
the Securities Depository.
"PAYING AGENT" shall mean any bank or trust company designated pursuant to
Section 9.10 to serve as a paying agency or place of payment for the Bonds and
any successors designated pursuant to this Indenture. Unless otherwise
designated by the Sponsor, the Trustee shall be the Paying Agent.
"PERSON" shall mean any individual, corporation, partnership, joint
venture, association, joint stock company, trust (including any beneficiary
thereof), unincorporated organization or government or any agency or political
subdivision thereof.
"PROCEEDING" shall mean any suit in equity, law or other judicial or
administrative proceeding.
"PROJECT" shall have the meaning set forth in the Recitals.
13
<PAGE>
"RATING AGENCY" shall mean Standard & Poor's Ratings Services. If Standard
& Poor's Ratings Services is no longer rating any of the Bonds, "Rating Agency"
means any nationally recognized statistical rating organization which is then
rating the Bonds.
"RECORD DATE" shall mean the 15th day preceding each Interest Payment Date.
"REDEMPTION FUND" shall mean the Fund of that name established pursuant to
Section 5.01.
"REMIC" shall mean the segregated asset pool comprising the Trust Estate
for which an election to be taxed as a "real estate mortgage investment conduit"
under the Code will be made pursuant to Section 3.01 hereof.
"REPLACEMENT BONDS" shall mean the certificated Bonds authenticated and
delivered by the Trustee pursuant to Section 2.14(b).
"RESIDUAL" shall mean the economic benefit to the Sponsor of the Trust
Estate arising by, through or under this Indenture, including the amounts of
cash representing that portion of the Trust Estate which is in excess of the
amounts required to be applied from the Trust Estate to pay or provide for
payment of the Bonds and expenses hereunder (the "Excess Cash Flow") in
accordance with the terms of this Indenture, which Residual is being assigned by
the Sponsor pursuant to this Indenture.
"RESIDUAL DISTRIBUTION DATE" shall mean each June 1 and December 1,
commencing December 1, 1996.
"RESIDUAL FUND" shall mean the Fund of that name established pursuant to
Section 5.01.
"RESIDUAL HOLDER" shall mean the owner of a fractional undivided interest
in the Residual pursuant to this Indenture.
"RESIDUAL RECORD DATE" shall mean the Business Day before a Residual
Distribution Date.
"SALE AGREEMENT" shall have the meaning set forth in the Recitals.
"SECURITIES DEPOSITORY" shall mean, with respect to any Class of Bonds to
be issued in book entry form, The Depository Trust Company, and its successors
and assigns or a successor clearing agency designated pursuant to Section 2.14
and its successors and assigns.
"SPECIAL TAX COUNSEL" shall mean Kutak Rock.
"SPONSOR" shall mean BFC Finance Corp., a Delaware corporation, its
successors and assigns.
14
<PAGE>
"SPONSOR'S CONSENT" shall mean the Waiver of Notice and Unanimous Written
Consent of the Board of Directors of the Sponsor dated March 21, 1996,
authorizing the issuance of the Bonds and the Certificates and the execution and
delivery of this Indenture and certain related documents.
"STATE" shall mean the State of Delaware.
"TRUSTEE" shall mean SouthTrust Bank of Alabama, National Association,
solely in its capacity as trustee, paying agent and bond registrar hereunder,
and its successors and assigns.
"TRUST ESTATE" shall mean the property, rights, moneys, securities and
other amounts Granted to the Trustee pursuant to the Granting Clauses hereof and
all other money, instruments or property subject to the lien of this Indenture.
"TRUST EXPENSE FUND" shall mean the Fund of that name established pursuant
to Section 5.01.
"TRUST FUNDS" shall mean the funds designated as such in Section 5.01.
"TRUST OFFICER" shall mean any officer of the Trustee or the Co-Trustee so
designated by the Trustee or the Co-Trustee.
"UCC" shall mean the Uniform Commercial Code as enacted and in effect in
the State, as applicable, as amended from time to time.
"UNDERWRITER" shall mean Lehman Brothers Inc.
(End of Article I)
15
<PAGE>
ARTICLE II
THE BONDS AND PAYMENTS ON THE BONDS
Section 2.01. AUTHORIZED AMOUNT OF BONDS.
No Bonds may be issued under the provisions of this Indenture except in
accordance with this Article II. The total aggregate principal amount of Bonds
that may be issued and authenticated hereunder is expressly limited to an
original face amount of $142,000,000. No additional Bonds may be issued except
for Bonds authenticated and delivered upon registration of transfer of, or in
exchange for, or in lieu of other Bonds as provided in Sections 2.05, 2.07,
2.08, 2.11 and 2.14.
Section 2.02. ISSUANCE OF AND PAYMENTS ON BONDS.
(a) There is hereby authorized to be issued upon satisfaction of the
conditions specified in Section 2.06 Bonds designated "BFC Finance Corp. REMIC
Lease-Backed Bonds, Series 1996," in two classes designated "Federal Lease-
Backed Class A," and "Federal Lease-Backed Class B," in the initial aggregate
principal amount of $142,000,000.
(b) The Bonds initially shall be issued only as fully registered Bonds
without coupons. Each Class of Bonds shall mature on the dates and in the
principal amounts and shall bear interest on the Outstanding principal amounts
thereof at the interest rates per annum set forth below:
CLASS A BONDS
Original Interest
Principal Rate
Stated Maturities Amount (Per Annum)
----------------- ----------- -----------
December 1, 1998 $ 2,630,000 6.125%
December 1, 1999 1,990,000 6.250
December 1, 2000 2,115,000 6.375
December 1, 2001 2,250,000 6.500
December 1, 2002 2,400,000 6.625
December 1, 2008 18,245,000 6.875
December 1, 2017 45,295,000 7.375
16
<PAGE>
CLASS B BONDS
Original Interest
Principal Rate
Stated Maturities Amount (Per Annum)
----------------- ----------- -----------
December 1, 1998 $ 5,000 5.750%
December 1, 1999 1,985,000 5.750
December 1, 2000 2,100,000 5.750
December 1, 2001 2,220,000 5.750
December 1, 2002 2,345,000 5.750
December 1, 2003 2,480,000 5.900
December 1, 2004 2,625,000 6.000
December 1, 2005 2,785,000 6.100
December 1, 2006 2,955,000 5.700
December 1, 2007 3,120,000 6.300
December 1, 2008 3,315,000 6.400
December 1, 2009 3,530,000 6.500
December 1, 2010 3,760,000 6.375
December 1, 2011 4,000,000 6.375
December 1, 2012 4,255,000 6.250
December 1, 2013 4,520,000 6.250
December 1, 2014 4,800,000 6.250
December 1, 2015 5,100,000 6.250
December 1, 2016 5,420,000 6.250
December 1, 2017 5,755,000 6.250
(c) Each Class of Bonds shall be numbered from R-1 upwards. The Class A
Bonds shall be issued in authorized denominations of $100,000 and multiples of
$5,000 in excess thereof and shall bear interest payable semiannually on each
June 1 and December 1 commencing December 1, 1996. Except for the Class B Bonds
with a stated maturity date of December 1, 1998 which shall be issued in an
authorized denomination of $5,000, the Class B Bonds shall be issued in
authorized denominations of $100,000 and multiples of $5,000 in excess thereof
and shall bear interest payable semiannually on each June 1 and December 1
commencing June 1, 1998.
The Class A Bonds will upon initial issuance be dated March 1, 1996, and
will bear interest from and including March 1, 1996, if the date of
authentication is prior to December 1, 1996, and otherwise from the Interest
Payment Date that is, or that immediately precedes, the date of authentication
(unless payment of interest on the Class A Bonds shall be in default, in which
case the Class A Bonds will bear interest from the date to which interest has
been paid or duly provided for or, if no such interest has been paid, from
March 1, 1996).
17
<PAGE>
The Class B Bonds will upon initial issuance be dated March 1, 1996, and
will bear interest from and including March 1, 1998, if the date of
authentication is prior to June 1, 1998, and otherwise from the Interest Payment
Date that is, or that immediately precedes, the date of authentication (unless
payment of interest on the Class B Bonds shall be in default, in which case the
Class B Bonds will bear interest from the date to which interest has been paid
or duly provided for or, if no such interest has been paid, from March 1, 1998).
The interest payable on the Bonds will be computed on the basis of a 360-
day year of twelve 30-day months.
Principal of, premium (if any), on, and interest on, the Bonds shall be
payable in any coin or currency of the United States of America which, at the
respective times of payment, is legal tender for the payment of public and
private debts. Except as may otherwise be required by a DTC Representation
Letter with respect to Bonds held by a Securities Depository, principal of and
interest on the Bonds shall be payable prior to final payment thereof (whether
at maturity or earlier redemption) to the Holders of the Bonds in whose names
the Bonds are registered as of the close of business on the applicable Record
Date by check mailed to such Holders at their addresses as they then appear on
the registration books kept by the Registrar or at such other address as is
furnished to the Paying Agent in writing by any such Holder; provided at the
option of any Holder of Bonds in an aggregate principal amount of at least
$1,000,000, any payment on the Bonds owned by such Holder may be transmitted by
wire transfer to such Holder, at such Holder's written request, to the bank
account number on file with the Registrar on the 5th day before the Record Date
or, if any such day is not a Business Day, the Business Day next preceding such
day. Principal of and interest on the Bonds due at final payment thereof
(whether at maturity or earlier redemption) shall be paid upon presentation and
surrender of the Bonds at the Corporate Trust Office of the Trustee.
If any payment of the principal of, premium (if any) on, or interest on,
the Bonds is due on a Bond Payment Date that is not a Business Day, such payment
will be made on the next succeeding Business Day, and no interest will accrue on
the amount of such payment during the intervening period.
Section 2.03. EXECUTION; LIMITED OBLIGATION.
The Bonds shall be executed on behalf of the Sponsor with the manual or
facsimile signature of its President or Vice President and attested by the
manual or facsimile signature of its Secretary. A facsimile signature shall have
the same force and effect as if personally signed. In case any officer of the
Sponsor whose manual or facsimile signature appears on the Bonds shall cease to
be such officer before the delivery of the Bonds, such manual or facsimile
signature shall nevertheless be valid and sufficient for all purposes, the same
as if such officer had remained in office until delivery. The Sponsor may adopt
and use for that purpose the manual or facsimile signature of any person or
persons who shall have been the President, Vice President or Secretary at any
time on or after the date borne by the Bonds, notwithstanding that such person
may not have been such President, Vice President or Secretary on the date of any
18
<PAGE>
such Bond or may have ceased to be such officer of the Sponsor at the time when
any such Bond shall be authenticated and delivered.
The Bonds, together with interest thereon, are not general obligations of
the Sponsor but are limited obligations thereof payable solely from the Trust
Estate pledged therefor and shall be a valid claim of the respective Holders
thereof against the Trust Estate held by the Trustee under this Indenture which
is hereby pledged, assigned and otherwise secured for the payment of the Bonds
as provided in this Indenture and shall be used for no other purpose than to pay
the principal of and interest on the Bonds, except as may be otherwise expressly
authorized in this Indenture. The Sponsor shall not be obligated to pay the
principal of the Bonds, the interest thereon or the other costs incident thereto
or any other obligations of the Sponsor hereunder except from the Trust Estate.
All covenants, stipulations, obligations and agreements of the Sponsor
contained in this Indenture shall be deemed to be covenants, stipulations,
obligations and agreements of the Sponsor to the full extent permitted by law.
No covenant, stipulation, obligation or agreement contained herein shall be
deemed to be a covenant, stipulation, obligation or agreement of any present or
future officer, agent or employee of the Sponsor in their individual capacity,
none of whom shall be liable personally on the Bonds or be subject to any
personal liability or accountability by reason of the issuance thereof. No
officer, agent or employee of the Sponsor shall incur any personal liability in
acting or proceeding or in not acting or not proceeding, in good faith,
reasonably, and in accordance with the terms of this Indenture.
Section 2.04. AUTHENTICATION.
No Bond shall be valid or obligatory for any purpose or entitled to any
security or benefit under this Indenture unless and until a certificate of
authentication on such Bond shall have been duly executed by the manual
signature of the Trustee, and such executed certificate of the Trustee upon any
such Bond shall be conclusive evidence that such Bond has been authenticated and
delivered under this Indenture. The Trustee's certificate of authentication on
any Bond shall be deemed to have been executed by it if signed by an authorized
Trust Officer, but it shall not be necessary that the same Trust Officer sign
the certificate of authentication on all of the Bonds issued hereunder.
Section 2.05. FORMS OF BONDS; INCORPORATION OF PROVISIONS.
(a) The Class A Bonds and the Trustee's certificate of authentication
therefor shall be in substantially the form set forth in Exhibit A hereto, and
the Class B Bonds and the Trustee's certificate of authentication therefor shall
be in substantially the form set forth in Exhibit B hereto, with such
appropriate insertions, omissions, substitutions and other variations as are
required or permitted by this Indenture, and may have such letters, numbers or
other marks of identification and such legends or endorsements placed thereon,
as may be required for them to comply with the rules of any securities exchange
on which the Bonds may be listed, or as may be required by any applicable
regulation (whether proposed, temporary or final)
19
<PAGE>
promulgated pursuant to the Code, including, without limitation, any legend
required in respect of original issue discount on any Bonds, as applicable,
or as consistently herewith, may be determined by the officers of the Sponsor
executing such Bonds, as evidenced by their execution of the Bonds. Any
portion of the text of any Bond may be set forth on the reverse thereof, with
an appropriate reference thereto on the face of the Bond. By this reference,
the terms of the Bonds set forth in Exhibits A and B hereto are incorporated
herein as if fully set forth.
(b) Each Bond shall bear upon the face thereof the designation so selected
for the Class to which it belongs. All Bonds of all Classes at any time
Outstanding shall be identical except for differences, if any, among the Bonds
of the different Classes in stated maturities, interest rates and other terms
which are required by this Indenture to differ.
(c) Upon original issuance, the Class B Bonds shall be registered in the
name or upon the order of BFC Guaranty Corp., as assignee of the Lender, and
delivered as provided in the Sponsor's Request described in Section 2.06(b).
The Class B Bonds shall be subject to restrictions on transfers as provided in
Section 2.08. The Class A Bonds, upon original issuance, will be issued in the
form of a single bond certificate for each maturity thereof (which shall be
typed in lieu of printing or engraving), to be delivered to the Securities
Depository by the Sponsor. Each such Class A Bond shall be initially registered
on the Bond Register in the name of the nominee of such Securities Depository,
and no Beneficial Owner will receive a certificate representing his interest in
such Class A Bonds, except in the event the Sponsor issues, and the Trustee
authenticates, Replacement Bonds as provided herein. While the Securities
Depository remains the sole Bondholder of such Class A Bonds, it will agree to
make book-entry transfers among its Participants and receive and transmit
payments of principal of, and interest on, such Class A Bonds until and unless
the Sponsor issues, and the Trustee authenticates and delivers, Replacement
Bonds to the Beneficial Owners of Bonds or their nominees, as described herein.
(e) Subject to Section 2.11, Replacement Bonds shall be either
typewritten, printed, lithographed or engraved or produced by any combination of
these methods, with or without steel-engraved borders, or may be produced in any
other manner permitted by the rules of any securities exchange on which the
Bonds may be listed or the Securities and Exchange Commission.
Section 2.06. DELIVERY OF BONDS.
Upon the execution and delivery of this Indenture by the Sponsor and the
Trustee, the Sponsor shall execute and deliver to the Trustee the Bonds of each
Class for authentication and the Trustee shall thereupon authenticate and
deliver the Bonds as directed by the Sponsor consistent with the terms hereof,
upon delivery by the Sponsor to the Trustee, and receipt by the Trustee, of the
following:
(a) SPONSOR'S CONSENT. A copy, duly certified by the Secretary of the
Sponsor, of the Sponsor's Consent.
20
<PAGE>
(b) SPONSOR'S REQUEST. A request and authorization to the Trustee on
behalf of the Sponsor and signed by an Authorized Officer (1) to authenticate
and deliver the Class A Bonds to the Securities Depository on behalf of the
Underwriter, the Class B Bonds to BFC Guaranty Corp. or upon its order and (2)
to execute and deliver the Certificates to the Sponsor as the initial Residual
Holder.
(c) NOTES. The original Notes, duly endorsed to the Trustee.
(d) LOAN DOCUMENTS. Originals of each of the Loan Documents.
(e) CASUALTY INSURANCE POLICY. An original of the Casualty Insurance
Policy.
(f) TITLE INSURANCE POLICIES. The title insurance policies with respect
to the Deed of Trust.
(g) DTC REPRESENTATION LETTER. A copy of the DTC Representation Letter
with respect to the Class A Bonds.
Upon receipt of these documents, the Trustee shall authenticate and deliver
the Bonds and execute and deliver the Certificates as requested by the Sponsor
in its request delivered pursuant to (b) above.
Section 2.07. MUTILATED, DESTROYED, LOST OR STOLEN BONDS.
If any mutilated Bond is surrendered to the Trustee or the Trustee receives
evidence to its satisfaction of the destruction, loss or theft of any Bond, and
there is delivered to the Trustee such security or indemnity as may be required
by the Trustee to save the Sponsor and the Trustee harmless, the Sponsor shall
execute and the Trustee shall authenticate and deliver, in exchange for or in
lieu of any mutilated, destroyed, lost or stolen Bond, a new Bond of like Class,
stated maturity, tenor and principal amount, bearing a number not
contemporaneously Outstanding. If any such mutilated, destroyed, lost or stolen
Bond shall have become due and payable, or shall have been called for
redemption, instead of issuing a new Bond, the Sponsor may pay such Bond without
surrender thereof, except that any mutilated Bond shall be surrendered.
Upon the issuance of a new Bond, the Sponsor or the Trustee may require the
payment by the Bondholder of a sum sufficient to cover any tax or other
governmental charge that may be imposed and any other reasonable expenses
(including the fees and expenses of the Trustee) related to such issuance.
Every new Bond issued pursuant to this Section 2.07 in lieu of any
mutilated, destroyed, lost or stolen Bond shall constitute an original
additional obligation of the Sponsor, whether the mutilated, destroyed, lost or
stolen Bond shall be at any time enforceable by anyone, and shall
21
<PAGE>
be entitled to all the benefits of this Indenture equally and ratably with
any and all other Bonds of the same Class duly issued hereunder.
The provisions of this Section 2.07 are exclusive and shall preclude, to
the extent permitted by applicable law, all other rights and remedies with
respect to the replacement or payment of mutilated, destroyed, lost or stolen
Bonds.
Section 2.08. REGISTRATION AND EXCHANGE OF BONDS; PERSONS TREATED AS
OWNERS.
(a) The Sponsor shall cause a Bond Register to be kept to record the
registration and transfer of the Bonds at the Corporate Trust Office and hereby
appoints the Trustee, as Bond Registrar, to keep such books and to make such
registrations and transfers, subject to the provisions of this Section 2.08,
under such reasonable regulations as the Sponsor or Trustee may prescribe. The
Bond Register shall show the names and addresses of each Holder of the Bonds.
(b) Upon surrender for registration of transfer or exchange of any Bond at
the Corporate Trust Office, the Sponsor shall execute and the Trustee shall
authenticate and deliver in the name of the transferee or transferees, a new
Bond of the same stated maturity and of authorized denominations for the same
Class and then unpaid principal amount.
At the option of the Bondholder, any Replacement Bonds issued when
permitted under this Indenture may be exchanged for other Replacement Bonds of
the same Class in any authorized denominations, of a like Class and aggregate
Outstanding principal amount and stated maturity, upon surrender of the
Replacement Bonds to be exchanged at the Corporate Trust Office.
Notwithstanding the foregoing, if the outstanding principal amount of a Bond
surrendered for exchange or transfer is in an amount less than $100,000 for a
Bond of the same Class, the Bond delivered in exchange therefor shall be in an
outstanding principal amount equal to that of the Bond so surrendered, and any
Bond so delivered upon such a transfer or exchange shall be deemed to be in an
authorized denomination for all purposes hereof. Whenever any Replacement Bonds
are so surrendered for exchange, the Sponsor shall execute, and the Trustee
shall authenticate and deliver, the Replacement Bonds which the Bondholder
making the exchange is entitled to receive.
All Bonds presented for any registration of transfer or exchange shall be
duly endorsed, or be accompanied by a written instrument of transfer, in form
and with guaranty of signature satisfactory to the Trustee, duly executed by the
registered owner or by an attorney duly authorized in writing.
The Sponsor and the Trustee shall not be required to register, transfer or
exchange any Bonds selected, called or being called for redemption, during any
period from a Record Date to the immediately succeeding Interest Payment Date.
22
<PAGE>
All Bonds issued upon any registration of transfer or exchange of Bonds
shall be valid obligations of the Sponsor, evidencing the same debt and entitled
to all of the security and benefits under this Indenture to the same extent as
the Bonds surrendered.
Bonds held by the Securities Depository shall be registered in the name of
the Securities Depository or its nominee and beneficial ownership of such Bonds
shall be transferred in accordance with the procedures of the Securities
Depository and the Participants.
Prior to the due presentment for registration of transfer or exchange of
any Bond, the Sponsor, the Trustee and any agent of the Sponsor or the Trustee
shall treat the Person in whose name such Bond is registered on any Record Date,
for purposes of receiving payments of principal of and interest on such Bond,
and on any other date for any other purpose, as the owner thereof, whether or
not such Bond be overdue, and the Sponsor, the Trustee and any such agent shall
not be affected by notice to the contrary.
In case of any registration of transfer or exchange, the Sponsor and the
Trustee may require payment of a sum sufficient to cover actual expenses
incurred in making such exchange or transfer and any tax or other governmental
charge that may be imposed in connection with any such registration of transfer
or exchange. In any actions taken by the Securities Depository, the Trustee
shall not be precluded from collecting its usual and customary fees, charges and
expenses.
(c) The foregoing Section 2.08(b) notwithstanding, the Trustee (i) shall
not register the transfer of any Class B Bond to the Lender and (ii) shall only
register transfer of the Class B Bonds in accordance with the provisions of the
Castle Rock Pledge Agreement, while the Class B Bonds are subject to the pledge
provided therein. The Sponsor hereby authorizes the Trustee to enter into and
perform under the Castle Rock Pledge Agreement in its capacity as Trustee
hereunder. At any time the Class B Bonds are not subject to the pledge provided
for in the Castle Rock Pledge Agreement, any request by BFC Guaranty Corp. or
any subsequent Holder of a Class B Bond to the Trustee to register the transfer
of a Class B Bond shall be accompanied by (in addition to the items required by
Section 2.08(b)) the following: (A) if such Class B Bond is being transferred
to a "qualified institutional buyer" (as defined in Rule 144A under the 1933
Act) in accordance with Rule 144A under the 1933 Act or pursuant to an exemption
from registration in accordance with Rule 144 or Rule 904 under the 1933 Act or
pursuant to an effective registration statement under the 1933 Act, a
certification to that effect from such Holder (in substantially the form of
Exhibit H hereto); or (B) if such Class B Bond is being transferred in reliance
on another exemption from the registration requirements of the 1933 Act, a
certification to that effect from such Holder (in substantially the form of
Exhibit H hereto) and an Opinion of Counsel from such Holder or the transferee
reasonably acceptable to the Sponsor and to the Trustee to the effect that such
transfer is in compliance with the 1933 Act.
(d) Unless otherwise agreed by the Sponsor, each Class B Bond shall bear a
legend to the following effect:
23
<PAGE>
THIS BOND (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A TRANSACTION
EXEMPT FROM REGISTRATION UNDER SECTION 5 OF THE UNITED STATES
SECURITIES ACT OF 1933 (THE "SECURITIES ACT"), AND THIS BOND MAY NOT
BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF
THIS BOND IS HEREBY NOTIFIED THAT THE SELLER MAY BE RELYING ON THE
EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT
PROVIDED BY RULE 144A THEREUNDER. THE HOLDER OF THIS BOND AGREES FOR
THE BENEFIT OF THE SPONSOR THAT (A) DURING THE TIME THIS BOND IS
PLEDGED UNDER THE CASTLE ROCK PLEDGE AGREEMENT (AS DEFINED IN THE
INDENTURE) THIS BOND MAY NOT BE TRANSFERRED EXCEPT IN ACCORDANCE WITH
THE TERMS THEREOF AND THEREAFTER THIS BOND MAY BE RESOLD, PLEDGED OR
OTHERWISE TRANSFERRED, ONLY (1) INSIDE THE UNITED STATES TO A PERSON
WHO THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER
(AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN A TRANSACTION
MEETING THE REQUIREMENTS OF RULE 144A, OR IN ACCORDANCE WITH ANOTHER
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT
(AND BASED UPON AN OPINION OF COUNSEL AS REQUIRED BY THE INDENTURE),
(2) TO THE SPONSOR, (3) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT, OR (4) OUTSIDE THE UNITED STATES TO A FOREIGN PERSON IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 904 UNDER THE SECURITIES
ACT AND, IN EACH CASE, IN ACCORDANCE WITH ANY APPLICABLE SECURITIES
LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE
JURISDICTION, AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS
REQUIRED TO, NOTIFY ANY PURCHASER FROM IT OF THIS BOND OF THE RESALE
RESTRICTIONS SET FORTH IN (A) ABOVE.
Section 2.09. DESTRUCTION OF BONDS.
Whenever any Bond Outstanding shall be delivered to the Trustee for
cancellation pursuant to this Indenture, upon payment of the principal amount or
redemption price, for replacement pursuant to Section 2.07, 2.11 or 2.14 or for
transfer or exchange pursuant to Section 2.08, such Bond shall be cancelled and
destroyed by the Trustee, and counterparts of a certificate of destruction
evidencing such destruction shall be furnished by the Trustee to the Sponsor.
Section 2.10. RESERVED.
24
<PAGE>
Section 2.11. TEMPORARY BONDS.
Pending the preparation of definitive Bonds, the Sponsor may execute and
the Trustee shall authenticate and deliver temporary Bonds. Temporary Bonds
shall be issuable as fully registered Bonds, of any authorized denomination, and
substantially in the form of the definitive Bonds, but with such omissions,
insertions and variations as may be appropriate for temporary Bonds, all as may
be determined by the Sponsor. Temporary Bonds may be issued without specific
terms and may contain such reference to any provisions of this Indenture as may
be appropriate. Every temporary Bond shall be executed by the Sponsor and
authenticated by the Trustee upon the same conditions and in substantially the
same manner, and with like effect, as the definitive Bonds. As promptly as
practicable the Sponsor shall execute and shall furnish definitive Bonds at
which time temporary Bonds may be surrendered in exchange for definitive Bonds
without charge to the Holder at the Corporate Trust Office of the Trustee, and
the Trustee shall authenticate and shall deliver in exchange for such temporary
Bonds a like aggregate principal amount of definitive Bonds of the same Class
and stated maturity. Until so exchanged the temporary Bonds shall be entitled
to the same benefits under this Indenture as definitive Bonds.
Section 2.12. RESERVED.
Section 2.13. NONPRESENTMENT OF BONDS.
Any money deposited with the Trustee or any Paying Agent in trust for the
payment of the principal of or interest on any Bond and remaining unclaimed for
five years after such principal or interest has become due and payable shall be
paid to the Residual Holders upon the written order of the Majority Residual
Holders if no Event of Default exists and all amounts due to the Trustee
hereunder have been paid. If such amounts are paid to the Residual Holders, the
Holder of such Bond shall thereafter, as an unsecured general creditor, look
only to such Residual Holders for payment thereof, and all liability of the
Trustee, the Sponsor or such Paying Agent with respect to such trust money shall
thereupon cease.
Any money deposited with the Trustee or any Paying Agent in trust for
payment of principal of or interest on any Bond which is unclaimed shall not be
invested and therefore the Trustee shall have no liability for any interest
thereon.
Section 2.14. TERMINATION OF BOOK-ENTRY SYSTEM.
(a) So long as the Class A Bonds (or any other Class of Bonds subsequently
delivered to a Securities Depository) are in book-entry only form, the Trustee
shall comply with the terms of the applicable DTC Representation Letter.
However, the book-entry system through the Securities Depository may be
terminated upon the happening of any of the following:
(i) The Securities Depository advises the Trustee in writing that the
Securities Depository is no longer willing or able to properly discharge
its responsibilities under the
25
<PAGE>
DTC Representation Letter and the Trustee or the Sponsor are unable to
locate a qualified successor clearing agency satisfactory to the Trustee
or the Sponsor; or
(ii) The Sponsor elects to discontinue the book-entry system through
the Securities Depository and so advises the Trustee and the Securities
Depository in writing.
(b) Upon the occurrence of any event described in Section 2.14(a), the
Trustee shall notify the Securities Depository of the occurrence of such event
and of the availability of definitive or temporary Replacement Bonds to
Beneficial Owners requesting the same, in an aggregate Outstanding amount
representing the interest of each such Beneficial Owner, making such adjustments
and allowances as it may find necessary or appropriate as to accrued interest
and previous payments of principal and calls for redemption. Definitive
Replacement Bonds for a Class shall be issued only upon surrender to the Trustee
of the Bond of such Class by the Securities Depository, accompanied by
registration instructions for the definitive Replacement Bonds for such Class
from the Securities Depository. Neither the Sponsor nor the Trustee shall be
liable for any delay in delivery of such instructions and conclusively may rely
on, and shall be protected in relying on, such instructions. Upon issuance of
definitive Replacement Bonds, all references herein to obligations imposed upon
or to be performed by the Securities Depository shall be deemed of no further
force and effect, and the Holders of the definitive Replacement Bonds shall be
deemed the Bondholders for all purposes of this Indenture.
Section 2.15. REDEMPTION PRIOR TO MATURITY.
(a) MANDATORY SINKING FUND REDEMPTION. (1) The Class A Bonds with
maturity dates shown below shall be redeemed in part, prior to their scheduled
maturity, on the dates and in the principal amounts shown below, at a redemption
price equal to the principal amount thereof, plus accrued interest thereon to
the redemption date, without premium, from moneys deposited into the Debt
Service Fund in accordance with Article V hereof:
CLASS A BONDS MATURING DECEMBER 1, 2008
December 1, Amount
----------- ----------
2003 $2,560,000
2004 2,735,000
2005 2,920,000
2006 3,120,000
2007 3,340,000
2008 3,570,000
26
<PAGE>
CLASS A BONDS MATURING DECEMBER 1, 2017
December 1, Amount
----------- ----------
2009 $3,815,000
2010 4,095,000
2011 4,395,000
2012 4,720,000
2013 5,070,000
2014 5,445,000
2015 5,845,000
2016 6,275,000
2017 5,635,000
(2) Redemptions pursuant to this Section 2.15(a) shall be made PRO RATA
among the Holders of each stated maturity by redeeming from each such Holder
that principal amount which bears the same proportion to the principal amount of
such stated maturity registered in the name of such Holder as the total
principal amount of such stated maturity to be redeemed on any sinking fund
payment date bears to the aggregate principal amount of such stated maturity
Outstanding prior to redemption. If the Trustee cannot make a strict PRO RATA
redemption among the Holders of a stated maturity, the Trustee shall redeem more
or less than a PRO RATA portion from one or more Holders of such stated maturity
in such manner as the Trustee deems fair and reasonable.
In connection with any such redemption prior to maturity, the Trustee shall
make appropriate entries in the Bond Register to reflect the portion of any Bond
so redeemed and the amount of the principal remaining outstanding. The
Trustee's notation in the Bond Register shall be conclusive as to the principal
amount of any Bond Outstanding at any time.
(b) EXTRAORDINARY MANDATORY REDEMPTION. (1) The Class A Bonds maturing on
December 1, 2017 and the Class B Bonds maturing on or after December 1, 2016 are
subject to extraordinary mandatory redemption prior to maturity on or after
December 1, 2015, upon notice from the Sponsor to the Trustee of the optional
total prepayment of the 49C Notes by 49C, as a whole on any Interest Payment
Date set forth below at the redemption prices (expressed as a percentage of the
principal amount redeemed) set forth below, plus accrued interest to the
redemption date.
Interest Payment Dates Redemption Price
---------------------- ----------------
December 1, 2015 and June 1, 2016 102%
December 1, 2016 and June 1, 2017 101%
27
<PAGE>
(2) The Bonds shall be subject to extraordinary mandatory redemption from
monies received by the Trustee constituting Note prepayments, in whole or in
part to the extent of such monies received by the Trustee, upon notice from the
Sponsor to the Trustee that the 49C Notes have become subject to mandatory
prepayment in whole due to casualty or condemnation with respect to all or
substantially all of the Project, at a price equal to one hundred percent (100%)
of the principal amount thereof, plus accrued interest thereon to the redemption
date, on the Interest Payment Date for which required notice can be given and
which next follows receipt by the Trustee of monies constituting such Note
prepayments.
(3) If not all of the Outstanding Bonds can be redeemed from monies
received by the Trustee pursuant to Section 2.15(b)(2), the Trustee shall apply
all monies so received to redeem the Outstanding Bonds in part, which redemption
shall be made pro rata among the Holders of the Outstanding Bonds.
In connection with any such partial redemption prior to maturity, the
Trustee shall make appropriate entries in the Bond Register to reflect the
portion of any Bond so redeemed and the amount of the principal remaining
outstanding. The Trustee's notation in the Bond Register shall be conclusive as
to the principal amount of any Bond Outstanding at any time.
Section 2.16. NOTICE OF REDEMPTION.
(a) Notice of any redemption under Section 2.15(b) shall be given by the
Trustee by certified mail, return receipt requested, not less than 30 days nor
more than 45 days prior to the applicable redemption date to each Holder in
whose name a Bond to be redeemed is registered on the Record Date preceding the
applicable redemption date, at such Bondholder's address appearing in the Bond
Register; provided, however, that prior to the Trustee giving any notice of
redemption, the Trustee shall have on deposit in the applicable account of the
Redemption Fund the redemption price for the Bonds to be redeemed.
(b) All notices of redemption shall state the amount and Class of Bonds
being redeemed, redemption date, redemption price, CUSIP numbers, (with respect
to the Class A Bonds only) the place where the Bonds are to be surrendered for
payment of the redemption price (in the case of redemptions in whole) and that
no interest shall accrue on such Bonds after such redemption date. Any failure
to give such notice, or any defect therein, shall not affect the validity of any
proceedings for the redemption of any other Bonds for which no such failure or
defect occurs.
(c) Notice of redemption having been given as provided above, and moneys
available for redemption being held by the Trustee for that purpose, thereupon
the Bonds to be redeemed, on the applicable redemption date, shall become due
and payable at the redemption price and interest thereon shall cease to accrue
and, unless there shall be a default in the payment of the redemption price, no
interest shall accrue on such redemption price for any period after such
redemption date. Bonds redeemed thereafter shall no longer be entitled to any
security or benefit under this Indenture, except to receive payment of the
applicable redemption price.
28
<PAGE>
(End of Article II)
29
<PAGE>
ARTICLE III
REMIC STATUS
Section 3.01. REMIC ELECTION.
(a) It is the intention of this Indenture and the parties hereto that the
Trust Estate shall constitute, and the affairs of the Trust Estate shall be so
conducted as to qualify the Trust Estate as a "real estate mortgage investment
conduit" as defined in and in accordance with Section 860D of the Code. In
furtherance of such intention, the Trustee covenants that it shall not knowingly
or intentionally take any action or omit to take any action that would cause the
termination of the REMIC status of the Trust Estate prior to liquidation of the
Trust Estate in accordance with the provisions hereof.
(b) The Class A Bonds and Class B Bonds are hereby designated as "regular
interests" in the REMIC within the meaning of Section 860G(a)(1) of the Code.
(c) The Residual is hereby designated as the sole "residual interest" in
the REMIC within the meaning of Section 860G(a)(2) of the Code.
(d) The Closing Date shall constitute the "startup day" for the REMIC
within the meaning of Section 860G(a)(9) of the Code.
(e) The Trustee shall, for federal income tax purposes, maintain books and
records with respect to the Trust Estate on a calendar year and on an accrual
basis.
(f) After the Closing Date, the Trustee shall not (i) accept any
contribution of additional assets to the Trust Estate unless the Trustee shall
have received an Opinion of Counsel to the effect that such contribution will
not cause the imposition of a tax on the Trust Estate or cause the Trust Estate
to lose its status as a REMIC at any time that any Bonds are Outstanding, or
(ii) permit or cause the sale, transfer, exchange or other disposition of any
portion of the Trust Estate, except as otherwise provided herein, unless such
sale or disposition is pursuant to a "qualified liquidation," as defined in Code
Section 860F(a)(4)(A), or unless the Trustee has received an Opinion of Counsel
that such sale will not cause the Trust Estate to lose its status as a REMIC at
any time that any Bonds are Outstanding or otherwise subject the Trust Estate to
taxation. The cost of any Opinion of Counsel specified in this Section 3.01(f)
shall not be an expense of the Trustee.
(g) No Investment Security shall be sold before its stated maturity if, as
a result of such sale, the Trust Estate would realize a gain unless sold either
(i) to meet a required payment on the Bonds or (ii) pursuant to a qualified plan
of liquidation in accordance with Section 3.03 hereof.
30
<PAGE>
(h) The Trustee is hereby authorized and directed to make information
available to the Internal Revenue Service and to any Residual Holder or
transferee thereof necessary to comply with Section 860D(a)(6)(B) of the Code
and to maintain records and information sufficient to make any calculations that
may be required pursuant to such section of the Code.
(i) Neither the Trustee nor the Sponsor shall enter into any arrangement
by which the Trust Estate will receive a fee or other compensation for services
nor permit the Trust Estate to receive any income from assets other than
"qualified mortgages" or "permitted investments" within the meaning of Section
860G of the Code.
Section 3.02. TAX COMPLIANCE.
(a) Subject to Section 3.02(c), the Trustee shall perform, or cause to be
performed, the following duties relating to the federal, state and local tax
compliance of the Trust Estate:
(i) cause to be prepared and filed with the Internal Revenue Service
and applicable state or local taxing authorities income tax or information
returns or reports relating to the Trust Estate, the Bonds and the
Certificates (including without limitation all returns and reports of the
Trust Estate as a REMIC) that are due after the Closing Date in the time
and manner required by the Code, applicable regulations or procedures
thereunder or equivalent provisions of state or local law;
(ii) cause the REMIC, in its first federal income tax return for the
short taxable year ending December 31, 1996, to elect to be treated as a
REMIC for such taxable year and all succeeding taxable years, and shall
file or cause to be filed all subsequent tax returns, or information
reports, and take such actions, as are required for such status;
(iii) within 30 days after the Closing Date, cause to be furnished to
the Internal Revenue Service, on Form 8811, or as otherwise may be required
by the Code, the name, title, address and telephone number of the person
that the Holders of Bonds may contact for tax information relating thereto,
together with such additional information as may be required by such Form,
and shall update (or cause to be updated) such information at the time and
in the manner required by the Code;
(iv) cause the REMIC, within 30 days after the Closing Date, to file
an application for a federal employer tax identification number; and
(v) cause to be prepared and delivered to Bondholders and Residual
Holders any and all tax or information returns or reports in the time and
manner required by the Code, applicable regulations or procedures
thereunder or equivalent provisions of state or local law.
31
<PAGE>
The federal, state or local income tax or information returns of the Trust
Estate shall be signed by the Trustee or such other Person as may be required to
sign such returns by the Code or state or local tax laws, regulations or rules.
If the Sponsor is determined to be the proper party to sign the foregoing tax
returns, the Sponsor shall sign such returns as directed by the Trustee. The
Trustee shall not have any obligation to determine whether any Person other than
the Trustee shall be required to sign such returns except during any period in
which the Manager is in default of its obligations hereunder.
(b) The Trustee shall have responsibility for all compliance with the
requirements of federal tax withholding and shall withhold, as required by the
Code, in respect of amounts payable to Holders of Certificates or Bonds.
(c) Notwithstanding the foregoing, the parties hereto acknowledge that
responsibility for preparing any tax report or tax return required by this
Section 3.02 (other than with respect to withholding) shall be with the Manager
or such other Person hired to prepare such returns by the Trustee in accordance
with this Indenture. All such reports or returns shall be delivered by the
Manager or other Person responsible for its preparation to the Trustee not later
than five days before the date on which the Trustee is required under this
Indenture or the Code (or applicable provisions of state or local law) to file
or distribute such report or return (such date, the "Due Date"); provided,
however, that, in the case of the Manager, the Due Date shall be the date which
is 14 days after the date the Manager has received all required information to
prepare such return or report) (such date before the required date for filing or
distributing, the "Submission Date"). If, by the Submission Date, the Trustee
has not received such return or report, the Trustee shall appoint, to prepare
any report or return not received by the Trustee on its Submission Date, an
organization which regularly engages in the preparation of such reports on a
continuous basis for profit and which represents itself to be an expert in such
matters. The cost or expense of any such organization appointed by the Trustee
shall be a cost and expense of the Trust Estate which shall be paid out of
amounts otherwise distributable to the Residual Holders. The Residual Holders
shall indemnify the Trustee for any costs incurred by the Trustee to comply with
its tax reporting duties pursuant to this Section 3.02. Notwithstanding any
other provision of this Indenture, the Trustee shall not be liable for any
errors by the Manager or any organization appointed by the Trustee pursuant to
this Section 3.02(c) and the Trustee shall be entitled to rely on the written
advice of the Manager or such Person as to who is the appropriate Person to sign
any return on behalf of the REMIC.
(d) If in any taxable year there shall be more than one Holder of the
Certificates, the Manager may be designated a tax matters person with respect to
the REMIC pursuant to Treasury Regulation Section 1.860F-4(d), which tax matters
person shall have the same duties with respect to the REMIC as those of a "tax
matters partner" under Subchapter C of Chapter 63 of Subtitle F of the Code.
32
<PAGE>
Section 3.03. TERMINATION OF THE REMIC UPON REDEMPTION OF THE BONDS.
In the event of redemption of the Bonds pursuant to Section 2.15(b)(1) or
(2) hereof, unless the Residual Holders have delivered to the Trustee a
Non-Disqualification Opinion with respect to failure to comply with the
requirements of this Section 3.03, the Trust Estate shall be liquidated as
follows:
(i) Not less than 15 days before the date on which the final payment
on the Bonds is expected to be made, the Trustee will notify the Residual
Holders of the expected date of such final payment;
(ii) As soon as possible after receiving the notice referred to in
clause (i) above (but in no event less than 5 days before the date on which
the Trustee expects to make the final payment on the Bonds), the Residual
Holders, by action of the Majority Residual Holders, shall cause to be
adopted a plan of complete liquidation of the Trust Estate within the
meaning of Section 860F(a)(4) of the Code, the Trustee shall sign such plan
(or cause the proper party, if not the Trustee, to sign the plan), and the
Trustee shall dispose of the Trust Estate in accordance with the provisions
of Section 3.03(iii);
(iii) At or after the time at which the plan of complete liquidation
of the Trust Estate is adopted and the Trustee is instructed to liquidate
the same and at or before the time at which the Trustee makes the final
payment on the Bonds, the Trustee shall request a nationally recognized
securities dealer designated in the plan of complete liquidation of the
Trust Estate to sell for cash to the highest bidder all of the Trust Estate
(except for (A) cash on hand and (B) any asset comprising all or part of
the Trust Estate which, pursuant to the terms of such asset, will be fully
converted into cash before the final payment on the Bonds); provided,
however, that such sale must be at a price not less than the redemption
price plus expenses less moneys available under this Indenture to redeem
the Bonds, exclusive of the sale proceeds; and
(iv) Upon liquidation of the Trust Estate, the Trustee shall make
final payment: first, on each Class of Bonds then Outstanding as provided
in this Indenture; and second, all of the remaining cash (and all other
remaining assets, if any) that comprises the Trust Estate, as provided in
Article XI hereof (other than cash retained to meet claims), shall be paid
to the Residual Holders pro rata as quickly as possible, but in no event
later than the close of business on the 90th day after the day on which the
plan of complete liquidation was adopted, and the existence of the REMIC
shall thereupon terminate.
