SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
_X_ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1998
OR
___ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File Number 1-13237
CHARTER MUNICIPAL MORTGAGE ACCEPTANCE COMPANY
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 13-3949418
- - ------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
625 Madison Avenue, New York, New York 10022
- - ---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (212) 421-5333
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes _X_ No ___
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
CHARTER MUNICIPAL MORTGAGE ACCEPTANCE COMPANY
BALANCE SHEETS
(unaudited)
<TABLE>
<CAPTION>
============ ============
March 31, December 31,
1998 1997
------------ ------------
ASSETS
<S> <C> <C>
Participating first mortgage bonds-at fair value $345,653,614 $346,300,000
Temporary investments 5,250,000 3,500,000
Cash and cash equivalents 733,925 2,296,899
Interest receivable 854,093 879,519
Promissory notes receivable 7,034,975 7,080,265
Deferred costs, net 2,282,417 2,292,409
Other assets 35,105 41,471
------------ ------------
Total assets $361,844,129 $362,390,563
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Note payable $ 21,540,245 $ 21,445,340
Accounts payable, accrued expenses and
other liabilities 576,251 635,691
Due to affiliates 657,395 674,949
Distributions payable 4,735,117 4,735,117
Excess of acquired net assets over cost 3,148,414 3,231,267
------------ ------------
Total liabilities 30,657,422 30,722,364
------------ ------------
Commitments and Contingencies
Shareholders' equity:
Beneficial owner's equity-manager 73,996 24,788
Beneficial owners' equity-other shareholders
(50,000,000 shares authorized;
20,587,465 shares issued and outstanding) 311,445,065 311,322,765
Net unrealized gain on first mortgage bonds 19,667,646 20,320,646
------------ ------------
Total shareholders' equity 331,186,707 331,668,199
------------ ------------
Total liabilities and shareholders' equity $361,844,129 $362,390,563
============ ============
</TABLE>
See accompanying notes to financial statements
2
<PAGE>
CHARTER MUNICIPAL MORTGAGE ACCEPTANCE COMPANY
STATEMENTS OF INCOME
(unaudited)
<TABLE>
<CAPTION>
=========================
Three Months Ended
March 31,
-------------------------
1998 1997
---------- ----------
<S> <C> <C>
Revenues:
Interest income:
Participating first mortgage bonds $5,890,264 $2,717,025
Temporary investments 41,526 32,292
Promissory notes 145,799 7,830
---------- ----------
Total revenues 6,077,589 2,757,147
---------- ----------
Expenses:
Interest expense 344,770 0
Management fees 0 202,656
Loan servicing fees 217,974 99,940
General and administrative 220,027 86,076
Amortization 46,856 46,180
---------- ----------
Total expenses 829,627 434,852
---------- ----------
Net Income $5,247,962 $2,322,295
========== ==========
</TABLE>
See accompanying notes to financial statements
3
<PAGE>
CHARTER MUNICIPAL MORTGAGE ACCEPTANCE COMPANY
STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
(unaudited)
<TABLE>
<CAPTION>
Net
Unrealized
Beneficial Gain (Loss)
Beneficial Owners' on
Owner's Equity - Participating
Equity Other First Mort-
-Manager Shareholders gage Bonds Total
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Balance at January 1, 1998 $ 24,788 $ 311,322,765 $ 20,320,646 $ 331,668,199
Net Income 376,171 4,871,791 0 5,247,962
Consolidation costs 0 (14,374) 0 (14,374)
Distributions (326,963) (4,735,117) 0 (5,062,080)
Net Change in Fair Value
of Participating
First Mortgage Bonds 0 0 (653,000) (653,000)
------------- ------------- ------------- -------------
Balance at March 31, 1998 $ 73,996 $ 311,445,065 $ 19,667,646 $ 331,186,707
============= ============= ============= =============
</TABLE>
See accompanying notes to financial statements
4
<PAGE>
CHARTER MUNICIPAL MORTGAGE ACCEPTANCE COMPANY
STATEMENTS OF CASH FLOWS
(unaudited)
<TABLE>
<CAPTION>
===========================
Three Months Ended
March 31,
---------------------------
1998 1997
---------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 5,247,962 $ 2,322,295
------------ ------------
Adjustments to reconcile net income to net
cash provided by operating activities:
Amortization 46,856 46,180
Amortization of excess of acquired net
assets over cost (82,853) 0
Amortization of deferred income (16,553) (16,553)
Changes in assets and liabilities:
Decrease in interest receivable 25,426 205,013
Decrease in other assets 6,366 12,597
Decrease in accounts payable,
accrued expenses and other liabilities (49,501) (26,655)
Increase in due from affiliates 0 84,225
(Decrease) increase in due to affiliates (13,935) 332,750
------------ ------------
Total adjustments (84,194) 637,557
------------ ------------
Net cash provided by operating activities 5,163,768 2,959,852
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Increase in deferred bond selection costs (35,963) 0
Net sale (purchase) of temporary investments (1,750,000) 300,000
Principal payments received from loans
made to properties 45,290 33,183
------------ ------------
Net cash used in investing activities (1,740,673) 333,183
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Distributions paid (5,065,699) (2,427,981)
Proceeds from note payable 94,905 0
Increase in deferred loan costs (901) 0
Consolidation costs paid (14,374) 0
------------ ------------
Net cash used in financing activities (4,986,069) (2,427,981)
------------ ------------
</TABLE>
(continued)
See accompanying notes to financial statements
5
<PAGE>
CHARTER MUNICIPAL MORTGAGE ACCEPTANCE COMPANY
STATEMENTS OF CASH FLOWS
(unaudited)
<TABLE>
<CAPTION>
===========================
Three Months Ended
March 31,
---------------------------
1998 1997
------------ ------------
<S> <C> <C>
Net increase (decrease) in cash and
cash equivalents (1,562,974) 865,054
Cash and cash equivalents at the
beginning of period 2,296,899 249,192
------------ ------------
Cash and cash equivalents at the
end of the period $ 733,925 $ 1,114,246
============ ============
SUPPLEMENTAL INFORMATION:
Interest paid $ 348,308 $ 0
============ ============
SUPPLEMENTAL DISCLOSURE OF NONCASH
FINANCING ACTIVITIES:
Distributions declared $ (5,062,080) $ (2,427,981)
Decrease in distributions payable to the Manager (3,619) 0
------------ ------------
Distributions paid $ (5,065,699) $ (2,427,981)
============ ============
</TABLE>
See accompanying notes to financial statements
6
<PAGE>
CHARTER MUNICIPAL MORTGAGE ACCEPTANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1998
(unaudited)
NOTE 1 - General
Charter Municipal Mortgage Acceptance Company (the "Company") is a Delaware
business trust which was formed by the consolidation (the "Consolidation"), on
October 1, 1997, of Summit Tax Exempt Bond Fund, L.P., Summit Tax Exempt L.P. II
("Tax Exempt II") and Summit Tax Exempt L.P. III, three limited partnerships
(the "Partnerships") co-sponsored by affiliates of Related Capital Company
("Related"), as part of the settlement of class action litigation described
below. Unless otherwise indicated, the "Company", as hereinafter used, refers to
Charter Municipal Mortgage Acceptance Company and, prior to October 1, 1997, Tax
Exempt II.
Pursuant to the Consolidation, the Company issued shares of beneficial interest
(the "Shares") to all partners in each of the Partnerships in exchange for their
interests in the Partnerships based upon each partner's proportionate interest
in the Shares issued to his or its Partnership in the Consolidation.