Nothing in this Section 3.03 shall prevent the final payment of the Bonds.
The Trustee shall not be liable, in the absence of bad faith, negligence or
willful misconduct, for its failure to sell any asset or to obtain the best
price for any asset sold. The cost of any Opinion of Counsel required under this
Section 3.03, including any Non-Disqualification Opinion, shall not be a cost or
expense of the Trustee.
33
<PAGE>
Section 3.04. RESERVED
Section 3.05. REMIC TAXES.
Unless, under the terms of this Indenture, another party is liable for such
tax, any tax on prohibited transactions or contributions or any other tax
imposed under the Code (or state or local law) on the Trust Estate shall be
payable from amounts that would otherwise be distributable to the Holders of
Residual Certificates on a pro rata basis; PROVIDED, HOWEVER, that if such
amounts are insufficient to pay such tax, the Trustee may accept funds to pay
such tax from any Person, so long as the Trustee receives a Non-Disqualification
Opinion (the cost of which opinion shall be paid by the Person furnishing such
funds) with respect thereto, to the effect that the acceptance of such funds
will not result in any additional unfunded tax liability or result in the
imposition of a tax on contributions to the Trust Estate. Notwithstanding
anything to the contrary contained herein, if the Residual Holders intend to
contest any such tax in appropriate Proceedings, the Residual Holders, by action
of the Majority Residual Holders, may prevent the Trustee, by delivering written
notice (and indemnification satisfactory to the Trustee) to the Trustee, from
making payment of such tax, if permitted by law, pending the outcome of such
proceedings. The Trustee is hereby authorized to retain from those amounts
otherwise distributable to the Residual Holders sufficient funds to reimburse
the Trustee for the payment of any tax liability of the Trust Estate (to the
extent that the Trustee has not been previously reimbursed therefor).
Section 3.06. LIMITATION OF LIABILITY.
Notwithstanding the foregoing provisions of this Article III, the Trustee
shall have no liability for compliance with matters pertaining to the tax status
of the REMIC or the Bonds or for otherwise complying with the provisions of the
Code as they pertain to the Bonds, other than (i) to follow the express
provisions set forth above in Sections 3.01(a), (e), (f), (g), (h) and (i) and
Section 3.02, and (ii) following such instructions as may be given by the
Manager, or in the absence of a Manager, by the Trustee's tax advisor, with
respect to such matters.
Anything herein to the contrary notwithstanding, under no circumstances
shall the Trustee be obligated to expend or advance its own funds for payment of
any tax imposed as a result of any action taken by any Person other than the
Trustee. It is hereby acknowledged and agreed to by the Holders that the
Trustee's obligation to pay any taxes or expenses hereunder imposed, other than
as a result of the Trustee's negligence or willful misconduct, is expressly
limited to the Residual.
(End of Article III)
34
<PAGE>
ARTICLE IV
GENERAL COVENANTS; REPRESENTATIONS AND WARRANTIES
Section 4.01. PAYMENT OF PRINCIPAL AND INTEREST.
In addition to the covenants and agreements of the Sponsor elsewhere in
this Indenture, the Sponsor covenants that it will cause to be duly and
punctually paid the principal of and interest on every Bond issued under this
Indenture at the place, on the dates and in the manner provided herein according
to the true intent and meaning thereof, provided that such principal and
interest are payable solely from the Trust Estate, including but not limited to,
income, revenues and receipts and amounts derived or to be derived from the
Trust Estate and payable to the Trustee and nothing in the Bonds or this
Indenture shall be considered as Granting any other funds or assets of the
Sponsor other than the Trust Estate. Amounts properly withheld under the Code
from payment to any Bondholder of interest or principal shall be considered as
having been paid by the Sponsor to such Bondholder for all purposes under this
Indenture.
The Sponsor and the Trustee further covenant that at no time when the Bonds
are Outstanding will it or they commingle any of its other moneys or other
assets (from whatever source) with the Trust Estate.
Notwithstanding any provision of this Indenture or any Bond to the
contrary, the Bonds, including any interest with respect thereto, are limited
obligations of the Sponsor and are payable solely from the sources provided
therefor, as described in this Indenture.
Section 4.02. PERFORMANCE OF COVENANTS.
The Sponsor covenants that it will perform faithfully at all times any and
all covenants, undertakings, stipulations and provisions to be performed by the
Sponsor and contained in this Indenture, in any and every Bond executed,
authenticated and delivered hereunder and in all of its proceedings pertaining
hereto. The Sponsor covenants that it has taken all necessary corporate and
legal action to issue the Bonds authorized hereby and to execute this Indenture,
to assign the Trust Estate and the amounts payable thereunder, to pledge the
amounts hereby pledged in the manner and to the extent herein set forth, to
constitute the Trust Estate as a segregated asset pool and to sell the Residual,
that all action on its part for the issuance of the Bonds and the execution and
delivery of this Indenture has been duly and effectively taken and that the
Bonds in the hands of the Bondholders, as the case may be, are and will be valid
and enforceable special and limited obligations of the Sponsor according to the
terms thereof and hereof.
Section 4.03. INSTRUMENTS OF FURTHER ASSURANCE.
The Sponsor agrees that the Trustee may defend its rights to the payments
and other amounts due with respect to the Trust Estate, including but not
limited to amounts due the Trustee under the Notes, the Loan Documents and the
Casualty Insurance Policy or any other
35
<PAGE>
insurance policy for the benefit of the Bondholders and the Residual Holders,
as their respective interests may appear, against the claims and demands of
all Persons whomsoever. The Sponsor covenants that it will do, execute,
acknowledge and deliver, or cause to be done, executed, acknowledged and
delivered, such supplemental indentures and such further acts, instruments
and transfers as the Trustee may reasonably require to better assure and
confirm unto the Trustee all and singular the rights Granted hereby to secure
the payment of principal of and interest on the Bonds or to Grant more
effectively all or any part of the Residual to the Residual Holders as
contemplated by this Indenture. The Sponsor covenants and agrees that, as a
result of the Grant of the Residual to the Residual Holders and the sale of
the Certificates, it has no further power or authority to sell, convey,
assign, pledge, encumber or otherwise dispose of any part of the Trust Estate
(except to the extent and for any period of time the Sponsor is a Holder of
all or part of the Certificates).
Section 4.04. RECORDING AND FILING.
Except for such financing statements and other documents relating to the
Trust Estate required to be filed on or prior to the Closing Date, the Trustee
will cause all financing statements related to this Indenture and all
supplements hereto, and such other documents as may be, in an Opinion of
Counsel, necessary to be kept and filed in such manner and in such places as may
be required by law in order to preserve and protect fully the security of the
Bondholders, the interests of the Residual Holders and the rights of the Trustee
hereunder, as their respective interests may appear. The Sponsor shall cooperate
in such filings and in the signing of such financing statements, continuation
statements and other documents presented to it as specified in an Opinion of
Counsel delivered pursuant to this Section 4.04.
Section 4.05. RIGHTS UNDER THE NOTES AND LOAN DOCUMENTS.
The Sponsor (to the extent the Sponsor has rights therein) and the Trustee
hereby covenant and agree they will not take any action or do anything or fail
to do anything specifically required of them which will result in a default
under or nonperformance of the Notes and Loan Documents. The Sponsor further
covenants and agrees that it will fulfill and faithfully perform its obligations
under the Loan Documents.
The Sponsor agrees that the Trustee, in the Trustee's name or (to the
extent required by law) in the name of the Sponsor, may enforce all rights of
the Sponsor, if any, and all obligations under and pursuant to the Notes and the
Loan Documents for and on behalf of the Bondholders and the Residual Holders, as
their respective interests may appear, whether or not the Sponsor is in Default
hereunder.
The Trustee shall have no obligation to exercise any rights or powers under
or with respect to the Notes or the Loan Documents except after the occurrence
of a payment default under the Notes or except after the occurrence of any other
type of default with respect to the Loan Documents of which the Trustee has
actual knowledge, in which case the Trustee shall exercise such of the rights
and powers vested in it by the Notes and the Loan Documents and
36
<PAGE>
use the same degree of care and skill in such exercise as a prudent man would
exercise or use under the circumstances in the conduct of his own affairs, in
all events subject to the rights, privileges and immunities of the Trustee
provided for in Article IX hereof.
Section 4.06. CREATION OF LIENS; SALE OF NOTES.
(a) The Sponsor shall not issue any bonds, obligations or other evidences
of indebtedness, other than the Bonds, secured by a pledge of or lien upon the
Trust Estate, and shall not create or cause to be created any lien or charge on
such revenues and moneys equal or superior to the lien created by this
Indenture.
(b) Neither the Sponsor nor the Residual Holders shall have any right to
sell or cause the sale of the Notes or any interest in any of the Loan Documents
unless such sale is effected pursuant to Article VIII hereof following an Event
of Default.
Section 4.07. BOOKS AND FUNDS.
The Trustee shall keep, or cause to be kept, proper books of record and
account in which complete and accurate entries shall be made of all its
transactions relating to all Funds established by or pursuant to this Indenture
and the Trust Estate, which shall, at all reasonable times, be subject to
inspection and available for copying, at such parties' expense, by the Sponsor,
a Residual Holder or of the owners of an aggregate of not less than 5% of the
aggregate Outstanding amount of Bonds or their representatives duly authorized
in writing. Such records and financial statements shall be prepared in
accordance with generally accepted accounting principles.
Section 4.08. COVENANTS REGARDING THE RESIDUAL HOLDERS.
In addition to each agreement and covenant of the Sponsor elsewhere
contained in this Indenture, the Sponsor hereby covenants and agrees with the
Residual Holders and the Trustee as follows:
(i) Upon request, the Sponsor will file or cause to be filed all
necessary certificates and documents as and when required or permitted by
this Indenture so as to obtain release of all property or amounts in the
Trust Estate which are properly releasable from the lien of this Indenture
in a timely fashion;
(ii) The Sponsor will not create or attempt to create any interest in
the Residual other than the interests created by this Indenture in favor of
the Residual Holders;
(iii) The Sponsor will not attempt to deny the irrevocable Grants and
assignments made in this Indenture to the Residual Holders; and
37
<PAGE>
(iv) The Sponsor will defend the Residual Holders against any claim
asserted against their interest in the Residual by any Person claiming to
have an interest in the Residual created by, through or under the Sponsor
or its successors.
Section 4.09. DUTIES AND RESPONSIBILITIES OF THE SPONSOR; INDEMNIFICATION.
The Sponsor need only perform those duties as are specifically set forth in
this Indenture, and no implied covenants or obligations of the Sponsor shall be
read into this Indenture. In the absence of bad faith on its part, the Sponsor
may rely, as to the truth of statements and the correctness of opinions
expressed therein, on certificates or Opinions of Counsel furnished to it.
Section 4.10. LIST OF BONDHOLDERS.
The Trustee, as Bond Registrar, will keep the Bond Register on file at the
Corporate Trust Office.
Section 4.11. MAINTENANCE OF CASUALTY INSURANCE POLICY.
The Sponsor covenants and agrees to obtain a replacement Casualty Insurance
Policy in the event the rating of the provider of the Casualty Insurance Policy
is downgraded below AA and to maintain and to comply with all conditions of and
to keep the Casualty Insurance Policy in an outstanding amount at all times at
least equal to the principal amount of the Outstanding Bonds and in full force
and effect throughout the term of this Indenture.
Section 4.12. WITHHOLDING TAXES.
Whenever it is acting as a Paying Agent for the Bonds, the Trustee shall
comply with all requirements of the Code, and all regulations thereunder, with
respect to the withholding from any payments made on such Bonds of any
withholding taxes imposed thereon and with respect to any reporting requirements
in connection therewith.
Section 4.13. DIRECTION OF RESIDUAL HOLDERS FOR CERTAIN ACTIONS.
The Sponsor and the Trustee hereby agree and acknowledge that, pursuant to
this Indenture, (i) the Residual Holders are Granted the right to consent to
certain actions by the Trustee or the Sponsor, (ii) the Residual Holders are
Granted the right to give certain directions to the Trustee and the Sponsor, and
(iii) the Residual Holders are Granted the right to exercise certain rights of
the Sponsor under this Indenture. Any request, demand, authorization,
direction, notice, consent, waiver or other action by the Residual Holder
described in (i) through (iii) above (collectively, a "Residual Holder Act")
shall be binding and be given effect by the Trustee and the Sponsor under this
Indenture if the same is (A) in writing, (B) signed by the Majority Residual
Holders as of the date such writing is executed and delivered, (C) accompanied
by any indemnification to the Trustee and the Sponsor specifically required by
this
38
<PAGE>
Indenture in connection with that Residual Holder Act and (D) accompanied by
all payments, Opinions of Counsel or other written instruments, if any,
specifically required under this Indenture or with respect to that Residual
Holder Act. In determining whether the Residual Holders signing such Residual
Holder Act are Majority Residual Holders, the Trustee and the Sponsor shall
conclusively be entitled to rely on a written statement contained in or
attached to such Residual Holder Act.
Section 4.14. MONEYS TO BE HELD IN TRUST.
All moneys required to be deposited with or paid to the Trustee for deposit
into any Trust Fund established under any provision of this Indenture shall be
held in trust by the Trustee in its trust capacity in Eligible Accounts for the
benefit of the Bondholders and the Residual Holders, as their respective
interests may appear, and, until applied or released in accordance with this
Indenture, shall constitute a part of the Trust Estate and be subject to the
security interest created hereby with respect to the Bonds. No Eligible Account
shall be evidenced by a certificate of deposit, passbook or other instrument.
Each Eligible Account shall be a separate and identifiable account from all
other funds and accounts held by the Trustee. All Eligible Accounts shall be
established and maintained in the name of the Trustee, bearing a designation
clearly indicating that the funds deposited therein are held for the benefit of
the holders of the Bonds. The Trustee shall possess all right, title and
interest in all funds on deposit from time to time in each Eligible Account and
in all proceeds thereof. Each Eligible Account shall be under the sole dominion
and control of the Trustee for the benefit of the holders of the Bonds, and
shall contain only funds held for their benefit. The Trustee agrees that it has
no right of setoff or banker's lien against, and no right to otherwise deduct
from any funds held in any Eligible Account (except the Trust Expense Fund) for
any amount owed it by the Sponsor, any securityholder or any credit support
provider.
Section 4.15. GENERAL REPRESENTATIONS AND WARRANTIES OF SPONSOR.
The Sponsor hereby makes the following general representations and
warranties for the benefit of the Trustee and the Holders:
(a) DUE ORGANIZATION, VALID EXISTENCE. The Sponsor is duly
organized, validly existing and in good standing under the laws of the
State of Delaware and possesses all licenses and authorizations necessary
to carry on its business.
(b) POWER AND AUTHORITY. The Sponsor has full power and authority to
carry on its business as now being conducted and to enter into this
Indenture and the Sale Agreement and the transactions contemplated thereby.
(c) EXECUTION AND DELIVERY. This Indenture and the Sale Agreement
have been duly executed and delivered by the Sponsor.
39
<PAGE>
(d) ENFORCEABILITY. This Indenture and the Sale Agreement constitute
valid, legal, binding and enforceable obligations of the Sponsor (subject
to bankruptcy, insolvency or creditor rights laws generally, and principles
of equity generally) without offset, defense, or counterclaim.
(e) NO CONFLICT. The execution, delivery and performance of this
Indenture and the Sale Agreement by the Sponsor will not cause or
constitute (with due notice or lapse of time or both) a default under or
conflict with the Sponsor's organizational documents or other agreements by
which the Sponsor is bound or otherwise materially or adversely affect
performance of duties.
(f) NO VIOLATION OF LAWS. The execution, delivery and performance of
this Indenture and the Sale Agreement by the Sponsor will not violate any
law, regulation, order or decree of any governmental authority.
(g) CONSENTS OBTAINED. All consents, approvals, authorizations,
orders or filings of or with any court or governmental agency or body, if
any, required for the execution, delivery and performance of this Indenture
and the Sale Agreement by the Sponsor have been obtained or made.
(h) NO LITIGATION. There is no pending action, suit or proceeding,
arbitration or governmental investigation against the Sponsor an adverse
outcome of which would materially affect the Sponsor's performance under
this Indenture or the Sale Agreement.
Section 4.16. SPECIAL PURPOSE REPRESENTATIONS AND COVENANTS OF THE
SPONSOR.
(a) PURPOSE. The Sponsor was organized solely for the purpose of
acquiring the Trust Estate, depositing the same into the trust created
hereby, issuing the Bonds and participating in the transactions
contemplated hereby and by the Sale Agreement.
(b) NO OTHER BUSINESS. The Sponsor has not and will not engage in
any business unrelated to the purpose set forth above.
(c) NO OTHER ASSETS. The Sponsor has not acquired and will not
acquire any assets other than those constituting the Trust Estate.
(d) NO DISSOLUTION. The Sponsor has not engaged in, sought or
consented to, and will not engage in, seek or consent to, any dissolution,
winding up, liquidation, consolidation, merger, asset sale, or amendment of
its certificate of incorporation.
(e) INDEPENDENT DIRECTOR. The Sponsor has and shall at all times
while the Bonds are Outstanding have at least one Independent Director.
40
<PAGE>
(f) UNANIMOUS CONSENT. The Sponsor has not caused or allowed and
will not cause or allow its board of directors to take any action requiring
the unanimous affirmative vote of 100% of the members of the board of
directors unless an independent director shall have participated in such
vote.
(g) BANKRUPTCY FILING. The Sponsor, without the unanimous consent of
all of its directors, shall not file a bankruptcy or insolvency petition or
otherwise institute insolvency proceedings with respect to itself or to any
other entity in which it has a direct or indirect legal or beneficial
ownership interest.
(h) NO OTHER INDEBTEDNESS. The Sponsor has no indebtedness other
than the indebtedness represented by the Bonds and will not incur any other
indebtedness while the Bonds are Outstanding.
(i) MISUNDERSTANDINGS. The Sponsor has not and will not fail to
correct any known misunderstanding regarding the separate identity of the
Sponsor.
(j) SEPARATE ACCOUNTS. The Sponsor has maintained and will maintain
its accounts, books and records separate from any other person or entity.
(k) OFFICIAL RECORDS. The Sponsor has maintained and will maintain
its books, records, resolutions and agreements as official records.
(l) COMMINGLING. The Sponsor has not and will not commingle its
funds or assets with those of any other entity, and has held and will hold
its assets in its own name.
(m) OWN NAME. The Sponsor has conducted and will conduct its
business in its own name.
(n) SEPARATE RECORDS. The Sponsor has maintained and will maintain
its financial statements, accounting records and other entity documents
separate from any other person or entity.
(o) OWN LIABILITIES. The Sponsor has paid and will pay its own
liabilities out of its own funds and assets.
(p) FORMALITIES. The Sponsor has observed and will observe all
corporate formalities.
(q) GUARANTEES. The Sponsor has not and will not assume or guarantee
or become obligated for the debts of any other entity or hold out its
credit as being available to satisfy the obligations of any other entity.
41
<PAGE>
(r) AFFILIATE SECURITIES. The Sponsor has not acquired and will not
acquire obligations or securities of its shareholders.
(s) ALLOCATIONS. The Sponsor has allocated and will allocate fairly
and reasonably any overhead for shared office space and use separate
stationery, invoices and checks.
(t) PLEDGES. The Sponsor has not pledged and will not pledge its
assets for the benefit of any other person or entity.
(u) IDENTIFICATION. The Sponsor has held itself out and identified
itself and will hold itself out and identify itself as a separate and
distinct entity under its own name and not as a division or part of any
other person or entity.
(v) LOANS. The Sponsor has not made and will not make loans to any
person or entity, except for the Sponsor's loan to DCDC II as evidenced by
the DCDC II Note.
(w) DIVISIONS. The Sponsor has not identified and will not identify
its shareholders, or any affiliates of them, as a division or part of it.
(x) ARM'S-LENGTH TRANSACTION. The Sponsor has not entered into and
will not enter into or be a party to, any transaction with its shareholders
or its affiliates except in the ordinary course of its business and on
terms which are intrinsically fair and are no less favorable to it than
would be obtained in a comparable arm's-length transaction with an
unrelated third party.
Section 4.17. SPONSOR REPRESENTATIONS AND WARRANTIES REGARDING TRUST
ESTATE. The Sponsor hereby makes the same representations and warranties with
respect to the assets constituting the Trust Estate as made by the Lender in
Section 3.01(b) of the Sale Agreement.
(End of Article IV)
42
<PAGE>
ARTICLE V
REVENUES AND TRUST FUNDS
Section 5.01. CREATION OF FUNDS AND ACCOUNTS TO BE HELD BY THE TRUSTEE.
The following funds and separate accounts within the funds are hereby created
for the Bonds and shall be held and maintained for the Holders of Bonds and the
Residual Holders, as their respective interests may appear, by the Trustee as
Trust Funds under this Indenture:
Debt Service Fund
Redemption Fund
Class A Bonds Account
Class B Bonds Account
Residual Fund
Trust Expense Fund
Trustee Account
Manager Account
For the purposes of internal accounting, any fund or account created by
this Indenture may contain one or more sub-accounts, as the Trustee may deem
proper.
Section 5.02. SPONSOR CONTRIBUTION. On the date of issuance of the Bonds,
the Sponsor shall deposit into the trust created hereby the Notes and the Loan
Documents. In exchange therefor, the Trustee shall issue for the benefit of the
Sponsor and upon the terms herein described the Class A Bonds, the Class B Bonds
and the Certificates.
Section 5.03 DEBT SERVICE FUND.
(a) DEPOSITS OR TRANSFER OF MONEYS INTO THE DEBT SERVICE FUND.
The Trustee shall deposit into the Debt Service Fund upon receipt (i) all
monies transferred from the Income Account held by the Trustee as the Approved
Bank with respect thereto which are payments made on account of the 49C Notes
pursuant to the Loan Agreement and (ii) all amounts received by it from payments
on the DCDC II Note.
(b) USE OF MONEYS IN DEBT SERVICE FUND.
Moneys on deposit in the Debt Service Fund shall be used in the following
order and priority: (i) to transfer to the Trustee Account of the Trust Expense
Fund on each Interest Payment Date beginning June 1, 1998 the sum of $10,000;
(ii) to pay interest on the Bonds coming due on each Bond Payment Date; and
(iii) to pay the principal on the Bonds as it becomes due on any Bond Payment
Date or, if principal is not due on any such Bond Payment Date, to reserve
against the principal due on the next succeeding Bond Payment Date the amount
set forth on Exhibit G hereto. After making such payments on the Bonds or
reserving such
43
<PAGE>
amounts, as applicable, on each Bond Payment Date, the Trustee will transfer
to the Manager Account of the Trust Expense Fund from the Debt Service Fund
the lesser of (A) the sum of the accrued fees and expenses of the Manager
then due and payable or (B) the balance on deposit in the Debt Service Fund.
After making such transfer to the Manager Account of the Trust Expense
Fund, on each June 1 and December 1 commencing December 1, 1998, the Trustee
will transfer the balance in the Debt Service Fund to the Residual Fund,
provided no Event of Default has occurred and is continuing.
Except for the transfers to the Trust Expense Fund and the Residual Fund
described above, the Trustee shall use moneys in the Debt Service Fund solely
for the payment of interest on the Bonds when due and the payment of principal
of and premium (if any) on the Bonds as the same become due and payable at
maturity or upon earlier redemption or acceleration. The Trustee shall at all
times maintain accurate records of deposits into the Debt Service Fund, and the
sources and timing of such deposits.
Section 5.04. THE REDEMPTION FUND.
(i) DEPOSITS INTO REDEMPTION FUND. The Sponsor shall cause to be
deposited into the Class A Bonds Account and the Class B Bonds Account, as
applicable, of the Redemption Fund, for the payment of principal, accrued
interest to the redemption date, if any, and premium, if any, upon any
extraordinary mandatory redemption of the Bonds (pursuant to Section 2.15
hereof), solely out of moneys received as prepayment on the 49C Notes, an amount
sufficient to pay, when due, the principal, accrued interest to the redemption
date, if any, and premium, if any, upon such a redemption of the Bonds.
(ii) USE OF MONEYS IN THE REDEMPTION FUND. The Trustee shall use moneys in
the Redemption Fund solely for the payment of principal of, premium, if any, and
accrued interest on the Bonds to the redemption date in connection with an
extraordinary mandatory redemption of Bonds pursuant to Section 2.15 hereof but
only if notice thereof has been given pursuant to Section 2.16 hereof.
Section 5.05. THE TRUST EXPENSE FUND.
(a) DEPOSITS AND TRANSFERS INTO TRUST EXPENSE FUND. Moneys shall be
transferred into the Trust Expense Fund from the Debt Service Fund at the times
and as provided in Section 5.03(b).
(b) USE OF TRUST EXPENSE FUND. The Trustee shall use the moneys
transferred or deposited into the Trustee Account of the Trust Expense Fund to
pay the fees and expenses of the Trustee, and use the moneys transferred or
deposited into the Manager Account of the Trust Expense Fund to pay the fees and
expenses of the Manager.
44
<PAGE>
Section 5.06. THE RESIDUAL FUND.
(a) DEPOSITS INTO RESIDUAL FUND. Moneys shall be transferred into the
Residual Fund from the Debt Service Fund at the times and as provided in Section
5.03.
(b) USE OF RESIDUAL FUND. The Trustee shall use moneys transferred into
the Residual Fund solely to make distributions on the Certificates on each
Residual Distribution Date.
Section 5.07. AMOUNTS REMAINING IN FUNDS.
Subject to compliance with Section 3.03 hereof, any amounts remaining in
any Fund and any revenues derived from the Notes after full payment of the
Bonds, including any fees, charges and expenses of the Trustee as provided
herein and all other amounts required to be paid hereunder shall be paid to the
Residual Holders and, upon such payment, the Trustee shall have no
responsibility for the use or application by the Residual Holders of such
amounts or the use or application by the Residual Holders of amounts from time
to time released from any other Fund established hereunder.
(End of Article V)
45
<PAGE>
ARTICLE VI
INVESTMENT OF MONEYS
(a) All amounts held in the Debt Service Fund by the Trustee shall be
initially invested in accordance with the provisions of the Investment
Agreement, and if such Investment Agreement or any substitute therefor ever
ceases to be in effect, at the direction of the Majority Residual Holders in
accordance with paragraph (b) below.
The Trustee is hereby authorized and directed to enter into the original
Investment Agreement. The Trustee shall give all required notices under the
Investment Agreement. The Trustee shall maintain said Investment Agreement
unless otherwise directed in writing by the Majority Residual Holders to obtain
a substitute Investment Agreement and such procurement is consistent with the
terms of the existing Investment Agreement. The Trustee shall notify the Rating
Agency prior to any amendment or modification of the Investment Agreement, and
shall furnish the Rating Agency with a copy of any such amendment or
modification. In addition, the Trustee shall notify the Rating Agency prior to
the execution and delivery of any substitute Investment Agreement and shall
furnish the Rating Agency with a copy thereof.
The Sponsor shall not assign any of its rights or interests in or to the
Investment Agreement (or any substitute Investment Agreement) unless the Sponsor
has first notified both the Trustee and the Rating Agency of the proposed
assignment and the Trustee has received from the Rating Agency a letter to the
effect that such proposed assignment will not result in any downgrade,
withdrawal or qualification of the rating on the Class A Bonds.
(b) All other amounts held under this Indenture by the Trustee shall be
invested at the direction of the Majority Residual Holders in Government
Securities and in such manner as may then be required by applicable federal or
state laws and regulations and applicable laws and regulations of the State,
regarding security for, or granting a preference in the case of, the deposit of
trust funds; provided all such Government Securities shall mature or be
redeemable at the times necessary to provide funds to make payments of debt
service and other expenditures as provided herein. In the absence of direction
from the Majority Residual Holders, the Trustee shall invest such amounts in
investments described in clause (c) of the definition of "Government
Securities."
All amounts deposited with the Trustee shall be credited to the particular
Fund to which such moneys belong.
(c) Whenever the cash balance in a particular Trust Fund is insufficient
to make payments required therefrom, the Trustee shall sell and reduce to cash
any Government Securities held therein as needed to make such payments.
(d) Government Securities purchased as an investment of moneys in any
Trust Fund held by the Trustee under the provisions of this Indenture shall be
deemed at all times to be a
46
<PAGE>
part of such Trust Fund. Any income or interest earned and any losses
suffered with respect to an investment in a Government Security shall be
credited or charged as applicable to the Trust Fund in which such Government
Security is held.
(e) The Trustee shall provide to the Sponsor and the Residual Holders
written monthly statements of transactions and investments pertaining to all
Trust Funds so long as any Bonds remain Outstanding.
(f) The Trustee shall have no liability with respect to investment in any
Government Security made at the written direction of the Majority Residual
Holders, and the Trustee shall have the right to require written direction of
the Majority Residual Holders before investing in any Government Security.
(g) The Trustee may act as principal or agent in the acquisition or
disposition of any Government Securities.
(End of Article VI)
47
<PAGE>
ARTICLE VII
DISCHARGE OF INDENTURE
Whenever the following conditions shall have been satisfied with respect to
the Bonds:
(a) either:
(i) all Bonds theretofore authenticated and delivered (other
than Bonds which have been mutilated, destroyed, lost or stolen and
which have been replaced or paid as provided in Section 2.07) have
been delivered to the Trustee for cancellation; or
(ii) all Bonds not theretofore delivered to the Trustee for
cancellation have become due and payable and there has been deposited
with the Trustee, in trust for such purpose, an amount of cash or non-
callable Government Securities of the type described in clauses (a)
and (b) of the definition thereof, the principal of and interest on
which non-callable obligations when due is sufficient to pay and
discharge the entire indebtedness on such Bonds not theretofore
delivered to the Trustee for cancellation;
(b) all other sums payable hereunder with respect to the Bonds
(including all Trustee fees and expenses) have been paid or provided for;
and
(c) the Trustee has received an Opinion of Counsel to the effect that
all conditions precedent herein provided for the satisfaction and discharge
of this Indenture with respect to the Bonds have been complied with;
then, at the direction of the Residual Holders, this Indenture and the lien,
rights and interests created hereby and thereby shall cease to be of further
effect, and the Trustee and each co-trustee and separate trustee, if any, then
acting as such hereunder shall, at the expense of the Residual Holders, execute
and deliver all such instruments as may be necessary to acknowledge the
satisfaction and discharge of this Indenture and shall pay, or assign or
transfer and deliver, to the Residual Holders all cash, securities and other
property held by the Trustee as part of the Trust Estate remaining after
satisfaction of the conditions set forth in (a) and (b) above.
48
<PAGE>
Notwithstanding the satisfaction and discharge of this Indenture, the
obligations of the Sponsor to the Trustee under Section 9.02, the obligations of
the Trustee and any Paying Agents to the Sponsor and to the holders of Bonds
under Section 9.10, the obligations of the Trustee to the owners of Bonds under
Section 4.14 and the provisions of Article II with respect to lost, stolen,
destroyed and mutilated Bonds, registration of transfers and exchanges of Bonds
and rights to receive payments of principal of and interest on the Bonds from
the moneys and/or Investment Securities deposited with and held by the Trustee
shall survive discharge of the lien of this Indenture on the Trust Estate.
(End of Article VII)
49
<PAGE>
ARTICLE VIII
EVENTS OF DEFAULT; REMEDIES
Section 8.01. EVENTS OF DEFAULT.
If any of the following events occur, subject to Section 8.17, it is hereby
defined as and declared to be and to constitute an Event of Default:
(a) A default in any payment when and as due of interest on any Bond;
or
(b) A default in any payment of principal of any Bond when and as
due, whether at the stated maturity thereof or when called for redemption;
or
(c) A failure by the Sponsor to perform or observe any covenants of
the Sponsor other than such covenants relating to (a) or (b) above, or if
any representation made in this Indenture or in any certificate delivered
pursuant to this Indenture shall prove to be materially incorrect at the
time made, and failure to remedy the same within 90 days after notice
thereof pursuant to Section 8.17 (or such longer period permitted in
accordance with Section 8.17).
Section 8.02. WAIVER, RESCISSION AND ANNULMENT OF REMEDY EVENT.
(a) The Trustee may waive any Event of Default which has been remedied and
its consequences.
(b) Subject to Section 8.12, the Trustee shall waive any Event of Default
which has not been remedied upon the written request of the Holders of a
majority of the aggregate Outstanding amount of each Class of Bonds affected
thereby.
(c) Notwithstanding Sections 8.02(a) and (b), no Event of Default shall be
waived or rescinded, or its consequences annulled, unless the Trustee is
provided a Non-Disqualification Opinion with respect to such action.
(d) No waiver, rescission or annulment shall extend to or affect any
subsequent Event of Default or impair any right consequent thereon.
Section 8.03. COLLECTION OF INDEBTEDNESS AND SUITS FOR ENFORCEMENT BY
TRUSTEE.
Subject to Section 8.12, if an Event of Default occurs and is continuing,
the Trustee, in its discretion, may proceed to protect and enforce its rights
and the rights of Bondholders by such appropriate Proceedings as the Trustee
shall deem most effective to protect and enforce any such rights, whether for
the specific enforcement of any covenant or agreement in this Indenture
50
<PAGE>
or in aid of the exercise of any power Granted herein, or to enforce any
other proper remedy or legal right vested in the Trustee by this Indenture or
by law.
Notwithstanding anything to the contrary in this Article VIII, the Sponsor
shall be liable for the payment of principal of and interest on the Bonds, and
for the payment of all other claims which may arise against it under this
Indenture or pursuant to any judgment entered against the Sponsor of any nature
whatsoever, only to the extent of the assets which are included in the Trust
Estate and such obligations are special and limited in accordance with Section
2.03.
Section 8.04. REMEDIES.
If an Event of Default shall have occurred and be continuing and its
consequences have not been rescinded or annulled, the Trustee may, subject to
Section 8.12 and in addition to its rights under Section 4.05, do one or more of
the following:
(a) Institute Proceedings for the collection of all amounts then
payable on the Notes, including all action commercially reasonable to
realize upon the collateral securing the Notes (assuming an event of
default exists with respect to the Notes pursuant to the terms thereof);
(b) Institute Proceedings for the collection of all amounts then
payable on the Bonds or under this Indenture, enforce any judgment obtained
and collect from the Trust Estate securing the Bonds moneys adjudged due;
(c) Institute Proceedings from time to time for the complete or
partial foreclosure of this Indenture with respect to the Trust Estate or
to enforce its rights hereunder;
(d) Exercise any remedies as a secured party under the UCC and take
any other appropriate action to protect and enforce the rights and remedies
of the Trustee or Holders;
(e) Replace the Manager in accordance with Section 12.21; and
(f) With respect to an Event of Default under Section 8.01(a) or (b)
that remains uncured for a period of 120 days or more, accelerate and
declare the Bonds immediately due and payable in full; provided at any time
there exists and is continuing an Event of Default under Section 8.01(a) or
(b), the Trustee shall accelerate and declare the Bonds immediately due and
payable in full if directed to do so by a majority in aggregate outstanding
amount of each Class of Bonds in accordance with Section 8.12 hereof. (Any
notice of an Event of Default under Section 8.01(a) or (b) provided to
Holders pursuant to Section 9.03 shall advise such Holders of such ability
to direct the Trustee to accelerate the Bonds.)
51
<PAGE>
Notwithstanding the foregoing, no deficiency judgment shall be sought or
obtained against the Sponsor or the Residual Holders if the amounts realizable
from the Trust Estate under this Indenture are insufficient to pay the
obligations hereunder or on the Bonds.
Section 8.05. TRUSTEE MAY ENFORCE CLAIMS WITHOUT POSSESSION OF BONDS.
All rights of action and claims under this Indenture or the Bonds may be
prosecuted and enforced by the Trustee without the possession of any Bonds or
evidence of ownership of the Residual or the production thereof in any
Proceeding relating thereto, and any such Proceeding instituted by the Trustee
shall be brought in its own name as trustee of an express trust, and any
recovery of judgment shall be for the ratable benefit of the Bondholders until
all Bonds have been paid, and the Residual Holders, as their respective
interests may appear.
Section 8.06. APPLICATION OF MONEYS COLLECTED.
All moneys received by the Trustee following an Event of Default upon the
exercise of any remedies available to it or otherwise, after payment of the
costs and expenses of the Proceedings resulting in the collection of such moneys
and of any amounts due and owing to the Trustee under this Indenture and any
extraordinary fees, charges, out-of-pocket expenses or advances incurred by the
Trustee as a result of its exercise of powers hereunder following the occurrence
of an Event of Default, shall be deposited in the Debt Service Fund and all
moneys in the Debt Service Fund (other than moneys held for redemption of Bonds
duly called for redemption) shall be applied to the extent permitted by law in
the following order, at the date or dates from time to time fixed by the
Trustee, in the manner and priority provided as follows until such Event of
Default is cured:
First - To the payment to the persons entitled thereto of all
installments of interest then due on the Bonds, in the direct order of the
maturity of the installments of such interest and, if the amounts available
shall not be sufficient to pay in full any particular installment, then to
the payment ratably, according to the amounts due on such installment, to
the persons entitled thereto, without any discrimination or privilege; and
Second - To the payment to the persons entitled thereto of the unpaid
principal and premium, if any, on any of the Bonds, which shall have become
due (other than Bonds which have matured or otherwise become payable before
such Event of Default and moneys for the payment of which are held in the
Debt Service Fund or otherwise held by the Trustee), with interest on such
principal from the respective dates upon which the same became due and, if
the amount available shall not be sufficient to pay in full the amount of
principal, premium, if any, and the interest due on any particular date,
then to the payment ratably, according to the amount of principal due on
such date, to the persons entitled thereto, without any discrimination or
privilege.
52
<PAGE>
To the extent funds remain after such payments, such funds shall be held by
the Trustee; provided that in no event shall Bonds be called for redemption in
part so long as an Event of Default is outstanding under this Indenture.
Section 8.07. LIMITATION ON SUITS.
(a) No Bondholder shall have any right to institute any Proceedings,
judicial or otherwise, with respect to this Indenture, or for the appointment of
a receiver or trustee, or for any other remedy hereunder, unless:
(i) Such Bondholder previously has given written notice to the
Trustee of a continuing Event of Default in respect of such Bond;
(ii) Bondholders of not less than 51% in aggregate Outstanding amount
of Bonds shall have made written request to the Trustee pursuant to Section
8.12 to institute Proceedings in respect of such Event of Default in its
own name as Trustee hereunder;
(iii) Such Bondholders have offered to the Trustee, and the
Trustee shall have accepted, reasonable indemnity against the costs,
expenses and liabilities to be incurred in compliance with such request;
and
(iv) The Trustee for 30 days after its receipt of such notice, request
and offer of indemnity has failed to institute any such Proceeding.
(b) Notwithstanding subsection (a) above, no Bondholders shall have any
right in any manner whatever by virtue of, or by availing of, any provision of
this Indenture to affect, disturb or prejudice the rights of any other
Bondholders or to obtain or to seek to obtain priority or preference over any
other Bondholder or to enforce any right under this Indenture, except in the
manner herein provided and for the equal and ratable benefit of all Bondholders.
(c) Notwithstanding subsection (a) above, each Holder of the Class A Bonds
shall have the right to institute, individually but on behalf of all Holders of
Bonds, any Proceedings, judicial or otherwise, for the collection of payments
due under the GSA Lease securing the 49C Notes or otherwise to realize upon the
value of the collateral pledged hereunder related to the GSA Lease if an Event
of Default under Section 8.01(a) or (b) has occurred and continues to exist. If
any such Proceeding is instituted by a Holder of the Class A Bonds, the Trustee
may but shall not be obligated to, intervene in any such Proceeding or institute
any similar Proceeding in its own name unless directed to do so by the requisite
percentage of Bondholders pursuant to Section 8.12.
Section 8.08. UNCONDITIONAL RIGHTS OF BONDHOLDERS TO RECEIVE PRINCIPAL AND
INTEREST.
Notwithstanding any other provision in this Indenture, a Bondholder shall
have the right, which is absolute and unconditional, to receive payment of the
principal of and interest, if any,
53
<PAGE>
on Bonds owned by such Bondholder (subject to Section 4.01) on or after the
respective Bond Payment Date.
Section 8.09. RESTORATION OF RIGHTS AND REMEDIES.
If the Trustee, any Residual Holder or any Bondholder has instituted any
Proceeding to enforce any right or remedy under this Indenture and such
Proceeding has been discontinued or abandoned for any reason, or has been
determined adversely to the Trustee, any Residual Holder or to such Bondholder,
then and in every such case the Sponsor, the Trustee, any Residual Holder and
Bondholders shall, subject to any determination in such Proceeding, be restored
severally and respectively to their former positions hereunder, and thereafter
all rights and remedies of the Trustee, any Residual Holder and Bondholders
shall continue as though no such Proceeding had been instituted.
Section 8.10. RIGHTS AND REMEDIES CUMULATIVE.
No right or remedy herein conferred upon or reserved to the Trustee, the
Residual Holders or to Bondholders is intended to be exclusive of any other
right or remedy, and every right and remedy shall, to the extent permitted by
law, be cumulative and in addition to every other right and remedy given
hereunder or now or hereafter existing at law or in equity or otherwise. The
assertion or employment of any right or remedy hereunder, or otherwise, shall
not prevent the concurrent assertion or employment of any other appropriate
right or remedy.
Section 8.11. DELAY OR OMISSION NOT WAIVER.
No delay or omission of the Trustee, any Residual Holder or of any
Bondholder to exercise any right or remedy accruing upon an Event of Default
shall impair any right or remedy or constitute a waiver of any such Event of
Default or any acquiescence therein. Every right and remedy given by this
Article VIII or by law to the Trustee, the Residual Holders or to Bondholders
may be exercised from time to time, and as often as may be deemed expedient, by
the Trustee, the Residual Holders or by Bondholders, as the case may be.
Section 8.12. CONTROL BY THE BONDHOLDERS UNTIL THERE ARE NO OUTSTANDING
BONDS.
Subject to Sections 8.07(a) and 9.01, Holders of a majority in aggregate
Outstanding amount of each Class of Bonds shall have the right at any time, by
an instrument in writing executed and delivered to the Trustee, to direct the
time, method and place of conducting any Proceeding for any remedy available to
the Trustee with respect to the Bonds or exercising any trust or power conferred
on the Trustee with respect to the Bonds provided that:
(a) such direction shall not be in conflict with any rule of law or
with this Indenture;
54
<PAGE>
(b) the Trustee shall have been provided with indemnity reasonably
satisfactory to it;
(c) any direction to the Trustee to undertake a sale of the Trust
Estate securing the Bonds shall be accompanied by a Non-Disqualification
Opinion;
(d) the Trustee may take any other action deemed proper by the
Trustee which is not inconsistent with such direction; provided, however,
that the Trustee need not take any action which it determines would be
unjustly prejudicial to Bondholders not consenting.