The Company is engaged in the acquisition and ownership (either directly or
indirectly) of tax-exempt participating and non-participating First Mortgage
Bonds ("FMBs") and other tax-exempt instruments issued by various state or local
governments or other agencies or authorities and secured by participating and
non-participating mortgage loans on the underlying properties.
The Company has engaged Related Charter LP, an affiliate of Related (the
"Manager"), to manage its day-to-day affairs. The Manager provides to the
Company substantially the same services that were provided to the Partnerships
by their general partners. The Manager also serves as the general partner of the
Company for tax purposes.
For financial accounting and reporting purposes, the Consolidation was accounted
for using the purchase method of accounting. Under this method, the Partnership
with the investor group receiving the largest ownership in the Company, in this
case Tax Exempt II, is deemed to be the acquirer. As the surviving entity for
accounting purposes, Tax Exempt II's assets and liabilities were recorded by the
Company at their historical cost, with the assets and liabilities of the other
Partnerships recorded at their estimated fair values for each Partnership (an
aggregate of approximately $158,129,000) as set forth in the Solicitation
Statement of the Company dated June 18, 1997 (the "Solicitation Statement").
Results of operations and other operating financial data for the Company for the
three months ended March 31, 1997 is only with respect to Tax Exempt II.
Basic income per share in the amount of $.24 is computed based on the net income
for the three months ended March 31, 1998 ($5,247,962), less the special
allocations to the Manager ($376,171), divided by the weighted average number of
shares outstanding for the period (20,587,465). Net income per unit information
for 1997 is not presented because it is not indicative of the Company's
continuing capital structure.
As the Company has no securities that can convert at March 31, 1998, diluted net
income per share is the same as basic net income per share.
7
<PAGE>
CHARTER MUNICIPAL MORTGAGE ACCEPTANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1998
(unaudited)
The accompanying financial statements have been prepared without audit. In the
opinion of management, the financial statements contain all adjustments
(consisting of only normal recurring adjustments) necessary to present fairly
the financial position of the Company as of March 31, 1998 and the results of
its operations and its cash flows for the three months ended March 31, 1998 and
1997. However, the operating results for the interim periods may not be
indicative of the results for the full year.
Certain information and footnote disclosures normally included in annual
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted. It is suggested that these financial
statements should be read in conjunction with the financial statements and notes
thereto included in the Company's Form 10-K/A-1 for the year ended December 31,
1997.
Certain reclassifications have been made to prior year amounts to conform to the
current year's presentation.
NOTE 2 - Participating First Mortgage Bonds ("FMBs")
The Company accounts for its investments in the FMBs as "available for sale"
debt securities under the provisions of Statement of Financial Accounting
Standards No. 115, "Accounting for Certain Investments in Debt and Equity
Securities" ("SFAS 115"). Accordingly, investments in FMBs are carried at their
estimated fair values, with unrealized gains and losses reported in a separate
component of partners' capital.
Because the FMBs are not readily marketable, the Company estimates fair value
for each bond as the present value of its expected cash flows using a discount
rate for comparable tax-exempt investments. This process is based upon
projections of future economic events affecting the real estate collateralizing
the bonds, such as property occupancy rates, rental rates, operating cost
inflation and market capitalization rates, and upon determination of an
appropriate market rate of interest, all of which are based on good faith
estimates and assumptions developed by the Company's management. Changes in
market conditions and circumstances may occur which would cause these estimates
and assumptions to change, therefore, actual results may vary from the estimates
and the variance may be material.
At March 31, 1998, the Company owns 32 FMBs which are secured by mortgages on
apartment complexes in 11 different states across the continental United States.
The face amount of the FMBs ranges from $5,000,000 to $19,450,000 with carrying
amounts from $5,000,000 to $20,571,000. The FMBs have maturity dates from
December 2003 through June 2018, however, they are callable from June 1998 to
June 2010. The stated interest rates range from 4.87% to 8.5%. The weighted
average interest rate recognized on the face amount of the portfolio of FMBs for
the three months ended March 31, 1998 and 1997 was 6.66% and 6.70%,
respectively.
The original obligors and owners of the Underlying Properties of ten of the
Company's FMBs have been replaced with affiliates of the Manager who have not
made equity investments. These entities have assumed the day to day
responsibilities and obligations of the Underlying Properties. These properties
are paying as interest an amount equal to the net cash flow generated by
operations which in some cases is not equal to the stated rate of the FMB. The
Company has no present intention of declaring a default under these FMBs.
8
<PAGE>
CHARTER MUNICIPAL MORTGAGE ACCEPTANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1998
(unaudited)
Effective January 1, 1998 the Highland Ridge and Willow Creek FMBs were modified
to reflect a change in their stated interest rate, allow for deferred base and
other interest accrued and unpaid through December 1997 to be paid at maturity
or upon event of sale or refinancing and extend the mandatory call and
prepayment lock-out dates. In addition, maturities were extended to 2017. The
Company is currently anticipating modifying certain other FMBs, with terms
generally similar to those above, where appropriate.
In addition to the stated base rates of interest, each of the FMBs which have
not been modified provides for "contingent interest" which is equal to: (a) an
amount equal to 50% to 100% of net property cash flow and 50% to 100% of net
sale or refinancing proceeds until the borrower has paid, during the
post-construction period, annual compound interest at a rate ranging from 8.875%
to 9.34% on a cumulative basis, and thereafter (b) an amount equal to 25% to 50%
of the remaining net property cash flow and 25% to 50% of the remaining net sale
or refinancing proceeds, until the borrower has paid interest at a simple annual
rate of 16% over the term of the FMB. Both the stated and contingent interest on
the FMBs are exempt from federal income taxation. During the three months ended
March 31, 1998 and 1997, one FMB paid contingent interest amounting to
approximately $83,000 and $40,000, respectively.
Certain of the FMBs have been previously modified. These modifications have
generally encompassed an extension of the maturity together with a prepayment
lock out feature and/or prepayment penalties together with an extension of the
mandatory redemption feature (5-10 years from modification). Stated interest
rates have also been adjusted together with the participation and contingent
interest features. Base interest rates, contingent interest, prepayment
lock-outs, mandatory redemption features vary dependent on the facts of a
particular FMB, the developer, the property's performance and requirements of
bond counsel and local issuers.
From time to time, the Company enters into forbearance agreements and permanent
modifications with certain borrowers. The determination as to whether it is in
the best interest of the Company to enter into forbearance agreements on the
FMBs, advance second mortgages, or alternatively, to pursue its remedies under
the loan documents, including foreclosure, is based upon several factors. These
factors include, but are not limited to, property performance, owner cooperation
and projected costs of foreclosure and litigation. Payments under each of the
existing forbearance agreements are current as of March 31, 1998.
With respect to the FMBs which are subject to forbearance agreements with the
respective obligors, the difference between the stated interest rates and the
rates paid (whether deferred and payable out of available future cash flow or,
ultimately, from sale or refinancing proceeds) on FMBs is not accrued for
financial statement purposes. The accrual of interest at the stated interest
rate will resume once a property's ability to pay the stated rate has been
adequately demonstrated. Unrecorded contractual interest income was
approximately $898,000 and $449,000 for the three months ended March 31, 1998
and 1997, respectively.
From time to time the Company has advanced funds to owners of certain underlying
properties in the form of promissory notes in order to complete construction or
when properties have operating difficulties including past due real estate taxes
and/or deferred maintenance items. As of March 31, 1998, the face amount of
promissory notes outstanding was $12,275,326, and their carrying value was
9
<PAGE>
CHARTER MUNICIPAL MORTGAGE ACCEPTANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1998
(unaudited)
$7,034,975, which is net of purchase accounting adjustments, and a reserve for
collectibility of $382,694.
The cost basis of the FMBs at March 31, 1998 and December 31, 1997 was
$325,985,968 and $325,979,355, respectively. The net unrealized gain on FMBs at
March 31, 1998 consists of gross unrealized gains and losses of $28,331,175 and
$8,663,529, respectively. The net unrealized gain on FMBs at December 31, 1997
consists of gross unrealized gains and losses of $28,984,175 and $8,663,529,
respectively.
NOTE 3 - Deferred Costs
The components of deferred costs are as follows:
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
------------ ------------
<S> <C> <C>
Deferred bond selection costs $ 3,792,928 $ 3,756,964
Deferred loan costs 543,128 542,227
------------ ------------
4,336,056 4,299,191
Less: Accumulated amortization (2,053,639) (2,006,782)
------------ ------------
$ 2,282,417 $ 2,292,409
============ ============
</TABLE>
NOTE 4 - Note Payable
On October 2, 1997, the Manager signed a conditional commitment letter with
Capital Markets Assurance Corporation, now merged with MBIA Insurance
Corporation ("MBIA") for a revolving credit enhancement facility (the
"Facility") for up to $150 million which will enable a subsidiary of the Company
to issue low interest rate AAA rated certificates ("Low Floater Certificates").
The Company will use the proceeds of such Facility to acquire FMBs. The interest
rate on the Facility is repriced each week based upon the then market
conditions. The Facility is expected to close in the second quarter of 1998
although no assurance can be given regarding the timing of such event.
Until the Facility is closed, Goldman Sachs & Company has opened an interim
credit facility (the "Interim Credit Facility") for the Company at prevailing
rates of interest for such accounts. At March 31, 1998, the rate was 6.79% and
the outstanding balance was $21,540,245. The Interim Credit Facility, which is
secured by certain of the Company's FMBs, will be repaid with proceeds from the
Facility, however it is payable on demand.
Indebtedness under the Facility and the Interim Credit Facility, together with
any other leveraging of the Company, will not exceed 50% of the Company's total
market value as of the date such debt is incurred.
10
<PAGE>
CHARTER MUNICIPAL MORTGAGE ACCEPTANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1998
(unaudited)
NOTE 5 - Related Parties
Charter Municipal Mortgage Acceptance Company (After the Consolidation)
- - -----------------------------------------------------------------------
Pursuant to the Management Agreement, the Manager receives (i) bond selection
fees equal to 2% of the principal amount of each FMB or other tax-exempt
instrument acquired or originated by the Company; (ii) special distributions
equal to .375% of total invested assets of the Company; (iii) loan servicing
fees equal to .25% of the outstanding principal amount of FMBs; (iv) a
liquidation fee based on the gross sales price of assets sold by the Company in
connection with a liquidation of the Company's assets; and (v) reimbursement of
certain administrative costs incurred by the Manager on behalf of the Company.
The costs, expenses and the special distribution incurred to the Manager for the
three months ended March 31, 1998 were as follows:
Expense reimbursement 48,734
Loan servicing fees 217,974
Special distribution 326,961
---------
$ 593,669
=========
Tax Exempt II (Prior to the Consolidation)
- - ------------------------------------------
Prior to the Consolidation, the general partners of Tax Exempt II were Related
Tax Exempt Associates II, Inc., a Delaware corporation (the "Related General
Partner"), and Prudential Bache Properties, Inc. ("PBP"), together the "General
Partners". The General Partners managed and controlled the affairs of Tax Exempt
II prior to the Consolidation.
The General Partners and their affiliates performed services for Tax Exempt II
which included, but were not limited to: accounting and financial management;
registrar, transfer and assignment functions; asset management; investor
communications; printing and other administrative services. The General Partners
and their affiliates received reimbursements for costs incurred in connection
with these services, the amount of which was limited by the provisions of the
partnership agreement of Tax Exempt II. The General Partners were paid, in
aggregate, an annual management fee equal to .5% of the total invested assets
(which equaled the total original face amount of the FMBs). An affiliate of the
Related General Partner received loan servicing fees in an amount of .25% per
annum of the principal amount outstanding on mortgage loans serviced by the
affiliate.
11
<PAGE>
CHARTER MUNICIPAL MORTGAGE ACCEPTANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1998
(unaudited)
The costs and expenses incurred to related parties for the three months ended
March 31, 1997 were as follows:
<TABLE>
<CAPTION>
<S> <C>
PBP and affiliates
General and administrative $ 17,446
Management fee 101,328
-----------
118,774
-----------
Related General Partner and affiliates
General and administrative 12,309
Management fee 101,328
Loan servicing fee 99,940
-----------
213,577
-----------
$ 332,351
===========
</TABLE>
General
- - -------
The original obligors of the Suntree, Players Club and River Run FMBs are
affiliates of the Manager.
As of March 31, 1998, the original owners of the underlying properties and
obligors of the Cedar Creek, Cypress Run, Highpointe, Greenway Manor, Sunset
Terrace, Pelican Cove, Loveridge, Sunset Downs, Sunset Creek and Sunset Village
FMBs had been replaced with affiliates of the Manager who have not made equity
investments. These entities have assumed the day-to-day responsibilities and
obligations of the Underlying Properties. Buyers are being sought who would make
equity investments in the underlying properties and assume the nonrecourse
obligations for the FMB.
NOTE 6 - Comprehensive Income
The Company adopted Statement of Financial Accounting Standards No. 130,
"Reporting Comprehensive Income" in the first quarter of 1998. The Company's
only element of other comprehensive income is the change in the unrealized gain
or loss on the Company's FMBs. Thus, comprehensive
income, which consists of net income plus or minus other comprehensive income,
for the three months ended March 31, 1998 and 1997 was $4,594,962 and
$2,322,295, respectively.
NOTE 7 - Subsequent Events
During the period April 1, 1998 through May 15, 1998 the Company acquired four
FMBs for an aggregate purchase price of $24,910,000, not including bond
selection fees of approximately $498,000. The purchases were financed entirely
from borrowings under the Interim Credit Facility. Further information regarding
the four FMBs is as follows:
12
<PAGE>
CHARTER MUNICIPAL MORTGAGE ACCEPTANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1998
(unaudited)
(a) Ocean Air Apartment Project
The Company acquired a $10 million Multifamily Housing Revenue FMB issued by the
Norfolk Redevelopment and Housing Authority on April 20, 1998. The FMB bears
interest at 7.25% per annum and is secured by the Ocean Air Apartment Project, a
434-unit affordable housing apartment complex in Norfolk, Virginia on which
renovation is expected to begin this spring.
(b) Phoenix Apartments
The Company acquired a $3.2 million Multifamily Housing Revenue FMB issued by
the California Statewide Communities Development Authority on April 28, 1998.
The FMB bears interest at 7.125% per annum and is secured by Phoenix Apartments,
a 184-unit affordable housing apartment complex in Stockton, California, which
is currently undergoing renovations.
(c) Stone Creek Apartments
The Company acquired a $8.8 million Multifamily Housing Revenue FMB issued by
the California Statewide Communities Development Authority on April 28, 1998.
The FMB bears interest at 7.125% per annum and is secured by the Stone Creek
Apartments, a 120-unit affordable housing apartment complex to be built in
Hanford, California.