Section 8.13. UNDERTAKING FOR COSTS.
All parties to this Indenture agree, and each Bondholder by such Holder's
acceptance of a Bond shall be deemed to have agreed, that any court may, in its
discretion, require, in any suit for the enforcement of any right or remedy
under this Indenture, or in any suit against the Trustee for any action taken,
suffered or omitted by it as Trustee, the filing by any party litigant in such
suit of an undertaking to pay the costs of such suit, and that such court may,
in its discretion, assess reasonable costs, including reasonable attorneys'
fees, against any party litigant in such suit, having due regard to the merits
and good faith of the claims or defenses made by such party litigant.
Section 8.14. SALE OF TRUST ESTATE.
(a) The power to make any sale of any portion of the Trust Estate (a
"Sale") shall not be exhausted by any one or more Sales as to any portion of the
Trust Estate remaining unsold, but shall continue unimpaired until the entire
Trust Estate shall have been sold or all amounts payable on the Bonds and under
this Indenture with respect thereto shall have been paid. The Trustee may from
time to time postpone any Sale by public announcement made at the time and place
of such Sale. The Trustee hereby expressly waives its right to any amount fixed
by law as compensation for any Sale but such waiver does not apply to amounts to
which the Trustee is otherwise entitled under Section 9.02.
(b) The Trustee may bid for and acquire any portion of the Trust Estate in
connection with a public Sale thereof, and, in lieu of paying cash therefor, may
make settlement for the purchase price by crediting against amounts owing on the
Bonds or other amounts secured by this Indenture, all or part of the net
proceeds of such Sale after deducting the costs, charges and expenses incurred
by the Trustee in connection with such Sale. The Bonds need not be produced in
order to complete any such Sale, or in order for the net proceeds of such Sale
to be credited against the Bonds. The Trustee may hold, lease, operate, manage
or otherwise deal with any property so acquired in any manner permitted by law.
If the Trustee shall have acquired the entire Trust Estate by purchasing it at
any public Sale, the Trustee will, to the extent permitted by applicable law,
apply all distributions received with respect to such Trust Estate pursuant to
Section 8.06.
55
<PAGE>
(c) The Trustee shall execute and deliver an appropriate instrument of
conveyance transferring its interest in any portion of the Trust Estate in
connection with a Sale thereof. In addition, the Trustee is hereby irrevocably
appointed the agent and attorney-in-fact of the Residual Holders to transfer and
convey its interest in any portion of the Trust Estate in connection with a Sale
thereof and to take all action necessary to effect such Sale. No purchaser or
transferee at such a Sale shall be bound to ascertain the Trustee's authority,
inquire into the satisfaction of any conditions precedent or see to the
application of any moneys.
(d) The foregoing provisions shall not preclude or limit the ability of
the Trustee to purchase, to the extent permitted by applicable law, all or any
portion of the Trust Estate at a private sale, provided that, in no event shall
the Trustee purchase or sell the Trust Estate unless it either (i) has received
an Opinion of Counsel to the effect that such sale will not result in the
imposition of taxes on "prohibited transactions," as defined in Section 860F of
the Code or (ii) the proceeds of such sale net of any tax on "prohibited
transactions", as defined in Section 860F of the Code, that is payable from the
Trust Estate would be not less than the entire amount that would be
distributable to the Holders of the Bonds, in full payment thereof in accordance
with Section 8.06.
Section 8.15. ACTION ON BONDS.
The Trustee's right to seek and recover judgment under this Indenture shall
not be affected by the seeking, obtaining or applying of any other relief under
or with respect to this Indenture. Neither the lien of this Indenture nor any
rights or remedies of the Trustee or Bondholders shall be impaired by the
recovery of any judgment by the Trustee against the Sponsor or by the levy of
any execution under such judgment upon any portion of the Trust Estate.
Section 8.16. RECEIVER.
Upon the occurrence of an Event of Default, and upon the filing of a suit
or other commencement of Proceedings to enforce the rights of the Trustee or the
Bondholders under this Indenture, the Trustee shall be entitled, as a matter of
right, to the appointment of a receiver or receivers of the Trust Estate and of
the revenues, receipts, earnings, income, and profits thereof, pending such
Proceedings, with such powers as the court making such appointment shall confer.
Section 8.17. NOTICE OF DEFAULTS UNDER SECTION 8.01(c); OPPORTUNITY OF
SPONSOR AND THE RESIDUAL HOLDERS TO CURE SUCH DEFAULTS.
Anything herein to the contrary notwithstanding, no Default under Section
8.01(c) shall constitute an Event of Default until actual notice of such Default
by first-class mail (postage prepaid) shall be given to the Sponsor (with a copy
to the Residual Holders) by the Trustee, the Majority Residual Holders or by the
owners of not less than 25% of the aggregate Outstanding amount of Bonds and the
Sponsor shall have had 90 days after receipt of such notice to correct such
Default or cause such Default to be corrected, and shall not have corrected such
Default
56
<PAGE>
or caused such Default to be corrected within the applicable period;
provided, however, if such Default be such that it cannot be corrected within
the 90-day period and if, within such 90-day period the Sponsor shall have
given notice to the Trustee of corrective action it proposes to take, which
corrective action is agreed to in writing by the Trustee with the consent of
the Majority Residual Holders to be satisfactory and the Sponsor shall
thereafter pursue such corrective action diligently until such Default is
cured, it shall not be considered an Event of Default during such period as
the Trustee shall permit in writing to the Sponsor, but such permission may
be revoked in writing to the Sponsor and the Trustee after reasonable time if
progress toward curing such Default satisfactory to the Trustee has not been
achieved. The foregoing notwithstanding, if any Default under Section
8.01(c) is not cured within 180 days following the Sponsor's receipt of the
notice described above, such Default shall constitute an Event of Default
hereunder.
With regard to any alleged Default concerning which notice is given to the
Sponsor and the Majority Residual Holders under the provisions of this Section
8.17, the Sponsor hereby grants, to the extent permitted by law, to the Majority
Residual Holders full authority to perform any covenant or obligation alleged in
said notice to constitute a Default, in the name and stead of the Sponsor with
full power to do any and all things and acts to the same extent that the Sponsor
could do and perform any such things and acts and with power of substitutions,
to the extent permitted by law.
(End of Article VIII)
57
<PAGE>
ARTICLE IX
TRUSTEE
Section 9.01. REPRESENTATIONS AND WARRANTIES OF THE TRUSTEE; ACCEPTANCE OF
THE TRUSTS.
In connection with the acceptance of its duties hereunder, the Trustee
makes the following representations and warranties:
(i) DUE ORGANIZATION, VALID EXISTENCE. The Trustee is duly organized
and validly existing as a national banking association with corporate trust
powers.
(ii) POWER AND AUTHORITY. The Trustee has full power and authority to
carry on its business as now being conducted and to enter into this
Indenture and accept the trusts imposed upon it hereby.
(iii) EXECUTION AND DELIVERY. This Indenture has been duly executed
and delivered by the Trustee.
(iv) ENFORCEABILITY. This Indenture constitutes the valid, legal,
binding and enforceable obligation of the Trustee (subject to bankruptcy,
insolvency or creditor rights laws generally, and principles of equity
generally) without offset, defense, or counterclaim.
(v) NO CONFLICT. The execution, delivery and performance of this
Indenture by the Trustee will not cause or constitute (with due notice or
lapse of time or both) a default under or conflict with the Trustee's
organizational documents or other agreements by which the Trustee is bound
or otherwise materially or adversely affect performance of duties.
(vi) NO VIOLATION OF LAWS. The execution, delivery and performance of
this Indenture by the Trustee will not violate any law, regulation, order
or decree of any governmental authority.
(vii) CONSENTS OBTAINED. All consents, approvals, authorizations,
orders or filings of or with any court or governmental agency or body, if
any, required for the execution, delivery and performance of this Indenture
by the Trustee have been obtained or made.
(viii) NO LITIGATION. There is no pending action, suit or proceeding,
arbitration or governmental investigation against the Trustee an adverse
outcome of which would materially affect the Trustee's performance under
this Indenture.
58
<PAGE>
The Trustee hereby accepts the trusts imposed upon it by this Indenture,
and agrees to perform said trusts, but only upon and subject to the following
express terms and conditions:
(a) Except during the continuance of an Event of Default of which the
Trustee is deemed to have notice under Section 9.03, the Trustee shall
perform such duties and only such duties as are specifically set forth in
this Indenture and no implied covenants or obligations shall be read into
this Indenture against the Trustee. Subject to Sections 9.01(c) and
9.01(f) and the standard of care established therein, if an Event of
Default has occurred and is continuing, the Trustee shall exercise such of
the rights and powers vested in it by this Indenture and use the same
degree of care and skill in its exercise, as a prudent man would exercise
or use under the circumstances in the conduct of his own affairs;
(b) The Trustee may execute any of the trusts or powers hereof and
perform any of its duties by or through attorneys, agents or receivers or
employees or other experts but shall be answerable for the conduct of the
same in accordance with the standard of care imposed upon the Trustee for
its own actions under this Indenture, and shall be entitled to advice of
counsel, accountants and other professionals or other experts concerning
all matters of trust hereof and the duties hereunder, and may in all cases
pay such reasonable compensation to all such attorneys, agents,
accountants, other professionals, receivers or other experts and employees
as may reasonably be employed and approved in the exercise of due care in
connection with the trusts hereof. The Trustee may act and rely upon the
opinion or advice of any attorneys, accountants and other professionals or
experts (who may be the attorney or attorneys, accountants and other
professionals or experts for the Sponsor, a Residual Holder or the
Manager), approved by the Trustee in the exercise of reasonable care. The
Trustee shall not be responsible for any loss or damage resulting from any
action taken or nonaction in good faith in reliance upon such opinion or
advice;
(c) The recitals of facts herein in the Bonds and in the Certificates
shall be taken as statements of the Sponsor, and the Trustee assumes no
responsibility for the correctness of the same, nor makes any
representations as to the validity or sufficiency of this Indenture or the
Trust Estate or of the Bonds or the Certificates nor shall incur any
responsibility in respect thereof, other than in connection with the duties
or obligations herein and in the Bonds and in the Certificates assigned to
or imposed upon it. The Trustee shall not be liable in connection with the
performance of its duties hereunder, except for its own negligent action,
negligent failure to act or willful misconduct and the Trustee shall not be
deemed to have breached any of its fiduciary duties under this Indenture to
the extent the Trustee is acting pursuant to a written direction of the
Residual Holders or the Bondholders permitted or required under this
Indenture. The Trustee may become the owner of Bonds with the same rights
it would have if it were not Trustee, and, to the extent permitted by law,
may act as depositary for and permit any of its officers or directors to
act as a member of, or in any other capacity with respect to, any committee
formed to protect the rights of owners, whether
59
<PAGE>
or not such committee shall represent the owners of a majority of the
aggregate Outstanding amount of the Bonds;
(d) The Trustee may rely and shall be protected in acting or
refraining from acting upon any resolution, statement, opinion, notice,
request, consent, certificate, order, affidavit, letter, telegram or other
paper or document reasonably believed (i) to be genuine and correct and
(ii) to have been signed or sent by the proper Person or Persons (which, in
the case of the Sponsor, shall be an Authorized Officer). The Trustee
shall not withhold unreasonably its consent, approval or action to any
reasonable request of the Sponsor or the Residual Holders. Any action
taken by the Trustee pursuant to this Indenture upon the request or
authority or consent of any Person who at the time of making such request
or giving such authority or consent is the owner of any Bond on the Bond
Register shall be conclusive and binding upon all future owners of the same
Bond or Certificate, as applicable, and upon Bonds or Certificates issued
in exchange therefor or in place thereof;
(e) As to the existence or nonexistence of any fact or as to the
sufficiency or validity of any instrument, paper or proceeding, the Trustee
shall be entitled to rely reasonably upon an Officer's Certificate or on a
certificate or written representation of others as sufficient evidence of
the facts therein contained and prior to the occurrence of a default of
which the Trustee has been notified as provided in Section 9.01(g), or of
which by Section 9.01(g) it is deemed to have notice, shall also be at
liberty to accept a similar certificate to the effect that any particular
dealing, transaction or action is necessary or expedient, but may, at its
discretion, secure such further evidence deemed necessary or advisable, but
shall in no case be bound to secure the same. The Trustee may accept such
Officer's Certificate or other certificate or written representation to the
effect that resolutions in the form therein set forth have been adopted as
conclusive evidence that such resolutions have been duly adopted and are in
full force and effect;
(f) The permissive right of the Trustee to do things enumerated in
this Indenture shall not be construed as a duty and it shall not be
answerable for other than its negligence, willful misconduct or reckless
disregard;
(g) The Trustee shall not be required to take notice or be deemed to
have notice of any Default or Event of Default hereunder except an Event of
Default under Section 8.01(a) or (b), the failure to make any of the
payments to the Trustee required to be made by Article IV hereof or the
failure of the Sponsor, the Manager or the Residual Holders to file with
the Trustee any document required by this Indenture to be so filed
subsequent to the issuance of the Bonds, unless a Trust Officer has actual
knowledge or notice of such Default or Event of Default or the Trustee
shall be specifically notified in writing of such Default by the Sponsor,
the Manager, the Residual Holders or by the owners of at least 25% of the
aggregate Outstanding amount of the Class of Bonds affected thereby or
owners of at least 25% of the Residual. All notices or other instruments
required by this Indenture to be delivered to the Trustee must, in
60
<PAGE>
order to be effective, be delivered to the Trustee must, in order to be
effective, be delivered at the Notice Address; and, in the absence of such
notice so delivered, the Trustee may conclusively assume there is no
Default or Event of Default except as foresaid;
(h) At any and all reasonable times, the Trustee, and its duly
authorized agents, attorneys, experts, engineers, accountants, other
professionals, and representatives, shall have the right fully to inspect
any and all of the property herein conveyed, including all books, papers
and records of the Sponsor pertaining to the revenues and receipts under
the Notes, Loan Documents and the Bonds and to make copies thereof;
provided, however, that the foregoing shall not impose any additional
obligations on the Trustee;
(i) The Trustee shall not be required to give any bond or surety in
respect of the execution of the said trusts and powers or otherwise in
respect of the premises;
(j) Notwithstanding anything elsewhere in this Indenture contained,
in respect of the authentication of any Bonds and the execution of any
Certificates, the withdrawal of any cash or the taking of any action
whatsoever within the purview of this Indenture, the Trustee shall have the
right, but shall not be required, to demand any showings, certificates,
opinions, appraisals or other information, or corporate action or evidence
thereof, in addition to that by the terms hereof required as a condition of
such action by the Trustee deemed desirable for the purpose of establishing
the right of the Sponsor to the authentication of any Bonds, the execution
of any Certificates, the withdrawal of any cash or the taking of any other
action by the Trustee;
(k) Before taking any action under Article VIII or any action in this
Indenture for which the express right to receive indemnification is granted
to the Trustee, the Trustee may require that a satisfactory indemnity be
furnished for the reimbursement of all expenses to which the Trustee may be
put and to protect the Trustee against all liability, except liability
which is adjudicated to have resulted from its negligence or willful
misconduct by reason of any action so taken;
(l) The Trustee shall not be responsible for any act or omission of
the Trustee taken in good faith or any consequences thereof but nothing in
this Section 9.01(l) shall be construed to excuse the Trustee for a
violation of the Trustee's standard of care hereunder;
(m) All moneys received into the Trust Funds hereunder by the Trustee
or any Paying Agent shall, until used or applied or invested as herein
provided, be held in trust for the purposes for which they were received
but need not be segregated from other funds except to the extent required
by law or this Indenture. Neither the Trustee nor any Paying Agent shall
be under any liability for the payment of interest on any moneys received
hereunder;
61
<PAGE>
(n) No provision of this Indenture shall require the Trustee to
expend or risk its own funds or otherwise incur any financial liability in
the performance of any of its duties hereunder, or in the exercise of any
of its rights or powers, if it shall have reasonable grounds for believing
that repayment of such funds or adequate indemnity against such risk or
liability is not reasonably assured to it;
(o) Notwithstanding any other provision of this Indenture, the
Trustee makes no representation as to the validity or adequacy of this
Indenture or the Bonds, shall not be accountable for the Sponsor's use of
the proceeds from the Bonds paid to the Sponsor, and shall not be
responsible for any statement in the Bonds (except the certificate of
authentication) or this Indenture or for the initial perfection of any lien
created by this Indenture or otherwise as security for the Bonds;
(p) Notwithstanding any other provision of this Indenture, the
Trustee shall not be responsible for the application of any of the proceeds
of the Bonds or any other moneys deposited with it and paid out, withdrawn
or transferred hereunder if such application, payment, withdrawal or
transfer shall be made in accordance with the provisions of this Indenture;
and
(q) Notwithstanding any other provision of this Indenture, the
Trustee shall not be personally liable for any claims by or on behalf of
any person, firm, corporation or other legal entity arising from the
conduct or management of, or from any work or thing done on, the Project,
and shall have no affirmative duty with respect to compliance of the
Project under state or Federal laws pertaining to the transport, storage,
treatment or disposal of pollutants, contaminants, waste or hazardous
materials or regulations, permits or licenses issued under such laws.
Section 9.02. FEES, CHARGES AND EXPENSES OF TRUSTEE.
The Trustee shall be entitled to payment and/or reimbursement for its fees,
charges and expenses, but solely from amounts deposited for such purposes into
the Trustee Account of the Trust Expense Fund or such amounts as to which it may
otherwise be entitled under the provisions of this Indenture, including, without
limitation, Section 8.06 hereof. Except for extraordinary fees, charges and
expenses that may be owed to or incurred by the Trustee following the occurrence
of an Event of Default and which shall be paid to the Trustee from the sources
and as otherwise provided in Section 8.06, the Trustee acknowledges that all its
fees, charges and expenses for all services to be rendered hereunder from the
Closing Date through December 1, 1997 were paid in advance on the Closing Date,
and acknowledges that its fees, charges and expenses for all services to be
rendered hereunder after December 1, 1997 shall be equal to and shall be
satisfied by the payment of $10,000 semiannually on each Interest Payment Date
commencing June 1, 1998. All fees, charges and expenses of the Trustee not paid
when due shall bear interest from the date incurred to the date of payment at a
rate of interest equal to two percent (2%) in excess of the Base Rate of
SouthTrust Bank of Alabama, National Association, as announced from time to
time.
62
<PAGE>
Section 9.03. NOTICE OF DEFAULT.
If a Default occurs of which the Trustee is by Section 9.01(g) required to
take notice or if notice of a Default or Event of Default is given as in Section
9.01(g) hereof provided, then the Trustee shall promptly give or cause to be
given written notice thereof by first-class mail to the Rating Agency and to the
Holders at their addresses as shown on the Bond Register and the Certificate
Register, respectively. The Trustee shall provide the Securities Depository
with notice of an Event of Default described in Section 8.01(a) or (b)
immediately upon the Trustee's knowledge of such Event of Default and, with
respect to any other Default or Event of Default, within 30 days of the
Trustee's knowledge thereof.
Section 9.04. INTERVENTION BY TRUSTEE.
In any Proceeding concerning the issuance or the payment of the Bonds or
the Certificates and which in the opinion of the Trustee and its counsel has a
substantial bearing on the interests of the owners of the Bonds, the Trustee may
intervene on behalf of Bondholders and the Trustee shall intervene if requested
to do so in writing by the owners of at least a majority of the aggregate
Outstanding amount of each Class of Bonds or the Majority Residual Holder, upon
request of indemnification acceptable to the Trustee.
Section 9.05. SUCCESSOR TRUSTEE.
Any corporation or association into which the Trustee may be converted or
merged, or with which it may be consolidated, or to which it may sell or
transfer its trust business and assets as a whole or substantially as a whole,
or any corporation or association resulting from any such conversion, sale,
merger, consolidation or transfer to which it is a party, IPSO FACTO shall be
and become successor to the Trustee hereunder and vested with all of the title
to the Trust Estate and all the trusts, powers, discretions, immunities,
privileges and all other matters as was its predecessor, without the execution
or filing of any instrument or any further act, deed or conveyance on the part
of any of the parties hereto, anything herein to the contrary notwithstanding,
provided that (i) the Majority Residual Holders consent to such succession and
(ii) the successor corporation or association satisfies the standards of Section
9.08.
Section 9.06. RESIGNATION BY TRUSTEE.
The Trustee and any successor Trustee may at any time resign from the
trusts hereby created by giving 30 days' prior written notice by registered or
certified mail to the Sponsor, the Rating Agency, the Manager and by first
class-mail (postage prepaid) to the registered Holder of each Bond and
Certificate, all at the Trustee's expense, and such resignation shall take
effect only upon the appointment and acceptance of a successor Trustee, pursuant
to Section 9.08. If no successor Trustee shall have been appointed and have
accepted appointment within 45 days of giving notice of removal or notice of
resignation as aforesaid, the resigning Trustee or any Holder (on behalf of
himself and all other Holders) may petition any court of competent jurisdiction
for the appointment of a successor Trustee and such court may thereupon, after
such
63
<PAGE>
notice (if any) as it may deem proper, appoint such successor Trustee.
Resignation of a Trustee pursuant to this Section 9.06 or removal of the
Trustee pursuant to Section 9.07 shall not relieve such resigning or removed
Trustee from liability for its acts before the date such removal or
resignation is effective.
Section 9.07. REMOVAL OF TRUSTEE.
The Trustee may be removed at any time by an instrument or concurrent
instruments in writing delivered to the Trustee, the Rating Agency, the Sponsor,
the Manager and the Residual Holders and signed by the owners of a majority of
the aggregate Outstanding amount of each Class of Bonds; provided, however, that
no removal shall become effective until a successor Trustee has been appointed
and has accepted the duties of the Trustee. In addition, any Trustee hereunder
may be removed at any time, (i) at the written request of the Majority Residual
Holders, for cause, including breach of the trusts set forth in this Indenture
and (ii) by the Sponsor with the written approval of the Majority Residual
Holders.
Section 9.08. APPOINTMENT OF SUCCESSOR TRUSTEE; TEMPORARY TRUSTEE.
In case the Trustee hereunder shall resign or be removed, or be dissolved,
or shall be in course of dissolution or liquidation, or otherwise become
incapable of acting hereunder, or in case it shall be taken under the control of
any public officer or officers, or of a receiver appointed by a court, a
successor may be appointed by the owners of a majority of the aggregate
Outstanding amount of each Class of Bonds, with the consent of the Majority
Residual Holders, by an instrument or concurrent instruments in writing signed
by such owners, or by their attorneys-in-fact, duly authorized and a copy of
which shall be delivered personally or sent by registered mail to the Sponsor,
the Trustee and the Manager. In addition, in case of such vacancy, the Sponsor,
upon written notice to the Manager, the Majority Residual Holders, the
Bondholders, and to the outgoing trustee may, with the consent of the Majority
Residual Holders, appoint a temporary Trustee to fill such vacancy until a
successor Trustee shall be appointed by the owners of a majority of the
aggregate Outstanding amount of each Class of Bonds with the consent of the
Majority Residual Holders in the manner above provided; and any such temporary
Trustee so appointed by the Sponsor shall immediately and without further act be
superseded by the Trustee so appointed. Notice of the appointment of a
successor Trustee shall be given in the same manner as provided by Section 9.06
with respect to the resignation of a Trustee. Any Trustee appointed under the
provisions of this Article (other than the initial Trustee hereunder) or
appointed as a successor to the Trustee shall be (i) a trust company or bank in
good standing, duly authorized to exercise trust powers under this Indenture,
having trust assets of at least $500,000,000 and a combined capital and surplus
of at least $75,000,000, and subject to supervision or examination by federal or
state authority provided there is such a bank or trust company willing or able
to serve in such capacity. In case at any time the successor Trustee shall
cease to be eligible in accordance with these provisions, the Trustee shall
resign immediately in the manner and with the effect specified in this Article
IX. If there is no qualified trustee willing to serve, the successor Trustee
shall be selected by the Majority Residual Holders.
64
<PAGE>
Section 9.09. CONCERNING ANY SUCCESSOR TRUSTEE.
Every successor Trustee appointed hereunder shall execute, acknowledge and
deliver to its or his predecessor and also to the Sponsor, the Trustee and the
Manager an instrument in writing accepting such appointment hereunder, with a
copy to the Residual Holders, and thereupon such successor, without any further
act, deed or conveyance, shall become fully vested with all the estates,
properties, rights, powers, trusts, duties and obligations of its predecessors;
but such predecessor shall, nevertheless, on the written request of the Sponsor,
or of its successors, execute and deliver an instrument transferring to such
successor Trustee all the estates, properties, rights, powers and trusts of such
predecessor hereunder; and every predecessor Trustee shall deliver all
securities and moneys held by it as Trustee hereunder to its or his successor.
Should any instrument in writing from the Sponsor be required by any successor
Trustee for more fully and certainly vesting in such successor the estate,
rights, powers and duties hereby vested or intended to be vested in the
predecessor, any and all such instruments in writing shall, on request, be
executed, acknowledged and delivered by the Sponsor. The resignation of any
Trustee and appointing a successor hereunder, together with all other
instruments provided for in this Article IX, shall be filed or recorded by the
successor Trustee in each recording office where this Indenture shall have been
filed or recorded.
Section 9.10. DESIGNATION AND SUCCESSION OF PAYING AGENTS.
The Trustee is hereby appointed as Paying Agent hereunder. Any bank or
trust company with or into which the Paying Agent may be merged or consolidated,
or to which the assets and business of such Paying Agent may be sold, shall be
deemed the successor of such Paying Agent for the purposes of this Indenture.
If the position of Paying Agent shall become vacant for any reason, the Sponsor
shall, within 30 days thereafter, appoint a bank or trust company to fill such
vacancy; provided, however, that if the Sponsor shall fail to appoint such
Paying Agent within said period, the Trustee shall make such appointment. Other
Paying Agents or fiscal agents may be appointed pursuant to Article IX hereof by
the Sponsor if in its discretion additional Paying Agents or fiscal agents are
deemed advisable. Any Paying Agent appointed to serve in such capacity
hereunder shall hold all moneys transferred to it in Eligible Accounts.
Paying Agents shall enjoy the same protective provisions in performance of
their duties hereunder as are specified in Section 9.01 with respect to the
Trustee insofar as such provisions may be applicable, and shall be entitled to
reasonable compensation and reimbursement of their expenses and costs from the
Trust Expense Fund.
Notice of the appointment of Paying Agents shall be given in the same
manner as provided by Section 9.06 with respect to the appointment of a
successor Trustee.
65
<PAGE>
Resignation or removal of a Paying Agent pursuant to this Section 9.10
shall not relieve such resigning or removed Paying Agent from liability for its
acts prior to the date such removal or resignation is effective.
(End of Article IX)
66
<PAGE>
ARTICLE X
SUPPLEMENTAL INDENTURES
Section 10.01. SUPPLEMENTAL INDENTURES WITHOUT CONSENT OF BONDHOLDERS.
Subject to Section 10.03, without the consent of, or notice to, any
Bondholders, the Sponsor (but only with the consent or direction of the Majority
Residual Holders) and the Trustee, at any time and from time to time, may enter
into one or more indentures supplemental hereto, in form satisfactory to the
Trustee, for any of the following purposes:
(a) To cure any ambiguity, to correct or supplement any provision of
this Indenture or in any supplemental indenture which may be defective or
inconsistent with any other provision herein or in any supplemental
indenture or to make such other provisions in regard to matters or
questions arising under this Indenture or under any supplemental indenture,
which shall not be inconsistent with the provisions of this Indenture, and
which do not adversely affect the interests of the Holders of any affected
Bonds;
(b) To conform to any mandatory provisions of law;
(c) To modify, amend or supplement this Indenture in such manner as
to permit the qualification hereof under the Trust Indenture Act of 1939 or
any similar federal statute hereafter in effect or under any state
securities laws and to add to this Indenture such other provisions as may
be expressly required by the Trust Indenture Act of 1939;
(d) To correct or amplify the description of the Trust Estate or
better to assure, convey and confirm unto the Trustee the Trust Estate, or
to subject to the lien of this Indenture additional property;
(e) To modify, eliminate or add to the provisions of this Indenture
to such extent as shall be necessary to maintain the qualification of the
Trust Estate as a REMIC under the Code; or
(f) To maintain or improve the then current rating by the Rating
Agency of any Class of Bonds (so long as the rating (if any) with respect
to any other Class of Bonds is not adversely affected thereby).
67
<PAGE>
Section 10.02. SUPPLEMENTAL INDENTURES WITH CONSENT OF BONDHOLDERS.
(a) Subject to Section 10.03, with the consent of the Bondholders of not
less than two-thirds in aggregate Outstanding amount of the Class of Bonds
affected thereby, the Sponsor (but only with the consent or direction of the
Majority Residual Holders) and the Trustee may enter into indentures
supplemental hereto for the purpose of adding any provisions to or changing in
any manner or eliminating any of the provisions of this Indenture or of
modifying in any manner the rights of Bondholders under this Indenture;
provided, however,
(1) that no such supplemental indenture shall, without the consent of
Bondholders of 100% in aggregate Outstanding amount of Bonds affected
thereby, change the stated maturity of the principal of, or any installment
of principal or interest on, any Bond or reduce the principal amount
thereof or the interest rate thereon or the redemption price with respect
thereto; and
(2) that no such supplemental indenture shall, without the consent of
Bondholders of 100% in aggregate Outstanding amount of Bonds:
(i) reduce the percentage of aggregate Outstanding amount of
Bonds, holders of which are specifically required hereunder (A) to
direct the Trustee to liquidate the Trust Estate, (B) consent to any
supplemental indenture or (C) for any waiver of compliance with
certain provisions of this Indenture or certain defaults hereunder and
their consequences provided for in this Indenture; or
(ii) except as expressly provided in this Indenture, create any
lien having a priority over or a parity with the lien of this
Indenture or terminate the lien of this Indenture on the Trust Estate
or deprive any Bondholder of the security afforded by the lien of this
Indenture.
If at any time the Sponsor shall, at the written direction of the Majority
Residual Holders, request the Trustee to enter into a supplemental indenture for
any of the purposes of this Section, the Trustee shall, at the expense of the
Residual Holders, cause notice of the proposed execution of such supplemental
indenture to be mailed, postage prepaid, to all Bondholders. Such notice shall
briefly set forth the nature of the proposed supplemental indenture and shall
state that copies thereof are on file at the Corporate Trust Office for
inspection by all Bondholders and Residual Holders. The Trustee shall not,
however, be subject to any liability to any Bondholder by reason of its failure
to mail the notice required by this Section, and any such failure shall not
affect the validity of such supplemental indenture when consented to and
approved as provided in this Section.
Whenever, at any time within one year after the date of mailing of such
notice, the Sponsor shall deliver to the Trustee an instrument or instruments in
writing purporting to be executed by the Majority Residual Holders and the
Holders of not less than the percentage of the Bondholders of each Class
required hereunder to approve the amendments set forth in the
68
<PAGE>
proposed supplemental indenture, which instrument or instruments shall refer
to the proposed supplemental indenture described in such notice and shall
specifically consent to and approve the execution thereof in substantially
the form of the copy thereof referred to in such notice, thereupon but not
otherwise, the Trustee may, if all other requirements of this Indenture with
respect thereto have been satisfied, execute such supplemental indenture in
substantially such form, without liability or responsibility to any Holder of
any Bond or Certificate, whether or not such Holder shall have consented
thereto.
If the Majority Residual Holders and the Holders of not less than the
percentage of the Bondholders of each Class required hereunder to approve the
amendments set forth in the proposed supplemental indenture at the time of the
execution of such supplemental indenture shall have consented to and approved
the execution thereof as herein provided, no Holder shall have any right to
object to the execution of such supplemental indenture, or to object to any of
the terms and provisions contained therein or the operation thereof, or in any
manner to question the propriety of the execution thereof, or to enjoin or
restrain the Trustee or the Sponsor from executing the same or from taking any
action pursuant to the provisions thereof.
(b) Promptly after the execution by the Sponsor and the Trustee of any
supplemental indenture pursuant to this Section 10.02, the Trustee shall mail by
first class mail, postage prepaid, to the Residual Holders, to each Bondholder
to which such supplemental indenture relates, and to the Rating Agency, a notice
setting forth in general terms the substance of such supplemental indenture.
Any failure of the Trustee to mail such notice, or any defect therein, shall
not, however, in any way impair or affect the validity of any such supplemental
indenture.
Section 10.03. CONSENT OF THE TRUSTEE OR THE MANAGER.
Notwithstanding any other provision of this Article X, no supplemental
indenture shall be adopted without the prior written consent of the Trustee or
the Manager if such supplemental indenture, as evidenced by an Opinion of
Counsel delivered by the Trustee or the Manager, would impose additional duties
or obligations upon the Trustee or the Manager.
Section 10.04. EXECUTION OF SUPPLEMENTAL INDENTURES.
In executing, or accepting the additional trusts created by, any
supplemental indenture permitted by this Article X or the modifications thereby
of the trusts created by this Indenture, (i) the Trustee shall require, as a
condition of such execution or acceptance, an Opinion of Counsel to the effect
that the execution and delivery of such supplemental indenture will not, when
applicable, cause the Trust Estate to fail to qualify as a REMIC so long as any
Bonds are Outstanding and (ii) the Trustee and the Sponsor shall be entitled to
receive, and (subject to Section 9.01) shall be fully protected in relying upon,
an Opinion of Counsel stating that the
69
<PAGE>
execution of such supplemental indenture is authorized or permitted by this
Indenture and that all conditions precedent thereto have been complied with.
The Trustee may, but shall not be obligated to, enter into any such supplemental
indenture which affects the Trustee's own rights, duties or immunities under
this Indenture or otherwise.
Section 10.05. EFFECT OF SUPPLEMENTAL INDENTURES.
Upon the execution of any supplemental indenture under this Article X, this
Indenture shall be modified and amended in accordance therewith, and such
supplemental indenture shall from a part of this Indenture for all purposes, and
every Holder theretofore or thereafter authenticated and delivered hereunder
shall be bound thereby.
Section 10.06. REFERENCE IN BONDS AND CERTIFICATES TO SUPPLEMENTAL
INDENTURES.
Bonds and Certificates authenticated and delivered after the execution of
any supplemental indenture pursuant to this Article X shall, if required by the
Sponsor, bear a notation in form approved by the Sponsor as to any matter
provided for in such supplemental indenture. If the Sponsor shall so determine,
new Bonds or Certificates, as appropriate, so modified as to conform, in the
opinion of the Trustee and the Sponsor, to any such supplemental indenture may
be prepared and executed by the Sponsor and authenticated and delivered by the
Trustee in exchange for Bonds Outstanding or Certificates, as appropriate. The
Trustee shall be reimbursed from the Trust Estate for all reasonable and direct
costs and expenses incurred by the Trustee in performing its duties and
obligations under this Section 10.06.
(End of Article X)
70
<PAGE>
ARTICLE XI
AMENDMENT OF NOTES; LOAN DOCUMENTS
Section 11.01. AMENDMENTS TO THE NOTES AND LOAN DOCUMENTS WITHOUT CONSENT
OF BONDHOLDERS.
The Sponsor, acting at the direction of the Majority Residual Holders, and
the Trustee may, without the consent of or notice to the Bondholders, consent to
any amendment of the Notes and Loan Documents (i) to cure any ambiguity or to
make minor corrections consistent with the terms thereof, or (ii) to make any
other change that does not materially adversely affect the interests of the
Bondholders, provided in either case there is delivered to the Trustee an
Opinion of Counsel stating such amendment would not materially adversely affect
the interests of the Bondholders and a Non-Disqualification Opinion.
Section 11.02. AMENDMENTS TO THE NOTES AND LOAN DOCUMENTS WITH CONSENT OF
BONDHOLDERS.
Except for the amendments as provided in Section 11.01, neither the Sponsor
nor the Trustee shall consent to any other amendment, change or modification of
the Notes and Loan Documents without the written consent of the Holders of not
less than two-thirds of the aggregate Outstanding amount of each Class of Bonds
affected thereby and the Majority Residual Holders. Prior to any such
amendment, there must be delivered to the Trustee a Non-Disqualification
Opinion. If at any time the Sponsor, the Majority Residual Holders or the
Trustee shall request the consent of the Trustee or the Holders to any such
proposed amendment, change or modification, the Trustee shall, upon being
satisfactorily indemnified with respect to expenses, cause notice of such
proposed amendment, change or modification mailed in the same manner as provided
by Section 10.02 with respect to supplemental indentures. Such notice shall
briefly set forth the nature of such proposed amendment, change or modification
and shall state that copies of the instrument embodying the same are on file
with the Trustee for inspection by all Bondholders. Nothing contained in this
Section 11.02 or the foregoing Section 11.01 shall permit, or be construed as
permitting, a reduction of the aggregate Outstanding amount of Bonds the owners
of which are required to consent to any such amendment, change or modification,
or a reduction in, or a postponement of, the payments under the Notes, without
the consent of all Bondholders and the Majority Residual Holders.
Section 11.03. EXECUTION OF AMENDMENTS.
In executing, or accepting the additional duties created by, any amendment
to the Notes or Loan Documents permitted under this Article XI, there shall, if
requested by the Trustee, be delivered, but not at the expense of the Trustee,
to the Trustee an Opinion of Counsel, upon which the Trustee may rely, setting
forth the specific provision of this Indenture pursuant to which the Notes or
Loan Documents are to be amended and to the effect that the execution of such
amendment is authorized or permitted by this Indenture; to the effect that all
conditions
71
<PAGE>
precedent thereto have been complied with; to the effect that the requisite
consent of Bondholders (of all Bonds or any specific Class) and the Majority
Residual Holders, if any, has been obtained; and, to the effect that the
execution of such amendment shall not adversely affect the interests of the
Bondholders.
(End of Article XI)
72
<PAGE>
ARTICLE XII
CERTIFICATES OF RESIDUAL INTEREST
Section 12.01. CREATION OF RESIDUAL INTEREST; LIMITED RIGHTS OF SPONSOR;
FORM AND EXECUTION OF CERTIFICATES.
(a) A Certificate of Residual Interest shall evidence a fractional
undivided ownership interest in the Residual, the rights of a Residual Holder
hereunder and the right of the registered Residual Holder thereof to receive the
respective fractional undivided interest in amounts released from the lien of
this Indenture and distributable to such Residual Holder as provided herein.
(b) Each Residual Holder from time to time is deemed to have conclusively
agreed and acknowledged, by its acceptance of a Certificate, that the only
amounts it shall be entitled to receive or claim for under this Indenture at any
time in its capacity as a Residual Holder hereunder, and from time to time, are
those amounts actually and properly released from the lien of this Indenture in
accordance with the express terms thereof and payable to the Residual Holders
under the terms hereof, and no Residual Holder in its capacity as a Residual
Holder hereunder shall have any claims or rights against the Trustee, the
Sponsor or the Bondholders with respect to any amounts not properly releasable
or to be released from the lien of this Indenture or payable to Residual Holders
under the terms hereof.
(c) Each Certificate of Residual Interest shall be substantially in the
form attached as Exhibit C hereto, which Exhibit C is hereby incorporated by
reference herein. Each Certificate shall, on issuance, be executed by manual
signature of a Trust Officer. A Certificate bearing the manual signature of an
individual who was, at the time of execution, a Trust Officer shall bind the
Trustee, notwithstanding that such individual has ceased to be a Trust Officer
before delivery of such Certificate or was not a Trust Officer at the date of
such Certificate. The initial Certificates shall be dated as of the Closing
Date. Certificates other than the initial Certificates shall be dated the date
of their execution by the Trustee. The Trustee's execution of any Certificate
shall be solely in its capacity as Trustee hereunder and not in its individual
capacity.
Section 12.02. REGISTRATION, TRANSFER AND EXCHANGE OF CERTIFICATES.
(a) The Trustee shall cause to be kept at its Corporate Trust Office a
Certificate Register in which, subject to such reasonable regulations as it may
prescribe, the Trustee shall provide for the registration of the Certificates
and the transfers and exchanges of such Certificates as herein provided. No
Certificate shall be entitled to any benefit under this Indenture, or be valid
for any purpose, unless there appears on such Certificate a certification by the
Trustee substantially in the form provided for on Exhibit C executed by the
Trustee by manual signature of a Trust Officer, and such executed certification
by the Trustee upon any Certificate shall be conclusive evidence, and the only
evidence, that such Certificate has been duly executed, authenticated and
delivered hereunder. The Trustee's signature shall be for
73
<PAGE>
execution and authentication purposes only and neither the Trustee nor any
Person signing on its behalf shall have any liability on the respective
Certificate (other than the certificate of authentication thereon). All
Certificates issued upon registration of transfer or exchange shall be dated
the date of their authentication.
(b) Notwithstanding any other provision of this Indenture, no legal or
beneficial interest in all or any portion of a Certificate may be transferred,
directly or indirectly, to a Disqualified Organization, or to an agent of a
Disqualified Organization (including a broker, nominee, or other middleman) (a
"Transferee's Agent") and any such purported transfer shall be void and of no
effect. Further, no legal or beneficial interest in all or any portion of a
Certificate may be registered in the name of an entity that holds REMIC residual
securities as nominee to facilitate the clearance and settlement of such
securities through electronic book-entry changes in accounts of participating
organizations (a "Book-Entry Nominee"). The Trustee shall not authenticate and
deliver a new Certificate in connection with any transfer of a Certificate, and
the Trustee shall not accept a surrender for transfer or registration of
transfer, or register the transfer of, any Certificate unless the transferor
shall have provided to the Trustee an affidavit (a "Transfer Affidavit"),
substantially in the form of Exhibit D hereof, signed by the transferee, to the
effect that the transferee is not acquiring the Certificate for the purpose of
avoiding or impeding the assessment or collection of tax and is not a
Disqualified Organization, an agent for any entity as to which the transferee
has not received a substantially similar affidavit, or a Book-Entry Nominee.
Each Certificate shall bear a legend referring to the foregoing restrictions.
Upon notice to the Trustee that any legal or beneficial interest in any portion
of a Certificate has been transferred, directly or indirectly, to a Disqualified
Organization or a Transferee's Agent in contravention of the foregoing
restrictions, the Trustee shall, as provided in Sections 3.02(a) and (c),
furnish to the transferor of such Certificate or to such Transferee's Agent
information with respect to the requirements of Section 860(e) of the Code,
including but not limited to the present value of the total anticipated excess
inclusions with respect to such Certificate (or portion thereof) for periods
after such transfer. The cost of computing and furnishing such information
shall be charged to the transferor or to such Transferee's Agent; however, the
Trustee shall in no event be excused from furnishing such information. Every
holder of a Certificate shall be deemed to have consented to such amendments to
this Indenture as may be required to further effectuate the restrictions on
transfer of Certificates to a Disqualified Organization, a Transferee's Agent or
a Book-Entry Nominee.