(d) Cedarbrook Apartments
The Company acquired a $2.8 million Multifamily Housing Revenue FMB issued by
the California Statewide Communities Development Authority on April 28, 1998.
The FMB bears interest at 7.125% per annum and is secured by the Cedarbrook
Apartments, a 70-unit affordable housing apartment complex to be built in
Watsonville, California.
13
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
When used in this quarterly report on form 10-Q, the words "believes,"
"anticipates," "expects" and similar expressions are intended to identify
forward-looking statements. Statements looking forward in time are included in
this quarterly report on form 10-Q pursuant to the "safe harbor" provision of
the private securities litigation reform act of 1995. Such statements are
subject to certain risks and uncertainties which could cause actual results to
differ materially, including, but not limited to, those set forth in
"management's discussion and analysis of financial condition and results of
operations." Readers are cautioned not to place undue reliance on these
forward-looking statements, which speak only as of the date hereof. The company
undertakes no obligation to publicly revise these forward-looking statements to
reflect events or circumstances occurring after the date hereof or to reflect
the occurrence of unanticipated events.
Liquidity and Capital Resources
- - -------------------------------
Charter Municipal Mortgage Acceptance Company (the "Company") is a Delaware
business trust which was formed by the consolidation (the "Consolidation"), on
October 1, 1997, of Summit Tax Exempt Bond Fund, L.P., Summit Tax Exempt L.P. II
("Tax Exempt II") and Summit Tax Exempt L.P. III, three limited partnerships
(the "Partnerships") co-sponsored by affiliates of Related Capital Company
("Related").
The Company is engaged in the acquisition and ownership (either directly or
indirectly) of tax-exempt participating and non-participating First Mortgage
Bonds ("FMBs") and other tax-exempt instruments issued by various state or local
governments or other agencies or authorities and secured by participating and
non-participating mortgage loans on the underlying properties. As of March 31,
1998, the Company owned 32 FMBs and had net assets of approximately
$331,187,000.
In order to generate increased tax exempt income and as a result enhance the
value of the Company's stock, the Company will originate and acquire additional
tax-exempt bonds secured by multifamily properties. The Company believes that it
can earn above market rates of interest on its bond acquisitions by focusing its
efforts primarily on affordable housing. The Manager estimates that nearly 50%
of all new multifamily development contains an affordable component which
produces tax credits pursuant to Section 42 of the Internal Revenue Code. The
Manager also believes that each year a growing number of these properties are
financed with tax-exempt bonds. The Company has designed a Direct Purchase
Program specifically designed to appeal to developers of such properties. In
general, these properties are smaller than traditional multifamily housing
properties, averaging 150 units. The traditional method of financing tax-exempt
properties requires the involvement of credit enhancement, rating agencies and
investment bankers. Therefore, the up-front cost of such financing is generally
much higher than traditional multifamily financing. Through its Direct Purchase
Program, the Company will originate and acquire tax-exempt bonds without the
cost associated with credit enhancement, rating agencies and investment bankers.
The Company believes that the up-front cost savings to the developer will
translate into a higher than market interest rate on the bonds acquired by the
Company.
The Company's growth will be financed through proceeds of a $150 million
revolving credit enhancement facility with MBIA which will enable a subsidiary
of the Company to issue low interest rate AAA rated certificates. Until the
facility is closed, an interim credit facility has been opened, secured with
certain of the Company's FMBs, which will be repaid with proceeds
14
<PAGE>
from the $150 million facility. The facility is expected to close in the second
quarter of 1998 although no assurance can be given regarding the timing of such
event. Although the credit facility may be increased, the Company's conservative
financing strategy dictates leverage of no more than 50% of the value of the
Company's capitalization.
During the period April 1, 1998 through May 15, 1998 the Company acquired four
FMBs for an aggregate purchase price of $24,910,000, not including bond
selection fees of approximately $498,000. The purchases were financed entirely
from borrowings under the Interim Credit Facility.
During the three months ended March 31, 1998, cash and cash equivalents of the
Company decreased approximately $1,563,000. This decrease was primarily due to
the net purchase of temporary investments ($1,750,000) and distributions paid
($5,066,000) which exceeded cash provided by operating activities ($5,164,000)
and proceeds from note payable ($95,000). Included in the adjustments to
reconcile the net income to cash provided by operating activities is
amortization in the amount of $53,000.
Future liquidity is expected to result from cash generated from the Company's
portfolio of FMBs and interest earned on funds invested in short-term tax-exempt
money market instruments. The Company has entered into forbearance agreements on
several FMBs and may be required to extend these agreements or enter into new
agreements in the future. Such agreements may adversely impact liquidity;
however interest payments from FMBs are anticipated to provide sufficient
liquidity to fund the Company's operating expenditures, debt service and
distributions in future years.
Effective January 1, 1998 the Highland Ridge and Willow Creek FMBs were modified
to reflect a change in their stated interest rate, allow for deferred base and
other interest accrued and unpaid through December 1997 to be paid at maturity
or upon event of sale or refinancing and extend the mandatory call and
prepayment lock-out dates. In addition, maturities were extended to 2017. The
Company is currently anticipating modifying certain other FMBs, with terms
generally similar to those listed above where appropriate.
Results of Operations
- - ---------------------
For the three months ended March 31, 1998 as compared to 1997, total revenues,
total expenses and net income increased and the results of operations are not
comparable due to the Consolidation of Tax Exempt II with two other Partnerships
on October 1, 1997, which resulted in the formation of the Company. The
Company's results of operations for the three months ended March 31, 1998
consisted primarily of the results of the Company's investment in thirty two
FMBs. The Company's results of operations for the three months ended March 31,
1997 consisted primarily of the results of Tax Exempt II's investment in fifteen
FMBs.
General
- - -------
The determination as to whether it is in the best interest of the Company to
enter into forbearance agreements on the FMBs or, alternatively, to pursue its
remedies under the loan documents, including foreclosure, is based upon several
factors including, but not limited to, property performance, owner cooperation
and projected legal costs.
The difference between the stated interest rates and the rates paid by FMBs is
not accrued as interest income for financial reporting purposes. The accrual of
interest at the stated interest rate will resume once an underlying property's
ability to pay the stated rate has been adequately demonstrated. Interest income
of approximately $898,000 and $449,000 was not recognized for the three months
ended March 31, 1998 and 1997, respectively.
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PART II. OTHER INFORMATION
Item 1. Legal Proceedings - None
Item 2. Changes in Securities - None
Item 3. Defaults Upon Senior Securities - None
Item 4. Submission of Matters to a Vote of Security Holders - None
Item 5. Other Information - None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
10(aaan) First Mortgage Bond, dated as of February 2, 1987, with
respect to the Highland Ridge Project in the principal
amount of $15,000,000 (filed herewith)
10(aaao) First Mortgage Bond, dated as of March 2, 1987, with
respect to the Mortenson I Project in the principal amount
of $6,100,000 (filed herewith)
27 Financial Data Schedule (filed herewith).
(b) Reports on Form 8-K
Current report on Form 8-K relating to the resignation of one officer
and the election of two officers was dated February 6, 1998 and was
filed on March 19, 1998.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
CHARTER MUNICIPAL MORTGAGE ACCEPTANCE COMPANY
Date: May 14, 1998 By: /s/ Stuart J. Boesky
--------------------
Stuart J. Boesky
Managing Trustee, President
Chief Executive Officer and
Chief Operating Officer
Date: May 14, 1998 By: /s/ Alan P. Hirmes
------------------
Alan P. Hirmes
Managing Trustee, Executive Vice
President, Secretary, Chief Financial
Officer and Chief Accounting Officer
UNITED STATES OF AMERICA
STATE OF MINNESOTA
COUNTY OF RAMSEY
CITY OF SAINT PAUL
HOUSING AND REDEVELOPMENT AUTHORITY
OF THE CITY OF SAINT PAUL
Number: R-___ $15,000,000
MULTIFAMILY HOUSING REVENUE BOND,
SERIES 1987
(HIGHLAND RIDGE PROJECT)
Interest Maturity Date of Amendment
Rate Date Original Issue Date
---- ---- -------------- ----
See below June 30, 2018 February 2, 1987 January 1, 1998
KNOW ALL PERSONS BY THESE PRESENTS that the Housing and Redevelopment
Authority of the City of Saint Paul, Minnesota in the County of Ramsey and the
State of Minnesota (the "Issuer"), for value received, promises to pay to
Charter Municipal Mortgage Acceptance Company (the "Fund") or registered
assigns, but only from the Multifamily Housing Revenue Bond Fund (Highland Ridge
Project) (the "Bond Fund") and solely from the sources and in the manner
hereinafter provided and upon presentation and surrender hereof at the principal
corporate trust office of the Trustee named below, the principal sum of
$15,000,000 DOLLARS
on the maturity date specified above, or, if this Bond is prepayable as stated
below, on a prior date on which it shall have been duly called for redemption or
purchase. Interest on said principal sum shall be paid to the Record Date Holder
hereof, as defined below, solely from the Bond Fund, until the principal sum is
paid or discharged, at the interest rates stated below and on the Interest
Payment Dates stated below and shall accrue from the dated date specified above,
or (in the case of transfer or exchange) as to interest of a particular type
from the most recent Interest Payment Date to which interest of such type has
been paid or provided for. The "Record Date Holder" is the person in whose name
this Bond is registered in the Bond Register maintained by the Trustee named
below or its
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successor in trust (the "Registered Holder" or "Holder" hereof) either (i) at
the close of business on the 15th day of the month (whether or not a business
day) next preceding each Interest Payment Date (the "Record Date"), irrespective
of any transfer or exchange of such Bond subsequent to such Record Date and
prior to such Interest Payment Date, or (ii) if the Issuer shall be in default
in payment of interest due on such Interest Payment Date, at the close of
business on a date (the "Special Record Date") for the payment of such defaulted
interest established by notice mailed by the Trustee on behalf of the Issuer;
notice of the Special Record Date shall be mailed not less than 15 days
preceding the Special Record Date, to the Registered Holder at the close of
business on the 5th day preceding the date of mailing. By the close of business
of the last Business Day prior to any Interest Payment Date interest shall be
payable by check or draft mailed to the Registered Holder at his address as it
appears on the Bond Register on the Record Date or the Special Record Date, as
the case may be. The principal of and interest and premium, if any, on this Bond
are payable in lawful money of the United States of America.
This Bond is one of a duly authorized issue and series in the original
aggregate principal amount of $15,000,000 designated as "Multifamily Housing
Revenue Bonds, Series 1987 (Highland Ridge Project)" (herein called the
"Bonds"), issued under and all equally and ratable secured under an Indenture of
Trust, dated as of February 1, 1987 (the "Indenture of Trust"), as amended and
supplemented by a First Supplemental Indenture dated as of January 1, 1998 (the
"Supplemental Indenture") (the Indenture of Trust and the Supplemental Indenture
being herein referred to as the "Indenture"), duly executed and delivered by the
Issuer to National City Bank of Minneapolis in Minneapolis, Minnesota (the
"Trustee"), as successor in trust to First Trust National Association (formerly
known as First Trust Company, Inc.) (the "1987 Trustee"), setting forth the
terms upon which such Bonds are issued and are to be authenticated and
delivered. Any capitalized terms used but not defined herein shall have the
meaning given them in the Indenture.
The Bonds are issued by the Issuer in the aggregate principal sum of
$15,000,000 for the purpose of refunding, redeeming and prepaying, in part, a
like principal amount of the Issuer's $25,000,000 Variable Rate Demand Purchase
Multifamily Housing Revenue Bonds, Series 1985 (Shepard Park Project) (the
"Prior Bonds") issued on December 31, 1985 for the purpose of financing the
acquisition, construction and installation of the Project referred to below.
$10,000,000 of the Prior Bonds were redeemed and prepaid from the Escrowed
Proceeds of the Prior Bonds on the Closing Date of the Bonds. Upon issuance of
the Bonds, the remaining proceeds of the Prior Bonds, together with the
investment earnings on all Prior Bonds proceeds, were transferred (the
"Transferred Proceeds") to the Construction Fund established for the purpose of
making a loan (the "Loan") to Highland Ridge Limited Partnership, a Minnesota
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limited partnership (the "Company") under the provisions of a Loan Agreement
dated as of February 1, 1987 by and between the Issuer and the Company (the
"1987 Loan Agreement") as amended by the First Amendment to Loan Documents dated
as of January 1, 1998 (the "Amendment") (the 1987 Loan Agreement as amended by
the Amendment being herein referred to as the "Loan Agreement"), to finance the
construction and acquisition of a multifamily housing development located in
Saint Paul, Minnesota. The Company has agreed under the Loan Agreement to repay
the Loan, together with interest thereon, in amounts and at times sufficient to
pay the principal of, premium, if any, and interest on the Bonds as the same
shall become due and payable (the "Basic Payments"). The Loan will be a
"non-recourse" obligation of the Company. The purpose of the Loan was to finance
a certain multifamily rental housing development (herein called the "Project").
Pursuant to the Indenture, the Issuer has assigned and pledged to the Trustee,
for the equal and ratable benefit of the Holders of the Bonds, the Basic
Payments due under said Loan Agreement. Payment of the principal of and interest
on the Bonds is further secured by a Building Loan Mortgage and Security
Agreement dated as of February 1, 1987 (the "Mortgage") from the Company, as
mortgagor, to the 1987 Trustee, as mortgagee, an Assignment of Leases, Rents and
Other Income dated as of February 1, 1987 (the "Assignment of Leases") between
the Company and the 1987 Trustee, each as amended by the Amendment. The Company,
1987 Trustee and Issuer have entered into a Regulatory Agreement (the
"Regulatory Agreement") dated as of February 1, 1987, also amended by the
Amendment, requiring compliance with certain requirements of Federal and State
law relating to the operation and maintenance of the Project as a multifamily
housing development and as residential rental property. The Company had further
executed and caused to be recorded a Certificate of Amendment dated as of
February 1, 1987 to the Declaration of Restrictive Covenants (the "Declaration")
dated as of December 1, 1985, constituting, as further amended by the Amendment,
a covenant running with the land and requiring compliance with Federal and State
requirements similar to those contained in the Regulatory Agreement. Reference
is hereby made to the Loan Agreement, Mortgage, Assignment of Leases Regulatory
Agreement, Declaration (each as amended by the Amendment) and Indenture
(including the Supplemental Indenture and all other indentures supplemental
thereto), for a description of the property encumbered and assigned, the
provisions, among others, with respect to the nature and extent of the security,
the rights of the Issuer, and the rights, duties and obligations of the Company,
the Trustee and the Holders of the Bonds and the terms upon which the Bonds are
issued and secured.
Interest on the Bonds.