(c) No transfer of a Certificate shall be made unless such transfer is
made pursuant to an effective registration statement or otherwise in accordance
with the requirements under the 1933 Act and effective registration or
qualification under applicable state securities laws or is made in a transaction
which does not require such registration or qualification under state law. The
Trustee shall be entitled to assume conclusively that no such registrations are
then effective unless the request for transfer is accompanied by an Opinion of
Counsel addressed to the Trustee that all such registrations are then in effect.
If a transfer of a Certificate is to be made in reliance upon an exemption from
the 1933 Act, the Trustee shall not transfer such Certificate unless it receives
a Transferee's Agreement substantially in the form of Exhibit E hereto, signed
by the Transferee; provided, however, that if the proposed Transferee does not
deliver such
74
<PAGE>
Transferee's Agreement, in lieu of such Transferee's Agreement, (i) the
Trustee shall require a written Opinion of Counsel, addressed to the Trustee,
to the effect that such transfer may be made pursuant to an exemption,
describing the applicable exemption and the basis therefor, from the 1933 Act
and state laws or is being made pursuant to the 1933 Act and state laws or is
being made pursuant to the 1933 Act and state laws, which Opinion of Counsel
shall not be an expense of the Trustee or the Sponsor, and (ii) the Trustee
shall require the transferee to execute a certification on which the Trustee,
absent the Trustee having actual knowledge that such certification is false,
may rely setting forth the facts surrounding such transfer. The Holder of
such a Certificate desiring to effect such transfer shall, and does hereby
agree to, indemnify the Trustee and the Sponsor against any liability that
may result if the transfer is not so exempt or is not made in accordance with
such federal and state laws.
(d) No transfer of a Certificate shall be made unless the Trustee shall
have received either (i) a representation letter from the transferee of such
Certificate to the effect that such transferee is not an employee benefit plan
subject to Section 406 of ERISA, nor a Person acting on behalf of any such plan,
which representation letter shall not be an expense of the Trustee or the
Sponsor, or (ii) in the case of any such Certificate presented for registration
in the name of an employee benefit plan subject to ERISA (or comparable
provisions of any subsequent enactments), or a trustee of any such plan, an
Opinion of Counsel addressed to the Trustee to the effect that the purchase or
holding of such Certificate will not constitute or result in a prohibited
transaction under ERISA, will not cause the Trustee, the Sponsor or the Manager
to be a fiduciary under the plan and will not subject the Sponsor, the Trustee
or the Manager to any obligation in addition to those undertaken in this
Indenture, which Opinion of Counsel shall not be an expense of the Trustee or
the Sponsor.
(e) Subject to the requirements and limitations of this Section 12.02,
upon surrender for registration of transfer or exchange of any Certificate at
the Corporate Trust Office, the affidavits, certificates and Opinions of Counsel
required by Sections 12.02(b), (c) and (d), and the name, address and taxpayer
identification number of the proposed transferee, the Trustee shall execute,
authenticate and deliver, in the name of the designated transferee or
transferees, subject to the minimum denomination limits of Section 12.01(d)
hereof, one or more new Certificates of like aggregate fractional undivided
interest in the Residual. All Certificates surrendered for registration of
transfer or exchange shall be cancelled, and held by the Trustee subject to its
standard retention policy and thereafter destroyed by the Trustee. A service
charge shall be made for any registration of transfer or exchange of
Certificates, and, in addition, the Trustee may require payment of a sum
sufficient to cover any tax or governmental charge that may be imposed in
connection with expenses in connection with any required Opinions of Counsel,
Transfer Affidavits, Transferee Agreements or certifications required hereunder
in connection with a transfer of a Certificate shall be borne by the transferee
or the transferor, and shall not be an expense of the Trustee, the Residual or
the Sponsor. The transferee of a Certificate shall, for all purposes of this
Indenture, be deemed to be the Residual Holder of such Certificate from and
after the date as of which the transfer to it is registered by the Trustee on
the Certificate register maintained by the Trustee in accordance with Section
12.02(a) hereof, and, upon registration of such transfer to the transferee, the
transferor shall be released from all
75
<PAGE>
duties and obligations under this Indenture; provided, however, that such
transferor shall remain liable to the Trustee and the Sponsor with respect to
the duties, obligations and liabilities arising from and after the date the
transferor became a registered holder of the transferred Certificate and
before the date of such transfer to the transferee.
(f) Every Certificate presented or surrendered for transfer or exchange
shall (i) be duly endorsed by, or be accompanied by a written instrument of
transfer in form acceptable to, transfer agents registered with the Securities
and Exchange Commission and (ii) be duly executed by the Residual Holder thereof
or his attorney duly authorized in writing. Before due presentation of a
Certificate for registration of transfer or exchange, the Trustee, and any agent
of the Trustee shall treat the Person in whose name any Certificate is
registered on the Certificate Register maintained by the Trustee as the owner of
such Certificate for the purpose of receiving distributions pursuant to Section
12.06 hereof, for any allocation of taxable income or net loss to such Residual
Holder required by the Code and for all other purposes whatsoever including but
not limited to giving direction to the Trustee or giving consents as provided
herein, and neither the Trustee nor any agent of the Trustee shall be affected
by notice to the contrary.
(g) Each Person who has or who acquires any ownership interest in the
Certificates shall be deemed by the acceptance or acquisition of such ownership
interest to have agreed to be bound by the provisions of this Section and the
rights of each Person acquiring any ownership interest in the Certificates are
expressly subject to the following provisions:
(1) Any attempted or purported transfer of any ownership interest in
the Certificates in violation of the provisions of this Section 12.02 shall
be absolutely null and void and shall vest no rights in the purported
transferee; and
(2) Each Person at any time acquiring any ownership interest in the
Certificates by its acceptance of the same shall be deemed to have
indemnified the Sponsor, the Trustee, any Manager and each Bondholder from
and against any cost, liability, claim or expense, including any tax,
incurred as a result of any transfer or attempted or purported transfer of
any ownership interest in the Certificates by or to such Person in
violation of the provisions of this Section 12.02. Each such Person also
authorizes the Trustee, acting as an independent agent on behalf of such
Person, to withhold from amounts, if any, otherwise payable to such Person
pursuant to the terms of this Indenture all amounts due as indemnification
under this Section 12.02 and to pay such amounts to the Person entitled to
indemnification.
Section 12.03. LOST, STOLEN, DESTROYED OR MUTILATED CERTIFICATES.
If (i) any mutilated Certificate is surrendered to the Trustee, or the
Trustee receives evidence to its satisfaction of the destruction, loss or theft
of any Certificate, and (ii) there was delivered to the Trustee such security or
indemnity as may be required by the Trustee to save the Trustee harmless (the
unsecured indemnity agreement of an institutional Residual Holder having a net
worth at least equal to the amount of the indemnity required by the Trustee
pursuant
76
<PAGE>
to this Section 12.03 shall be deemed reasonable indemnity for purposes of
this Section 12.03), the Trustee shall execute, authenticate and deliver, in
exchange for or in lieu of such mutilated, destroyed, lost or stolen
Certificate, a new Certificate of like tenor and aggregate fractional
undivided interest in the Residual. In connection with the issuance of any
new Certificate under this Section 12.03, the Trustee may impose a service
charge and shall require the payment by the holder of a sum sufficient to
cover any tax or other governmental charge and shall require the payment by
the holder of a sum sufficient to cover any tax or other governmental charge
that may be imposed in relation thereto and any other expense (including an
indemnity bond required by the Trustee or fees and expenses of the Trustee)
connected therewith. Any duplicate Certificate issued pursuant to this
Section 12.03 shall constitute complete and indefeasible evidence of
ownership of a fractional undivided interest in the Residual hereunder, as if
originally issued, whether or not the lost or stolen Certificate shall be
found at any time.
Section 12.04. COMMUNICATIONS WITH OTHER RESIDUAL HOLDERS.
If any Residual Holder (hereinafter referred to as "applicant") applies in
writing to the Trustee, and such application states that the applicant desires
to communicate with other Residual Holders with respect to the Residual Holders'
rights under this Indenture or under the Certificates and is accompanied by a
copy of the communication which such applicant proposes to transmit, the Trustee
shall, within five Business Days after its receipt of such application, furnish
or cause to be furnished to such applicant a list of the names and addresses of
the Residual Holders as of a date no more than five Business Days before the
date the Trustee received such request from the applicant. Every Residual
Holder, by receiving and holding the same, agrees with the Trustee that the
Trustee shall not be held accountable by reason of the disclosure of such
information as to the names and addresses of the Residual Holders hereunder,
regardless of the source from which such information was derived.
Section 12.05. INITIAL ISSUANCE OF CERTIFICATES.
The initial Certificates shall be executed and authenticated by the
Trustee, following execution and delivery of this Indenture by the parties
hereto, and shall be registered in the name of and delivered to the Sponsor as
the initial Residual Holder.
Section 12.06. PAYMENTS, DISTRIBUTIONS AND REPORTS.
(a) On each Residual Distribution Date, all amounts in the Residual Fund
shall be distributed by the Trustee to the Residual Holders of record on the
Residual Record Date for such Residual Distribution Date, pro rata in accordance
with the percentage of the Residual owned by each Residual Holder of record on
such Residual Record Date. Payments of distributions to a Residual Holder shall
be made by the Trustee by check mailed to the Residual Holder at the address of
such Residual Holder as it appears on the Certificate Register on the Residual
Record Date for such distribution or as may otherwise be agreed to by the
Trustee and such Residual Holder; provided, however, that any distribution to a
Residual Holder owning 50% or more of the Residual shall, if in an amount
greater than $1,000, be paid by wire transfer
77
<PAGE>
to such Residual Holder if such Residual Holder has provided written wire
instructions to the Trustee before the Residual Record Date for such
distribution. Any checks returned undelivered shall be held in accordance
with Section 11.10 hereof.
(b) All distributions to the Residual Holders pursuant to this Section
12.06 shall be divided among such Residual Holders PRO RATA in accordance with
the percentage of the entire fractional undivided ownership interest in the
Residual owned by such Residual Holder. All Residual items of income, gain,
loss, deduction and credit also shall be allocated among the Residual Holders in
accordance with the percentage of the fractional undivided ownership interest in
the Residual owned by each such Residual Holder.
Section 12.07. RESERVED.
Section 12.08. COVENANTS OF RESIDUAL HOLDERS.
Each Residual Holder, by acceptance of a Certificate of Residual Interest,
covenants with the Sponsor and the Trustee that it:
(a) Shall pay and be liable for all federal, state and local taxes
attributable to its ownership of the fractional undivided interest in the
Residual evidenced by its Certificate including, taking into account, in
determining its taxable income, its pro rata portion of the taxable income
under all applicable provisions of the Code and all income as may be
reported to it on Schedule Q to Internal Revenue Service Form 1066;
(b) Will take no action to question or invalidate the lien of this
Indenture against the Trust Estate or seek or maintain any claim or
interest in the Trust Estate having a priority over the lien of this
Indenture;
(c) In its capacity as a Residual Holder, will assert no claim or
interest in the Trust Estate by reason of owning its Certificate other than
with respect to amounts properly or actually releasable from the lien of
this Indenture as provided therein and payable to Residual Holders pursuant
to Section 12.06 hereof;
(d) In its capacity as a Residual Holder, will not cause, or
participate in, the filing of a petition in involuntary bankruptcy,
insolvency or receivership against the Sponsor or the Trust Estate, or take
any action to cause the Sponsor or the Trust Estate to be declared a
bankrupt or insolvent, under any applicable federal or state law;
(e) In its capacity as a Residual Holder, will not assert any claim
or interest under this Indenture in any other assets or interests of the
Sponsor other than with respect to its interest in the Residual created by
this Indenture;
(f) In its capacity as Residual Holder, will not take any action
which would (i) cause the segregated asset pool comprising the Trust Estate
to be disqualified as a
78
<PAGE>
REMIC under the Code, (ii) constitute a "prohibited transaction" with
respect to the Trust Estate as a REMIC under the Code, or (iii) subject the
Sponsor or the Trust Estate to tax; and
(g) In its capacity as Residual Holder, will not take, or fail to
take, any action which would create a liability for the Sponsor.
Section 12.09. RESERVED.
Section 12.10. LIABILITY FOR UNCLAIMED MONEYS UNDER THE INDENTURE.
If, as provided in Section 2.13 of this Indenture, moneys held by the
Trustee for payment of the Bonds are released from the lien of this Indenture
and distributed to the then Residual Holders as provided in Section 12.06
hereof, the Trustee shall have the right to claim for and obtain the return of
the amount of any such payments received by such Residual Holders to the extent
a Holder of a Bond has a claim for such amounts as a general unsecured creditor
of the Trust Estate; provided, however, that such Residual Holder shall only be
liable to the Trustee for an aggregate amount equal to the amount released from
this Indenture and actually distributed to such Residual Holder. The Residual
Holder's liability under this Section 12.10 shall survive termination of this
Indenture.
Section 12.11. APPOINTMENT OF THE MANAGER.
The Manager is hereby appointed to serve as Manager hereunder. By its
execution and acknowledgement hereof, the Manager agrees to perform the duties
and obligations of the Manager specified herein.
Section 12.12. DUTIES OF THE MANAGER.
(a) The Manager shall be responsible for preparing and delivering to the
Trustee, on or before the Submission Dates specified in Section 3.02, all tax
returns or reports to be prepared by the Trustee pursuant to this Indenture.
(b)(1) If, in connection with preparing or making any filings of reports
or returns required under Section 3.02, any elections are permitted or required
to be made, the Manager shall notify the Residual Holders in writing with
respect to any such elections permitted or required to be made, which
notification shall set forth the Manager's recommendations, if any, with respect
to which elections, if any, should be made with respect to a report or return
under Section 3.02. Such notification to the Residual Holders shall request
direction from the Residual Holders with respect to such elections. Subject to
the last sentence of this Section 12.12(b)(1), the Manager, and if necessary the
Trustee, shall make such elections as they may be directed in writing to make by
the Majority Residual Holders. If the Majority Residual Holders fail to provide
timely direction to the Manager following a request by the Manager with respect
to elections permitted or required to be made with respect to such tax or
information reports or
79
<PAGE>
returns, then, subject to the last sentence of this Section 12.12(b)(1), the
Manager may make such elections as are consistent with this Indenture and as
may be necessary or advisable or as may from time to time be required, under
any applicable federal, state or local statute or rule or regulation thereunder.
Notwithstanding any written direction with respect to an election from the
Majority Residual Holders, and notwithstanding any recommendation of the
Manager, (i) no election shall be made if the making of such election would or
could, in the reasonable opinion of the Manager, result in the imposition of a
tax on the Trust Estate or result in a disqualification of the Trust Estate as
a REMIC and (ii) all elections necessary to preserve the qualification of the
Trust Estate as a REMIC and avoid imposition of a tax on the Trust Estate shall
be made in such reports or returns.
(2) In preparing the returns, related schedules and information required
pursuant to Section 3.02, the Manager shall not be liable for any action taken
in reliance on an Opinion of Counsel (a copy of which shall be received by the
Trustee on the Submission Date (as provided in Section 3.02(c)) absent a written
objection to the form and content thereof received by the Manager from the
Majority Residual Holders. If such written objection is received by the
Manager, then the Manager, to the extent not inconsistent with this Indenture,
shall, upon receipt of appropriate indemnification for itself, the Trustee and
the Sponsor against and with respect to tax and other liabilities from the
Residual Holders (if the Residual Holders made such written objection) and
written advice from Counsel to the Residual Holders or the Trustee, as the case
may be, as to the appropriateness of the form and content recommended by the
Majority Residual Holders, prepare such reports in the form and content so
directed by the Residual Holders. All returns and reports required under
Section 3.02 shall be signed as provided in Section 3.02, except that each such
return or report shall be signed by the Manager as "income tax preparer" if
necessary.
Section 12.13. OTHER DUTIES OF THE MANAGER.
(a) On or before January 31 of each year commencing January 31, 1997, the
Manager shall advise the Trustee, in writing, as to all reports and returns
(including the dates for filing or distributing such returns or reports) which,
until the following January 31, then applicable provisions of the Code, Treasury
regulations thereunder or state or local law require to be prepared, filed or
distributed with respect to the Trust Estate as a REMIC, or with respect to the
Bonds or the Certificates. If, after any such written advice to the Trustee,
there is a change in applicable law deleting or adding a report or return, or
changing the date for filing or distribution thereof, the Manager shall so
notify the Trustee in writing.
(b) The Manager shall also (i) monitor the REMIC status of the Trust
Estate; (ii) advise the Trustee whether transactions proposed by the Trustee or
the Holders of Residual Certificates could jeopardize the REMIC status of the
Trust Estate or result in the imposition of tax on the Trust Estate; and (iii)
advise the Trustee and the Holders of Certificates (including any such Holders
designated as the "tax matters persons" of the REMIC) with respect to any
administrative or judicial proceedings relating to an audit or examination by
any governmental taxing authority regarding the REMIC. The Manager shall not be
liable or responsible for any
80
<PAGE>
action taken or failure to take action by the Trustee or the Residual Holders
recommended by the Manager pursuant to this Section 12.13(b).
Section 12.14. COOPERATION OF PARTIES; FURNISHING OF INFORMATION.
(a) By its execution of the acceptance of its appointment hereunder, the
Manager acknowledges receipt, on or before the Closing Date, of copies of this
Indenture.
(b) To permit the Manager to perform its duties under this Indenture, the
Trustee agrees that, within a reasonable period of time of receipt by the
Trustee, it will cause to be mailed to the Manager copies of the following:
(1) the Notes, Loan Documents and Casualty Insurance Policy;
(2) information as to the amounts paid or payable as compensation,
expenses and indemnification of the Trustee with respect to this Indenture;
(3) all Officers' Certificates and Opinions of Counsel delivered to
the Trustee with respect to the Bonds or the Certificates; and
(4) such other documents and information as the Manager may
reasonably request in order to perform its duties under this Indenture.
(c) Within a reasonable period of time after its delivery to the Manager
of any information specified in Section 12.14(b), the Trustee shall, upon
request, mail copies of such information to any Person which is then the
Majority Residual Holder.
Section 12.15. MANAGER COMPENSATION.
(a) Except as provided in Section 12.15(b), the Manager agrees that the
fee to be paid to it on the Closing Date shall constitute full payment of all
amounts due it for performing the duties of Manager under this Indenture.
Except as provided in Section 12.15(b), all direct and indirect expenses
incurred by the Manager in connection with its performance of its duties and
obligations under this Indenture, including but not limited to expenses of
agents or subcontractors or counsel shall be paid by the Manager, and the
Manager shall not be entitled to reimbursement therefor from the Sponsor, the
Residual Holders, the Trustee or the Bondholders.
(b) Notwithstanding anything in Section 12.15(a) to the contrary, the
Manager shall be entitled to receive reimbursement of its extraordinary and
necessary reasonable out-of-pocket expenses paid to third parties solely from
moneys deposited and available for such purpose in the Manager Account of the
Trust Expense Fund. In order to receive any such reimbursement, the Manager
will provide to the Trustee a certification that such out-of-pocket expenses
have been incurred, upon which certification the Trustee shall be entitled to
rely conclusively.
81
<PAGE>
Section 12.16. COVENANTS OF THE MANAGER.
The Manager hereby covenants and agrees, for the benefit of the Trustee,
the Sponsor and the Residual Holders from time to time, as follows:
(i) It will not engage or participate in any "prohibited transaction"
with respect to the Trust Estate (as such term is defined in the Code with
respect to a REMIC), or otherwise cause a federal or state tax to be
imposed on the Trust Estate as a REMIC or upon the Sponsor;
(ii) It will prepare reports to Residual Holders in accordance with
the terms of this Indenture with respect to the Certificates and taxable
income or net loss with respect thereto in accordance with applicable
regulations thereunder;
(iii) It will comply with all applicable provisions of the Code and
applicable regulations thereunder with respect to the Trust Estate as a
REMIC and maintaining the continuing treatment of the Trust Estate as a
REMIC under the Code and applicable regulations thereunder; and
(iv) At its own cost and expense, it will promptly take all actions as
may be necessary to discharge any liens on any part of the Trust Estate
which result from actions by or claims against the Manager not related to
the administration of the Trust Estate or the transactions contemplated by
this Indenture.
Section 12.17. MANAGER MAY SEEK INSTRUCTIONS.
(a) If, in performing its duties under this Indenture, (i) the Manager is
required to decide between alternative courses of action or (ii) the Manager is
unsure of the application of any provision of this Indenture with respect to its
duties and responsibilities hereunder or thereunder, or (iii) any action
permitted hereunder may, in the determination of the Manager, have a material
adverse effect on the Residual, then the Manager may, at its expense and cost,
promptly deliver a notice to the Trustee, requesting the Trustee to seek
direction of the Residual Holders in accordance with this Indenture. If the
Trustee does not receive instructions within 10 Business Days after it has
delivered notice requesting such instructions to the Residual Holders, or such
shorter period of time set forth in such notice, the Manager shall not be liable
for taking or refraining from taking any action if such action or non-action is
not inconsistent with the provisions of this Indenture.
(b) Notwithstanding anything in this Indenture to the contrary, the
Manager shall not be required to take any action at the request or direction of
the Trustee or the Residual Holders if, in the reasonable determination of the
Manager, such action would result in (i) the Manager being deemed to have
engaged in a prohibited transaction with respect to the Trust Estate as a REMIC;
(ii) result in a disqualification of the Trust Estate as a REMIC; (iii) subject
the Sponsor or the Trust Estate to tax; or (iv) adversely affect the Holders of
the Bonds.
82
<PAGE>
(c) The Manager shall not be liable for any termination or
disqualification of the Trust Estate's status as a REMIC or for any prohibited
transaction with respect to the Trust Estate as a REMIC if (i) such termination
or disqualification is caused by actions or inactions of the Manager taken or
omitted by the Manager as specifically permitted to be taken or omitted in this
Indenture or (ii) such termination or prohibited transaction is the result of
actions or inactions of the Manager as to which this Indenture specifically
entitles the Manager to act or not act pursuant to written instructions of the
Trustee or written direction of the Majority Residual Holders. Nothing herein,
however, shall be construed as relieving the Manager from liability under this
Indenture for its own negligent action, negligent failure to act or willful
misconduct.
Section 12.18. OBLIGATIONS OF RESIDUAL HOLDERS.
By their acknowledgment hereof, the Holders of the Certificates severally
agree to indemnify the Manager for, and to hold it harmless against, any and all
losses and liabilities, obligations, damages, penalties, taxes (excluding any
taxes payable by the Manager on or measured by any compensation for services
rendered by the Manager under this Indenture), claims, actions, suits or out-of-
pocket expenses or cost of any kind and nature whatsoever incurred or arising
out of or in connection with the services rendered by the Manager under this
Indenture, including but not limited to the reasonable cost and out-of-pocket
expenses of defending itself against any claim of liability in the premises,
except to the extent the same may be incurred or arise out of the Manager's
failure to perform its specific duties and obligations hereunder or, the
negligent action of the Manager, the Manager's negligent failure to act or the
Manager's willful misconduct in the performance of the Manager's duties and
obligations hereunder. As provided in this Indenture, the Holders of the
Residual, by their acknowledgment hereof, covenant and agree that the Residual
Holders shall have no claim upon, and shall assert no liability against, the
Sponsor or the Trustee for any action or failure to act by the Manager during
the term of this Indenture, without regard to whether the Manager itself is
liable to the Residual Holders with respect to such action or failure to act and
without regard to whether a Residual Holder itself consented to the appointment
of such Manager. Such claims or liabilities shall be asserted solely against
the Manager, and not against the Sponsor or the Trustee.
Section 12.19. INDEMNIFICATION.
The Manager shall reimburse, indemnify and hold harmless the Trustee, its
affiliates, shareholders, directors, officers, employees, the Sponsor, and
Residual Holders (the "Indemnified Persons") with respect to all expenses,
losses, damages, liabilities, demands, charges and claims of any nature in
respect of the negligent action of the Manager, the Manager's negligent failure
to act or perform its duties hereunder or the Manager's willful misconduct in
the performance of the Manager's duties and obligations hereunder, including
without limiting the generality of the foregoing, claims against, and
liabilities of, the Residual Holders, or taxes levied or imposed upon the
Sponsor or the Trust Estate as a REMIC by reason of, caused by or arising out of
any such negligent act, performance or omission or willful misconduct by the
Manager, unless (i) if the Trustee is the Person seeking indemnification under
83
<PAGE>
this Section 12.19, the Trustee shall have specifically consented to such action
or inaction in writing at the request of the Manager or such action or inaction
by the Manager shall have been at the written request or direction of the
Trustee or (ii) if a Residual Holder is the Person seeking indemnification under
this Section 12.19, such action or inaction shall have been undertaken by the
Manager at the written direction of the Majority Residual Holders.
Section 12.20. INDEPENDENCE OF THE MANAGER.
The Manager shall be an independent contractor. The Manager shall have no
authority to act for or represent the Trustee or the Residual Holder in any way
and shall not be deemed an agent of the Trustee or the Residual Holder. The
Manager shall not be deemed to assume the obligations of the Trustee under this
Indenture except as specifically provided in this Indenture. Nothing contained
in this Indenture (i) shall constitute the Manager and the Trustee as members of
any partnership, joint venture, association, syndicate, unincorporated business,
or other separate entity, (ii) shall be construed to impose any liability as
such on either of them, or (iii) shall be deemed to confer on either of them any
express, implied or apparent authority to incur any obligation or liability on
behalf of the other.
Section 12.21. TERMINATION OF THE MANAGER.
(a) The Manager may be removed by the Trustee or the Majority Residual
Holders acting with the consent of the Trustee, which consent shall not be
unreasonably withheld, if the Manager shall default in the performance of any
term of this Indenture and, after written notice of such default to the Manager
and the Trustee, shall not cure such default within 30 days, such removal to be
of immediate effect. In addition to failure to perform hereunder, the Manager
shall be deemed to be in default of its obligations hereunder if: (i) a decree
or order by a court having jurisdiction in the premises is entered adjudging the
Manager a bankrupt or insolvent, or approving as properly filed a petition
seeking reorganization, arrangement, adjustment or composition of or in respect
to the Manager under the Federal Bankruptcy Code or any other applicable federal
or state law, or appointing a receiver, liquidator, assignee, or sequestrator
(or other similar official) of the Manager or of any substantial part of its
property, or ordering the winding up or liquidation of its affairs, and the
continuance of any such decree, order or appointment unstayed and in effect for
a period of 60 consecutive days; or (ii) the Manager institutes a proceeding to
be adjudicated a bankrupt or insolvent, or it consents to the institution of
bankruptcy or insolvency proceedings against it, or it files a petition or
answer or consent seeking reorganization or relief under the Federal Bankruptcy
Code or any other similar applicable federal or state law, or it consents to the
filing of any such petition or to the appointment of a receiver, liquidator,
assignee, trustee or sequestrator (or other similar official) of the Manager or
of any substantial part of its property, or the making by it of a general
assignment for the benefit of creditors in connection therewith, or the
admission by it in writing of its inability to pay its debts generally as they
become due, or the taking of corporate action by the Manager in furtherance of
any such action.
84
<PAGE>
(b) The Manager may not resign its duties hereunder unless the Manager
secures a successor manager, approved by the Trustee and the Majority Residual
Holders. Approval by the Trustee and the Majority Residual Holders shall not be
unreasonably withheld.
(c) Before the effective date of any such termination or resignation, the
Manager shall deliver or cause to be delivered to the Trustee or its designee,
all of its files, records and materials with respect to the services theretofore
rendered by it hereunder; provided, however, that the Manager shall not be
required to disclose, turn over or make available its software, proprietary or
otherwise, or other proprietary materials. Any such termination or resignation
shall not be effective as to the Trustee until the Trustee has received written
notice thereof.
(d) Notwithstanding any discharge of this Indenture, the Manager shall
remain liable pursuant to the provisions hereof to the Sponsor, the Trustee and
the Residual Holders for its acts and omissions before the effective date of any
such termination.
Section 12.22. LIMITATION OF LIABILITY OF THE MANAGER.
(a) Unless otherwise expressly provided herein, except for acts of
negligence or willful misconduct hereunder, the Manager shall not be liable to
the Residual Holders, in its capacity as Manager hereunder, with respect to any
action taken or omitted to be taken by it in accordance with this Indenture.
(b) The Manager shall not be responsible or liable, in its capacity as
Manager hereunder, for or in respect of the recitals herein, the validity or
sufficiency of this Indenture and the Certificates or for the due execution
hereof or thereof by the Sponsor, the Residual Holders or any other party
thereto, or for the form, character, sufficiency, value or validity of any part
of the Trust Estate or for or in respect of the validity or sufficiency of the
Certificates, and the Manager shall in no event assume or incur liability, duty
or obligation to any Residual Holder or to the Sponsor other than as expressly
provided for herein. The representations and warranties contained herein and in
the Bonds shall be taken as the representations and warranties of the parties
making such representations and warranties and the Manager assumes no
responsibility for the correctness of the same. The Manager shall not be under
any responsibility or duty with respect to the application of any money pursuant
to this Indenture.
(c) The Manager shall be obligated only for the performance of such duties
as are specifically set forth in this Indenture and no implied covenant or
obligations of the Manager shall be read into this Indenture. The Manager shall
not be liable for any action or omission to act as manager hereunder except for
its own negligence or willful misconduct hereunder. The Manager shall have no
liability or responsibility to the Residual Holders for acting upon any written
instructions presented by the Majority Residual Holders or the Trustee in
connection with this Indenture which the Manager in good faith believes to be
genuine and to be in conformity with this Indenture. In no event shall the
Manager have any responsibility to ascertain or take action with respect to the
property constituting the Residual (except as expressly provided herein) whether
or not the Manager has or is deemed to have notice or knowledge of such matter,
or
85
<PAGE>
take any steps necessary to preserve rights against any parties with respect
to the property constituting the Residual, or account for the validity or value,
or the kind or amount, of any property constituting the Residual.
(d) The Manager shall not be bound in any way by any agreement or contract
with respect to the matters set forth in this Indenture, other than this
Indenture, and the Manager shall not be required to ascertain or inquire as to
the performance or observance of any of the covenants or agreements contained
herein or in any Certificate delivered pursuant hereto or thereto, to be
performed or observed by the Sponsor, the Trustee or any other Person.
(e) The Manager, upon receipt of any notice, resolution, request, consent,
order, certificate, report, opinion, bond, or other paper or document furnished
to it pursuant to any provision of this Indenture shall examine such instrument
to determine whether it conforms to the requirements of this Indenture and shall
be protected in acting upon any such instrument believed by it to be genuine and
to have been signed or presented by the proper party or parties. The Manager
may consult with counsel, at its own expense, acceptable to Majority Residual
Holders and any Opinion of Counsel shall be full and complete authorization and
protection in respect of any action taken or suffered by the Manager under this
Indenture in good faith and in accordance therewith.
(f) Whenever the Manager shall deem it necessary or desirable that a
matter be proved or established before taking or suffering any action under this
Indenture, such matter (unless other evidence in respect thereof is specifically
prescribed in this Indenture) may be deemed conclusively to be proved and
established by a certificate of the appropriate party executing such
certificate, and such certificate shall be full warrant for any action taken or
suffered in good faith under the provisions of this Indenture upon the faith
thereof, but in its discretion and in lieu thereof, the Manager may accept other
evidence of such fact or matter or may require such further or additional
evidence as to it may seem reasonable.
(End of Article XII)
86
<PAGE>
ARTICLE XIII
MISCELLANEOUS
Section 13.01. COMPLIANCE CERTIFICATES AND OPINIONS.
Upon any application or request by the Sponsor to the Trustee to take any
action under any provision of this Indenture, the Sponsor shall furnish to the
Trustee an Officer's Certificate stating that all conditions precedent, if any
provided for in this Indenture relating to the proposed action have been
complied with and, if deemed reasonably necessary by the Trustee, an Opinion of
Counsel stating that, in the opinion of such counsel, there has been compliance
with all such conditions precedent, if any. Notwithstanding the foregoing, in
the case of any such application or request as to which the furnishing of such
document is specifically required by any provision of this Indenture relating to
such particular application or request, no additional certificate or opinion
need be furnished.
Any certificate or opinion with respect to compliance with a condition or
covenant provided for in this Indenture shall include:
(i) A brief statement as to the nature and scope of the examination
or investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(ii) A statement that, in the opinion of each such individual, he has
made such examination or investigation as is necessary to enable him to
express an informed opinion as to whether or not there has been compliance
with such covenant or condition; and
(iii) A statement as to whether, in the opinion of each such
individual, there has been compliance with such condition or covenant.
Section 13.02. FORM OF DOCUMENTS DELIVERED TO TRUSTEE.
In any case where several matters are required to be certified by, or
covered by an opinion of, any specified Person, it is not necessary that all
such matters be certified by, or covered by the opinion of, only one such
Person, or that they be so certified or covered by only one document, but one
such person may certify or give an opinion with respect to some matters and one
or more other such Persons may certify or give an opinion as to other matters,
and any such Person may certify or give an opinion as to such matters in one or
several documents.
Any Officer's Certificate or certificate of the Trustee may be based,
insofar as it relates to legal matters, upon a certificate or opinion of, or
representation by, counsel, unless such officer executing such Officer's
Certificate or certificate of the Trustee knows, or in the exercise of
reasonable care should know, that the certificate or opinion or representation
with respect to the matters upon which his certificate or opinion is based is
erroneous. Any such certificate or
87
<PAGE>
Opinion of Counsel may be based, insofar as it relates to factual matters,
upon an Officer's Certificate or certificate of the Trustee, unless such
counsel knows, or in the exercise of reasonable care should know, that the
Officer's Certificate or certificate of the Trustee with respect to such
matters is erroneous.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
Section 13.03. ACTS OF BONDHOLDERS.
(a) Any request, demand, authorization, direction, notice, consent, waiver
or other action provided by this Indenture to be given or taken by Bondholders
may be embodied in and evidenced by one or more instruments of substantially
similar tenor signed by such Bondholders in person or by their agent duly
appointed in writing; and, except as herein otherwise expressly provided, such
action shall become effective when such instrument or instruments are delivered
to the Trustee, and, where it is hereby expressly required, to the Sponsor.
Such instrument or instruments (and the action embodied therein and evidenced
thereby) are herein sometimes referred to as the "Act of the Bondholders"
signing such instrument or instruments. Proof of execution of any such
instrument or of a writing appointing any such agent shall be sufficient for any
purpose of this Indenture and conclusive in favor of the Trustee and the
Sponsor, if made in the manner provided in this Section 13.03.
(b) The fact and date of the execution by any Person of any such
instrument or writing may be proved in any manner which the Trustee deems
sufficient.
(c) The ownership of Bonds shall be proved by the Bond Register, to be
maintained by the Trustee as the Bond Registrar.
(d) Any request, demand, authorization, direction, notice, consent, waiver
or other action by the holder of any Bond or Certificate shall bind the Holder
of each Bond or Certificate issued in exchange therefor or in lieu thereof in
respect of anything done, omitted or suffered to be done by the Trustee or the
Sponsor in reliance thereon, whether or not notation of such action is made upon
such Bond or Certificate.
Section 13.04. NOTICES TO HOLDERS; WAIVER.
(a) Where this Indenture provides for Notice to the Holders of any event,
such notice shall be sufficiently given (unless otherwise herein expressly
provided) if in writing and given in accordance with Section 13.08 to each
Holder affected by such event, at its address as it appears on the Bond Register
or Certificate Register, as applicable, not later than the latest date, and not
earlier than the earliest date, prescribed herein for the giving of such notice.
In any case where notice to the Holders is given by mail, neither the failure to
mail such notice nor any
88
<PAGE>
defect in any notice so mailed to any particular Holder shall affect the
sufficiency of such notice with respect to other Holders for which proper
notice has been given, and any notice which is mailed in the manner herein
provided shall conclusively be presumed to have been duly given.
(b) Where this Indenture provides for notice in any manner, such notice
may be waived in writing by anyone entitled to receive such notice, either
before or after the event, and such waiver shall be the equivalent of such
notice. Waivers of notice by the Holders shall be filed with the Trustee, but
such filing shall not be a condition precedent to the validity of any action
taken in reliance upon such waiver.
(c) If by reason of the suspension of regular mail service as a result of
a strike, work stoppage, act of God or similar activity, the Trustee shall deem
it impractical to mail notice of any event to the Holders when such notice is
required to be given pursuant to any provision of this Indenture, then any
manner of giving such notice as shall be satisfactory to the Trustee shall be
deemed to be a sufficient giving of such notice.
(d) Any notice sent to Bondholders shall at the same time be sent to the
Rating Agency.
Section 13.05. LEGAL HOLIDAYS.
In any case where any date on which any payment is proposed to be paid
hereunder or the date upon which any notice or report is to be made or given or
any other action is to be taken hereunder shall not be a Business Day, then
(notwithstanding any other provision of the Bonds, the Certificates or this
Indenture) the payment, report or action need not be made or taken on such date,
but may be made or taken on the next succeeding Business Day with the same force
and effect as if made or taken on the nominal date, for such payment or date for
a notice or report or date for taking such action hereunder, as the case may be,
and no interest shall accrue with respect to such payment for the period from
and after any such nominal date.
Section 13.06. NATURE OF INTEREST IN TRUST ESTATE.
No owner of the Certificates shall have legal title to any part of the
Trust Estate and shall only be entitled to receive distributions with respect to
their undivided beneficial interest in the Trust Estate pursuant to this
Indenture once all amounts then due and payable on the Bonds have been paid in
accordance with this Indenture and such amounts are properly releasable from the
Trust Estate under the terms of this Indenture and all other amounts due under
Section 12.06 hereof have been paid. No transfer, by operation of law or
otherwise, of any right, title and interest of any other owner of a Certificate,
held by such other owner, shall operate to terminate this Indenture or the
trusts hereunder or entitle any successor transferee to an accounting or to the
transfer to it of legal title to any part of the Trust Estate.
89
<PAGE>
Section 13.07. SEVERABILITY.
If any provision of this Indenture shall be held or deemed to be or shall,
in fact, be illegal, inoperative or unenforceable, the same shall not affect any
other provision or provisions herein contained or render the same invalid,
inoperative or unenforceable to any extent whatever.
Section 13.08. NOTICES.
(a) Any notice, request, complaint, demand, communication or other paper
shall be sufficiently given and shall be deemed given when delivered or mailed
by first-class, registered or certified mail, postage prepaid, or sent by
telegram, facsimile, telecopy, telex, overnight mail or overnight delivery
service, addressed to the appropriate Notice Address. The Sponsor, the Trustee,
the Rating Agency or the Manager may, by notice given hereunder, designate any
further or different addresses to which subsequent notices, certificates or
other communications shall be sent.
(b) The Trustee will permit the Sponsor to have access to and to make
copies of all books and records relating to the Bonds at any reasonable time.
Section 13.09. COUNTERPARTS.
This Indenture may be executed simultaneously in several counterparts, each
of which shall be an original and all of which shall constitute but one and the
same instrument.
SECTION 13.10. APPLICABLE PROVISIONS OF LAW.
THIS INDENTURE, EACH SUPPLEMENTAL INDENTURE, IF ANY, AND EACH BOND SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE.
Section 13.11. CAPTIONS; REFERENCES IN INDENTURE.
The captions or headings in this Indenture are for convenience only and in
no way define, limit or describe the scope or intent of any provisions or
sections of this Indenture. All references in this instrument to designated
"Articles," "Sections," "Subsections" and other subdivisions are to be
designated Articles, Sections, Subsections and other subdivisions of this
instrument as originally executed. The words "herein," "hereof," "hereunder"
and other words of similar import refer to this Indenture as a whole and not to
any particular Article, Section, Subsection or other subdivision.
90
<PAGE>
Section 13.12. PARTIES INTERESTED HEREIN.
Nothing in this Indenture or in the Bonds or the Certificates expressed or
implied is intended or shall be construed to confer upon, or to give to, any
person or entity other than the Sponsor, the Residual Holders, the Trustee, the
Paying Agent, if any, the Manager and the registered owners of the Bonds, any
right, remedy or claim under or by reason of this Indenture or any covenant,
condition or stipulation hereof, and all covenants, stipulations, promises and
agreements in this Indenture contained by and on behalf of the Sponsor shall be
for the sole and exclusive benefit of the Sponsor, the Trustee, the Residual
Holders, the Paying Agent, if any, the Manager and the registered owners of the
Bonds.
91
<PAGE>
IN WITNESS WHEREOF, the Sponsor has caused this Indenture to be executed in
its name and on its behalf by the signature of its President or Vice President
and to be attested by the signature of its Secretary, and the Trustee, as
Trustee, Paying Agent and Bond Registrar, has caused this Indenture to be
executed by its duly authorized officer.
BFC FINANCE CORP., as Sponsor
Attest:
By: By:
---------------------------- ----------------------------------------
Name: Roger Bailey Name: Franklin L. Haney
Title: Secretary Title: President
SOUTHTRUST BANK OF ALABAMA, NATIONAL
ASSOCIATION,
as Trustee, Paying Agent and Bond Registrar
By:
----------------------------------------
Name: Patricia C. Connor
Title: Vice President - Corporate Trust
<PAGE>
ACKNOWLEDGEMENT AND AGREEMENT OF MANAGER
The undersigned hereby acknowledges its appointment as Manager under this
Indenture, and agrees to perform the duties of Manager as herein provided on the
terms and conditions herein provided.
BUILDING FINANCE COMPANY OF
TENNESSEE, INC.,
a Tennessee corporation
By:
--------------------------------------
Name: Franklin L. Haney
Title: President
<PAGE>
EXHIBIT A
CLASS A BOND FORM
THE PRINCIPAL OF THIS BOND IS SUBJECT TO MANDATORY REDEMPTION AND PAYMENT IN
PART PRIOR TO MATURITY AS SET FORTH HEREIN, WITHOUT NOTATION ON THIS BOND.
ACCORDINGLY, THE UNPAID PRINCIPAL BALANCE OF THIS BOND MAY BE LESS THAN THAT SET
FORTH BELOW. ANYONE ACQUIRING THIS BOND MAY ASCERTAIN ITS CURRENT PRINCIPAL
AMOUNT BY INQUIRY OF SOUTHTRUST BANK OF ALABAMA, NATIONAL ASSOCIATION, AS
TRUSTEE, PAYING AGENT AND BOND REGISTRAR (THE "TRUSTEE").
THE INTEREST ON THIS BOND IS SUBJECT TO FEDERAL INCOME TAX. AN ELECTION IS
BEING MADE TO TREAT THE SEGREGATED ASSET POOL COMPRISING THE TRUST ESTATE AS A
REAL ESTATE MORTGAGE INVESTMENT CONDUIT ("REMIC"). THIS BOND IS TO REPRESENT A
"REGULAR INTEREST" IN SUCH REMIC UNDER SECTION 860G OF THE INTERNAL REVENUE CODE
OF 1986, AS AMENDED.
R- $
BFC FINANCE CORP.
REMIC LEASE-BACKED BOND
SERIES 1996
FEDERAL LEASE-BACKED CLASS A
Interest Rate: Original Dated Date: Maturity Date: CUSIP No.:
- -------------- -------------------- -------------- -----------
% March 1, 1996 December 1,
REGISTERED OWNER: CEDE & CO.