The Bonds shall bear interest as provided below:
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<PAGE>
(a) Base Interest. From Bond Closing until the Conversion Date, the Bonds
shall bear interest calculated and payable as follows (which shall be referred
to herein as "Base Interest"):
(i) During the Initial Period, the Bonds shall bear Base Interest at a
rate equal to 9.0% per annum payable on each payment date specified in
paragraph (d)(1) below.
(ii) During the Second Period, the Bonds shall bear Base Interest at a
rate equal to 9.0% per annum for the first six months thereof; 8.0% per
annum from and after the first day of the seventh month thereof to (but not
including) the Amendment Date; and 7.25% per annum thereafter, payable on
each payment date specified in paragraph (d)(1) below. Base Interest shall
be calculated on the basis of a year of 365 days, actual days elapsed.
(iii) In addition to the Base Interest which accrues as described in
(a)(i) and (ii) above, additional Base Interest shall accrue on the Bonds
from February 2, 1987 through March 14, 1987 in the amount of $560,000,
which additional Base Interest shall be payable in full on the first
Interest Payment Date for Base Interest.
(iv) Accrued and unpaid Base Interest in the amount of $309,399 as of
the Amendment Date (which amount is referred to as the "Base Deferred
Interest Amount") shall be deferred without interest until paid. The Base
Deferred Interest Amount shall be payable subsequent to the Amendment Date
on the earliest possible payment dates specified in paragraph (d)(3) below
on the basis and to the extent of 100% of Net Sale or Refinancing Proceeds,
after the payment of accrued and unpaid Base Interest (and interest
thereon) other than the Base Deferred Interest Amount, and prior to the
payment of Deferred Interest and Contingent Interest.
Notwithstanding that the Base Deferred Interest Amount shall be deferred
without interest until paid as provided in this paragraph (a)(iv), any Base
Interest due and payable from and after the Amendment Date which remains
unpaid from time to time (specifically excluding the Base Deferred Interest
Amount) shall accrue interest thereon at the rate of 12.00% per annum
(compounded annually) until paid, and the payment so in default shall
continue as an obligation of the Company as provided in Section 4.02(2) of
the Loan Agreement.
(v) In addition to the Base Interest which accrues as described above
in paragraphs (a)(i), (ii), (iii) and (iv), additional Base Interest shall
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<PAGE>
accrue on the Bonds from the Amendment Date to December 31, 1999 in the
amount of $75,000, payable at the rate of $3,125 monthly commencing on the
first Interest Payment Date for Base Interest in January, 1998 and
continuing through the first Interest Payment Date for Base Interest in
December, 1999.
(b) Contingent Interest. After the Initial Period and through the
Conversion Date, the Bonds also shall bear interest calculated and payable as
follows:
(1) Primary Contingent Interest. During each year or part thereof of
the Second Period, to (but not including) the Amendment Date, the Bonds
shall bear Contingent Interest at an annual rate equal to the Primary
Contingent Interest Rate payable on the basis and to the extent of 100% of
Net Cash Flow for each such year or part thereof, or, to the extent not
fully paid on or before the Amendment Date because 100% of Net Cash Flow is
insufficient, on the basis and to the extent of 100% of Net Sale or
Refinancing Proceeds (after the payment of Base Interest including the Base
Deferred Interest Amount), all as provided below.
Contingent Interest equal to Maximum Primary Contingent Interest shall be
payable on the Bonds on each payment date prior to the Amendment Date
specified in paragraph (d)(2) below on the basis and to the extent of 100%
of Net Cash Flow, measured for purposes of such payment and subject to the
adjustments and reconciliation as specified in paragraph (e) below. If 100%
of Net Cash Flow is insufficient to pay the Maximum Primary Contingent
Interest, then there shall be payable the maximum amount possible to the
extent of 100% of Net Cash Flow (which amount is referred to as the
"Primary Contingent Interest").
The difference between the Maximum Primary Contingent Interest and the
Primary Contingent Interest shall be deferred with interest thereon at 9.0%
per annum, compounded annually, until the Amendment Date (such difference
together with the compounded interest thereon is referred to collectively
with all such amounts previously deferred and unpaid as "Primary Deferred
Interest"). Primary Deferred Interest in the amount of $1,412,863 which
remains accrued and unpaid as of the Amendment Date (which amount is
referred to as the "Primary Deferred Interest Amount") shall be deferred
without interest until paid, and shall be payable subsequent to the
Amendment Date on the earliest possible payment dates specified in
paragraph (d)(3) below on the basis and to the extent of 100% of Net Sale
or Refinancing Proceeds, after the payment of accrued Base Interest (and
interest thereon) and the Base Deferred Interest Amount, and prior to the
payment of Supplemental Deferred Interest and
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<PAGE>
Supplemental Contingent Interest payable from Net Sale or Refinancing
Proceeds.
From and after the Amendment Date, no further Maximum Primary Contingent
Interest (other than the Primary Deferred Interest Amount) shall be due or
payable.
(2) Supplemental Contingent Interest. During each year or part thereof
of the Second Period, the Bonds shall also bear Contingent Interest at an
annual rate equal to the Supplemental Contingent Interest Rate payable on
the basis and to the extent of 15% of so much of Net Cash Flow for each
such year or part thereof as remains after reducing Net Cash Flow by the
amount of any payments on the basis of Net Cash Flow specified above in
paragraph (b)(1) or, to the extent not fully paid because 15% of Net Cash
Flow remaining after reducing Net Cash Flow by the amount of such payments
is insufficient, on the basis and to the extent of 15% of so much of Net
Cash Flow as remains after reducing Net Cash Flow by the amount of any
payments on the basis of Net Cash Flow specified above in paragraph (b)(1),
and 15% of so much of Net Sale or Refinancing Proceeds as remains after
reducing Net Sale or Refinancing Proceeds by the amount of any payments on
the basis of Net Sale or Refinancing Proceeds specified above in paragraphs
(a)(iv) and (b)(1), all as provided below.
Contingent Interest equal to Maximum Supplemental Contingent Interest shall
be payable on the Bonds on each payment date specified in paragraph (d)(2)
below on the basis and to the extent of 15% of so much of Net Cash Flow as
remains after reducing Net Cash Flow by the amount of any payments on the
basis of Net Cash Flow specified above in paragraph (b)(1), measured for
purposes of such payment and subject to the adjustments and reconciliation
as specified in paragraph (e) below. If 15% of Net Cash Flow after such
payments is insufficient to pay the Maximum Supplemental Contingent
Interest payable on any payment date specified in paragraph (d)(2) below,
then there shall be payable the maximum amount possible on the basis and to
the extent of 15% of Net Cash Flow after such payments (which amount is
referred to as the "Supplemental Contingent Interest").
The difference between the Maximum Supplemental Contingent Interest and the
Supplemental Contingent Interest shall be deferred without interest (such
difference is referred to collectively with all such amounts previously
deferred as "Supplemental Deferred Interest") and shall thereafter be
payable on the earliest possible payment dates specified in paragraph
(d)(2)below on the basis and to the extent of 15% of so much of Net Cash
Flow as remains after reducing Net Cash Flow by the amount of
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<PAGE>
any such payments on the basis of Net Cash Flow specified above in
paragraph (b)(1), measured for purposes of such payment and subject to the
adjustments and reconciliation as specified in paragraph (e) below.
Supplemental Deferred Interest shall be paid on the basis and to the extent
of 15% of Net Cash Flow remaining after reducing Net Cash Flow by the
amount of such payments specified in paragraph (b)(1), before any
Supplemental Contingent Interest is paid on such basis.