PRINCIPAL SUM:
BFC FINANCE CORP. (the "Sponsor"), a Delaware corporation, for value
received, hereby promises to pay, but solely from the sources hereinafter
described, to the registered Owner set forth above or registered assigns, the
Principal Sum set forth above on the Maturity Date set forth above (unless this
Bond shall have been duly called for prior redemption, in which case on such
redemption date), and to pay such registered Owner interest (computed on the
basis of a 360-day year of twelve 30-day months) on such Principal Sum at the
Interest Rate set forth above, semiannually on each June 1 and December 1,
commencing December 1, 1996 (each an "Interest Payment Date") from and including
March 1, 1996, if the date of authentication hereof
<PAGE>
is prior to December 1, 1996, and otherwise from the Interest Payment Date
that is, or that immediately precedes, the date of authentication hereof
(unless payment of interest on this Bond shall be in default, in which case
from the date to which interest has been paid or duly provided for or, if no
such interest has been paid, from March 1, 1996).
Principal of, premium (if any), on, and interest on, this Bond shall be
payable in any coin or currency of the United States of America which, at the
respective times of payment, is legal tender for the payment of public and
private debts. Except as may otherwise be required by a DTC Representation
Letter in effect with respect to this Bond, principal of and interest on this
Bond shall be payable prior to final payment hereof (whether at maturity or
earlier redemption) to the Holder in whose name this Bond is registered as of
the close of business on the applicable Record Date by check mailed to such
Holder at the address thereof appearing on the registration books kept by the
Registrar or at such other address as is furnished to the Paying Agent in
writing by such Holder; provided at the option of any Holder of Bonds in an
aggregate principal amount of at least $1,000,000, any payment on the Bonds
owned by such Holder may be transmitted by wire transfer to such Holder, at such
Holder's written request, to the bank account number on file with the Registrar
on the 5th day before the Record Date or, if any such day is not a Business Day,
the Business Day next preceding such day. Principal of and interest on this
Bond due at final payment hereof (whether at maturity or earlier redemption)
shall be paid to the Holder hereof upon presentation and surrender of this Bond
at the Corporate Trust Office of the Trustee.
If any payment of the principal of, premium (if any) on, or interest on,
this Bond is due on a Bond Payment Date that is not a Business Day, such payment
will be made on the next succeeding Business Day, and no interest will accrue on
the amount of such payment during the intervening period.
This Bond is one of a duly authorized issue of bonds of the Sponsor, known
as "BFC Finance Corp. REMIC Lease-Backed Bonds Series 1996" issued in the total
original aggregate principal amount of $142,000,000 (the "Bonds") in two classes
designated "Federal Lease-Backed Class A" (the "Class A Bonds") and "Federal
Lease-Backed Class B" (the "Class B Bonds") pursuant to a Trust Indenture dated
as of March 1, 1996 (the "Indenture"), between the Sponsor and the Trustee.
This Bond constitutes one of the Class A Bonds issued pursuant to the Indenture.
The Class A Bonds and the Class B Bonds (collectively, the "Bonds") are parity
obligations under the Indenture (except for certain rights, including remedies,
available to the Class A Bondholders not available to the Class B Bondholders).
The Bonds, together with interest thereon, are not general obligations of
the Sponsor but are limited obligations thereof payable solely from the Trust
Estate pledged therefor under the Indenture.
The Trust Estate under the Indenture consists of all of the Sponsor's
right, title and interest in and to (a) the Notes and the Note Payments, (b) the
Loan Documents, (c) all moneys, securities and investments deposited with the
Trustee on the Closing Date or thereafter and held
A-2
<PAGE>
in all Trust Funds created under the Indenture, (d) the Casualty Insurance
Policy, (e) its security interest in the Income Account and the Cash Flow
Account, (f) all proceeds of the foregoing, including, without limitation,
all proceeds of the conversion, voluntary or involuntary, of any of the
foregoing into cash or other liquid property, tangible and intangible, and
(g) all other property, tangible and intangible, from time to time deposited
with or pledged to the Trustee in accordance with the Indenture.
Reference is made to the Indenture for a more detailed description of the
security therein provided for the Bonds, for the nature, extent and manner of
enforcement of such security, for the covenants and agreements made for the
benefit of the Holders of the Bonds and for a statement of the rights of the
Holders of the Bonds. All capitalized terms used herein and not otherwise
defined herein shall have the meanings assigned such terms in the Indenture.
The Indenture, the Notes and the Loan Documents may be modified, amended or
supplemented only to the extent and in the circumstances permitted by the
Indenture as from time to time amended.
(a) MANDATORY SINKING FUND REDEMPTION. (1) The Class A Bonds maturing on
December 1, 2008 shall be subject to mandatory sinking fund redemption on
December 1, 2003 and each December 1 thereafter to and including December 1,
2007, in the principal amounts provided in a mandatory sinking fund schedule set
forth in the Indenture, at a redemption price equal to the principal amount
thereof, plus accrued interest thereon to the redemption date, without premium,
from moneys deposited into the Debt Service Fund.
(2) The Class A Bonds maturing on December 1, 2017 shall be subject to
mandatory sinking fund redemption on December 1, 2009 and each December 1
thereafter to and including December 1, 2016 in the principal amounts provided
in a mandatory sinking fund schedule set forth in the Indenture, at a redemption
price equal to the principal amount thereof, plus accrued interest thereon to
the redemption date, without premium, from moneys deposited into the Debt
Service Fund.
(3) Redemptions pursuant to (a)(1) and (2) above shall be made PRO RATA
among the Holders of each stated maturity by redeeming from each such Holder
that principal amount which bears the same proportion to the principal amount of
such stated maturity registered in the name of such Holder as the total
principal amount of such stated maturity to be redeemed on any sinking fund
payment date bears to the aggregate principal amount of such stated maturity
Outstanding prior to redemption. If the Trustee cannot make a strict PRO RATA
redemption among the Holders of a stated maturity, the Trustee shall redeem more
or less than a PRO RATA portion from one or more Holders of such stated maturity
in such manner as the Trustee deems fair and reasonable.
In connection with any such redemption prior to maturity, the Trustee shall
make appropriate entries in the Bond Register to reflect the portion of any Bond
so redeemed and the
A-3
<PAGE>
amount of the principal remaining outstanding. The Trustee's notation in the
Bond Register shall be conclusive as to the principal amount of any Bond
Outstanding at any time.
(b) EXTRAORDINARY MANDATORY REDEMPTION. (1) The Bonds shall be subject to
extraordinary mandatory redemption from monies received by the Trustee
constituting Note prepayments, in whole or in part to the extent of such monies
received by the Trustee, upon notice from the Sponsor to the Trustee that the
49C Notes have become subject to mandatory prepayment in whole due to casualty
or condemnation with respect to all or substantially all of the Project, at a
price equal to one hundred percent (100%) of the principal amount thereof, plus
accrued interest thereon to the redemption date, on the Interest Payment Date
for which required notice can be given and which next follows receipt by the
Trustee of monies constituting such Note prepayments. If not all of the
Outstanding Bonds can be redeemed from monies so received by the Trustee, the
Trustee shall apply all such monies received to redeem the Outstanding Bonds in
part, which redemption shall be made PRO RATA among the Holders of the
Outstanding Bonds.
(2) The Class A Bonds maturing on December 1, 2017 are subject to
extraordinary mandatory redemption prior to maturity on or after December 1,
2015, upon notice from the Sponsor to the Trustee of the optional total
prepayment of the 49C Notes by 49C, as a whole on any Interest Payment Date set
forth below at the redemption prices (expressed as a percentage of the principal
amount redeemed) set forth below, plus accrued interest to the redemption date.
Interest Payment Dates Redemption Price
---------------------- ----------------
December 1, 2015 and June 1, 2016 102%
December 1, 2016 and June 1, 2017 101%
Notice of any redemption under (b) above shall be given by the Trustee by
certified mail, return receipt requested, not less than 30 days nor more than 45
days prior to the applicable redemption date to each Holder in whose name a Bond
to be redeemed is registered on the Record Date preceding the applicable
redemption date, at such Bondholder's address appearing in the Bond Register.
Any failure to give such notice, or any defect therein, shall not affect
the validity of any proceedings for the redemption of any other Bonds for which
no such failure or defect occurs.
Upon surrender for transfer of any Bond at the Corporate Trust Office of
the Trustee, duly endorsed for transfer or accompanied by an assignment duly
executed by the Holder or his attorney duly authorized in writing, the Sponsor
shall execute and the Trustee shall authenticate and deliver in the name of the
transferee or transferees a new fully registered Bond or Bonds for a like
aggregate principal amount of the same maturity and Class. Bonds may be
exchanged
A-4
<PAGE>
upon surrender thereof at the Corporate Trust Office of the Trustee for a
like aggregate principal amount of fully registered Bonds of the same
maturity and Class.
The Sponsor and the Trustee shall not be required to register, transfer or
exchange any Bonds selected, called or being called for redemption, during any
period from a Record Date to the immediately succeeding Interest Payment Date.
In case of any registration of transfer or exchange, the Sponsor and the Trustee
may require payment of a sum sufficient to cover actual expenses incurred in
making such exchange or transfer and any tax or other governmental charge that
may be imposed in connection with any such registration of transfer or exchange.
The Sponsor and the Trustee may treat the Holder hereof as the absolute
owner hereof for all purposes, and the Sponsor and the Trustee shall not be
affected by any notice to the contrary. This Bond shall not be entitled to any
benefit under the Indenture or become valid or obligatory for any purpose, until
the certificate of authentication hereon endorsed shall have been signed by the
Trustee.
The Holder of this Bond shall have no right to enforce the provisions of
the Indenture or to institute action to enforce the pledge, assignment or
covenants made therein or to take any action with respect to an Event of Default
under the Indenture or to institute, appear in or defend any suit, action or
other proceeding at law or in equity with respect thereto, except as provided in
the Indenture.
The terms and provisions of the Indenture are incorporated herein by
reference and made a part hereof with the same force and effect as if fully
stated herein. By the acceptance of this Bond, the Holder hereof is deemed to
have agreed and consented to all the terms and provisions of the Indenture.
All acts, conditions and things required to exist, to happen and to be
performed precedent to and in connection with the issuance of this Bond exist,
have happened and have been performed in due time, form and manner as required
by the Indenture and by the proceedings of the Sponsor with respect hereto.
A-5
<PAGE>
IN WITNESS WHEREOF, BFC Finance Corp. has caused this Bond to be executed
on its behalf by the manual or facsimile signature of its President and attested
by the manual or facsimile signature of its Secretary, all as of March 1, 1996.
BFC FINANCE CORP.
--------------------------------
Franklin L. Haney
President
ATTEST:
- -------------------------------
Secretary
CERTIFICATE OF AUTHENTICATION
This Bond is one of the BFC Finance Corp. REMIC Lease-Backed Bond Series
1996 Federal Lease-Backed Class A issued under the provisions of the
within-mentioned Indenture.
Dated:
SOUTHTRUST BANK OF ALABAMA,
NATIONAL ASSOCIATION, as Trustee
By:
--------------------------------
Authorized Signatory
A-6
<PAGE>
ASSIGNMENT
FOR VALUE RECEIVED the undersigned hereby sells, assigns and transfers unto
- -------------------------------------------------------------------------------
(Please print or typewrite Name and Address, including Zip Code,
and Federal Taxpayer Identification or Social Security Number of Assignee)
- -------------------------------------------------------------------------------
the within Bond and all rights thereunder, and hereby irrevocably constitutes
and appoints
- -------------------------------------------------------------------------------
Attorney to register the transfer of the within Bond on the books kept for
registration thereof, with full power of substitution in the premises.
Dated:
---------------------------
Signature guaranteed by:
- --------------------------------- ----------------------------------
NOTICE: Signature must be NOTICE: The signature to this
guaranteed by an eligible assignment must correspond with
guarantor institution (as defined the name as it appears on the
in Rule 17Ad-15 under the face of the within Bond in every
Securities Exchange Act of 1934, particular, without alteration or
as amended) that participates in any change whatsoever.
a Securities Transfer Association
recognized signature guarantee
program or such other guarantee
program acceptable to the Trustee.
A-7
<PAGE>
EXHIBIT B
CLASS B BOND FORM
THIS BOND (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A TRANSACTION EXEMPT
FROM REGISTRATION UNDER SECTION 5 OF THE UNITED STATES SECURITIES ACT OF 1933
(THE "SECURITIES ACT"), AND THIS BOND MAY NOT BE OFFERED, SOLD OR OTHERWISE
TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION
THEREFROM. EACH PURCHASER OF THIS BOND IS HEREBY NOTIFIED THAT THE SELLER MAY
BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES
ACT PROVIDED BY RULE 144A THEREUNDER. THE HOLDER OF THIS BOND AGREES FOR THE
BENEFIT OF THE SPONSOR THAT (A) DURING THE TIME THIS BOND IS PLEDGED UNDER THE
CASTLE ROCK PLEDGE AGREEMENT (AS DEFINED IN THE INDENTURE) THIS BOND MAY NOT BE
TRANSFERRED EXCEPT IN ACCORDANCE WITH THE TERMS THEREOF AND THEREAFTER THIS BOND
MAY BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY (1) INSIDE THE UNITED
STATES TO A PERSON WHO THE SELLER REASONABLY BELIEVES IS A QUALIFIED
INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, OR IN ACCORDANCE WITH ANOTHER
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (AND BASED
UPON AN OPINION OF COUNSEL AS REQUIRED BY THE INDENTURE), (2) TO THE SPONSOR,
(3) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT, OR (4) OUTSIDE THE UNITED
STATES TO A FOREIGN PERSON IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 904
UNDER THE SECURITIES ACT AND, IN EACH CASE, IN ACCORDANCE WITH ANY APPLICABLE
SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE
JURISDICTION, AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED
TO, NOTIFY ANY PURCHASER FROM IT OF THIS BOND OF THE RESALE RESTRICTIONS SET
FORTH IN (A) ABOVE.
THE PRINCIPAL OF THIS BOND IS SUBJECT TO MANDATORY REDEMPTION AND PAYMENT IN
PART PRIOR TO MATURITY AS SET FORTH HEREIN, WITHOUT NOTATION ON THIS BOND.
ACCORDINGLY, THE UNPAID PRINCIPAL BALANCE OF THIS BOND MAY BE LESS THAN THAT SET
FORTH BELOW. ANYONE ACQUIRING THIS BOND MAY ASCERTAIN ITS CURRENT PRINCIPAL
AMOUNT BY INQUIRY OF SOUTHTRUST BANK OF ALABAMA, NATIONAL ASSOCIATION, AS
TRUSTEE, PAYING AGENT AND BOND REGISTRAR (THE "TRUSTEE").
THE INTEREST ON THIS BOND IS SUBJECT TO FEDERAL INCOME TAX. AN ELECTION IS
BEING MADE TO TREAT THE SEGREGATED ASSET POOL COMPRISING THE TRUST ESTATE AS A
REAL ESTATE MORTGAGE INVESTMENT CONDUIT ("REMIC"). THIS BOND IS TO REPRESENT A
"REGULAR INTEREST" IN SUCH REMIC UNDER SECTION 860G OF THE INTERNAL REVENUE CODE
OF 1986, AS AMENDED.
R- $
BFC FINANCE CORP.
REMIC LEASE-BACKED BOND
SERIES 1996
FEDERAL LEASE-BACKED CLASS B
Interest Rate: Original Dated Date: Maturity Date:
- -------------- --------------------- --------------
% March 1, 1996
REGISTERED OWNER:
PRINCIPAL SUM:
BFC FINANCE CORP. (the "Sponsor"), a Delaware corporation, for value
received, hereby promises to pay, but solely from the sources hereinafter
described, to the registered Owner set forth above or registered assigns, the
Principal Sum set forth above on the Maturity
<PAGE>
Date set forth above (unless this Bond shall have been duly called for prior
redemption, in which case on such redemption date), and to pay such
registered Owner interest (computed on the basis of a 360-day year of twelve
30-day months) on such Principal Sum at the Interest Rate set forth above,
semiannually on each June 1 and December 1, commencing June 1, 1998 (each an
"Interest Payment Date") from and including March 1, 1998, if the date of
authentication hereof is prior to June 1, 1998, and otherwise from the
Interest Payment Date that is, or that immediately precedes, the date of
authentication hereof (unless payment of interest on this Bond shall be in
default, in which case from the date to which interest has been paid or duly
provided for or, if no such interest has been paid, from March 1, 1998).
Principal of, premium (if any), on, and interest on, this Bond shall be
payable in any coin or currency of the United States of America which, at the
respective times of payment, is legal tender for the payment of public and
private debts. Except as may otherwise be required by a DTC Representation
Letter in effect with respect to this Bond, principal of and interest on this
Bond shall be payable prior to final payment hereof (whether at maturity or
earlier redemption) to the Holder in whose name this Bond is registered as of
the close of business on the applicable Record Date by check mailed to such
Holder at the address thereof appearing on the registration books kept by the
Registrar or at such other address as is furnished to the Paying Agent in
writing by such Holder; provided at the option of any Holder of Bonds in an
aggregate principal amount of at least $1,000,000, any payment on the Bonds
owned by such Holder may be transmitted by wire transfer to such Holder, at such
Holder's written request, to the bank account number on file with the Registrar
on the 5th day before the Record Date or, if any such day is not a Business Day,
the Business Day next preceding such day. Principal of and interest on this
Bond due at final payment hereof (whether at maturity or earlier redemption)
shall be paid to the Holder hereof upon presentation and surrender of this Bond
at the Corporate Trust Office of the Trustee.
If any payment of the principal of, premium (if any) on, or interest on,
this Bond is due on a Bond Payment Date that is not a Business Day, such payment
will be made on the next succeeding Business Day, and no interest will accrue on
the amount of such payment during the intervening period.
This Bond is one of a duly authorized issue of bonds of the Sponsor, known
as "BFC Finance Corp. REMIC Lease-Backed Bonds, Series 1996" issued in the total
original aggregate principal amount of $142,000,000 (the "Bonds") in two classes
designated "Federal Lease-Backed Class A" (the "Class A Bonds"), and "Federal
Lease-Backed Class B" (the "Class B Bonds") pursuant to a Trust Indenture dated
as of March 1, 1996 (the "Indenture"), between the Sponsor and the Trustee.
This Bond constitutes one of the Class B Bonds issued pursuant to the Indenture.
The Class A Bonds and the Class B Bonds (collectively, the "Bonds") are parity
obligations under the Indenture (except for certain rights, including remedies,
available to the Class A Bondholders not available to the Class B Bondholders).
B-2
<PAGE>
The Bonds, together with interest thereon, are not general obligations of
the Sponsor but are limited obligations thereof payable solely from the Trust
Estate pledged therefor under the Indenture.
The Trust Estate under the Indenture consists of all of the Sponsor's
right, title and interest in and to (a) the Notes and the Note Payments, (b) the
Loan Documents, (c) all moneys, securities and investments deposited with the
Trustee on the Closing Date or thereafter and held in all Trust Funds created
under the Indenture, (d) the Casualty Insurance Policy, (e) its security
interest in the Income Account and the Cash Flow Account, (f) all proceeds of
the foregoing, including, without limitation, all proceeds of the conversion,
voluntary or involuntary, of any of the foregoing into cash or other liquid
property, tangible and intangible, and (g) all other property, tangible and
intangible, from time to time deposited with or pledged to the Trustee in
accordance with the Indenture.
Reference is made to the Indenture for a more detailed description of the
security therein provided for the Bonds, for the nature, extent and manner of
enforcement of such security, for the covenants and agreements made for the
benefit of the Holders of the Bonds and for a statement of the rights of the
Holders of the Bonds. All capitalized terms used herein and not otherwise
defined herein shall have the meanings assigned to such terms in the Indenture.
The Indenture, the Notes and the Loan Documents may be modified, amended or
supplemented only to the extent and in the circumstances permitted by the
Indenture as from time to time amended.
EXTRAORDINARY MANDATORY REDEMPTION. (1) The Bonds shall be subject to
extraordinary mandatory redemption from monies received by the Trustee
constituting Note prepayments, in whole or in part to the extent of such monies
received by the Trustee, upon notice from the Sponsor to the Trustee that the
49C Notes have become subject to mandatory prepayment in whole due to casualty
or condemnation with respect to all or substantially all of the Project, at a
price equal to one hundred percent (100%) of the principal amount thereof, plus
accrued interest thereon to the redemption date, on the Interest Payment Date
for which required notice can be given and which next follows receipt by the
Trustee of monies constituting such Note prepayments. If not all of the
Outstanding Bonds can be redeemed from monies so received by the Trustee, the
Trustee shall apply all such monies received to redeem the Outstanding Bonds in
part, which redemption shall be made PRO RATA among the Holders of the
Outstanding Bonds.
(2) The Class B Bonds maturing on or after December 1, 2016 are subject to
extraordinary mandatory redemption prior to maturity on or after December 1,
2015, upon notice from the Sponsor to the Trustee of the optional total
prepayment of the 49C Notes by 49C, as a whole on any Interest Payment Date set
forth below at the redemption prices (expressed as a percentage of the principal
amount redeemed) set forth below, plus accrued interest to the redemption date.
B-3
<PAGE>
Interest Payment Dates Redemption Price
---------------------- ----------------
December 1, 2015 and June 1, 2016 102%
December 1, 2016 and June 1, 2017 101%
Notice of any redemption under (1) or (2) above shall be given by the
Trustee by certified mail, return receipt requested, not less than 30 days nor
more than 45 days prior to the applicable redemption date to each Holder in
whose name a Bond to be redeemed is registered on the Record Date preceding the
applicable redemption date, at such Bondholder's address appearing in the Bond
Register.
Any failure to give such notice, or any defect therein, shall not affect
the validity of any proceedings for the redemption of any other Bonds for which
no such failure or defect occurs.
This Bond is subject to restrictions on transfer as provided in the legend
appearing on the first page hereof and in the Indenture.
The Sponsor and the Trustee shall not be required to register, transfer or
exchange any Bonds selected, called or being called for redemption, during any
period from a Record Date to the immediately succeeding Interest Payment Date.
In case of any registration of transfer or exchange, the Sponsor and the Trustee
may require payment of a sum sufficient to cover actual expenses incurred in
making such exchange or transfer and any tax or other governmental charge that
may be imposed in connection with any such registration of transfer or exchange.
The Sponsor and the Trustee may treat the Holder hereof as the absolute
owner hereof for all purposes, and the Sponsor and the Trustee shall not be
affected by any notice to the contrary. This Bond shall not be entitled to any
benefit under the Indenture or become valid or obligatory for any purpose, until
the certificate of authentication hereon endorsed shall have been signed by the
Trustee.
The Holder of this Bond shall have no right to enforce the provisions of
the Indenture or to institute action to enforce the pledge, assignment or
covenants made therein or to take any action with respect to an Event of Default
under the Indenture or to institute, appear in or defend any suit, action or
other proceeding at law or in equity with respect thereto, except as provided in
the Indenture.
The terms and provisions of the Indenture are incorporated herein by
reference and made a part hereof with the same force and effect as if fully
stated herein. By the acceptance of this Bond, the Holder hereof is deemed to
have agreed and consented to all the terms and provisions of the Indenture.
All acts, conditions and things required to exist, to happen and to be
performed precedent to and in connection with the issuance of this Bond exist,
have happened and have been
B-4
<PAGE>
performed in due time, form and manner as required by the Indenture and by
the proceedings of the Sponsor with respect hereto.
B-5
<PAGE>
IN WITNESS WHEREOF, BFC Finance Corp. has caused this Bond to be executed
on its behalf by the manual or facsimile signature of its President and attested
by the manual or facsimile signature of its Secretary, all as of March 1, 1996.
BFC FINANCE CORP.
--------------------------------
Franklin L. Haney
President
ATTEST:
- -------------------------------
Secretary
CERTIFICATE OF AUTHENTICATION
This Bond is one of the BFC Finance Corp. REMIC Lease-Backed Bond Series
1996 Federal Lease-Backed Class B issued under the provisions of the
within-mentioned Indenture.
Dated:
SOUTHTRUST BANK OF ALABAMA,
NATIONAL ASSOCIATION, as Trustee
By:
------------------------------
Authorized Signatory
B-6
<PAGE>
ASSIGNMENT
FOR VALUE RECEIVED the undersigned hereby sells, assigns and transfers unto
- -------------------------------------------------------------------------------
(Please print or typewrite Name and Address, including Zip Code,
and Federal Taxpayer Identification or Social Security Number of Assignee)
- -------------------------------------------------------------------------------
the within Bond and all rights thereunder, and hereby irrevocably constitutes
and appoints
- -------------------------------------------------------------------------------
Attorney to register the transfer of the within Bond on the books kept for
registration thereof, with full power of substitution in the premises.
Dated:
-----------------------
Signature guaranteed by:
- --------------------------------- ----------------------------------
NOTICE: Signature must be NOTICE: The signature to this
guaranteed by an eligible assignment must correspond with
guarantor institution (as defined the name as it appears on the
in Rule 17Ad-15 under the face of the within Bond in every
Securities Exchange Act of 1934, particular, without alteration or
as amended) that participates in any change whatsoever.
a Securities Transfer Association
recognized signature guarantee
program or such other guarantee
program acceptable to the Trustee.
B-7
<PAGE>
EXHIBIT C
RESIDUAL CERTIFICATE FORM
THE RESIDUAL INTEREST REPRESENTED BY THIS CERTIFICATE HAS NOT BEEN, AND WILL NOT
BE, REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "1933 ACT"), OR
ANY STATE SECURITIES LAWS, AND MAY NOT BE DIRECTLY OR INDIRECTLY OFFERED OR SOLD
OR OTHERWISE DISPOSED OF (INCLUDING PLEDGED) BY THE OWNER HEREOF EXCEPT IN
ACCORDANCE WITH THE PROVISIONS OF SECTION 12.02 OF THE INDENTURE REFERRED TO
HEREIN.
NO.: PERCENTAGE INTEREST: %
BFC FINANCE CORP.
REMIC RESIDUAL CERTIFICATE
SERIES 1996
REGISTERED OWNER:
THIS CERTIFICATE DOES NOT CONTAIN A COMPLETE SUMMARY OF THE INDENTURE
PURSUANT TO WHICH IT IS ISSUED. THE OWNER IS REFERRED TO SUCH INDENTURE, COPIES
OF WHICH MAY BE OBTAINED FROM SOUTHTRUST BANK OF ALABAMA, NATIONAL ASSOCIATION,
(THE "TRUSTEE").
THIS CERTIFIES THAT SOUTHTRUST BANK OF ALABAMA, NATIONAL ASSOCIATION,
acting not in its individual capacity, but solely as Trustee under and pursuant
to the Trust Indenture dated as of March 1, 1996 (the "Indenture"), by and
between the Trustee and BFC Finance Corp. (the "Sponsor"), hereby certifies that
the Registered Owner set forth above (the "Owner") is the owner of the undivided
fractional Percentage Interest set forth above in the Residual pursuant to the
Indenture. Capitalized terms used herein, unless otherwise defined, shall have
the meanings ascribed thereto in the Indenture.
This Certificate is one of the Certificates referred to in the Indenture
and is issued under and is subject to the terms, provisions and conditions of
the Indenture to which the Owner of this Certificate, by virtue of its
acceptance hereof, agrees and by which the Owner hereof is bound. Reference is
hereby made to the Indenture for a statement of the rights and obligations of
the Owner of this Certificate, the duties, rights and obligations of the Sponsor
and the Trustee, and the limitations thereon, as well as for a statement of the
terms and conditions of the interest created by the Indenture. Reference is
also made to the Indenture for the provisions regarding the transfer of this
Certificate and requirements with respect thereto, amendment of the Indenture
and other matters. The terms of the Indenture are hereby incorporated herein
and deemed accepted by the Owner of this Certificate. A copy of the Indenture
may be obtained from the Trustee. THE FRACTIONAL UNDIVIDED INTEREST IN THE
RESIDUAL EVIDENCED HEREBY IS A FRACTIONAL UNDIVIDED INTEREST IN A RESIDUAL
INTEREST IN A SEGREGATED ASSET POOL FOR WHICH ELECTION FOR TREATMENT AS A "REAL
ESTATE MORTGAGE INVESTMENT CONDUIT" ("REMIC"), AS DEFINED IN THE INTERNAL
REVENUE CODE OF 1986, AS AMENDED (THE "CODE"), IS BEING MADE.
<PAGE>
TRANSFER OF THIS CERTIFICATE IS RESTRICTED AS SET FORTH IN THE INDENTURE.
NO TRANSFER OF THIS CERTIFICATE MAY BE MADE TO A "DISQUALIFIED ORGANIZATION" AS
DEFINED IN SECTION 860E(e)(5) OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED
(THE "CODE"). SUCH TERM INCLUDES THE UNITED STATES, ANY STATE OR POLITICAL
SUBDIVISION THEREOF, ANY FOREIGN GOVERNMENT, ANY INTERNATIONAL ORGANIZATION, ANY
AGENCY OR INSTRUMENTALITY OF ANY OF THE FOREGOING (OTHER THAN CERTAIN TAXABLE
INSTRUMENTALITIES), ANY COOPERATIVE ORGANIZATION FURNISHING ELECTRIC ENERGY OR
PROVIDING TELEPHONE SERVICE TO PERSONS IN RURAL AREAS, OR ANY ORGANIZATION
(OTHER THAN A FARMERS' COOPERATIVE) THAT IS EXEMPT FROM FEDERAL INCOME TAX
UNLESS SUCH ORGANIZATION IS SUBJECT TO THE TAX ON UNRELATED BUSINESS INCOME. NO
TRANSFER OF THIS CERTIFICATE WILL BE REGISTERED BY THE TRUSTEE UNLESS THE
PROPOSED TRANSFEREE HAS DELIVERED AN AFFIDAVIT AFFIRMING, AMONG OTHER THINGS,
THAT THE PROPOSED TRANSFEREE IS NOT A DISQUALIFIED ORGANIZATION AND IS NOT
ACQUIRING THE CERTIFICATE FOR THE ACCOUNT OF A DISQUALIFIED ORGANIZATION. A
COPY OF THE FORM OF AFFIDAVIT REQUIRED OF EACH PROPOSED TRANSFEREE IS ON FILE
AND AVAILABLE FROM THE TRUSTEE.
A TRANSFER OF THIS CERTIFICATE IN VIOLATION OF THE APPLICABLE TRANSFER
RESTRICTIONS MAY GIVE RISE TO A SUBSTANTIAL TAX UPON THE TRANSFEROR OR, IN
CERTAIN CASES, UPON AN AGENT ACTING FOR THE TRANSFEREE. A PASS-THRU ENTITY THAT
HOLDS THIS CERTIFICATE AND THAT HAS A DISQUALIFIED ORGANIZATION AS A RECORD
OWNER IN ANY TAXABLE YEAR GENERALLY WILL BE SUBJECT TO A TAX FOR EACH SUCH YEAR
EQUAL TO THE PRODUCT OF (A) THE AMOUNT OF EXCESS INCLUSIONS WITH RESPECT TO THE
PORTION OF THIS CERTIFICATE OWNED THROUGH SUCH PASS-THRU ENTITY BY SUCH
DISQUALIFIED ORGANIZATION, AND (B) THE HIGHEST MARGINAL FEDERAL TAX RATE ON
CORPORATIONS. FOR PURPOSES OF THE PRECEDING SENTENCE, THE TERM "PASS-THRU"
ENTITY INCLUDES REGULATED INVESTMENT COMPANIES, REAL ESTATE INVESTMENT TRUSTS,
COMMON TRUST FUNDS, PARTNERSHIPS, TRUSTS, ESTATES, COOPERATIVES TO WHICH PART I
OF SUBCHAPTER T OF THE CODE APPLIED AND, EXCEPT AS PROVIDED IN REGULATIONS,
NOMINEES.
In addition to the other representations, warranties and covenants set
forth in the Indenture, by acceptance hereof, the Owner named in this
Certificate represents and warrants to the Sponsor and the Trustee as follows:
(1) The Owner understands that this Certificate is not registered
under the 1933 Act or any state "Blue Sky" laws;
(2) The Owner has knowledge and experience in financial and business
matters as to be capable of evaluating the merits and risks of an
investment in this Certificate, it is able to bear the economic risk of
investment in this Certificate and it is an accredited investor as defined
in Regulation D under the 1933 Act;
(3) The Owner acquired this Certificate for its own account or for
accounts as to which it exercises sole investment discretion and not with a
view to any distribution of this Certificate, subject, nevertheless, to the
understanding that disposition of its property shall at all times be and
remain within the Owner's control;
C-2
<PAGE>
(4) This Certificate must be held indefinitely by the Owner unless
subsequently registered under the 1933 Act and any applicable state "Blue
Sky" laws or an exemption from the registration requirements of the 1933
Act and any such laws is available;
(5) The Owner's interest in and rights with respect to the Trustee
Estate are specifically limited to the rights and interests created by the
Indenture and are expressly subordinate to the lien of the Indenture; and
(6) The Owner is not a Disqualified Organization.
The Owner hereof agrees that, as the Owner hereof, it is severally liable
for liabilities of the holder of the Certificates pursuant to the Indenture,
including but not limited to liabilities and indemnities under Section 12.18 of
the Indenture and not to transfer this Certificate except in accordance with the
Indenture. Failure to comply with the transfer requirements of the Indenture
will void any purported transfer and have the other effects on the transferor
and transferee provided in the Indenture, reference to which is hereby made.
By the acceptance hereof, the Owner agrees with the Sponsor and the Trustee
that neither the Sponsor nor the Trustee shall be held accountable by reason of
the disclosure of information regarding the name and address of such Owner,
regardless of the source from which such information was derived, provided such
disclosure is pursuant to Section 12.04 of the Indenture. The Owner, by its
acceptance hereof, acknowledges and agrees that the only amounts that it shall
be entitled to receive or claim for on any Residual Distribution Date, and from
time to time, are those amounts actually and properly released from the lien of
the Indenture in accordance with express terms thereof and payable under the
Indenture, and the Owner shall have no claim or right by reason of owning this
Certificate against the Trustee under the Indenture, the Sponsor or the Holders
of the Bonds issued under the Indenture with respect to any amounts not properly
released or to be released from the lien of the Indenture.
By acceptance of this Certificate, the Owner consents to amendments or
modification of this Certificate and the Indenture to the extent the Trustee, on
advice of counsel, deems such amendment or modification necessary or required
under the Code or applicable regulations thereunder to make or maintain the
REMIC election or the REMIC status of the Trust Estate.
This Certificate does not represent a debt or a liability of the Sponsor.
No lien or claim is created hereby or by the Indenture against the assets of the
Sponsor other than to the Residual in the Trust Estate to the extent provided
for in the Indenture.
C-3
<PAGE>
IN WITNESS WHEREOF, the Trustee has caused this Certificate to be issued as
of the date hereof.
Dated: SOUTHTRUST BANK OF ALABAMA,
NATIONAL ASSOCIATION, not in its individual
capacity but solely as Trustee
By:
------------------------------------------
Name:
Title:
C-4
<PAGE>
ABBREVIATIONS
The following abbreviations, when used in the inscription on the face of
this Certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM - as tenants in common
TEN ENT - as tenants by the entireties
JT TEN - as joint tenants with right of survivorship and
not as tenants in common
UNIF GIFT MIN ACT Custodian
----------------- ---------------------
(Cust) (Minor)
under Uniform Gifts to Minors
Act
--------------------------
(State)
Additional abbreviations may also be used though not in the above list
---------------------
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto
PLEASE INSERT SOCIAL SECURITY
OR OTHER IDENTIFYING NUMBER
OF ASSIGNEE
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
(Please print or typewrite name and address,
including zip code, of assignee)
- ------------------------------------------------------------------------------
the within Certificate, and all rights thereunder, hereby irrevocably
constituting and appointing
- ------------------------------------------------------------------------------
Attorney to transfer said Certificate on the Certificate Register, with full
power of substitution in the premises.
Dated:
----------------------- ---------------------------------
Signature Guaranteed by
---------------------------------
NOTICE: The signature(s) to this assignment must correspond with the name as
it appears upon the face of the within Certificate in every particular,
without alteration or enlargement or any change whatever. Signature(s) must
be guaranteed by a commercial bank or by a member firm of the New York Stock
Exchange or another national securities exchange. Notarized or witnessed
signatures are not acceptable.
C-5
<PAGE>
EXHIBIT D
CERTIFICATE TRANSFER AFFIDAVIT
STATE OF )
) ss.:
COUNTY OF )
The undersigned, being first duly sworn, deposes and says under penalty of
perjury as follows:
1. The undersigned is an officer of ________________, the proposed
Transferee of a Certificate issued pursuant to the Trust Indenture dated as of
March 1, 1996 (the "Indenture") by and between BFC Finance Corp. and SouthTrust
Bank of Alabama, National Association, as Trustee. Capitalized terms used, but
not defined herein, shall have the meanings ascribed to such terms in the
Indenture. The Transferee has authorized the undersigned to make this affidavit
on behalf of the Transferee.
2. The Transferee is not a Disqualified Organization. The Transferee is
not acquiring its ownership interest in the Certificates for the account of, or
as agent (including a broker, nominee or other middleman) for, any person as
entity from which it has not received an affidavit substantially in the form of
this Transfer Affidavit. The Transferee is not an entity that holds REMIC
residual interests as nominee in order to facilitate the clearance and
settlement of such securities through electronic book-entry changes to accounts
of participating organizations.
3. The Transferee has been advised of, and understands that under the
Code, (i) a tax will be imposed on transfers of Certificates to Persons that are
Disqualified Organizations; (ii) such tax will be imposed on the transferor, or,
if such transfer is through an agent (which includes a broker, nominee or
middleman) for a Person that is a Disqualified Organization, on the agent; and
(iii) the Person otherwise liable for the tax shall be relieved of liability for
the tax if the subsequent transferee furnished to such Person an affidavit that
such subsequent transferee is not a Disqualified Organization and, at the time
of transfer, such Person does not have actual knowledge that the affidavit is
false.
4. The Transferee is not acquiring its ownership interest in the
Certificates for the purpose of avoiding or impeding the assessment or
collection of tax.
5. The Transferee has been advised of, and understands that under the
Code, a tax will be imposed on a "pass-thru entity" holding Certificates if at
any time during the taxable year of the pass-thru entity a Person that is a
Disqualified Organization is the record holder of an interest in such entity.
(For this purpose, a "pass-thru entity" includes a regulated investment company,
a real estate investment trust or common trust fund, a partnership, trust or
estate, and
<PAGE>
certain cooperatives and, except as may be provided in Treasury Regulations,
persons holding interest in pass-thru entities as a nominee for another
Person).
6. The Transferee has received a copy of and has reviewed the provisions
of the Indenture (incorporated herein by reference) (including, but not limited
to, Article XII thereof) and understands the legal consequences of the
acquisition of an ownership interest in the Certificates including, without
limitation, the restrictions on subsequent transfers and the provisions
regarding voiding the transfer. The Transferee expressly agrees to be bound by
and to abide by the provisions of the Indenture (including, but not limited to,
Article XII thereof) and the restrictions noted on the face of the Certificates.
The Transferee understands and agrees that any breach of any of the
representations included herein shall render the transfer to the Transferee
contemplated thereby null and void.
The Transferee further acknowledges that the breach of any of the
representations included herein shall permit the Trustee to withhold payments
otherwise distributable in respect of the Certificate and to apply such amounts
as indemnification from and against any cost, liability or tax incurred as a
result of the purported transfer.
7. The Transferee agrees to require a Transfer Affidavit containing the
representations and agreements substantially in the form hereof from any Person
to whom the Transferee attempts to transfer its ownership interest in a
Certificate, and in connection with any transfer by a Person for whom the
Transferee is acting as nominee, trustee or agent, and the Transferee will not
transfer its ownership interest or cause any ownership interest to be
transferred to any Person that the Transferee knows is a Disqualified
Organization.
8. The Transferee's taxpayer identification number is __________________.
D-2
<PAGE>
IN WITNESS WHEREOF, the Transferee has caused this instrument to be
executed on its behalf, by its duly authorized officer and its corporate seal
to be hereunto affixed, duly attested, this ______ day of __________________.
[NAME OF TRANSFEREE]
By:
------------------------------
Name:
Title:
[Corporate Seal]
ATTEST:
- -------------------------------------
Title:
D-3
<PAGE>
EXHIBIT E
CERTIFICATE TRANSFEREE'S AGREEMENT FORM
SouthTrust Bank of Alabama, National Association
The undersigned is an officer of ____________, the proposed Transferee of a
Certificate issued pursuant to the Trust Indenture dated as of March 1, 1996
(the "Indenture") by and between BFC Finance Corp. and SouthTrust Bank of
Alabama, National Association, as Trustee. Capitalized terms used, but not
defined herein, shall have the meanings ascribed to such terms in the Indenture.
By its execution and acknowledgement hereof, and its acceptance of the
Certificate evidencing % of the ownership of the Residual, the proposed
Transferee represents and warrants to, and covenants and agrees with, the
Trustee as follows:
(a) It understands that the Certificates have not been, and will not be,
registered under the Securities Act of 1933 ("1933 Act"), in reliance upon the
exemptions provided in the 1933 Act, or under the securities or "Blue Sky" laws
of any state in reliance upon exemptions therefrom, and it hereby covenants and
agrees that it will not sell or otherwise transfer the Certificates or any part
thereof (i) without registration under the 1933 Act and any applicable
securities or "Blue Sky" laws or pursuant to exemptions therefrom and (ii) upon
compliance with the provisions of the Indenture and the Certificates then
applicable to such sale or other transfer. It further represents and warrants
that it fully understands and agrees that it must bear the economic risk of the
purchase of the Certificates for an indefinite period of time and that neither
the Trustee nor the Sponsor has an obligation to register or otherwise
facilitate the transfer of any Certificate or an ownership interest in the
Residual except as expressly provided in the Indenture.
(b) It is acquiring the Certificates for its own account as principal and
not for the account of one or more pension or trust accounts for which it is
acting as trustee, or for the account of one or more agency accounts for which
it is acting as agent, and that, in any such case, such acquisition is being
made not with a view to a distribution thereof, in whole or in part.
(c) It understands that under current law the purchase and holding of the
Certificates by or on behalf of any employee benefit plan subject to the
fiduciary responsibility provisions of ERISA may result in "prohibited
transactions" within the meaning of ERISA and the Code. It is not, and is not
purchasing on behalf of, any such plan. Transfer of the Certificates will not
be registered unless, before the registration of any transfer, the transferee
(i) executes a representation letter stating that it is not, and is not
purchasing on behalf of, any such plan or (ii) provides an Opinion of Counsel
addressed to the Trustee that the purchase or holding of Certificates by or on
behalf of such plan will not constitute or result in a prohibited transaction
under ERISA, will not cause the Sponsor, the Trustee, or the Manager to be a
fiduciary under
<PAGE>
the plan, and will not subject the Sponsor, the Trustee, or the Manager to
any obligation or liability in addition to those undertaken in the Indenture.
(d) It customarily engages in the purchase of mortgages, mortgage-related
securities, mortgage derivative securities and residual interests therein, and
has such knowledge and experience in financial and business matters as to be
capable of evaluating the merits and risks specifically in the area of mortgage-
related securities and mortgage derivative securities of an investment in the
Certificates, it is able to bear the substantial economic risk of investment in
the Certificates and the manner in which fluctuations in interest rates affect
the value of mortgages, mortgage-related securities, mortgage derivative
securities and residual interests therein and it is an "accredited investor" as
that term is defined in Regulation D under the 1933 Act.
(e) It is not affiliated with the Trustee or any affiliate of the Trustee
or its nominee to hold the Trust Estate.
(f) It understands that substantial risks are involved in an investment in
the Residual and that, under certain circumstances, it could fail to recoup its
initial investment in the Residual.
(g) It has read and understood, and is bound by, all the terms and
conditions of the Certificates and the Indenture and the obligations of an owner
of a Certificate under the Indenture, including, but not limited to, the
provisions of the Indenture setting forth limitations on the liability of the
Trustee, the Sponsor and the Manager.
(h) It has discussed with any of its advisors, counsel and accountants
that it has deemed appropriate the legal, tax and financial implications of
investment in a REMIC residual interest and understands that its taxable income
for any accounting period may not correspond to the cash flow, if any, for such
period and its decision to invest in the REMIC residual interest evidenced by
the Certificates acquired by it is not based upon any representation made to it
by the Sponsor other than the statements or representations by the Sponsor in
the Indenture.
(i) It has not relied upon the Sponsor or the Trustee, or upon any
information or materials prepared or furnished by the Sponsor or the Trustee, or
its agents or counsel, in determining whether its investment in the Certificate
is legal for it or an investment which it may make under applicable federal or
state laws and regulations.
E-2
<PAGE>
(j) It will be, except to the extent specified in the Indenture, severally
liable for all fees, expenses, taxes, indemnity payments and other liabilities
of the Sponsor and the Trustee, other than the Bonds, to the extent such fees,
expenses, taxes, indemnity payment and other liabilities of the Sponsor or the
Trustee, as the case may be, are not paid out of the Residual and for all other
obligations of an owner of Certificates pursuant to the Indenture.
[NAME OF TRANSFEREE]
By:
------------------------------
E-3
<PAGE>
EXHIBIT F
LOAN DOCUMENTS
1. Instrument of Assignment of Payments under Government Contracts from 49C to
Trustee.
2. Notice of Assignment of U.S. Government Contract acknowledged by
contracting officer.
3. Lease Status Certificate executed by contracting officer dated March 28,
1996.
4. $99,000,000 Promissory Note dated as of March 26, 1996 from 49C to Lender.
5. $27,087,366.74 Promissory Note dated as of March 26, 1996 from 49C to
Lender.
6. $9,310,689.07 Promissory Note dated as of March 26, 1996 from DCDC II to
Sponsor.
7. Loan Agreement dated as of March 26, 1996 between the Lender and 49C.
8. Deed of Trust, Security Agreement and Assignment of Rents dated as of March
29, 1996 among 49C, Richard W. Klein, Jr., as trustor, and the Lender, as
beneficiary.
9. Assignment of Rents and Leases and Other Income dated as of March 26, 1996
by 49C in favor of the Lender.
10. Acknowledgement, Subordination, Non-Disturbance and Attornment Agreement
dated as of March 26, 1996 among United States of America acting by and
through the General Services Administration, 49C, the Lender, the Sponsor
and the Trustee.
11. Cash Flow Account Security, Pledge and Assignment Agreement dated as of
March 26, 1996 between 49C and the Lender.
12. Account Agreement dated as of March 26, 1996 among the Lender, the Borrower
and the Trustee relating to the Operating Reserve Account.
13. Income Account Security, Pledge and Assignment Agreement dated as of March
26, 1996, between 49C and the Lender.
14. Account Agreement dated as of March 26, 1996 among the Borrower, the Lender
and the Trustee relating to the Income Account.
15. Account Agreement dated as of March 26, 1996 Crestar Bank, N.A., 49C and
the Lender relating to the Operating Account.
<PAGE>
16. Security Agreement dated as of March 26, 1996 between 49C as debtor and the
Lender as secured party.
17. Assignment of Warranties, Management Agreements, Contractors' Agreements
and other Contract Rights dated as of March 26, 1996 by 49C in favor of the
Lender.
18. Second Deed of Trust, Security Agreement and Assignment of Rents made as of
March 26, 1996, among 49C, as trustor, Richard W. Klein, Jr., as trustee,
and the Lender, as beneficiary.
19. UCC-1 Financing Statements
20. Assignment of Collateral and Trust Agreement dated as of March 1, 1996 by
and among DCDC II, the Sponsor and the Trustee as collateral agent.
21. Agreement Relating to Refinancing of Existing Indebtedness and Other
Matters dated as of March 26, 1996 among the Lender, Parcel 49B Limited
Partnership, 49C, Tower Associates, Inc., and Tower Associates II, Inc.
F-2
<PAGE>
EXHIBIT G
SCHEDULE OF AMOUNTS TO BE RESERVED AGAINST FUTURE
BOND PRINCIPAL PAYMENTS
<PAGE>
EXHIBIT H
CERTIFICATE TO BE DELIVERED UPON EXCHANGE
OR REGISTRATION OF TRANSFER OF BONDS FORM
Re: BFC Finance Corp.
REMIC Lease-Backed Bonds
Series 1996
Federal Lease-Backed Class B Bonds
This Certificate relates to $___________________ principal amount of Bonds
held in *______________ book-entry or *________________ definitive form by
__________________ (the "Transferor").
The Transferor*:
/ / has requested the Trustee by written order to deliver in exchange for
its beneficial interest in the Book-Entry Bond held by the Depository a Bond or
Bonds in definitive, registered form of authorized denominations in an aggregate
principal amount equal to its beneficial interest in such Book-Entry Bond (or
the portion thereof indicated above); or
/ / has requested the Trustee by written order to exchange or register the
transfer of a Bond or Bonds.
In connection with such request and in respect of each such Bond, the
Transferor does hereby certify that Transferor is familiar with the Indenture
relating to the above captioned Bonds and as provided in such Indenture, the
transfer of this Bond does not require registration under the Securities Act (as
defined below) because:*
/ / Such Bond is being required for the Transferor's own account, without
transfer (in satisfaction of Section _____ or Section ______ of the Indenture).
/ / Such Bond is being transferred to a "qualified institutional buyer"
(as defined in Rule 144A under the Securities Act of 1933, as amended (the
"Securities Act")) in reliance on Rule 144A (in satisfaction of Section ______,
Section ______ or Section ______ of the Indenture) or pursuant to an exemption
from registration in accordance with Rule 904 under the Securities Act (in
satisfaction of Section ______ or Section ________ of the Indenture).
_________________
* Check application box.
<PAGE>
/ / Such Bond is being transferred in accordance with Rule 144 under the
Securities Act, or pursuant to an effective registration statement under the
Securities Act (in satisfaction of Section ______ or Section ______ of the
Indenture).
/ / Such Bond is being transferred in reliance on and in compliance with
an exemption from the registration requirements of the Securities Act, other
than Rule 144A, 144 or Rule 904 under the Securities Act. An Opinion of Counsel
to the effect that such transfer does not require registration under the
Securities Act accompanies this Certificate (in satisfaction of Section _____ or
Section _______ of the Indenture).
[INSERT NAME OF TRANSFEROR]
By:
--------------------------------
Date:
--------------------------------
H-2
<PAGE>
EXHIBIT 5.1
[Letterhead of Brownstein Hyatt Farber & Strickland, P.C.]
July 1, 1997
BFC Guaranty Corp.
1455 Pennsylvania Avenue, N.W., Suite 230
Washington, D.C. 20004
Gentlemen:
BFC Guaranty Corp. ("Guaranty") and BFC Finance Corp. ("Finance")
have filed with the Securities and Exchange Commission a registration
statement (the "Registration Statement") on Form S-4 (No. 333-17969), as
amended through Amendment No. 2 filed on the date hereof, which relates to
the issuance of Guaranty's Guarantees (the "Guarantees") of Public Facilities
Revenue Bonds, Series 1996 B issued by Castle Rock Ranch Public Improvements
Authority (the "Authority") and Finance's REMIC Lease-Backed Bonds Series
1996, Class B (the "REMIC Bonds") to be issued pursuant to an exchange offer
(the "Exchange Offer") by Guaranty and the Authority as set forth in the
Registration Statement.
We have examined such corporate records of Guaranty and Finance and
such other documents as we have deemed appropriate to give this opinion.
Based upon the foregoing, we are of the opinion that the Guarantees
and the REMIC Bonds have been duly authorized and, when issued in accordance
with the terms of the Exchange Offer, will be validly issued, fully paid and
nonassessable.
We hereby consent to the filing of this opinion as Exhibit 5 to the
Registration Statement as it is proposed to be amended and to the use of our
name in the Prospectus that is a part of the Registration Statement under the
caption "LEGAL MATTERS."
Very truly yours,
BROWNSTEIN HYATT FARBER
& STRICKLAND, P.C.
<PAGE>
EXHIBIT 8.1
[Letterhead of Brownstein Hyatt Farber & Strickland, P.C.]
July 1, 1997
BFC Guaranty Corp.
1455 Pennsylvania Avenue, N.W., Suite 230
Washington, D.C. 20004
Gentlemen:
BFC Guaranty Corp. ("Guaranty") and BFC Finance Corp. have filed
with the Securities and Exchange Commission a registration statement (the
"Registration Statement") on Form S-4 (No. 333-17969), as amended through
Amendment No. 2 filed on the date hereof, which relates to the issuance of
Guaranty's Guarantees (the "Guarantees") of Public Facilities Revenue Bonds,
Series 1996 B issued by Castle Rock Ranch Public Improvements Authority (the
"Authority") to be issued pursuant to an exchange offer (the "Exchange
Offer") by Guaranty and the Authority as set forth in the Registration
Statement.
We have examined such corporate records of Guaranty and such other
documents as we have deemed appropriate to give this opinion.
Based upon the foregoing, we hereby confirm that the opinion set forth
in the Registration Statement under the caption "TAX EXEMPTION--Exchange Bonds"
is our opinion.
We hereby consent to the filing of this opinion as Exhibit 8 to the
Registration Statement as it is proposed to be amended and to the use of our
name in the Prospectus that is a part of the Registration Statement under the
caption "TAX EXEMPTION--Exchange Bonds."
Very truly yours,
BROWNSTEIN HYATT FARBER
& STRICKLAND, P.C.
<PAGE>
MEMORANDUM OF AGREEMENT
This Memorandum of Agreement is executed as of this 9th day of April, 1997
by and between BUILDING FINANCE COMPANY OF TENNESSEE, INC. (the "Lender"), BFC
FINANCE CORP. (the "Sponsor"), and BFC GUARANTY CORP. (the "Guarantor").
RECITALS
1. Parcel 49C Limited Partnership, a District of Columbia limited
partnership ("49C"), has acquired fee simple title to certain real property in
the District of Columbia located at 445 12th Street, S.W. and has undertaken to
construct thereon an office building to be known as Portals II, containing an
aggregate of approximately 545,000 square feet of net usable area, a detached
parking garage and certain other related facilities (such real estate and the
improvements to be constructed thereon, the "Project"). 49C has entered into a
lease (Lease No. GS-11B-40155, effective January 3, 1996, the "GSA Lease") with
the United States of America acting through the General Services Administration
(the "GSA") for office and related space to be located within such office
building and constructed, owned and managed by 49C (the "GSA Leased Space").
Following construction, the GSA Leased Space is expected to be used initially by
the Federal Communications Commission.
2. In connection with the refinancing of the acquisition of the real
estate related to the Project, 49C has executed and delivered an amended and
restated promissory note evidencing an acquisition loan in the amount of
$27,087,366.74 (the "Acquisition Loan") to the Lender.
3. To finance the construction of the improvements related to the
Project, 49C has entered into a Loan Agreement dated as of March 1, 1996 with
the Lender (the "Loan Agreement"), pursuant to which 49C has borrowed the sum of
$99,000,000 from the Lender.
4. To evidence the Acquisition Loan, 49C has executed and delivered a
note in the amount of $27,087,366.74 (the "Acquisition Note"). To secure its
obligations under the Acquisition Note, 49C has executed and delivered various
documents specified therein (collectively and as further described on Exhibit F,
the "Acquisition Loan Documents"). Pursuant to the Construction Loan Agreement,
49C has executed and delivered to the Lender a note in the amount of $99,000,000
(the "Construction Note," and together with the Acquisition Note, the "49C
Notes") to memorialize its obligations thereunder and various other documents
specified therein securing or relating to the indebtedness evidenced by the
Construction Loan (the "Construction Loan Documents," and together with the
Acquisition Loan Documents, the "49C Loan Documents"). The 49C Notes are
primarily secured by deeds of trust (collectively, the "Deed of Trust") on the
Project and by an assignment of the lease payments to be made under the GSA
Lease.
5. The base rent payable under the GSA Lease for the initial 449,859 net
usable square feet of GSA Leased Space was based on an initial annual rental
rate of $38.85 per net usable square foot for the first 287,483 of net usable
square feet of space leased and $37.95 per
<PAGE>
net usable square foot for the remaining 162,376 of net usable square feet
leased for a total initial amount of $17,330,883.75 per year, or
$1,444,240.31 per month. The Government may deduct from the base rent during
any year of the term of the GSA Lease an amount which will not exceed $8.50
per net usable square foot (which amount may be increased each year in
accordance with a formula set forth in the GSA Lease using the same
methodology for calculating the increase in the rent for operating costs set
forth in the GSA Lease) for 49C's failure to perform its obligations under
the GSA Lease. Consequently, the total base rent not subject to set-off is
$13,507,082.22 per year, or $1,125,590.19 per month. Full rent is payable in
equal installments in arrears commencing March 1, 1998.
6. To finance the loans to 49C, the Lender has formed the Sponsor as a
special purpose entity and absolutely sold and assigned to the Sponsor all of
its rights, title and interest in and to the 49C Notes and the 49C Loan
Documents pursuant to a Sale Agreement dated as of March 1, 1996 between the
Lender and the Sponsor (the "Sale Agreement") (excluding scheduled interest
payments on the 49C Notes for interest which accrues through January 31, 1998
and certain other rights with respect to construction of the Project as
therein described).
7. Concurrently with such absolute sale and assignment, the Sponsor
loaned to DCDC II, Inc., a Colorado corporation ("DCDC II"), the sum of
$9,310,689,07, in exchange for which the Sponsor received from DCDC II a note
in such principal amount (the "DCDC II Note"). The DCDC II Note was secured
by various documents specified therein, including a deed of trust on
approximately 300 acres of undeveloped land in Castle Rock, Colorado (the
"DCDC II Deed of Trust") and a collateral pledge agreement (the "DCDC II Loan
Documents").
8. The Sponsor deposited the 49C Notes, the DCDC II Note
(collectively, the "Notes"), the 49C Loan Documents and the DCDC II Loan
Documents (collectively, the "Loan Documents") into a trust created pursuant
to a Trust Indenture, dated as of March 1, 1996, with South Trust Bank of
Alabama, N.A. and issued various classes of debt secured by the Notes, the
payments thereon (excluding scheduled interest payments on the 49C Notes for
interest which accrues through January 31, 1998) (the "Note Payments"), the
Loan Documents and the other security constituting the Trust Estate.
9. The Sponsor determined (i) to issue and sell $142,000,000 aggregate
original principal amount REMIC Leased-Backed Bonds, Series 1996 (the
"Bonds") in two classes as hereafter described and (ii) to cause to be
issued, concurrent with issuance and sale of the Bonds, the Series 1996 REMIC
Residual Certificates (the "Certificates") evidencing ownership of all of the
Residual. The initial Holder of all the Certificates is the Sponsor.
10. The Bonds were issued in two classes. The Class A Bonds were
issued in the total original principal amount of $74,925,000 and the Class B
Bonds (collectively with the Class A Bonds, the "Bonds") were issued in the
total original principal amount of $67,075,000. The Class A Bonds were sold
in a public offering and the Class B Bonds were placed with BFC Guaranty Corp.
2
<PAGE>
11. In connection with the organization of the Guarantor and the
Sponsor, shares of stock in the Guarantor and the Sponsor were issued to
certain individuals and entities. No stock purchase or similar agreement was
executed at that time, and it has been requested that the ownership interests
of stock and the consideration with respect to such interests be restated as
provided herein.
NOW, THEREFORE, in consideration of the foregoing, the undersigned
hereby agrees as follows:
1. In consideration for the transfer by the Lender to the Sponsor of
the 49C Notes, the Sponsor has (i) paid to the Lender the amount of the Class
A Bonds (less costs of issuance thereof and less the amount of the DCDC II
Note), (ii) delivered to the Lender 100% of the shares of stock of the
Sponsor, and (iii) delivered to the Guarantor the Class B Bonds.
2. In consideration for delivery by the Sponsor of the Class B Bonds
plus $1,000, the Guarantor delivered 1,500 shares of its no par common stock,
representing all of the guarantor's issued and authorized shares, to the
Lender.
3. This Agreement is intended to be and shall be considered a
restatement of the agreement of the undersigned on the date of issue of the
Bonds, effective as of the date of issue of the Bonds, without regard to the
date of execution hereof.
IN WITNESS WHEREOF, the undersigned hereunder set their hands as of this
9th day of April, 1997.
BUILDING FINANCE COMPANY OF TENNESSEE
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
BFC GUARANTY CORP.
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
BFC FINANCE CORP.
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
3
<PAGE>
EXHIBIT 12 -- RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
PERIOD ENDED DECEMBER 31, 1996 PERIOD ENDED APRIL 30, 1997
------------------------------ ---------------------------
CASTLE ROCK CASTLE ROCK
PUBLIC PUBLIC
BFC GUARANTY IMPROVEMENTS BFC FINANCE BFC GUARANTY IMPROVEMENTS BFC FINANCE
CORP. AUTHORITY CORP. CORP. AUTHORITY CORP.
------------ ------------ ----------- ------------ ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
Net Income (Loss) 2,300,099 (2,933,991) 24,692 1,046,103 (1,341,080) 55,522
Income Taxes 1,184,900 0 12,720 538,902 0 28,600
Fixed Charges 0 3,090,059 7,302,806 0 1,371,552 3,255,126
------------ ------------ ----------- ------------ ------------ -----------
Earnings 3,484,999 156,068 7,340,218 1,585,005 30,472 3,339,246
------------ ------------ ----------- ------------ ------------ -----------
Fixed Charges
Amortization of Bond Issue Costs 0 61,751 76,548 0 27,446 34,021
Interest Expense 0 3,028,308 7,226,258 0 1,344,106 3,221,105
------------ ------------ ----------- ------------ ------------ -----------
Total Fixed Charges 0 3,090,059 7,302,806 0 1,371,552 3,255,126
------------ ------------ ----------- ------------ ------------ -----------
Ratio of Earnings To Fixed Charges 0 5.05% 100.51% 0 2.22% 102.58%
------------ ------------ ----------- ------------ ------------ -----------
</TABLE>
Caste Rock Public Improvements Authority's earnings are inadequate to cover
fixed charges. The total deficiency is $2,933,991 for the period ended
December 31, 1996 and $1,341,080 for the period ended April 30, 1997. The
deficiency will be covered by the debt service reserve of $4,917,238 as of
December 31, 1996 and $4,916,384 as of April 30, 1997.
<PAGE>
CONSENT OF JOSEPH DECOSIMO AND COMPANY, LLP
We consent to the reference to our firm under the caption "Experts" in
the Registration Statement (Form S-4) and related Prospectus of BFC Guaranty
Corp., BFC Finance Corp. and Castle Rock Ranch Public Improvements Authority,
respectively, for the registration and guarantee of $66,975,000 par value of
Public Facilities Revenue Bonds, Series 1996B, and to the inclusion herein of
our reports dated April 19, 1997 for BFC Guaranty Corp., May 9, 1997 for BFC
Finance Corp. and February 18, 1997 for Castle Rock Ranch Public Improvements
Authority, with respect to the financial statements of BFC Guaranty Corp.,
BFC Finance Corp and Castle Rock Ranch Public Improvements Authority for the
period from March 29, 1996 to December 31, 1996, filed with the Securities
and Exchange Commission.
/s/ JOSEPH DECOSIMO AND COMPANY, LLP
-----------------------------------------
Joseph DeCosimo and Company
A Tennessee Registered Limited
Liability Partnership
Chattanooga, Tennessee
June 25, 1997
<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------
FORM T-1
FOR STATEMENTS OF ELIGIBILITY AND QUALIFICATION
UNDER THE TRUST INDENTURE ACT OF 1939
OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE
--------------
SOUTHTRUST BANK, NATIONAL ASSOCIATION
(EXACT NAME OF TRUSTEE AS SPECIFIED IN ITS CHARTER)
Not Applicable 63-0022787
(STATE OF INCORPORATION IF (I.R.S. EMPLOYER
NOT A NATIONAL BANK) IDENTIFICATION NO.)
100 Office Park Drive,
Birmingham, Alabama 35223
(ADDRESS OF TRUSTEE'S PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
Judith B. Miller
SouthTrust Bank, National Association
100 Office Park Drive
Birmingham, Alabama 35223
(205) 254-5105
(NAME, ADDRESS AND TELEPHONE NUMBER OF AGENT FOR SERVICE)
BFC FINANCE CORP.
(EXACT NAME OF OBLIGOR AS SPECIFIED IN ITS CHARTER)
Delaware 52-1994568
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
1455 Pennsylvania Avenue, N.W., Suite 230
Washington, D.C. 20004
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
--------------
REMIC Lease-Backed Bonds, Series 1996
Class A
Class B
(TITLE OF THE INDENTURE SECURITIES)
<PAGE>
ITEM 1. GENERAL INFORMATION
FURNISH THE FOLLOWING INFORMATION AS TO THE TRUSTEE:
(a) NAME AND ADDRESS OF EACH EXAMINING OR SUPERVISING AUTHORITY TO WHICH
IT IS SUBJECT.
Comptroller of the Currency
Southeastern District Office
1117 Perimeter Center West, Suite W401
Atlanta, Georgia 30338-5417
Federal Reserve Bank of Atlanta
104 Marietta Street, N.W.
Atlanta, Georgia 30303-2713
Federal Deposit Insurance Corporation
550 17th Street, N.W.
Washington, D.C. 20429
(b) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS.
Yes.
ITEM 2. AFFILIATIONS WITH OBLIGOR AND UNDERWRITERS.
IF THE OBLIGOR OR ANY UNDERWRITER FOR THE OBLIGOR IS AN AFFILIATE OF
THE TRUSTEE, DESCRIBE EACH SUCH AFFILIATION.
None.
ITEM 3. VOTING SECURITIES OF THE TRUSTEE.
FURNISH THE FOLLOWING INFORMATION AS TO EACH CLASS OF VOTING
SECURITIES OF THE TRUSTEE:
AS OF JUNE 1, 1997
- -------------------------------------------------------------------------------
COL. A COL B
- -------------------------------------------------------------------------------
TITLE OF CLASS AMOUNT OUTSTANDING
- -------------------------------------------------------------------------------
Common Stock 1,020,000 shares,
par value $8.83/share
1
<PAGE>
ITEM 4. TRUSTEESHIPS UNDER OTHER INDENTURES.
IF THE TRUSTEE IS A TRUSTEE UNDER ANOTHER INDENTURE UNDER WHICH ANY OTHER
SECURITIES, OR CERTIFICATES OF INTEREST OR PARTICIPATION IN ANY OTHER
SECURITIES, OF THE OBLIGOR ARE OUTSTANDING, FURNISH THE FOLLOWING INFORMATION:
(a) TITLE OF THE SECURITIES OUTSTANDING UNDER EACH SUCH OTHER INDENTURE.
None.
(b) A BRIEF STATEMENT OF THE FACTS RELIED UPON AS A BASIS FOR THE CLAIM
THAT NO CONFLICTING INTEREST WITHIN THE MEANING OF SECTION 310(B)(1)
OF THE ACT ARISES AS A RESULT OF THE TRUSTEESHIP UNDER ANY SUCH OTHER
INDENTURE, INCLUDING A STATEMENT AS TO HOW THE INDENTURE SECURITIES
WILL RANK AS COMPARED WITH THE SECURITIES ISSUED UNDER SUCH OTHER
INDENTURE.
Not Applicable.
ITEM 5. INTERLOCKING DIRECTORATES AND SIMILAR RELATIONSHIPS WITH THE OBLIGOR
OR UNDERWRITERS.
IF THE TRUSTEE OR ANY OF THE DIRECTORS OR EXECUTIVE OFFICERS OF THE TRUSTEE
IS A DIRECTOR, OFFICER, PARTNER, EMPLOYEE, APPOINTEE, OR REPRESENTATIVE OF THE
OBLIGOR OR OF ANY UNDERWRITER FOR THE OBLIGOR, IDENTIFY EACH SUCH PERSON HAVING
ANY SUCH CONNECTION AND STATE THE NATURE OF EACH SUCH CONNECTION.
None.
ITEM 6. VOTING SECURITIES OF THE TRUSTEE OWNED BY THE OBLIGOR OR ITS
OFFICIALS.
FURNISH THE FOLLOWING INFORMATION AS TO THE VOTING SECURITIES OF THE
TRUSTEE OWNED BENEFICIALLY BY THE OBLIGOR AND EACH DIRECTOR, PARTNER AND
EXECUTIVE OFFICER OF THE OBLIGOR:
AS OF JUNE 1, 1997
- -------------------------------------------------------------------------------
COL. A COL. B COL. C COL. D
- -------------------------------------------------------------------------------
PERCENTAGE OF
VOTING SECURITIES
REPRESENTED BY
AMOUNT OWNED AMOUNT GIVEN IN
NAME OF OWNER TITLE OF CLASS BENEFICIALLY COL. C
- -------------------------------------------------------------------------------
Based upon an examination of the books and records of the trustee and upon
information received from the obligor, the amount of voting securities of the
trustee owned beneficially by the obligor and its directors and executive
officers, taken as a group, does not exceed one percent of the outstanding
voting securities of the trustee.
2
<PAGE>
ITEM 7. VOTING SECURITIES OF THE TRUSTEE OWNED BY UNDERWRITERS OR THEIR
OFFICIALS.
FURNISH THE FOLLOWING INFORMATION AS TO THE VOTING SECURITIES OF THE
TRUSTEE OWNED BENEFICIALLY BY EACH UNDERWRITER FOR THE OBLIGOR AND EACH
DIRECTOR, PARTNER AND EXECUTIVE OFFICER OF EACH SUCH UNDERWRITER:
AS OF JUNE 1, 1997
- -------------------------------------------------------------------------------
COL. A COL. B COL. C COL. D
- -------------------------------------------------------------------------------
PERCENTAGE OF
VOTING
SECURITIES
AMOUNT OWNED REPRESENTED BY
NAME OF OWNER TITLE OF CLASS BENEFICIALLY AMOUNT GIVEN IN
COL. C
- -------------------------------------------------------------------------------
Based upon an examination of the books and records of the trustee and upon
information received from the underwriters and the obligor, the amount of voting
securities of the trustee owned beneficially by any underwriter, and its
directors, partners and executive officers, taken as a group, does not exceed
one percent of the outstanding voting securities of the trustee.
ITEM 8. SECURITIES OF THE OBLIGOR OWNED OR HELD BY THE TRUSTEE.
FURNISH THE FOLLOWING INFORMATION AS TO SECURITIES OF THE OBLIGOR OWNED
BENEFICIALLY OR HELD AS COLLATERAL SECURITY FOR OBLIGATIONS IN DEFAULT BY THE
TRUSTEE:
AS OF JUNE 1, 1997
- -------------------------------------------------------------------------------
COL. A COL. B COL. C COL. D
- -------------------------------------------------------------------------------
AMOUNT OWNED
BENEFICIALLY OR
WHETHER THE HELD AS COLLATERAL PERCENT OF CLASS
SECURITIES ARE SECURITY FOR REPRESENTED BY
VOTING OR NONVOTING OBLIGATIONS IN AMOUNT GIVEN IN
TITLE OF CLASS SECURITIES DEFAULT COL. C
- -------------------------------------------------------------------------------
Based upon an examination of the books and records of the trustee the
amount of any class of securities of the obligor owned beneficially by the
trustee or held by the trustee as collateral securities for obligations in
default does not exceed one percent of the outstanding securities of such class.
3
<PAGE>
ITEM 9. SECURITIES OF UNDERWRITERS OWNED OR HELD BY THE TRUSTEE.
IF THE TRUSTEE OWNS BENEFICIALLY OR HOLDS AS COLLATERAL SECURITY FOR
OBLIGATIONS IN DEFAULT ANY SECURITIES OF AN UNDERWRITER FOR THE OBLIGOR, FURNISH
THE FOLLOWING INFORMATION AS TO EACH CLASS OF SECURITIES OF SUCH UNDERWRITER ANY
OF WHICH ARE SO OWNED OR HELD BY THE TRUSTEE.
AS OF JUNE 1, 1997
- -------------------------------------------------------------------------------
COL. A COL. B COL. C COL. D
- -------------------------------------------------------------------------------
AMOUNT OWNED
BENEFICIALLY OR HELD
AS COLLATERAL PERCENT OF CLASS
SECURITY FOR REPRESENTED BY
NAME OF ISSUER AND OBLIGATIONS IN AMOUNT GIVEN IN
TITLE OF CLASS AMOUNT OUTSTANDING DEFAULT BY TRUSTEE COL. C
- -------------------------------------------------------------------------------
The trustee does not own beneficially or hold as collateral security for
obligations in default any securities of any class of any underwriter for the
obligor in excess of one percent of the outstanding securities of such class.
ITEM 10. OWNERSHIP OF HOLDINGS BY THE TRUSTEE OF VOTING SECURITIES OF CERTAIN
AFFILIATES OR SECURITY HOLDERS OF THE OBLIGOR.
IF THE TRUSTEE OWNS BENEFICIALLY OR HOLDS AS COLLATERAL SECURITY FOR
OBLIGATIONS IN DEFAULT VOTING SECURITIES OF A PERSON WHO, TO THE KNOWLEDGE OF
THE TRUSTEE (1) OWNS 10 PERCENT OR MORE OF THE VOTING SECURITIES OF THE OBLIGOR
OR (2) IS AN AFFILIATE, OTHER THAN A SUBSIDIARY, OF THE OBLIGOR, FURNISH THE
FOLLOWING INFORMATION AS TO THE VOTING SECURITIES OF SUCH PERSON.
AS OF JUNE 1, 1997
- -------------------------------------------------------------------------------
COL. A COL. B COL. C COL. D
- -------------------------------------------------------------------------------
AMOUNT OWNED
BENEFICIALLY OR PERCENT OF
HELD AS COLLATERAL CLASS
SECURITY FOR REPRESENTED BY
NAME OF ISSUER AND OBLIGATIONS IN AMOUNT GIVEN IN
TITLE OF CLASS AMOUNT OUTSTANDING DEFAULT BY TRUSTEE COL. C
- -------------------------------------------------------------------------------
None.
4
<PAGE>
ITEM 11. OWNERSHIP OR HOLDINGS BY THE TRUSTEE OF ANY SECURITIES OF A PERSON
OWNING 50 PERCENT OR MORE OF THE VOTING SECURITIES OF THE OBLIGOR.
IF THE TRUSTEE OWNS BENEFICIALLY OR HOLDS AS COLLATERAL SECURITY FOR
OBLIGATIONS IN DEFAULT ANY SECURITIES OF A PERSON WHO, TO THE KNOWLEDGE OF THE
TRUSTEE, OWNS 50 PERCENT OR MORE OF THE VOTING SECURITIES OF THE OBLIGOR,
FURNISH THE FOLLOWING INFORMATION AS TO EACH CLASS OF SECURITIES OF SUCH PERSON
ANY OF WHICH ARE SO OWNED OR HELD BY THE TRUSTEE.
AS OF JUNE 1, 1997
- -------------------------------------------------------------------------------
COL. A COL. B COL. C COL. D
- -------------------------------------------------------------------------------
AMOUNT OWNED
BENEFICIALLY OR HELD PERCENT OF
AS COLLATERAL CLASS
NAME OF ISSUER SECURITY FOR REPRESENTED BY
AND TITLE OF OBLIGATIONS IN AMOUNT GIVEN IN
CLASS AMOUNT OUTSTANDING DEFAULT BY TRUSTEE COL. C
- -------------------------------------------------------------------------------
The trustee does not own beneficially or hold as collateral security for
obligations in default any securities of any person who, to the knowledge of the
trustee, owns 50 percent or more of the voting securities of the obligor in
excess of one percent of the outstanding securities of such class.
ITEM 12. INDEBTEDNESS OF THE OBLIGOR TO THE TRUSTEE.
EXCEPT AS NOTED IN THE INSTRUCTIONS, IF THE OBLIGOR IS INDEBTED TO THE
TRUSTEE, FURNISH THE FOLLOWING INFORMATION:
AS OF JUNE 1, 1997
- -------------------------------------------------------------------------------
COL. A COL. B COL. C
- -------------------------------------------------------------------------------
NATURE OF INDEBTEDNESS AMOUNT OUTSTANDING DATE DUE
- -------------------------------------------------------------------------------
None.
ITEM 13. DEFAULTS BY THE OBLIGOR.
(a) STATE WHETHER THERE IS OR HAS BEEN A DEFAULT WITH RESPECT TO THE
SECURITIES UNDER THIS INDENTURE. EXPLAIN THE NATURE OF ANY SUCH
DEFAULT.
None.
(b) IF THE TRUSTEE IS A TRUSTEE UNDER ANOTHER INDENTURE UNDER WHICH ANY
OTHER SECURITIES, OR CERTIFICATES OF INTEREST OR PARTICIPATION IN
OTHER SECURITIES, OF THE OBLIGOR ARE OUTSTANDING, OR IS TRUSTEE FOR
MORE THAN ONE OUTSTANDING SERIES OF SECURITIES UNDER THE INDENTURE,
STATE WHETHER THERE HAS BEEN A DEFAULT UNDER ANY SUCH INDENTURE OR
SERIES, IDENTIFY THE INDENTURE OR SERIES AFFECTED, AND EXPLAIN THE
NATURE OF ANY SUCH DEFAULT.
Not applicable.
5
<PAGE>
ITEM 14. AFFILIATES WITH THE UNDERWRITERS.
IF ANY UNDERWRITER IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH
AFFILIATION.
Not applicable.
ITEM 15. FOREIGN TRUSTEE.
IDENTIFY THE ORDER OR RULE PURSUANT TO WHICH THE FOREIGN TRUSTEE IS
AUTHORIZED TO ACT AS SOLE TRUSTEE UNDER INDENTURES QUALIFIED OR TO BE QUALIFIED
UNDER THE ACT.
Not applicable.
ITEM 16. LIST OF EXHIBITS.
Exhibit 1 Articles of Association of the Trustee as Now in Effect.
Exhibit 2 Certificate of Authority of the Trustee to Commerce Business.
Exhibit 3 Certificate of Authority of the Trustee to Exercise Trust Powers.
Exhibit 4 Existing Bylaws of the Trustee.
Exhibit 5 Not Applicable.
Exhibit 6 Consent of the Trustee.
Exhibit 7 Report of Condition of the Trustee.
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, the
Trustee, SouthTrust Bank, a National Association organized and existing under
the laws of Alabama, has duly caused this statement of eligibility and
qualification to be signed on its behalf by the undersigned, thereunto duly
authorized, all in the City of Birmingham, and State of Alabama, on the __ day
of June, 1997.
SOUTHTRUST BANK,
NATIONAL ASSOCIATION
-------------------------------------------
(Trustee)
By /s/ John Hiott, Vice President
--------------------------------------
John Hiott (Name and Title)
Vice President
6
<PAGE>
EXHIBIT 1
SOUTHTRUST BANK OF ALABAMA, NATIONAL ASSOCIATION
Birmingham, Alabama
ARTICLES OF ASSOCIATION
AS AMENDED AND RESTATED
January 13, 1995
I hereby certify this is a true and correct copy of the
Articles of Association of SouthTrust Bank of Alabama,
National Association as of this 8th day of October, 1996.
/s/ SANDRA B. GODDARD
-------------------------------
Sandra B. Goddard
Senior Vice President/Cashier
<PAGE>
AMENDED AND RESTATED ARTICLES OF ASSOCIATION
SOUTHTRUST BANK OF ALABAMA, NATIONAL ASSOCIATION
FIRST. The title of this Association shall be "SouthTrust Bank of Alabama,
National Association."
SECOND. The main office of the Association shall be in Birmingham, County of
Jefferson, State of Alabama. The general business of the Association shall
be conducted at its main office and its branches.
THIRD. The Board of Directors of this Association shall consist of not less
than five nor more than twenty-five persons, the exact number of directors
within such minimum and maximum limits to be fixed and determined from time
to time by resolution of the Board of Directors or by resolution of the
shareholders at any annual or special meeting thereof. Unless otherwise
provided by the laws of the United States, any vacancy in the Board of
Directors for any reason, including an increase in the number thereof, may be
filled by action of the Board of Directors.
Honorary or advisory members of the Board of Directors, without voting power
or power of final decision in matters concerning the business and affairs of
the Association, may be appointed by resolution of the Board of Directors.
If requested by the Board of Directors, honorary or advisory directors shall
attend meetings of the Board of Directors, but shall not have voting power.
Honorary or advisory Directors shall not be counted for purposes of
determining the number of Directors of the association or the presence of a
quorum in connection with any Board action, and shall not be required to own
qualifying shares. The Amended and Restated By-laws of the Association shall
contain such other provisions regarding honorary or advisory members of the
Board of Directors as are not inconsistent with these Amended and Restated
Articles of Association.
FOURTH. The annual meeting of shareholders of the Association shall be held
in the City of Birmingham, State of Alabama, at the Association's principal
offices on the third Tuesday of January of each year at such time as may be
fixed by the Board of Directors of the Association, and if a legal holiday,
then on the next following banking day, or at such other date, time and place
as may be fixed by the Board of Directors and stated in the notice of the
meeting. At the annual meeting of shareholders, the shareholders shall elect
a Board of Directors of the Association and transact such other business as
properly may be brought before such meeting.
1
<PAGE>
Nominations of persons for election to the Board of Directors of the
Association may be made by the Board of Directors or by any holder of any
outstanding capital stock of the Association entitled to vote in respect of
the election of directors of the Association. Nominations, other than those
made by or on behalf of the Board of Directors of the Association, shall be
made in writing and shall be delivered or mailed to the Chairman of the Board
or the President of the Association and to the Comptroller of the Currency,
Washington, D.C., not less than fourteen days nor more than fifty days prior
to any meeting of shareholders called for the election of directors,
provided, however, that if less than twenty-one days' notice of the meeting
is given to the shareholders, such nomination shall be mailed or delivered to
the Chairman of the Board or the President of the Association and to the
Comptroller of the Currency not later than the close of business on the
seventh day following the day on which the notice of meeting was mailed.
Such notification shall contain the following information to the extent known
to the notifying, shareholder: (a) the name and address of each proposed
nominee; (b) the principal occupation of each proposed nominee; (c) the total
number of shares of capital stock of the bank that will be voted for each
proposed nominee; (d) the name and residence address of the shareholder; and
(e) the number of shares of capital stock of the Bank owned by the notifying
shareholder. Nominations not made in accordance herewith may, in the
discretion of the chairman of the meeting, be disregarded by the chairman of
the meeting, and if so disregarded by the chairman of the meeting, the
inspectors of election, or the persons performing a similar duty, may
disregard all votes cast for such nominees.
Unless otherwise specified in these Amended and Restated Articles of
Association or required by law, (1) all matters requiring shareholder action,
including amendments to the Articles of Association, must be approved by
shareholders owing a majority voting interest in the outstanding voting
stock, and (2) each shareholder shall be entitled to one vote per share.
FIFTH. The amount of authorized capital stock of this Association shall be
$9,006,600.00 divided into 1,020,000 shares of common stock of the par value
per share of eight dollars and eighty-three cents ($8.83) but said capital
stock may be increased or decreased from time to time, in accordance with the
provisions of the laws of the United States.
If the capital stock is increased by the sale of additional shares thereof,
each shareholder shall be entitled to subscribe for such additional shares in
proportion to the number of shares of said capital stock owned by him at the
time the increase is authorized by the shareholders, unless another time
subsequent to the date of the shareholders' meeting is specified in a
resolution adopted by the shareholders at the time the increase is
authorized. The Board of Directors shall have the power to prescribe a
reasonable period of time within which the preemptive rights to subscribe to
the new shares of capital stock must be exercised.
The Board of Directors of this Association may authorize the issue of capital
stock or of debt obligations, whether or not subordinated, without the approval
of its shareholders.
2
<PAGE>
SIXTH. The Board of Directors shall appoint one of its members President of
this Association, who shall be Chairman of the Board, unless the board appoints
another director to be Chairman. The Board of Directors shall have the power to
appoint one or more Vice Presidents and to appoint a Cashier and such other
officers and employees as may be required to transact the business of this
Association.
The Board of Directors shall have the power to define the duties of the officers
and employees of the Association; to fix the salaries to be paid to them; to
dismiss them; to require bonds from them and to fix the penalty thereof; to
regulate the manner in which any increase of the capital of the Association
shall be made; to manage and administer the business and affairs of the
Association; to make all By-laws that may be lawful for them to make; and
generally to do and perform all acts that may be legal for a Board of Directors
to do and perform.
SEVENTH. The Board of Directors shall have the power to change the location of
the main office to any other place within the limits of Birmingham, Alabama,
without the approval of the shareholders but subject to the approval of the
Comptroller of the Currency; and shall have the power to establish or change the
location of any branch or branches of the Association to any other location,
without the approval of the shareholders but subject to the approval of the
Comptroller of the Currency.
EIGHTH. The corporate existence of this Association shall continue until
terminated in accordance with the law of the United States.
NINTH. The Board of Directors of this Association, or any shareholder owning,
in the aggregate, not less than 10 percent of the outstanding capital stock of
this Association entitled to vote in respect of any matter to be considered at
any special meeting of shareholders, may call a special meeting of shareholders
at any time. Unless otherwise provided by law, a notice of the date, place,
time and purpose of every special meeting of the shareholders shall be given by
first-class mail, postage prepaid, mailed at least ten days and not more than
sixty days prior to the date of such meeting to each shareholder of record at
his address as shown upon the books of this Association, and a notice of the
date, place and time of every annual meeting of the shareholders shall be given
by first-class mail, postage prepaid, mailed at least ten days prior to the date
of such meeting to each shareholder of record at his address at least ten days
and not more than say days prior to the date of such meeting to each shareholder
of record at his address as shown upon the books of this Association.
TENTH. Subject to the limitations stated in this Article Tenth, the Association
shall indemnifying its directors, honorary and advisory directors, officers and
employees to the extent permitted by the General Corporation Law of Delaware, as
such law shall be in force from time to time. In addition to the conditions
under which indemnification is permitted under the General Corporation Law of
Delaware, such indemnification shall not be made by the Association if in the
judgment of the Association the director, honorary or advisory
3
<PAGE>
director, officer or employee has not cooperated with the Association in its
dealing with any aspect of the claim, suit, action or proceeding in which the
Association has an interest. If requested by the Association, the director,
honorary or advisory director, officer or employee shall assist in
investigations and in the conduct of suits, including attending hearings and
trials and giving evidence in connection therewith. Such indemnification
shall not include indemnification of directors, honorary or advisory
directors, officers or employees of the Association against expenses,
penalties, or other payments incurred in an administrative proceeding or
action instituted by an appropriate bank regulatory agency which proceeding
or action results in a final order assessing civil money penalties or
requiring affirmative action by an individual in the form of payments to the
Association, except that the Association may advance expenses in connection
with such a proceeding or action as set forth below.