To the extent that Maximum Supplemental Contingent Interest and all
Supplemental Deferred Interest are not fully paid on the basis and to the
extent of 15% of Net Cash Flow remaining after reducing Net Cash Flow by
the amount of such payments on payment dates specified in paragraph (d)(2)
below, they shall be payable on the basis and to the extent of 15% of so
much of Net Sale or Refinancing Proceeds as remains after deducting any
payments on the basis of Net Sale or Refinancing Proceeds specified above
in paragraphs (a)(iv) and (b)(1) on the earliest possible payment dates
specified in paragraph (d)(3) below.
All payments of additional Base Interest pursuant to (a)(v) above shall be
credited to the payment of Supplemental Deferred Interest and Supplemental
Contingent Interest otherwise due and payable from Net Cash Flow pursuant
to this paragraph (b)(2), for the period commencing from and after the
Amendment Date to and through December 31, 1999.
(c) Reserved.
(d) Payment Dates for Interest. The Interest payable on the Bonds to the
Conversion Date as provided above shall be payable on the following dates:
(1) Base Interest shall be payable (i) on each Interest Payment Date
for Base Interest, (ii) on each redemption date before the Conversion Date
(but only with respect to the Bonds redeemed), and (iii) on the Conversion
Date.
(2) Contingent Interest and Deferred Interest that is payable on the
basis of Net Cash Flow shall be payable (i) on each Interest Payment Date
for Contingent Interest and Deferred Interest to and including the
Conversion Date, (ii) on each redemption date during the Second Period (but
only with respect to the Bonds redeemed), (iii) on each date on which
Contingent Interest and Deferred Interest is payable from Net Sale or
Refinancing Proceeds (as provided in paragraph (d)(3) below), and (iv) on
the Conversion Date.
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<PAGE>
(3) The Base Deferred Interest Amount, the Primary Deferred Interest
Amount, Contingent Interest and Deferred Interest that is payable on the
basis of Net Sale or Refinancing Proceeds shall be payable on the next
Interest Payment Date for any interest succeeding by at least thirty (30)
days the date of the Event of Sale or Refinancing relating to the Sale of
the Project or Refinancing of the Project, except in the case of (x) a
Refinancing of the Project described in clause (i) or (iv) of the
definition thereof, in which case it shall be payable on the redemption
date or payment date, as the case may be, (y) a Sale of the Project
described in clause (i) of the definition thereof resulting in a call of
the Bonds for redemption pursuant to Section 3-1(1)(e) of the Indenture, in
which case it shall be payable on the redemption date, or (z) a Refinancing
of the Project described in clause (ii) of the definition thereof, in which
case it shall be payable on the Initial Remarketing Date.
(e) Calculation of Net Cash Flow.
(1) (i) No later than thirty (30) days before each payment date for
Contingent Interest and Deferred Interest specified in paragraph (d) (2)
above (or such lesser number of days as shall be the maximum number of days
possible if the payment date was not known until less than forty (40) days
before the payment date), the Company shall calculate Net Cash Flow for the
three-month period ending on the last day of the third preceding month
before such payment date and shall provide the Trustee (but only after the
Trustee has accepted the duty to calculate interest pursuant to the
Indenture) and the Holders (if fewer than three) (i) the analysis of such
Net Cash Flow, (ii) unaudited financial statements of the Project for such
three-month period and (iii) a calculation of the amount of Contingent
Interest and Deferred Interest then payable.
(ii) Notwithstanding the foregoing in clause (i), (A) except as
may result from adjustments and reconciliation provided below in this
paragraph (e), the period of time for which Net Cash Flow is measured for
purposes of a payment date for Contingent Interest and Deferred Interest on
any Bonds specified in paragraph (d)(2) hereof shall not include any time
for which Net Cash Flow has been measured for purposes of a previous
payment date for Contingent Interest and Deferred Interest on such Bonds
specified in paragraph (d)(2) hereof, and (B) the calculation of Net Cash
Flow and the amount of Contingent Interest and Deferred Interest payable
therefrom on the Conversion Date shall be reconciled and adjusted to give
effect to the actual amount of Net Cash Flow for the current calendar year
(and the preceding calendar year if the Conversion Date falls before
delivery of the audit referred to in paragraph (e)(2) hereof in the current
calendar year) up to but not including the
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Conversion Date (such actual amount of Net Cash Flow being measured by the
actual amount known as of the most recent possible date and an amount
reasonably estimated to be earned between such date and the Conversion
Date) and all Contingent Interest and Deferred Interest paid during the
current calendar year (and the preceding calendar year if the Conversion
Date falls before delivery of the audit referred to in paragraph (e)(2)
hereof in the current calendar year) in the manner described in paragraph
(e)(3) below, except that any underpayments or overpayments of Contingent
Interest and Deferred Interest shall be paid or refunded, as the case may
be, on the Conversion Date.
(iii) The amount of Net Cash Flow reflected in the analysis
described above, as adjusted in the case of the analysis in connection with
the Conversion Date, shall provide the basis for the calculation of
Contingent Interest and Deferred Interest payable on the basis of Net Cash
Flow on each payment date therefor specified in paragraph (d)(2) hereof,
except as provided below. The Trustee, upon direction of the owners of a
majority in principal amount of the Bonds (if it has accepted the duty to
calculate interest thereon pursuant to the Indenture), or the Holders of a
majority in principal amount of Bonds themselves, may request further
substantiation of the Company's calculation of Net Cash Flow and may verify
and correct as necessary the calculations thereof. If the Trustee or the
Holders of a majority in principal amount of the Bonds do so reasonably
modify such calculation, the Trustee or such Holders shall notify the
Company of such modified calculation no later than ten (10) Business Days
before such payment date (or such lesser number of days as shall be the
maximum number of days practicable if the Trustee or such Holders received
the calculation of Net Cash Flow less than thirty (30) days before the
payment date) and such modified calculation shall be the basis for the
calculation of Contingent Interest and Deferred Interest payable on the
basis of Net Cash Flow on the payment date. Except to the extent provided
in this paragraph (e)(1) with respect to the Conversion Date, the analysis
and payment on the basis of Net Cash Flow described in this paragraph
(e)(1) is intended to provide a preliminary payment of Contingent Interest
and Deferred Interest on the basis of Net Cash Flow prior and subject to
the adjustment and reconciliation process described in paragraphs (e)(2)
and (e)(3) hereof.
(2) No later than March 15 of each calendar year (up to and, unless
the Conversion Date falls before delivery of the audit, including the
calendar year in which the Conversion Date occurs) the Company shall
provide to the Issuer, the Trustee and the Holders of the Bonds (if fewer
than three) an audit of the operations of the Project for the preceding
calendar year prepared and certified by an Accountant acceptable to the
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Trustee (if it has accepted the duty to calculate interest pursuant to the
Indenture), Company and the Holders (if fewer than three) in accordance
with generally accepted auditing standards. The audit shall state the
actual amount of Net Cash Flow for that calendar year and shall calculate
all Contingent Interest and Deferred Interest paid and payable from Net
Cash Flow during such calendar year pursuant hereto.