The Association may pay premiums for insurance covering the liability of its
directors, honorary or advisory directors, officers or employees except where
prohibited by the General Corporation Law of Delaware and except with regard to
insurance coverage for a formal order assessing civil money penalties against an
Association director, honorary or advisory director, officer, or employee
arising out of an administrative proceeding or action instituted by an
appropriate bank regulatory agency.
The indemnification provisions of this Article Tenth are not intended to
adversely affect any rights that the Association or any director, honorary or
advisory director, officer or employee of the Association may have with
respect to any insurance policy, including, without limitation, any insurance
policy maintained by the Association.
The Association shall advance expenses to its directors, honorary or advisory
directors, officers or employees arising out of such an administrative
proceeding or action instituted by an appropriate regulatory agency prior to
a final order being entered only in accordance with the following:
All advances must be subject to reimbursement if a final order is
entered in the action assessing civil money penalties or requiring
payments to the Association. Moreover, before any advances are made,
the Board of Directors of the Association, in good faith, must
determine in writing, that all of the following conditions are met:
(1) the officer, director, honorary or advisory
director, or employee has a substantial likelihood of
prevailing on the merits;
(2) in the event the officer, director honorary or
advisory director or employee does not prevail, he or she
will have the financial capability to reimburse the
Association; and
4
<PAGE>
(3) payment of expenses by the Association will not
adversely affect the Association's safety and soundness.
If at any time the Board of Directors of the Association believes, or
should reasonably believe that either conditions (1), (2) or (3) are
no longer met, the Association must cease paying such expenses or
premiums. Further, the Board of Directors of the Association must
enter into a written agreement with the director, honorary or advisory
director, officer or employee specifying the conditions under which he
or she will be required to reimburse the Association. At a minimum,
the agreement shall require reimbursement for expenses already paid,
if and to the extent the Board of Directors finds that the director,
honorary or advisory director, officer or employee willfully
misrepresented factors relevant to the Board of Directors'
determination of conditions (1) or (2), or if a final decision
assessing penalties or requiring payments is returned. The
Association shall ensure that it complies with all applicable laws and
regulations affecting loans to directors, officers and employees,
including but not limited to 12 U.S.C. Sections 84, 375a and 375b and
12 C.F.R. Section 215, as such laws and regulations shall be in
effect from time to time, in the event reimbursement is required.
ELEVENTH. These Amended and Restated Articles of Association may be amended at
any regular or special meeting of the shareholders by the affirmative vote of
the holders of a majority of the stock of this Association, unless the vote of
the holders of a greater amount of stock is required by law, and in that case by
the vote of the holders of such greater amount.
5
<PAGE>
Exhibit 2
- -----------------------------------------------------------------------------
Comptroller of the Currency
Administrator of National Banks
- -----------------------------------------------------------------------------
Washington, D.C. 20219
CERTIFICATE
I, Eugene A. Ludwig, Comptroller of the Currency, do hereby certify that:
1. The Comptroller of the Currency, pursuant to Revised Statutes 324, et seq.,
as amended, 12 U.S.C. 1, et seq., as amended, has possession, custody and
control of all records pertaining to the chartering, regulation and supervision
of all National Banking Associations.
2. "SouthTrust Bank of Alabama, National Association", Birmingham, Alabama
(Charter No. 14569), is a National Banking Association formed under the laws of
the United States and is authorized thereunder to transact the business of
banking on the date of this Certificate.
IN TESTIMONY WHEREOF, I have hereunto
subscribed my name and caused my seal of
office to be affixed to these presents at
the Treasury Department, in the City of
Washington and District of Columbia,
this 29th day of March, 1996.
/s/ Eugene A. Ludwig
----------------------------------------
Comptroller of the Currency
<PAGE>
Exhibit 3
- -----------------------------------------------------------------------------
Comptroller of the Currency
Administrator of National Banks
- -----------------------------------------------------------------------------
Washington, D.C. 20219
CERTIFICATION OF FIDUCIARY POWERS
I, Eugene A. Ludwig, Comptroller of the Currency, do hereby certify the records
in this Office evidence "SouthTrust Bank of Alabama, National Association",
Birmingham, Alabama (Charter No. 14569), was granted, under the hand and seal of
the Comptroller, the right to act in all fiduciary capacities authorized under
the provisions of The Act of Congress approved September 28, 1962, 76 Stat. 668,
12 U.S.C. 92a. I further certify the authority so granted remains in full force
and effect.
IN TESTIMONY WHEREOF, I have hereunto subscribed
my name and caused my seal of Office of the
Comptroller of the Currency to be affixed to
these presents at the Treasury Department, in the
City of Washington and District of Columbia, this
29th day of June, 1995.
/s/ Eugene A. Ludwig
---------------------------------------------
Comptroller of the Currency
<PAGE>
EXHIBIT 4
SOUTHTRUST BANK OF ALABAMA, NATIONAL ASSOCIATION
BIRMINGHAM, ALABAMA
BY-LAWS
AS AMENDED AND RESTATED
January 13, 1995
I hereby certify this is a true and correct
copy of the By-Laws of SouthTrust Bank of
Alabama, National Association as of this 8th
day of October, 1996.
/s/ SANDRA B. GODDARD
-----------------------------
Sandra B. Goddard
Senior Vice President/Cashier
<PAGE>
ARTICLE ONE
Shareholders
Section 1.
The annual meeting of shareholders of the Association shall be held in
the City of Birmingham, State of Alabama, at the Association's principal
offices on the third Tuesday of January of each year at such time as may be
fixed by the Board of Directors of the Association, and if a legal holiday,
then on the next following banking day, or at such other date, time and place
as may be fixed by the Board of Directors and stated in the notice of the
meeting. At the annual meeting of shareholders, the shareholders shall elect
a Board of Directors of the Association and transact such other business as
properly may be brought before such meeting. Written notice of the annual
meeting of shareholders, stating the date, place and time thereof, shall be
mailed, postage prepaid, at least ten days and not more than sixty days prior
to the date thereof, to each shareholder entitled to vote in respect of the
matters to be considered at such annual meeting of shareholders.
Section 2.
The Board of Directors of the Association, or any shareholder owning, in
the aggregate, not less than 10 percent of the outstanding capital stock of
the Association entitled to vote in respect of any matter to be considered at
any special meeting of shareholders, may call a special meeting of
shareholders at any time. Unless otherwise provided by law, written notice
of any special meeting of shareholders, stating the date, place, time and
purposes thereof, shall be mailed, postage prepaid, at least ten days and not
more than sixty days prior to the date thereof, to each shareholder entitled
to vote at such special meeting of shareholders.
Section 3.
The holders of the outstanding common stock of the Association shall be
entitled to one vote for each share held by them with respect to all matters
coming before any meeting of shareholders as to which a vote or consent of
the shareholders is required, including the election of directors. Except as
otherwise provided by law or by the Amended and Restated Articles of
Association, a majority of the outstanding capital stock of the Association
entitled to vote thereat shall constitute a quorum in all meetings of the
shareholders, and a majority of the votes cast shall decide every issue or
question presented to any meeting of the shareholders, except that the Board
of Directors of the Association may increase the vote of the shareholders
required with respect to any such matter or question.
1
<PAGE>
Section 4.
At any meeting of shareholders, a shareholder entitled to vote thereat
may be represented by proxy duly appointed by such shareholder in writing.
Any person or group of persons, including directors or attorneys for the
Association, may be designated to act as proxy for any such shareholders, but
officers or employees of the Association may not be designated to act as
proxy.
Section 5.
The Board of Directors of the Association may fix a record date for
determining shareholders of the Association entitled to notice of and to vote
at any meeting of the shareholders of the Association, which date shall be a
date not in excess of sixty days prior to the date of such meeting.
Section 6.
If a meeting of shareholders is adjourned to a different date, time or
place, notice need not be given of the new date, time or place, provided that
the new date, time or place is announced at the meeting before adjournment,
unless an additional item of business is to be considered at such adjourned
meeting or unless the Association becomes aware of an intervening event
materially affecting any matter to be voted on at such adjourned meeting. If
a new record date for the adjourned meeting is fixed, notice of the adjourned
meeting, stating the date, time, place and purposes thereof, shall be given
to each shareholder of record entitled to vote at such adjourned meeting.
ARTICLE TWO
Directors and Other Positions
Section 1.
(a) The business and the affairs of the Association shall be managed and
administered by the Board of Directors of the Association, which shall
consist of not less than five nor more than twenty-five persons, the exact
number of which, within such limits, to be established from time to time by
the Board of Directors or by the holders of the majority of the outstanding
capital stock of the Association entitled to vote in respect of the election
of directors of the Association.
(b) Nominations of persons for election to the Board of Directors of the
Association may be made by the Board of Directors or by any holder of any
outstanding capital stock of the Association entitled to vote in respect of the
election of directors of the
2
<PAGE>
Association. Nominations, other than those made by or on behalf of the Board
of Directors of the Association, shall be made in writing and shall be
delivered or mailed to the Chairman of the Board or the President of the
Association and to the Comptroller of the Currency, Washington, D.C., not
less than fourteen days nor more than fifty days prior to any meeting of
shareholders called for the election of directors, provided, however, that if
less than twenty-one days' notice of the meeting is given to the
shareholders, such nomination shall be mailed or delivered to the Chairman of
the Board or the President of the Association and to the Comptroller of the
Currency not later than the close of business on the seventh day following
the day on which the notice of meeting was mailed. Such notification shall
contain the following information to the extent known to the notifying
shareholder: (a) the name and address of each proposed nominee; (b) the
principal occupation of each proposed nominee; (c) the total number of shares
of capital stock of the bank that will be voted for each proposed nominee;
(d) the name and residence address of the notifying shareholder; and (e) the
number of shares of capital stock of the Bank owned by the notifying
shareholder. Nominations not made in accordance herewith may, in the
discretion of the chairman of the meeting, be disregarded by the chairman of
the meeting, and if so disregarded by the chairman of the meeting, the
inspectors of election, or the persons performing a similar duty, may
disregard all votes cast for such nominees.
(c) Directors need not be elected by written ballot, unless the chairman
of the meeting otherwise determines.
(d) Directors elected at any meeting of shareholders shall serve for the
ensuing year and until their successors are elected and shall qualify,
subjects to other provisions hereof and subject to the ability of the holders
of a majority of the outstanding capital stock entitled to vote in respect of
the election of directors to remove a director, with or without cause, at any
time. No director shall act as a director until he shall have taken the oath
of office required by law.
Section 2.
All vacancies on the Board of Directors occurring in the intervals
between meetings of the shareholders may be filled by the Board of Directors.
Section 3.
The Board of Directors shall meet immediately upon adjournment of the
meeting of shareholders at which such directors have been elected, or at such
other time as the Board of Directors may determine, and following such
initial meeting, the Board of Directors shall hold regular meetings on the
third Tuesday in each month at 10:30 a.m. at the principal offices of the
Association, unless said Tuesday is a legal holiday, in which case, the
meeting shall be held on the next following banking day at the same place and
hour.
3
<PAGE>
Section 4.
Special meetings of the Board of Directors may be called by the Chairman
of the Board, the President or any three members of the Board of Directors.
Each member of the Board of Directors shall be given a reasonable advance
notice of any special meeting of the Board of Directors, stating the date,
time and place of such special meeting, which notice may be given in writing
or in person or by telegram, telephone or other reasonable means.
Section 5.
Each director of the Association who is not an officer or employee of the
Association shall be entitled to an attendance fee for each meeting of the
Board of Directors and a quarterly retained fee, the amount of such fees to
be established from time to time by the Human Resources Committee of the
Board of Directors.
Section 6.
A majority of the entire Board of Directors is required to constitute a
quorum of the Board of Directors authorized to transact business at any
meeting of the Board of Directors. Except as otherwise provided by law, the
Amended and Restated Articles of Association or the Amended and Restated
By-laws, an act of the majority of the directors present at a meeting of the
Board of Directors, at which a quorum is present, shall be the act of the
Board of Directors. In the absence of a quorum, no business shall be
transacted except that the members of the Board of Directors present may
adjourn such meeting from time to time until a quorum is secured.
Section 7.
If a majority of the directors present at any meeting of the Board of
Directors so determines, any action of the Board of Directors may be
conducted by written ballot.
Section 8.
At the initial meeting of the Board of Directors after each annual
meeting of shareholders, the Board of Directors shall elect the committees
and officers contemplated by these Amended and Restated By-laws.
Section 9.
(a) Any director of the Association or any member of any Area Board who
has reached his or her 68th birthday or who has retired from his or her
principal business position or occupation will not be eligible for re-election
as director or as a member of an Area Board; provided, however, that the
foregoing provision relating to retirement from such
4
<PAGE>
person's principal business position or occupation shall not apply to any
director who has served as Chairman of the Board of the Association.
Section 10.
A director of the Association is eligible for election as a director
emeritus if such person is ineligible for re-election as a director of the
Association under Section 9 above or if such person has served as a director
of the Association for at least five years and voluntarily declines to stand
for re-election as a director. Immediately following each annual meeting of
shareholders, or from time to time as the Board of Directors may determine,
the Board of Directors, in its discretion, may elect one or more eligible
persons to serve as a director emeritus for the ensuing year or until his or
her successor is elected and shall qualify. Notwithstanding the foregoing,
the Board of Directors of the Association may remove, with or without cause,
a director emeritus from office at any time. If requested by the Board of
Directors, a director emeritus may attend meetings of the Board of Directors,
but shall not have voting power or power of final decision on any matter
concerning the business or affairs of the Association, and his or her
presence at any meeting of the Board of Directors shall not be counted in the
determination of a quorum. A director emeritus shall not have the same
responsibilities and liabilities imposed by law and banking regulation upon
members of the Board of Directors. A director emeritus shall receive such
fees as the Board of Directors may from time to time determine. A director
emeritus shall not be required to own qualifying shares of Common Stock of
SouthTrust Corporation.
Section 11.
Immediately following each annual meeting of shareholders, or from time
to time as the Board of Directors may determine, the Board of Directors of
the Association may elect persons to serve as advisory or honorary members of
the Board of Directors, and in this regard, may establish, in its discretion
and by appropriate resolution, separate advisory or honorary boards in each
city or other geographical area in which the Association transacts business
(each advisory or honorary board being hereinafter referred to as the "Area
Board"). Members of each Area Board shall be elected to serve for the ensuing
year and until their successors are elected and shall qualify.
Notwithstanding the foregoing, the Board of Directors of the Association may
remove, with or without cause, any member of any Area Board at any time. The
members of the Area Boards shall assist the Board of Directors and the
officers of the Association in business development, with particular emphasis
being placed upon business development in the city or other geographical area
with respect to which such members have been designated, and shall have such
other duties and functions as the Board of Directors, by appropriate
resolution, shall determine; provided, however, that the members of the Area
Boards shall not have power of final decision on any matter concerning the
business or affairs of the Association. If requested by the Board of
Directors, the members of the Area Boards shall attend meetings of the Board
of Directors of the Association, but shall not have voting power, and the
presence of any Area Board member at
5
<PAGE>
any meeting of the Board of Directors shall not be counted in the
determination of a quorum. Members of the Area Boards shall not be deemed to
have the responsibilities and liabilities imposed upon directors of the
Association by law and banking regulations. Members of the Area Boards may
receive such fees as the Human Resources Committee of the Board of Directors
may from time to time determine. The members of each Area Board shall not be
required to own qualifying shares of Common Stock of SouthTrust Corporation.
The provisions of the Amended and Restated Articles of Association and
the Amended and Restated By-laws of the Association governing the conduct of
meetings of the Board of Directors, including, without limitation, the time
and place of any such meeting, the power to convene or call a meeting, the
giving of notice of any meeting, and the quorum and voting requirements
thereof, shall apply to each Area Board, and meetings and other business of
each Area Board shall be convened and conducted in accordance with such
provisions.
The Chief Executive Officer of the city or other geographical area for
which any Area Board is established shall serve as an ex officio member of
any such Area Board. In addition, subject to the other notice provisions
contained herein the Chief Executive Officer of the city or other
geographical area for which any Area Board is established shall be entitled
to convene or call meetings of any such Area Board and shall be entitled to
attend and vote in respect of all matters coming before meetings of any such
Area Board.
ARTICLE THREE
Officers
Section 1.
The officers of the Association shall be a Chairman of the Board of
Directors, who shall serve as Chief Executive Officer, and a President, who
shall serve as Chief Administrative Officer, both of whom shall be directors;
one or more Vice Presidents, one or more of whom may be designated as
Executive Vice President; one or more of whom may be designated as Senior
Vice Presidents; and one or more of whom may be designated as Group Vice
Presidents; one or more Assistant Vice Presidents; a Cashier; a Secretary; a
Comptroller; one or more Executive Vice Presidents and Trust Officers, Senior
Vice Presidents and Trust Officers, Vice Presidents and Trust Officers and
Assistant Vice Presidents and Assistant Trust Officers; and such other
officers as may, from time to time, be appointed, or elected, by the Board of
Directors to perform such duties as may be designated by the Board of
Directors of the Association. The same person may be elected to more than
one of such offices, provided that no person may be President and Cashier at
the same time. If the office of the Chairman of the Board of Directors
becomes vacant, the powers and duties herein vested in and imposed upon the
holder of that office shall be vested in and discharged by the President, and
the number of persons constituting the Executive
6
<PAGE>
Committee of the Board of Directors shall be correspondingly decreased while
any such vacancy continues.
Section 2.
The Chairman of the Board or, in his absence, the President, shall
preside at all meetings of the Board of Directors and, in case of absence or
inability to act of the Chairman of the Board and of the President, the Board
of Directors shall appoint one of their members to preside during such
absence or inability.
The Chairman of the Board, or in his absence, the President shall preside
at all meetings of the Executive Committee of the Board of Directors, and, in
case of absence or inability to act of the Chairman of the Board and the
President, the Executive Committee shall elect one of its members to preside
during such absence or inability.
The Chairman of the Board shall exercise general supervision of the
business and affairs of the Association, and, without limiting the foregoing,
shall act as the Chief Executive Officer of the Association. In the absence
of the Chairman of the Board, the powers and duties hereby vested in and
imposed upon such person shall be exercised by the President. In the absence
of both the Chairman of the Board and the President, those powers and duties
shall be exercised by such officer of the Association as may have been
designated for that purpose by the Chairman of the Board or the President, as
the case may be. If none has been so designated by either thereof, the Board
of Directors shall designate an officer of the Association to act in such
capacity.
Section 3.
The President shall have general executive and administrative powers with
respect to the business and affairs of the Association and shall have and may
exercise any and all other powers and duties pertaining by law, regulation or
practice to the office of President. The President also shall have and may
exercise such further powers and duties as may from time to time be assigned
or conferred upon him by the Board of Directors of the Association.
Section 4.
The Vice Presidents of the Association shall perform such duties and
possess such powers as may be directed and delegated by the Board of
Directors; the Executive Vice President(s) shall rank in priority over all
other Vice Presidents, and the Senior Vice President(s) and Group Vice
President(s) shall rank below any Executive Vice President but shall rank in
priority and in presiding over all other Vice Presidents.
7
<PAGE>
Section 5.
The Secretary shall attend all meetings of the Board of Directors and
record all the proceedings of the meetings of the Board of Directors in a book
to be kept for that purpose, which will be housed in the office of the
Secretary. The Secretary shall give, or cause to be given, notice of all
meetings of the Board of Directors, and shall perform such other duties as may
be prescribed by the Board of Directors. The Secretary shall have the custody
of the corporate seal of the Association and he or she, or in the Secretary's
absence, the Cashier or an Assistant Secretary, or any other officer of the
Association designated by the Board of Directors, shall have authority to affix
the same to any instrument requiring it. When so affixed, it may be attested by
his or her signature or by the signature of the Cashier. The Board of Directors
may give general authority to any other officer to affix the seal of the
Association and to attest the affixing by his signature.
Section 6.
The Cashier shall have the custody of such property and assets of the
Association as may be entrusted to him or her by the Board of Directors. In the
absence, removal or other disability of the Cashier, the Chairman of the Board
or the President shall designate an officer for that purpose who shall perform
his or her duties until action by the Board of Directors or Executive Committee.
Section 7.
The Chairman of the Board, the President, any Executive Vice President, any
Senior Vice President, any Group Vice President or any Vice President shall have
the power and authority to execute bonds, mortgages and other contracts
requiring a seal, under the seal of the Association, except where required or
permitted by law to be otherwise signed and executed and except where the
signing and the execution thereof shall be expressly delegated by the Board of
Directors to some other officer or agent of the Association.
Section 8.
The Executive Vice President and Trust Officer, each Senior Vice President
and Trust Officer and any other officer designated by the Board of Directors are
hereby authorized to make, execute and acknowledge all bonds, certificates,
deeds, mortgages, notes, releases, leases, agreements, contracts, bills of sale,
assignments, transfers, powers of attorney or substitution, proxies to vote
stock, or any other instrument in writing that may be necessary in the purchase,
sale, mortgage, lease, assignment, transfer, management or handling, in any way,
of any property of any description held or controlled by the Association in its
corporate or in any fiduciary capacity; and shall have such other duties and
powers as shall be designated by the Board of Directors. The Executive Vice
President and Trust Officer shall exercise general supervision and management
over the affairs of the Trust and Financial
8
<PAGE>
Services Division of the Association. The officers named above shall
exercise the authority granted above in compliance with various policies and
procedures as may be approved by the Board of Directors or the Trust Policy
Committee from time to time.
Section 9.
The other officers of the Association shall perform such duties as may be
prescribed by the Board of Directors, the Chairman of the Board or the
President.
Section 10.
Any office described in Sections 1 through 6 of Article Three of the
Amended and Restated By-laws may, by appropriate resolution adopted by the Board
of Directors of the Association, be established in respect of any city or other
geographical area in which the Association transacts business and the Board of
Directors of the Association may elect persons to fill any such office created
thereby in Section 1 through 6 of Article Three hereof. In such event, the
duties and responsibilities assigned to each officer of the Association also
shall constitute the duties and responsibilities of the person serving in a
comparable office with respect to any such city or other geographical area, and
such persons shall be deemed officers of the Association, except that, in the
latter case, such duties and responsibilities shall be limited to the operations
of the Association in the city or other geographical area with respect to which
such person has been so designated, and provided that there shall be only one
Cashier of the Association. Any person designated by the Board of Directors to
serve as an officer with respect to any city or other geographical area shall be
given such title as the Board of Directors may determine; provided, however,
that such titles shall distinguish such persons from those persons holding
comparable positions with the Association.
Section 11.
The officers of this Association shall receive such compensation as may be
fixed by the Board of Directors or, if the Board of Directors directs, and
following advice or consultation with such persons as the Board of Directors
deems appropriate, the Human Resources Committee.
Section 12.
The Chairman of the Board may suspend any officer of the Association except
the President until the next regular or called meeting of the Board of
Directors, and any officer of this Association may be removed by a majority of
the Board of Directors at any regular or called meeting of the Board of
Directors.
9
<PAGE>
Section 13.
Bonds shall be required of the officers, tellers and other employees in
such amounts as may be designated by the Board of Directors.
Section 14.
The officers shall hold office from the time of their respective elections
until the first meeting of the Board of Directors following the next annual
meeting of the shareholders or until their successors shall be elected and
qualify; provided, however, that the Board of Directors may remove, with or
without cause, any officer of the Association at any time.
ARTICLE FOUR
Conveyances, Transfers and Contracts
Section 1.
The Chairman of the Board or the President is authorized, in his
discretion, to do and perform any and all corporate and official acts in
carrying on the business of the Association, either of its own or when acting in
any fiduciary capacity whatsoever. Each is hereby empowered, in his discretion,
to appoint all necessary agents or attorneys. The Chairman of the Board, the
President, any Executive Vice President, any Senior Vice President, any Group
Vice President or any Vice President is also authorized to make, execute and
acknowledge all deeds, mortgages, releases, leases, agreements, contracts, bills
of sale, assignments, transfers, powers of attorney or of substitution, proxies
to vote stock, or any other instrument in writing that may be necessary in the
purchase, sale, mortgage, lease, assignment, transfer, management, or handling
in any way of any property of any description, held or controlled by the
Association, either in its own right or in any fiduciary capacity, and the
Secretary or Cashier is authorized to act and affix the corporate seal to any
and all instruments in writing requiring such attestation or which are executed
under seal. The enumeration of particular powers in this By-law shall not
restrict, or be taken to restrict, in any way the general powers and authority
herein given to said officer.
Section 2.
The Chairman of the Board, the President, any Executive Vice President,
Senior Vice President, Group Vice President, Vice President or Assistant Vice
President, including those persons serving in such capacities who also carry the
designation of Trust Officer, the Comptroller, the Cashier, or any employee so
designated by the Chairman of the Board or the President, is authorized and
empowered to receive and give receipts for money due and
10
<PAGE>
payable to the Association from any source whatever and to sign and endorse
checks, drafts and warrants in its name or on its behalf.
Section 3.
The Chairman of the Board, the President, any Executive Vice President,
Senior Vice President, Group Vice President or Vice President, including those
persons serving in such capacities who also carry the designation of Trust
Officer, shall have full power and authority to sign and execute any and all
trustees' certificates executed by the Association or any certificate of any
character pertaining to any activity or condition in the Trust and Financial
Services Division of the Association and also shall have full power and
authority to sign any acceptance of any trust on behalf of the Association;
provided, however, (i) that prior approval of the acceptance of any trust shall
have been granted by such directors, officers or committees as shall then be
authorized by the Trust Policy Committee to grant such approval and (ii) that
the giving of such approval shall be made a matter of written record.
ARTICLE FIVE
Committees
Section 1.
EXECUTIVE COMMITTEE. The Board of Directors shall, at its initial meeting
after its election in each year, elect from among their number a committee of
three or more who, with the Chairman of the Board and the President of the
Association, acting as ex officio members, shall constitute the Executive
Committee of the Board of Directors. Each member of the Executive Committee
shall serve for the ensuing year and until his or her successor is elected and
shall qualify; provided, however, that any member of the Executive Committee may
be removed, with or without cause, at any time by the Board of Directors. All
vacancies in said Committee shall be filled by the Board of Directors.
The Chairman of the Board of Directors and the President of the Association
shall be ex-officio members of the Committee and shall have the power to vote
with respect to all matters coming before the Executive Committee. The
Executive Committee shall meet at such times as it may decide. It shall keep a
separate book of minutes of its proceedings and actions, and make reports to the
Board of Directors, from time to time, of its actions.
All the powers of the Board of Directors when the Board is not in session
may be exercised by the Executive Committee, except that the Executive Committee
shall not declare dividends or distribute assets of the Association. Unless
otherwise provided by resolutions
11
<PAGE>
duly adopted by the Board of Directors, a majority of the Executive Committee
shall constitute a quorum for the transaction of business.
The Executive Committee shall review all loans when the total liability of
the borrower exceeds an established amount, which amount is to be determined and
set by the Board of Directors from time to time.
All persons appointed or elected to office by the Executive Committee shall
hold their respective offices only until the next annual meeting of the Board of
Directors.
Each member of the Executive Committee, except salaried officers of the
Association, shall be entitled to an attendance fee for each meeting of the
Committee, the amount of such fee to be established by the Board of Directors.
Section 2.
AUDIT AND EXAMINATION COMMITTEE. The Board of Directors shall, at its
initial meeting after its election in each year, elect from among its number a
committee of three or more who constitute the Audit and Examination Committee of
the Board of Directors. No member of the Audit and Examination Committee shall
be an officer or employee of the Association or shall be a member of the Trust
Policy Committee. Each member of the Audit and Examination Committee shall
serve until his or her successor is elected and shall qualify; provided,
however, that any member of the Audit and Examination Committee may be removed,
with or without cause, at any time by the Board of Directors of the Association.
The Audit and Examination Committee shall make suitable examinations every
six months of the affairs of the Association. The result of such examination
shall be reported in writing to the Board of Directors at the next regular
meeting thereafter, stating whether the Association is in a sound and solvent
condition, whether adequate internal audit controls and procedures are being
maintained, and recommending to the Board such changes in the manner of doing
business, etc. as shall be deemed advisable. The Audit and Examination
Committee, upon its own recommendation and with the approval of the Board of
Directors, may employ a qualified firm of Certified Public Accountants to make
an examination and audit of the Association. If such a procedure is followed,
the one annual examination and audit of such firm of accountants and the
presentation of its report to the Board of Directors will be deemed sufficient
to comply with the requirements of this section of these Amended and Restated
Bylaws.
At least once during each calendar year and as often as required by
regulations, the Audit and Examination Committee shall make suitable audits of
the Trust and Financial Services Division or cause suitable audits to be made by
auditors responsible only to the Board of Directors and, at such time, shall
ascertain whether the Trust and Financial
12
<PAGE>
Services Division has been administered in accordance with law, appropriate
regulations and sound fiduciary principles. In lieu of such periodic audits,
the Board of Directors may elect to adopt an adequate continuous audit
system. A report of the audits and examinations, together with the action
taken thereon, shall be noted in the minutes of the Board of Directors.
Each member of the Audit and Examination Committee, except salaried
officers, shall be entitled to an attendance fee for each meeting of the
Committee, the amount of such fee to be established by the Human Resources
Committee of the Board of Directors.
Section 3.
TRUST POLICY COMMITTEE. The Board of Directors shall, at its initial
meeting after its election in each year, elect from among its number a committee
of four or more directors, who are not officers or employees of the Association,
who shall constitute the Trust Policy Committee. Each member of the Trust
Policy Committee shall serve for the ensuing year and until his or her successor
is elected and shall qualify; provided, however, that any member of the Trust
Policy Committee may be removed, with or without cause, at any time by the Board
of Directors of the Association.
The Trust Policy Committee shall be responsible for the formulation of
policy with respect to all fiduciary functions exercised by the Trust and
Financial Services Division and shall take all such action as, in its judgment,
may be necessary to insure the proper functioning of the Trust and Financial
Services Division in matters pertaining to trust administration, investments,
operations and new business development. The Trust Policy Committee shall from
time to time receive information reflecting the implementation of its decisions
and shall have authority to establish standing or ad hoc committees for the
purpose of carrying out policies formulated by it. The Trust Policy Committee
shall review the affairs of the Trust and Financial Services Division on an
annual basis and, if appropriate, make recommendations with respect thereto.
The Trust Policy Committee may authorize any one or more of its members, or
officers assigned to the Trust and Financial Services Division, to grant prior
approval of the acceptance of any or all appointments of the Association in a
fiduciary capacity and to cause the granting of each such prior approval to be
made a matter of written record. The Trust Policy Committee shall have such
other and further duties as may from time to time be assigned to it by the Board
of Directors.
All investments of trust funds shall be made, retained or disposed of in
accordance with policies, procedures or practices established or approved by the
Trust Policy Committee, or with the express approval of the Trust Policy
Committee, and the Trust Policy Committee shall keep minutes of all of its
meetings showing the disposition of all matters considered and passed upon by
it. At least once during each period of twelve months, the Trust Policy
Committee shall review, or cause to be reviewed, all the assets held in or for
each fiduciary account for which the Trust and Financial Services Division is
charged with
13
<PAGE>
investment responsibility in order to determine the safety and current value
of such accounts and the feasibility of retaining or disposing of them.
The Trust Policy Committee shall fix the time for its regular meetings (to
be held at least quarterly), provide for the call of special meetings and may
adopt rules of procedure. Unless otherwise provided by a resolution duly
adopted by the Board of Directors, the majority of the Trust Policy Committee
shall constitute a quorum for the transaction of business. Each member of the
Trust Policy Committee shall be entitled to an attendance fee for each meeting
of the Trust Policy Committee, the amount of such fee to be established by the
Board of Directors.
Section 4.
HUMAN RESOURCES COMMITTEE. The Board of Directors shall, at its initial
meeting after its election in each year, elect from among its number a committee
of three or more members who shall constitute the Human Resources Committee.
Each member of the Human Resources Committee shall serve for the ensuing year
and until his or her successor is elected and shall qualify; provided, however,
that any member of the Human Resources Committee may be removed, with or without
cause, at any time by the Board of Directors of the Association. The Human
Resources Committee shall monitor, on behalf of the Board of Directors,
management's performance in providing the management and manpower requirements
for the proper functioning and progress of the Association and shall counsel
with management; the Human Resources Committee shall review plans for management
succession, management training and management development programs; the Human
Resources Committee shall review (and, if directed by the Board of Directors,
establish) salary and wage administration procedures, including current ranges
and surveys; approve any major deviation from established salary and wage
levels; review compliance with applicable regulations; approve (and, if directed
by the Board of Directors, establish) compensation of the principal executive
officers, considering the recommendation of the Chairman of the Board, and in
the case of the Chief Executive Officer's salary, considering the recommendation
of the Chairman or President of SouthTrust Corporation; establish directors'
fees, review and recommend proposed new Board members; review employee relation
plans and activities; and establish a budget for contributions and review
management's recommendations for individual contributions.
Each member of the Human Resources Committee shall be entitled to an
attendance fee for each meeting of the Human Services Committee, the amount of
such fee to be established by the Board of Directors.
Section 5.
The Board of Directors also may appoint, from time to time, such other
committees, including temporary committees, for such purposes and with such
powers as the Board of
14
<PAGE>
Directors may determine, and may establish such attendance fees for the
members of such other committees as the Board of Directors may determine.
Section 6.
The persons constituting the entire membership of any committee provided
for or created pursuant to the Amended and Restated By-laws may be increased by
the Board of Directors whenever it sees fit. In the case of any such increase
in the membership of any such committee, the Board of Directors may fix the term
of service on any committee of any person elected to fill a vacancy created by
any such increase.
ARTICLE SIX
Loans
Section 1.
Loans may be made by or upon the authority of the Executive Committee or
its designee as specified in the Loan Policy and Administration Manual.
Section 2.
The Board of Directors shall from time to time establish regulations or
standards respecting the review and authority subject to which real estate loans
may be made by the Association in any fiduciary capacity. Authority to make
real estate loans in a fiduciary capacity may be delegated by the Board of
Directors to the Trust Policy Committee; such loans may be made by an officer or
a committee of officers who may be authorized and directed by the Trust Policy
Committee, as the case may be, to perform those duties. In any such case,
instructions relating to the powers, duties, authority and procedure for
approving such loans, the maximum and minimum amounts of same, the terms and
conditions of same, and the names of officers authorized to approve such loans
and appraise or approve the appraisal of the real estate concerned, shall be set
forth in detail in the minutes of the Trust Policy Committee.
Section 3.
On payment of the sums loaned for which collateral security has been taken,
either by mortgage of real or personal property or by other pledge of
collateral, whether said loans have been made from funds of the Association or
from funds held in a fiduciary capacity, the Executive Committee shall from time
to time designate bank officers that shall have the full power and authority to
release or cancel the same on the margin of the record, if recorded, or in any
other manner as the law in such cases may require or permit.
15
<PAGE>
ARTICLE SEVEN
Borrowings
Section 1.
With the approval of the Board of Directors or Executive Committee, the
Chairman of the Board, the President, any Executive Vice President, Senior Vice
President, Group Vice President, or Vice President, including those persons
serving in such capacities who also carry the designation of Trust Officer,
shall have the authority to borrow money, including the authority to pledge and
hypothecate any securities or any stacks or bonds, notes, or any property, real
or personal, of the Association as collateral for such loan, and to endorse or
guarantee in its name any notes or obligations payable or belonging to the
Association and to execute and acknowledge, any document or instrument required
for such purpose or purposes.
Section 2.
All time or interest bearing certificates of deposit may be signed by the
Chairman of the Board, the President, any Executive Vice President, Senior Vice
President, Group Vice President, Vice President or any Assistant Vice President,
the Cashier or any employee or employees of the Association designated by name
or by job title or description from time to time by the Chairman of the Board or
the President. The provisions of this Section 2 are supplemental to any other
provision of these Amended and Restated By-laws.
ARTICLE EIGHT
Savings Deposits
Section 1.
Savings deposits shall be subject to such rules and regulations as may be
adopted from time to time by the Board of Directors of this Association.
16
<PAGE>
ARTICLE NINE
Corporate Seal
Section 1.
The Corporate Seal of the Association shall be circular in shape and around
the outer circle shall have the words: SOUTHTRUST BANK OF ALABAMA, NATIONAL
ASSOCIATION, and on the inner circle may, but need not include the words:
BIRMINGHAM, ALABAMA.
ARTICLE TEN
Dividends and Distributions
Section 1.
The Board of Directors may, at any regular or special meeting, declare such
dividends, or make such distributions, as in its judgment are proper, out of the
earnings and funds of the Association legally available therefor.
ARTICLE ELEVEN
Stock Certificates
Section 1.
Certificates evidencing shares of capital stock of this Association shall
be signed by the Chairman of the Board, the President or any Vice President or
Assistant Vice President and the Cashier, or the Secretary and shall have the
seal of the Association affixed thereto. Stock certificates shall conform to
law in all respects.
Section 2.
Transfers of shares of capital stock of the Association can only be made in
writing upon the production of a certificate or certificates evidencing such
shares of capital stock with a transfer and assignment endorsed thereon by the
person, or persons, in whose name the certificates were issued, the personal
representatives thereof, or duly authorized attorneys-in-fact. The former
certificate or certificates shall be surrendered and canceled before the new
certificate or certificates are issued or delivered.
17
<PAGE>
Section 3.
The stock transfer books may be closed for such purposes and such time as
may be specified in resolutions duly adopted by the Board of Directors.
Section 4.
In case of loss or destruction of any certificate evidencing shares of
capital stock of the Association, the holder or owner thereof shall give notice
thereof to the Cashier or Secretary of the Association, and if such holder or
owner shall desire the issue of a new certificate in the place of the one lost
or destroyed, he or she shall make affidavit of such loss or destruction and
deliver the same to the Cashier or the Secretary of the Association and
accompany the same with a bond, with security satisfactory to the Association,
to indemnify and save harmless the Association against any loss, damage or
expense in case the certificate so lost or destroyed should thereafter be
presented to the Association. The proof of loss, and the condition and security
of the said bond, shall be approved by the Executive Committee or Board of
Directors before the issue of any new certificate.
ARTICLE TWELVE
Amendment and Repeal of the Amended and Restated By-laws
Section 1.
The Amended and Restated By-laws may be altered, amended or repealed by the
Board of Directors or the shareholders of the Association.
ARTICLE THIRTEEN
Emergency Preparedness Program
Section 1.
In the event of the destruction of properties, personnel and records of the
Association, to the extent that continued operation of the Association is not
reasonably possible, provisions in various resolutions hereafter adopted by the
Board of Directors with reference to emergency operations shall become effective
and continue to be in effect until conditions warrant the reestablishment of
operations.
18
<PAGE>
Exhibit 6
CONSENT OF TRUSTEE
Pursuant to the Requirements of Section 321(b) of the Trust Indenture Act of
1939 in connection with the proposed issue of Public Facilities Revenue Bonds by
Castle Rock Ranch Public Improvement Authority, we hereby consent that reports
of examination by Federal, State, Territorial, or District authorities may be
furnished by such authorities to the Securities and Exchange Commission upon
request therefor.
SouthTrust Bank of Alabama National Association
By: /s/ JOHN HIOTT
---------------------------------
Vice President & Manager
Corporate Trust
Dated: DECEMBER 9, 1996
<PAGE>
Exhibit 7
Comptroller of the Currency
Administrator of National Banks
REPORT OF CONDITION
Consolidating domestic and foreign subsidiaries of the
SOUTHTRUST BANK OF ALABAMA, NATIONAL ASSOCIATION of Birmingham in the state of
Alabama, at the close of business on June 30, 1996, published in response to
call made by Comptroller of the Currency, under title 12, United States Code,
Section 161. Charter Number 14569 Comptroller of the Currency Southeastern
District.
Statement of Resources and Liabilities
<TABLE>
ASSETS Thousands of dollars
<S> <C> <C>
Cash and balances due from depository institutions:
Noninterest-bearing balances and currency and coin . . . . . . . . 306,714
Interest-bearing balances. . . . . . . . . . . . . . . . . . . . . 1,088
Securities
Held-to-maturity securities . . . . . . . . . . . . . . . . . . . 867,810
Available-for-sale securities . . . . . . . . . . . . . . . . . . 1,440,445
Federal funds sold and securities purchased under agreements to
resell in domestic offices of the bank and of its Edge and
Agreement subsidiaries, and in IBFs:
Federal funds sold . . . . . . . . . . . . . . . . . . . . . . . 141,400
Securities purchased under agreements to resell. . . . . . . . . 50,942
Loans and lease financing receivables:
Loans and leases, net of unearned income . . . . . . . 8,827,508
LESS: Allowance for loan and lease losses. . . . . . . 118,785
LESS: Allocated transfer risk reserve. . . . . . . . . 0
Loans and leases, net of unearned income, allowance
and reserve . . . . . . . . . . . . . . . . . . . . . . . . . . 8,708,723
Assets held in trading accounts . . . . . . . . . . . . . . . . . . . 0
Premises and fixed assets (including capitalized leases). . . . . . . 207,874
Other real estate owned . . . . . . . . . . . . . . . . . . . . . . . 12,873
Investments in unconsolidated subsidiaries and associated companies . 0
Customers' liability to this bank on acceptances outstanding. . . . . 22,628
Intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . 46,566
Other assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 227,841
Total assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,034,904
</TABLE>
<PAGE>
LIABILITIES
<TABLE>
<S> <C> <C>
Deposits:
In domestic offices . . . . . . . . . . . . . . . . . . . . . . 7,283,943
Noninterest-bearing. . . . . . . . . . . . . . . 1,363,993
Interest-bearing . . . . . . . . . . . . . . . . 5,919,950
In foreign offices, Edge and Agreement subsidiaries, and IBFs 258,360
Federal funds purchased and securities sold under agreements to
repurchase in domestic offices of the bank and of its Edge and
Agreement subsidiaries, and in IBFs:
Federal funds purchased . . . . . . . . . . . . . . . . . . . . 1,440,446
Securities sold under agreements to repurchase. . . . . . . . . 475,761
Demand notes issued to the U.S. Treasury . . . . . . . . . . . . . . 59,198
Trading liabilities. . . . . . . . . . . . . . . . . . . . . . . . . 0
Other borrowed money:
With a remaining maturity of one year or less . . . . . . . . . 977,763
With a remaining maturity of more than one year . . . . . . . . 427,000
Mortgage indebtedness and obligations under capitalized leases . . . 0
Banks liability on acceptances executed and outstanding. . . . . . . 22,628
Subordinated notes and debentures. . . . . . . . . . . . . . . . . . 150,000
Other liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . 130,349
Total liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . 11,225,448
Limited-life preferred stock and related surplus . . . . . . . . . . 0
EQUITY CAPITAL
Perpetual preferred stock and related surplus. . . . . . . . . . . . 0
Common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,006
Surplus. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 182,284
Undivided profits and capital reserves . . . . . . . . . . . . . . . 632,106
Net unrealized holding gains (losses) on available-for-sale
securities . . . . . . . . . . . . . . . . . . . . . . . . . . (13,940)
Cumulative foreign currency translation adjustments. . . . . . . . . 0
Total equity capital . . . . . . . . . . . . . . . . . . . . . . . . 809,456
Total liabilities, limited-life preferred stock, and equity
capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,034,904
</TABLE>
I, Carol H. Tiarsmith, Senior Vice
President and Controller of
SouthTrust Bank of Alabama, National
Association, do hereby declare that
this Report of Condition is true and
correct to the best of my knowledge
and belief.
/s/ CAROL H. TIARSMITH
--------------------------------
Carol H. Tiarsmith
October 9, 1996
--------------------------------
Date
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<CIK> 0001028934
<NAME> BFC GUARANTY CORPORATION
<S> <C> <C>
<PERIOD-TYPE> OTHER 4-MOS
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1997
<PERIOD-START> MAR-29-1996 JAN-01-1997
<PERIOD-END> DEC-31-1996 APR-30-1997
<CASH> 1,000 1,000
<SECURITIES> 53,800,994 55,203,858
<RECEIVABLES> 0 0
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 0 0
<PP&E> 0 0
<DEPRECIATION> 0 0
<TOTAL-ASSETS> 59,405,685 60,908,164
<CURRENT-LIABILITIES> 0 0
<BONDS> 0 0
0 0
0 0
<COMMON> 1,000 1,000
<OTHER-SE> 53,041,309 54,087,412
<TOTAL-LIABILITY-AND-EQUITY> 59,405,685 60,908,164
<SALES> 0 0
<TOTAL-REVENUES> 3,484,999 1,585,005
<CGS> 0 0
<TOTAL-COSTS> 0 0
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 0 0
<INCOME-PRETAX> 3,484,999 1,585,005
<INCOME-TAX> 1,184,900 538,902
<INCOME-CONTINUING> 2,300,099 1,046,103
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 2,300,099 1,046,103
<EPS-PRIMARY> 1533.40 697.40
<EPS-DILUTED> 1533.40 697.40
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<CIK> 0001041869
<NAME> BFC FINANCE CORPORATION
<S> <C> <C>
<PERIOD-TYPE> 9-MOS 4-MOS
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1997
<PERIOD-START> MAR-29-1996 JAN-01-1997
<PERIOD-END> DEC-31-1996 APR-30-1997
<CASH> 0 0
<SECURITIES> 0 0
<RECEIVABLES> 126,488,158 129,827,406
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 0 0
<PP&E> 0 0
<DEPRECIATION> 0 0
<TOTAL-ASSETS> 128,622,991 131,928,218
<CURRENT-LIABILITIES> 0 0
<BONDS> 128,170,270 129,617,911
0 0
0 0
<COMMON> 1,500 1,500
<OTHER-SE> 24,692 80,214
<TOTAL-LIABILITY-AND-EQUITY> 128,622,991 131,928,218
<SALES> 0 0
<TOTAL-REVENUES> 7,340,218 3,339,248
<CGS> 0 0
<TOTAL-COSTS> 0 0
<OTHER-EXPENSES> 76,548 34,021
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 7,226,258 3,221,105
<INCOME-PRETAX> 37,412 84,122
<INCOME-TAX> 12,720 28,600
<INCOME-CONTINUING> 24,692 55,522
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 24,692 55,522
<EPS-PRIMARY> 16.46 37.01
<EPS-DILUTED> 16.46 37.01
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 9-MOS 4-MOS
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1997
<PERIOD-START> MAR-29-1996 JAN-01-1997
<PERIOD-END> APR-30-1997 APR-30-1997
<CASH> 5,416 5,533
<SECURITIES> 4,911,822 4,901,851
<RECEIVABLES> 0 0
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 0 0
<PP&E> 54,550,000 54,550,000
<DEPRECIATION> 0 0
<TOTAL-ASSETS> 65,077,179 65,080,206
<CURRENT-LIABILITIES> 0 0
<BONDS> 67,666,820 67,633,526
0 0
0 0
<COMMON> 0 0
<OTHER-SE> (2,933,991) (4,275,071)
<TOTAL-LIABILITY-AND-EQUITY> 65,077,179 65,080,206
<SALES> 0 0
<TOTAL-REVENUES> 310,033 92,059
<CGS> 0 0
<TOTAL-COSTS> 0 0
<OTHER-EXPENSES> 215,716 89,033
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 3,028,308 1,344,106
<INCOME-PRETAX> (2,933,991) (1,341,080)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (2,933,991) (1,341,080)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (2,933,991) (1,341,080)
<EPS-PRIMARY> 0 0
<EPS-DILUTED> 0 0
</TABLE>
<PAGE>
EXHIBIT 99.1
LETTER OF TRANSMITTAL
TO TENDER FOR EXCHANGE
PUBLIC FACILITIES REVENUE BONDS SERIES 1996
OF
CASTLE ROCK RANCH PUBLIC IMPROVEMENTS AUTHORITY
PURSUANT TO THE PROSPECTUS DATED ______________, 199_
- --------------------------------------------------------------------------------
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK CITY
TIME, ON ________________, 1997 UNLESS EXTENDED (THE "EXPIRATION DATE").
- --------------------------------------------------------------------------------
PLEASE READ CAREFULLY THE ATTACHED INSTRUCTIONS
If you desire to accept the Exchange Offer, this Letter of Transmittal should
be completed, signed and submitted to the Exchange Agent:
BY OVERNIGHT CARRIER OR BY HAND: BY REGISTERED OR CERTIFIED MAIL:
SouthTrust Bank of Alabama, N.A. SouthTrust Bank of Alabama, N.A.
100 Office Park Drive, Lower Level P.O. Box 2554
Birmingham, AL 35223 Birmingham, AL 35290
Attention: Corporate Trust Department Attention: Corporate Trust Department
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET
FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
FOR ANY QUESTIONS REGARDING THIS LETTER OF TRANSMITTAL OR FOR ANY
ADDITIONAL INFORMATION, YOU MAY CONTACT THE EXCHANGE AGENT BY TELEPHONE AT
_______________, OR BY FACSIMILE AT _______________.
The undersigned hereby acknowledges receipt of the Prospectus dated
______________, 199_ (the "Prospectus") of Castle Rock Ranch Public
Improvements Authority (the "Issuer"), and this Letter of Transmittal (the
"Letter of Transmittal"), that together constitute the Issuer's offer (the
"Exchange Offer") to exchange $5,000 in principal amount of its Public
Facilities Revenue Bonds, Series 1996 B (the "Exchange Bonds"), which have
been registered under the Securities Act of 1933, as amended (the "Securities
Act"), pursuant to a Registration Statement, for each $5,000 in principal
amount of its outstanding Public Facilities Revenue Bonds, Series 1996 (the
"Bonds"), of which $100,000,000 aggregate principal amount is outstanding.
Capitalized terms used but not defined herein have the meanings ascribed to
them in the Prospectus.
The undersigned hereby tenders the Bonds described in Box 1 below (the
"TENDERED BONDS") pursuant to the terms and conditions described in the
Prospectus and this Letter of Transmittal. The undersigned is the registered
owner of all the Tendered Bonds and the undersigned represents that it has
received from each beneficial owner of the Tendered notes ("BENEFICIAL
OWNERS") a duly completed and executed form of "INSTRUCTION TO REGISTERED
HOLDER AND/OR BOOK-ENTRY TRANSFER FACILITY PARTICIPANT FROM BENEFICIAL OWNER"
accompanying this Letter of Transmittal, instructing the undersigned to take
the action described in this Letter of Transmittal.
Subject to, and effective upon, the acceptance for exchange of the
Tendered Bonds, the undersigned hereby exchanges, assigns, and transfers to,
or upon the order of, the Issuer, all right, title, and interest in, to, and
under the Tendered Bonds.
<PAGE>
Please issue the Exchange Bonds exchanged for Tendered Bonds in the
name(s) of the undersigned. Similarly, unless otherwise indicated under
"SPECIAL DELIVERY INSTRUCTIONS" below (Box 3), please send or cause to be
sent the certificates for the Exchange Bonds (and accompanying documents, as
appropriate) to the undersigned at the address shown below in Box 1.
The undersigned hereby irrevocably constitutes and appoints the Exchange
Agent as the true and lawful agent and attorney in fact of the undersigned
with respect to the Tendered notes, with full power of substitution (such
power of attorney being deemed to be an irrevocable power coupled with an
interest), to (i) deliver the Tendered Bonds to the Issuer or cause ownership
of the Tendered Bonds to be transferred to, or upon the order of, the Issuer,
on the books of the registrar for the notes and deliver all accompanying
evidences of transfer and authenticity to, or upon the order of, the Issuer
upon receipt by the Exchange Agent, as the undersigned's agent, of the
Exchange Bonds to which the undersigned is entitled upon acceptance by the
Issuer of the Tendered Bonds pursuant to the Exchange Offer, and (ii) receive
all benefits and otherwise exercise all rights of beneficial ownership of the
Tendered notes, all in accordance with the terms of the Exchange Offer.
The undersigned understands that tenders of Bonds pursuant to the
procedures described under the caption "The Exchange Offer" in the Prospectus
and in the instructions hereto will constitute a binding agreement between
the undersigned and the Issuer upon the terms and subject to the conditions
of the Exchange Offer, subject only to withdrawal of such tenders on the
terms set forth in the Prospectus under the caption "The Exchange
Offer-Withdrawal of Tenders." All authority herein conferred or agreed to be
conferred shall survive the death or incapacity of the undersigned and any
Beneficial Owner(s), and every obligation of the undersigned or any
Beneficial Owners hereunder shall be binding upon the heirs, representatives,
successors, and assigns of the undersigned and such Beneficial Owner(s).
The undersigned hereby represents and warrants that the undersigned has
full power and authority to tender, exchange, assign, and transfer the
Tendered notes and that the Issuer will acquire good and unencumbered title
thereto, free and clear of all liens, restrictions, charges, encumbrances,
and adverse claims when the Tendered Bonds are acquired by the Issuer as
contemplated herein. The undersigned and each Beneficial Owner will, upon
request, execute and deliver any additional documents reasonably requested by
the Issuer or the Exchange Agent as necessary or desirable to complete and
give effect to the transactions contemplated hereby.
The undersigned hereby represents and warrants that the information set
forth in Box 2 is true and correct.
By accepting the Exchange Offer, the undersigned hereby represents and
warrants that (i) the Exchange Bonds to be acquired by the undersigned and
any Beneficial Owner(s) in connection with the Exchange Offer are being
acquired by the undersigned and any Beneficial Owner(s) in the ordinary
course of business of the undersigned and any Beneficial Owner(s), (ii) the
undersigned and each Beneficial Owner are not participating, do not intend to
participate, and have no arrangement or understanding with an person to
participate, in the distribution of the Exchange notes, (iii) except as
otherwise disclosed in writing herewith, neither the undersigned nor any
Beneficial Owner is an "affiliate," as defined in Rule 405 under the
Securities Act, of the Issuer or the Credit Enhancement Provider, and (iv)
the undersigned and each Beneficial Owner acknowledge and agree that any
person participating in the Exchange Offer with the intention or for the
purpose of distributing the Exchange Bonds must comply with the registration
and prospectus delivery requirements of the Securities Act of 1933, as
amended (together with the rules and regulations promulgated thereunder, the
"Securities Act"), in connection with a secondary resale of the Exchange
Bonds acquired by such person and cannot rely on the position of the Staff of
the Securities and Exchange Commission (the "Commission") set forth in the
no-action letters that re discussed in the section of the Prospectus entitled
"The Exchange Offer." In addition, by accepting the Exchange Offer, the
undersigned hereby (i) represents and warrants that, if the undersigned or
the beneficial Owner of the Bonds is a Participating Broker-Dealer, such
participating Broker-Dealer acquired the notes for its own account as a
result of market-making activities or other trading activities and has not
entered into any arrangement or understanding with the Issuer or any
"affiliate" of the Issuer (within the meaning of Rule 405 under the
Securities Act) to distribute the Exchange Bonds to be received in the
Exchange Offer, and (ii) acknowledges that, by receiving Exchange notes for
its own account in exchange for Bonds, where such Bonds were acquired as a
result of market-making activities or other trading activities, such
Participating Broker-Dealer will deliver a prospectus meeting the
requirements of the Securities Act in connection with any resale of such
Exchange Bonds.
<PAGE>
/ / CHECK HERE IF TENDERED BONDS ARE BEING DELIVERED HEREWITH
/ / CHECK HERE IF TENDERED BONDS ARE BEING DELIVERED PURSUANT TO A NOTICE OF
GUARANTEED DELIVERY PREVIOUSLY DELIVERED TO THE EXCHANGE AGENT AND COMPLETE
"USE OF GUARANTEED DELIVERY" BELOW (Box 4).
/ / CHECK HERE IF TENDERED BONDS ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER
MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH THE BOOK-ENTRY
TRANSFER FACILITY AND COMPLETE "USE OF BOOK-ENTRY TRANSFER" BELOW (Box 5).
PLEASE READ THIS ENTIRE LETTER OF TRANSMITTAL
CAREFULLY BEFORE COMPLETING THE BOXES
- -------------------------------------------------------------------------------
BOX 1
DESCRIPTION OF BONDS TENDERED
(ATTACH ADDITIONAL SIGNED PAGES, IF NECESSARY)
- -------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
Aggregate
Name(s) and Address(es) of Registered Bond Holder(s), Certificate Principal Amount Aggregate
exactly as name(s) appear(s) on Bond Certificate(s) Number(s) of Represented by Principal Amount
(Please fill in, if blank) Bonds* Certificate(s) Tendered**
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
Total
- --------------------------------------------------------------------------------------------------------
* Need not be completed by persons tendering by book-entry transfer.
** The minimum permitted tender is $1,000 in principal amount of Bonds. All other tenders must be in
integral multiples of $1,000 of principal amount. Unless otherwise indicated in this column, the
principal amount of all Bond Certificates identified in this Box 1 or delivered to the Exchange Agent
herewith shall be deemed tendered. See Instruction 4.
- --------------------------------------------------------------------------------------------------------
</TABLE>
- -------------------------------------------------------------------------------
BOX 2
BENEFICIAL OWNER(S)
- -------------------------------------------------------------------------------
STATE OF PRINCIPAL RESIDENCE OF EACH PRINCIPAL AMOUNT OF TENDERED BONDS
BENEFICIAL OWNER OF TENDERED NOTES HELD FOR ACCOUNT OF BENEFICIAL OWNER
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
- -------------------------------------------------------------------------------
BOX 3
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 5, 6 AND 7)
TO BE COMPLETED ONLY IF EXCHANGE BONDS EXCHANGED FOR BONDS AND UNTENDERED
BONDS ARE TO BE SENT TO SOMEONE OTHER THAN THE UNDERSIGNED, OR TO THE
UNDERSIGNED AT AN ADDRESS OTHER THAN THAT SHOWN ABOVE.
Mail Exchange Bond(s) and any untendered Bonds to:
Name(s):
- -------------------------------------------------------------------------------
(please print)
Address:
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(include ZIP Code)
Tax Identification or
Social Security No.:
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
BOX 4
USE OF GUARANTEED DELIVERY
(SEE INSTRUCTION 2)
TO BE COMPLETED ONLY IF BONDS ARE BEING TENDERED BY MEANS OF A NOTICE OF
GUARANTEED DELIVERY.
Name(s) of Registered Holder(s):
- -------------------------------------------------------------------------------
Date of Execution of Notice of Guaranteed Delivery:
---------------------------
Name of Institution which Guaranteed Delivery:
--------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
BOX 5
USE OF BOOK-ENTRY TRANSFER
(SEE INSTRUCTION 1)
TO BE COMPLETED ONLY IF DELIVERY OF TENDERED BONDS IS TO BE MADE BY
BOOK-ENTRY TRANSFER.
Name(s) of Tendering Institution:
- -------------------------------------------------------------------------------
Account Number:
----------------------------------------------------------------
Transaction Code Number:
-------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
- -------------------------------------------------------------------------------
BOX 6
TENDERING HOLDER SIGNATURE
(SEE INSTRUCTIONS 1 AND 5)
IN ADDITION, COMPLETE SUBSTITUTE FORM W-9
- -------------------------------------------------------------------------------
X
---------------------------------------------
X ---------------------------------------------
Signature of Registered Holder(s) or
Authorized Signatory
Note: The above lines must be signed by the
registered holder(s) of notes as their name(s)
appear(s) on the Bonds or by persons(s) authorized
to become registered holder(s) (evidence of which
authorization must be transmitted with this Letter
of Transmittal). If signature is by a trustee,
executor, administrator, guardian, attorney-in-fact,
officer, or other person acting in a fiduciary or
representative capacity, such person must set forth
his or her full title below. See Instruction 5.
Name(s):
------------------------------------------
------------------------------------------
Capacity:
-----------------------------------------
------------------------------------------
Street Address:
------------------------------------
------------------------------------------
------------------------------------------
(include Zip Code)
Area Code and Telephone Number
---------------
Tax Identification or Social Security Number:
---------------
Signature Guarantee
(If required by Instruction 5)
Authorized Signature
X
------------------------------------------
Name:
------------------------------------------
(please print)
Title:
------------------------------------------
Name of Firm:
-------------------------------------
(Must be an Eligible Institution as defined in
Instruction 2)
Address:
------------------------------------------
------------------------------------------
------------------------------------------
(include Zip Code)
Area Code and Telephone Number:
------------------------------------------
Dated:
------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
<TABLE>
<S> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------
PAYOR'S NAME: DAY INTERNATIONAL GROUP, INC.
- --------------------------------------------------------------------------------------------------------------------------
Name (if joint tenants, list first and circle the name of the person or entity whose number you enter in
Part 1 below. See instructions if your name has changed).
--------------------------------------------------------------------------------------------------------
Address
SUBSTITUTE --------------------------------------------------------------------------------------------------------
City, State and ZIP Code
--------------------------------------------------------------------------------------------------------
FORM W-9 List account number(s) here (optional)
Department of the --------------------------------------------------------------------------------------------------------
Treasury PART 1 - PLEASE PROVIDE YOUR TAXPAYER IDENTIFICATION NUMBER ("TIN") IN THE BOX |Social Security Number or
AT RIGHT AND CERTIFY BY SIGNING AND DATING BELOW |TIN
Internal Revenue -------------------------------------------------------------------------------|------------------------
Service PART 2 - Check the box if you are NOT subject to backup withholding under the provisions of section
3406(a)(1)(C) of the Internal Revenue Code because (1) you have not been notified that you are subject to
backup withholding as a result of failure to report all interest or dividends, or (2) the Internal Revenue
Service has notified you that you are no longer subject to backup withholding. / /
- --------------------------------------------------------------------------------------------------------------------------
CERTIFICATION -- UNDER THE PENALTIES OF PERJURY, I CERTIFY THAT THE |PART 3 -
INFORMATION PROVIDED ON THIS FORM IS TRUE, CORRECT AND COMPLETE |Awaiting TIN / /
SIGNATURE ______________________________ DATE _______________
- --------------------------------------------------------------------------------------------------------------------------
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT
- ----- TO THE EXCHANGE OFFER. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON
SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
</TABLE>
<PAGE>
EXHIBIT 99.2
NOTICE OF GUARANTEED DELIVERY
WITH RESPECT TO
PUBLIC FACILITIES REVENUE BONDS, SERIES 1996
OF
CASTLE ROCK RANCH PUBLIC IMPROVEMENTS AUTHORITY
Pursuant to the Prospectus Dated ____________, 199__
This form must be used by a holder of Public Facilities Revenue Bonds,
Series 1996 (the "Bonds") of Castle Rock Ranch Improvements Authority (the
"Authority"), who wishes to tender Bonds to the Exchange Agent pursuant to
the guaranteed delivery procedures described in "The Exchange offer -
Guaranteed Delivery Procedures" of the Authority's Prospectus, dated
_________________, 199_ (the "Prospectus") and in Instruction 2 to the
related Letter of Transmittal. Any holder who wishes to tender Bonds
pursuant to such guaranteed delivery procedures must ensure that the Exchange
Agent receives this Notice of Guaranteed Delivery prior to the Expiration
Date of the Exchange Offer. Capitalized terms used but not defined herein
have the meanings ascribed to them in the Prospectus of the Letter of
Transmittal.
- -------------------------------------------------------------------------------
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK CITY
TIME, ON ________________, 1997 UNLESS EXTENDED (THE "EXPIRATION DATE").
- -------------------------------------------------------------------------------
SOUTHTRUST BANK OF ALABAMA, NATIONAL ASSOCIATION
(the "Exchange Agent")
BY OVERNIGHT CARRIER OR BY HAND: BY REGISTERED OR CERTIFIED MAIL:
SouthTrust Bank of Alabama, N.A. SouthTrust Bank of Alabama, N.A.
100 Office Park Drive, Lower Level P.O. Box 2554
Birmingham, AL 35223 Birmingham, AL 35290
Attention: Corporate Trust Department Attention: Corporate Trust Department
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE
WILL NOT CONSTITUTE A VALID DELIVERY.
<PAGE>
This form is not to be used to guarantee signatures. If a signature on a
Letter of Transmittal is required to be guaranteed by an "Eligible
Institution" under the instructions thereto, such signature guarantee must
appear in the applicable space provided in the signature box on the Letter of
Transmittal.
Ladies and Gentlemen:
The undersigned hereby tenders to the Authority, upon the terms and
subject to the conditions set forth in the Prospectus and the related letter
of Transmittal, receipt of which is hereby acknowledged, the principal amount
of Bonds set forth below pursuant to the guaranteed delivery procedures set
forth in the Prospectus and in Instruction 2 of the Letter of Transmittal.
The undersigned hereby tenders the Bonds listed below:
<TABLE>
- --------------------------------------------------------------------------------------
<S> <C> <C>
CERTIFICATE NUMBER(S) (IF KNOWN) OF BONDS OR AGGREGATE PRINCIPAL AGGREGATE PRINCIPAL
ACCOUNT NUMBER AT THE BOOK-ENTRY FACILITY AMOUNT REPRESENTED AMOUNT TENDERED
- --------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------
</TABLE>
<PAGE>
- -------------------------------------------------------------------------------
PLEASE SIGN AND COMPLETE
- -------------------------------------------------------------------------------
Signatures of Registered Holder(s) or
Authorized Signatory: Date: , 1995
------------------ -----------------------
Address:
- --------------------------------------- ----------------------------
- --------------------------------------- -------------------------------------
Name(s) of Registered Holder(s): Area Code and Telephone No.
------- ----------
- ---------------------------------------
- ---------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
This Notice of Guaranteed Delivery must be signed by the Holder(s)
exactly as their name(s) appear on certificates for Bonds or on a security
position listing as the owner of notes, or by persons(s) authorized to become
Holder(s) by endorsements and documents transmitted with this notice of
guaranteed Delivery. If signature is by a trustee, executor, administrator,
guardian, attorney-in-fact, officer or other person acting in a fiduciary or
representative capacity, such person must provide the following information.
Please print name(s) and address(es)
Name(s):
---------------------------------------------------------------------
Capacity:
----------------------------------------------------------------------
Address(es):
-------------------------------------------------------------------
------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
- -------------------------------------------------------------------------------
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a firm which is a member of a registered national
securities exchange or of the National Association of Securities Dealers,
Inc., or is a commercial bank or trust company having an office or
correspondent in the United States, or is otherwise an "eligible guarantor
institution" within the meaning of Rule 17Ad-15 under the Securities Exchange
Act of 1934, as amended, guarantees deposit with the Exchange Agent of the
Letter of Transmittal (or facsimile thereof), together with the Bonds
tendered hereby in proper form for transfer (or confirmation of the
book-entry transfer of such notes into the Exchange Agent's account at the
Book-Entry Transfer Facility described in the prospectus under the caption
"The Exchange Offer -- Guaranteed Delivery Procedures" and in the Letter of
Transmittal) and any other required documents, all by 5:00 p.m., New York
City time, on the fifth New York Stock Exchange trading day following the
Expiration Date.
- -------------------------------------------------------------------------------
Name of firm
--------------------------- --------------------------------------
(Authorized Signature)
Address Name
--------------------------- ---------------------------------
(Please Print)
Title
--------------------------- ---------------------------------
(Include Zip Code)
Area Code and Tel. No. Dated , 1995
----------------- ----------------------
- -------------------------------------------------------------------------------
DO NOT SEND SECURITIES WITH THIS FORM. ACTUAL SURRENDER OF SECURITIES
MUST BE MADE PURSUANT TO, AND BE ACCOMPANIED BY, AN EXECUTED LETTER OF
TRANSMITTAL.
<PAGE>
INSTRUCTIONS FOR NOTICE OF GUARANTEED DELIVERY
1. DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY. A properly
completed and duly executed copy of this Notice of Guaranteed Delivery and
any other documents required by this Notice of Guaranteed Delivery must be
received by the Exchange Agent at its address set forth herein prior to the
Expiration Date. The method of delivery of this Notice of Guaranteed Delivery
and any other required documents to the Exchange Agent is at the election and
sole risk of the holder, and the delivery will be deemed made only when
actually received by the Exchange Agent. If delivery is by mail, registered
mail with return receipt requested, properly insured, is recommended. As an
alternative to delivery by mail, the holders may wish to consider using an
overnight or hand delivery service. In all cases, sufficient time should be
allowed to assure timely delivery. For a description of the guaranteed
delivery procedures, see Instruction 2 of the Letter of Transmittal.
2. SIGNATURES ON THIS NOTICE OF GUARANTEED DELIVERY. If this Notice of
guaranteed Delivery is signed by the registered holder(s) of the Bonds
referred to herein, the signature must correspond with the name(s) written on
the face of the Bonds without alteration, enlargement, or any change
whatsoever. If this Notice of Guaranteed Delivery is signed by a participant
of the Book-Entry Transfer Facility whose name appears on a security position
listing as the owner of the Bonds, the signature must correspond with the
name shown on the security position listing as the owner of the notes.
If this Notice of Guaranteed Delivery is signed by a person other
than the registered holder(s) of any Bonds listed or a participant of the
Book-Entry Transfer Facility, this Notice of Guaranteed Delivery must be
accompanied by appropriate bond powers, signed as the name of the registered
holder(s) appears on the Bonds or signed as the name of the participant shown
on the Book-Entry Transfer Facility's security position listing.
If this Notice of Guaranteed Delivery is signed by a trustee,
executor, administrator, guardian, attorney-in-fact, officer of a
corporation, or other person acting in a fiduciary or representative
capacity, such person should so indicate when signing and submit with the
Letter of Transmittal evidence satisfactory to the Authority of such person's
authority to so act.
3. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions and
requests for assistance and requests for additional copies of the Prospectus
may be directed to the Exchange Agent at the address specified in the
Prospectus. Holders may also contact their broker, dealer, commercial bank,
trust company, or other nominee for assistance concerning the Exchange Offer.
<PAGE>
Exhibit 99.3
INSTRUCTIONS TO LETTER OF TRANSMITTAL
FORMING PART OF THE TERMS AND CONDITIONS
OF THE EXCHANGE OFFER
1. DELIVERY OF THIS LETTER OF TRANSMITTAL AND BONDS. A properly
completed and duly executed copy of this Letter of Transmittal, including
Substitute Form W-9, and any other documents required by this Letter of
Transmittal must be received by the Exchange Agent at its address set forth
herein, and either certificates for Tendered Bonds must be received by the
Exchange Agent at its address set forth herein or such Tendered Bonds must be
transferred pursuant to the procedures for book-entry transfer described in the
Prospectus under the caption "EXCHANGE OFFER--BOOK-ENTRY TRANSFER" (and a
confirmation of such transfer received by the Exchange Agent), in each case
prior to 5:00 p.m., New York City time, on the Expiration Date. The method of
delivery of certificates for Tendered Bonds, this Letter of transmittal and all
other required documents to the Exchange Agent is at the election of the
tendering holder and the delivery will be deemed made only when actually
received by the Exchange Agent. If delivery is made by mail with return receipt
requested, properly insured, is recommended. Instead of delivery by mail, it is
recommended that the Holder use an overnight or hand delivery service. In all
cases, sufficient time should be allowed to assure timely delivery. No Letter
of Transmittal or Bonds should be sent to the Company. Neither the Issuer nor
the registrar is under any obligation to notify any tendering holder of the
Issuer's acceptance of Tendered Bonds prior to the closing of the Exchange
Offer.
2. GUARANTEED DELIVERY PROCEDURES. Holders who wish to tender their
Bonds but whose Bonds are not immediately available, and who cannot deliver
their Bonds, this Letter of Transmittal or any other documents required hereby
to the Exchange Agent prior to the Expiration Date must tender their Bonds
according to the guaranteed delivery procedures set forth below, including
completion of Box 4. Pursuant to such procedures: (i) such tender must be made
by or through a firm which is a member firm of the Medallion System (an
"Eligible Institution") and the Notice of Guaranteed Delivery must be signed by
the holder, (ii) prior to the Expiration Date, the Exchange Agent must have
received from the holder and the Eligible Institution a properly completed and
duly executed Notice of Guaranteed Delivery (by mail or hand delivery) setting
forth the name and address of the holder, the certificate number(s) of the
Tendered Bonds and the principal amount of Tendered Bonds, stating that the
tender is being made thereby and guaranteeing that, within five New York Stock
Exchange trading days after the Expiration Date, this Letter of Transmittal
together with the certificate(s) representing the Bonds and any other required
documents will be deposited by the Eligible Institution with the Exchange Agent;
and (iii) such properly completed and executed Letter of Transmittal, as well as
all other documents required by this Letter of Transmittal and the
certificate(s) representing all Tendered Bonds in proper form for transfer, must
be received by the Exchange Agent within five New York Stock Exchange trading
days after the Expiration Date. Any holder who wishes to tender Bonds pursuant
to the guaranteed delivery procedures described above must ensure that the
Exchange Agent receives the Notice of Guaranteed Delivery relating to such Bonds
prior to 5:00 p.m., New York City time, on the Expiration Date. Failure to
complete the guaranteed delivery procedures outlined above will not, of itself,
affect the validity or effect a revocation of any Letter of Transmittal form
properly completed and executed by an Eligible Holder who attempted to use the
guaranteed delivery process.
3. BENEFICIAL OWNER INSTRUCTIONS TO REGISTERED HOLDERS. Only a holder in
whose name Tendered Bonds are registered on the books of the registrar (or the
legal representative or attorney-in-fact of such registered holder) may execute
and deliver this Letter of Transmittal. Any Beneficial Owner of Tendered Bonds
who is not the registered holder must arrange promptly with the registered
holder to execute and deliver this Letter of Transmittal on his or her behalf
through the execution and delivery to the registered holder of the INSTRUCTIONS
TO REGISTERED HOLDER AND/OR BOOK-ENTRY TRANSFER FACILITY PARTICIPANT FROM
BENEFICIAL OWNER form accompanying this Letter of Transmittal.
4. PARTIAL TENDERS. Tenders of Bonds will be accepted only in integral
multiples of $5,000 in principal amount. If less than the entire principal
amount of Bonds held by the holder is tendered, the tendering holder should fill
in the principal amount tendered in the column labeled "Aggregate Principal
Amount Tendered" of the box entitled "Description of Bonds Tendered" (Box 1)
above. The entire principal amount of Bonds delivered to the Exchange Agent
will be deemed to have been tendered unless otherwise indicated. If the entire
principal amount of all Bonds held by the holder is not tendered, then Bonds for
the principal amount of Bonds not tendered and the Exchange Bonds issued in
exchange for any Bonds tendered and accepted will be sent to the Holder at his
<PAGE>
or her registered address, unless a different address is provided in the
appropriate box on this Letter of Transmittal, as soon as practicable
following the Expiration Date.
5. SIGNATURES ON THE LETTER OF TRANSMITTAL; BOND POWERS AND ENDORSEMENTS;
GUARANTEE OF SIGNATURES. If this Letter of Transmittal is signed by the
registered holder(s) of the Tendered Bonds, the signature must correspond with
the name(s) as written on the face of the Tendered Bonds without alteration,
enlargement or any change whatsoever.
If any of the Tendered Bonds are owned of record by two or more joint
owners, all such owners must sign this Letter of Transmittal. If any Tendered
Bonds are held in different names, it will be necessary to complete, sign and
submit as many separate copies of the Letter of Transmittal as there are
different names in which Tendered Bonds are held.
If this Letter of Transmittal is signed by the registered holder(s) of
Tendered Bonds, and Exchange Bonds issued in exchange therefor are to be issued
(and any untendered principal amount of Bonds is to be reissued) in the name of
the registered holder(s), then such registered holder(s) need not and should not
endorse any Tendered Bonds, nor provide a separate bond power. In any other
case, such registered holder(s) must either properly endorse the Tendered Bonds
or transmit a properly completed separate bond power with this Letter of
Transmittal, with the signature(s) on the endorsement or bond power guaranteed
by an Eligible Institution.
If this Letter of Transmittal is signed by a person other than the
registered holder(s) of any Tendered Bonds, such Tendered Bonds must be endorsed
or accompanied by appropriate bond powers, in each case, signed as the name(s)
of the registered holder(s) appear(s) on the Tendered Bonds, with the
signature(s) on the endorsement or bond power guaranteed by an Eligible
Institution.
If this Letter of Transmittal or any Tendered Bonds or bond powers are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations, or others acting in a fiduciary or representative
capacity, such persons should so indicate when signing and, unless waived by the
Issuer, evidence satisfactory to the Issuer of their authority to so act must be
submitted with this Letter of Transmittal.
Endorsements on Tendered Bonds or signatures on bond powers required by
this Instruction 5 must be guaranteed by an Eligible Institution.
Signatures on this Letter of Transmittal must be guaranteed by an Eligible
Institution unless the Tendered Bonds are tendered (i) by a registered holder
who has not completed the box set forth herein entitled "Special Delivery
Instructions" (Box 3) or (ii) by an Eligible Institution.
6. SPECIAL DELIVERY INSTRUCTIONS. Tendering holders should indicate, in
the applicable box (Box 3), the name and address to which the Exchange Bonds
and/or substitute Bonds for principal amounts not tendered or not accepted for
exchange are to be sent, if different from the name and address of the person
signing this Letter of Transmittal. In the case of issuance in a different
name, the taxpayer identification or social security number of the person named
must also be indicated.
7. TRANSFER TAXES. The Issuer will pay all transfer taxes, if any,
applicable to the exchange of Tendered Bonds pursuant to the Exchange Offer.
If, however, a transfer tax is imposed for any reason other than the transfer
and exchange of Tendered Bonds pursuant to the Exchange Offer, then the amount
of any such transfer taxes (whether imposed on the registered holder or on any
other person) will be payable by the tendering holder. If satisfactory evidence
of payment of such taxes or exemption therefrom is not submitted with this
Letter of Transmittal, the amount of such transfer taxes will be billed directly
to such tendering holder.
Except as provided in this Instruction 7, it will not be necessary for
transfer tax stamps to be affixed to the Tendered Bonds listed in this Letter of
Transmittal.
8. TAX IDENTIFICATION NUMBER. Federal income tax law requires that the
holder(s) of any Tendered Bonds which are accepted for exchange must provide the
Issuer (as payor) with its correct taxpayer identification number ("TIN"),
which, in the case of a holder who is an individual, is his or her social
security number. If the Issuer is not provided with the correct TIN, the Holder
may be subject to backup withholding and a $50 penalty imposed by the Internal
Revenue Service. (If withholding results in an overpayment of taxes, a refund
may be obtained.) Certain holders (including, among others, all corporations
and certain foreign individuals) are not subject
2
<PAGE>
to these backup withholding and reporting requirements. See the enclosed
"Guidelines for Certification of Taxpayer Identification Number or Substitute
Form W-9" for additional instructions.
To prevent backup withholding, each holder of Tendered Bonds must provide
such holder's correct TIN by completing the Substitute Form W-9 set forth
herein, certifying that the TIN provided is correct (or that such holder is
awaiting a TIN), and that (i) the holder has not been notified by the Internal
Revenue Service that such holder is subject to backup withholding as a result of
failure to report all interest or dividends or (ii) the Internal Revenue Service
has notified the holder that such holder is no longer subject to backup
withholding. If the Tendered Bonds are registered in more than one name or are
not in the name of the actual owner, consult the "Guidelines for Certification
of Taxpayer Identification Number on Substitute Form W-9" for information on
which TIN to report.
The Issuer reserves the right in its sole discretion to take whatever steps
are necessary to comply with the Issuer's obligation regarding backup
withholding.
9. VALIDITY OF TENDERS. All questions as to the validity, form,
eligibility (including time of receipt), acceptance and withdrawal of Tendered
Bonds will be determined by the Issuer in its sole discretion, which
determination will be final and binding. The Issuer reserves the right to
reject any and all Bonds not validly unlawful. The Issuer also reserves the
right to waive any conditions of the Exchange Offer or defects or irregularities
in tenders of Bonds as to any ineligibility of any holder who seeks to tender
Bonds in the Exchange Offer. The interpretation of the terms and conditions of
the Exchange Offer (including this Letter of Transmittal and the instructions
hereto) by the Issuer shall be final and binding on all parties. Unless waived,
any defects or irregularities in connection with tenders of Bonds must be cured
within such time as the Issuer shall determine. Neither the Issuer, the
Exchange Agent not any other person shall be under any duty to give notification
of defects or irregularities with respect to lenders of Bonds, nor shall any of
them incur any liability for failure to give such notification. Tenders of
Bonds will not be deemed to have been made until such defects or irregularities
have been cured or waived. Any Bonds received by the Exchange Agent that are
not properly tendered and as to which the defects or irregularities have not
been cured or waived will be returned by the Exchange Agent to the tendering
holders, unless otherwise provided in this Letter of Transmittal, as soon as
practicable following the Expiration Date.
10. WAIVER OF CONDITIONS. The Company reserves the absolute right to
amend, waive or modify any of the conditions in the Exchange Offer in the case
of any Tendered Bonds.
11. NO CONDITIONAL TENDER. No alternative, conditional, irregular, or
contingent tender of Bonds or transmittal of this Letter of Transmittal will be
accepted.
12. MUTILATED, LOST, STOLEN OR DESTROYED BONDS. Any tendering Holder
whose Bonds have been mutilated, lost, stolen or destroyed should contact the
Exchange Agent at the address indicated herein for further instructions.
13. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions and requests
for assistance and requests for additional copies of the Prospectus or this
Letter of Transmittal may be directed to the Exchange Agent at the address
indicated herein. Holders may also contact their broker, dealer, commercial
bank, trust company or other nominee for assistance concerning the Exchange
Offer.
14. ACCEPTANCE OF TENDERED BONDS AND ISSUANCE OF BONDS; RETURN OF BONDS.
Subject to the terms and conditions of the Exchange Offer, the Issuer will
accept for exchange all validly tendered Bonds as soon as practicable after the
Expiration Date and will issue Exchange Bonds therefor as soon as practicable
thereafter. For purposes of the Exchange Offer, the Issuer shall be deemed to
have accepted tendered Bonds when, as and if the Issuer has given written or
oral notice (immediately followed in writing) thereof to the Exchange Agent. If
any Tendered Bonds are not exchanged pursuant to the Exchange Offer for any
reason, such unexchanged Bonds will be returned, without expense, to the
undersigned at the address shown in Box 1 or at a different address as may be
indicated herein under "Special Delivery Instructions" (Box 3).
15. WITHDRAWAL. Tenders may be withdrawn only pursuant to the procedures
set forth in the Prospectus under the caption "The Exchange Offer."
3
<PAGE>
INSTRUCTIONS TO REGISTERED HOLDER AND/OR
BOOK-ENTRY TRANSFER FACILITY PARTICIPANT FROM BENEFICIAL OWNER
OF
CASTLE ROCK RANCH PUBLIC IMPROVEMENTS AUTHORITY
PUBLIC FACILITIES REVENUE BONDS, SERIES 1996
To Registered Holder and/or Participant of the Book-Entry Transfer
Facility:
The undersigned hereby acknowledges receipt of the Prospectus, dated
__________, 199__ (the "Prospectus") of Castle Rock Ranch Public Improvements
Authority (the "Authority"), and the accompanying Letter of Transmittal (the
"Letter of Transmittal"), that together constitute the Authority's offer (the
"Exchange Offer"). Capitalized terms used but not defined herein have the
meanings ascribed to them in the Prospectus.
This will instruct you, the registered holder and/or book-entry transfer
facility participant, as to action to be taken by you relating to the Exchange
Offer with respect to the Public Facilities Revenue Bonds (the "Bonds") held by
you for the account of the undersigned.
The aggregate face amount of the Bonds held by you for the account of the
undersigned is (FILL IN AMOUNT):
$ of the Public Facilities Revenue Bonds, Series 1996
With respect to the Exchange Offer, the undersigned hereby instructs you
(CHECK APPROPRIATE BOX):
/ / TO TENDER the following Bonds held by you for the account of the
undersigned (INSERT PRINCIPAL AMOUNT OF BONDS TO BE TENDERED, IF ANY):
$
/ / NOT TO TENDER any Bonds held by you for the account of the
undersigned.
If the undersigned instructs you to tender the Bonds held by you for the
account of the undersigned, it is understood that you are authorized (a) to
make, on behalf of the undersigned (and the undersigned, by its signature below,
hereby makes to you), the representation and warranties contained in the Letter
of Transmittal that are to be made with respect to the undersigned as a
beneficial owner, including but not limited to the representations that (i) the
undersigned's principal residence is in the state of (FILL IN STATE) ,
(ii) the undersigned is acquiring the Exchange Bonds in the ordinary course of
business of the undersigned, (iii) the undersigned is not participating, does
not participate, and has no arrangement or understanding with any person to
participate in the distribution of the Exchange Bonds, (iv) the undersigned
acknowledges that any person participating in the Exchange Offer for the purpose
of distributing the Exchange Bonds must comply with the registration and
prospectus delivery requirements of the Securities Act of 1933, as amended (the
"Act"), in connection with a secondary resale transaction of the Exchange Bonds
acquired by such person and cannot rely on the position of the Staff of the
Securities and Exchange Commission set forth in no-action letters that are
discussed in the section of the Prospectus entitled "The Exchange Offer--Resales
of the Exchange Bonds," and (v) the undersigned is not an "affiliate," as
defined in Rule 405 of the Act, of the Authority; (b) to agree, on behalf of the
undersigned, as set forth in the Letter of Transmittal; and (c) to take such
other action as necessary under the Prospectus or the Letter of Transmittal to
effect the valid tender of such Bonds.
- ------------------------------------------------------------------------------
SIGN HERE
Name of beneficial owner(s):
-------------------------------------------------
Signature(s):
----------------------------------------------------------------
Name (PLEASE PRINT):
---------------------------------------------------------
Address:
---------------------------------------------------------------------
---------------------------------------------------------------------
---------------------------------------------------------------------
Telephone number:
------------------------------------------------------------
Taxpayer Identification or Social Security Number:
----------------------------
Date:
------------------------------------------------------------------------
- ------------------------------------------------------------------------------