(3) The audit prepared in accordance with paragraph (e)(2) shall
state the amount of Contingent Interest and Deferred Interest payable and
paid during the subject calendar year. If the amounts of Contingent
Interest and Deferred Interest payable on the basis of Net Cash Flow
(measured on the basis of actual Net Cash Flow for such calendar year
according to the audit) exceeded the amount paid, then there shall be
payable to the Holders of the Bonds any such payable and unpaid amounts on
the payment date for Contingent Interest and Deferred Interest specified in
paragraph (d)(2) hereof immediately following the receipt by the Trustee
and the said Holders of the audit. If the amount of Contingent Interest and
Deferred Interest payable on the basis of Net Cash Flow (measured on the
basis of actual Net Cash Flow for such calendar year according to the
audit) is less than the amount actually paid, such overpaid amount shall be
credited against any other interest payments (whether Base Interest or
Contingent Interest and Deferred Interest) or other payments due from the
Issuer to the Holders of the Bonds on the Payment Date (or Payment Dates)
immediately following the receipt by the Trustee and the said Holders of
the audit and the Holders shall not be required to refund any such amount
unless the crediting does not exhaust the overpayment, in which case the
balance of the overpayment will be refunded by the Holders on the
Conversion Date.
(f) Fair Market Value of the Project for Purposes of Determining
Refinancing Proceeds.
(1) In order to calculate the fair market value of the Project for
purposes of determining Sale or Refinancing Proceeds in the event of a
Refinancing of the Project (other than a Refinancing of the Project
described in clause (iii) of the definition thereof) the fair market value
of the Project is required to be determined as set forth below, such
determination to be completed no later than fifteen (15) days before the
date on which Contingent Interest and Deferred Interest are payable on the
basis and to the extent of Net Sale or Refinancing Proceeds or as soon
thereafter as possible (but not after the said payment date if the notice
described in the following sentence cannot be given at the time specified).
The Company shall give notice to the Trustee and to the Holders of the
Bonds of the impending Refinancing of the Project at least ninety (90) days
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before the expected date of Refinancing of the Project or as much notice as
is possible, promptly upon learning of the impending Refinancing of the
Project. The Holders of all of the Bonds and the Company may jointly
determine and agree upon the fair market value of the Project but must do
so at least sixty (60) days before the proposed date of the Refinancing of
the Project; failing such agreement the Holders of a majority in principal
amount of the Bonds shall select an independent M.A.I. appraiser and the
Company shall select an independent M.A.I. appraiser. The appraisers shall
jointly determine and agree upon the fair market value of the Project. If
the two appraisers are unable to agree upon the fair market value of the
Project at least thirty (30) days before the proposed date of the
Refinancing of the Project, the Holders and the Company shall select a
third independent M.A.I. appraiser. If such Holders and the Company are
unable to agree upon a third appraiser by such date, the two appraisers
shall select the third appraiser. If the two appraisers are unable to agree
upon the third appraiser at least twenty-five (25) days before the proposed
date of the Refinancing of the Project, such Holders or Company may
petition any court of competent jurisdiction for the appointment of the
third independent appraiser. As early as practicable, but prior to the
expected date of the Refinancing of the Project, the third appraiser shall
select from between the two appraisals the one which the third appraiser
believes to assess more accurately the fair market value of the Project and
the appraisal so selected shall be the fair market value of the Project,
shall provide the basis for the calculation of Contingent Interest and
Deferred Interest payable on the basis of Net Sale or Refinancing Proceeds
in the event of a Refinancing of the Project (other than a Refinancing of
the Project described in clause (iii) of the definition thereof) on each
payment date therefor specified in paragraph (d)(3) hereof and shall be
binding upon the Company and the Holders of the Bonds. The fees and
expenses of the appraiser selected by each party shall be borne by the
party selecting the appraiser and the cost of the third appraiser shall be
borne equally by the Company and the Holders of the Bonds.
(2) The fair market value of the Project for purposes of this
paragraph (f) shall reflect the amount each appraiser believes an informed
and willing purchaser under no compulsion to purchase the Project would pay
to an informed and willing seller under no compulsion to sell the Project,
less those costs of a sale appropriate to the marketplace within which the
Project would be sold. Such determination shall take into consideration
such factors as the appraisers may deem relevant. Except as provided below,
the fair market value of the Project set forth in an appraisal shall be
determined as of the date of such appraisal.
11
<PAGE>
(3) If the Refinancing of the Project is based upon a redemption of
Bonds pursuant to Section 3-1(1)(b) or (h) of the Indenture, the fair
market value of the Project shall be determined as of the day before the
occurrence of any events requiring the payment of Insurance Proceeds or a
Condemnation Award, as if such events had not occurred and were not
anticipated.
(g) Interest After Initial Remarketing Date. From and after the Initial
Remarketing Date, if all of the Bonds have been remarketed pursuant to the
Indenture, the Bonds shall bear interest at the Reset Rate as determined
pursuant to Section 2-13 of the Indenture.
(h) Interest Limitation. Notwithstanding anything elsewhere contained
in this Bond or in the Indenture, (a) total interest on the Bonds, cumulative
from the date of issuance hereof until the Conversion Date, shall not exceed the
sum of 14.5% per annum, simple and noncompounded for each year from such date of
issuance to the date of calculation; and (b) if the interest rate on the Bonds
shall at any time be deemed to be in excess of the maximum rate permitted by
law, then the Bonds shall instead bear interest at the maximum rate permitted by
such law. Any excess payment of interest shall be deemed to be a credit against
the unpaid principal amount of the Bonds and the principal amount of the Bonds
shall be reduced prorata by such amount and interest shall no longer accrue on
such credit amount.
The Bonds are subject to prepayment and redemption (or purchase) prior to
maturity in whole or in part at such time or times, under such circumstances at
such redemption price and in such manner as is set forth in the Indenture. Upon
an election by the Holder of a redemption in whole of the Bonds pursuant to
Section 3-1(1)(f) of the Indenture, at the direction of the Company given not
less than 60 days in advance, either (i) the Bonds shall be redeemed on the date
specified in the notice to the Issuer, the Trustee, and the Company from the
Holder described in Section 3-1(1)(f) of the Indenture or (ii) the Bonds will be
deemed tendered for purchase and remarketed as provided in the Indenture on the
date specified in the notice to the Issuer, the Trustee, and the Company from
the Holder described in said Section 3-1(1)(f), or on such earlier Interest
Payment Date selected by the Company in its direction to remarket the Bonds but
in no event before the Interest Payment Date following the Reference Month in
2003. The Bonds may only be remarketed if the conditions specified in the
Indenture are met which conditions include requirements that either the Bonds be
rated and that certain disclosures be made in connection with such remarketing
or that the remarketing be limited to certain institutional investors who shall
agree to restrictions on the transfer thereof.
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<PAGE>
The purchase price of the Bonds so remarketed in lieu of redemption shall
be the principal amount thereof plus accrued interest including all Base
Interest, the Base Deferred Interest Amount, Contingent Interest and Deferred
Interest (including the Primary Deferred Interest Amount) to the Initial
Remarketing Date and shall be payable on the Initial Remarketing Date. If the
conditions to remarketing of the Bonds set forth in the Indenture are not
satisfied, or if the Bonds are not successfully remarketed, or if the full
purchase price thereof is not paid or available for payment on the Initial
Remarketing Date, or if all Interest (including Contingent Interest and Deferred
Interest) and principal payable on the Bonds up to and including the Initial
Remarketing Date has not been fully paid, then all Bonds tendered shall be
redeemed and not remarketed pursuant to Section 3-1(1)(d) of the Indenture.
In the event of either optional or mandatory redemption by lot, the Trustee
shall assign to each Bond then Outstanding (as defined in the Indenture) a
distinctive number for each $5,000 of the principal amount of such Bond. The
Trustee shall then select by lot, using such method of selection as it shall
deem proper in its discretion, from the numbers so assigned to such Bonds, as
many numbers as, at $5,000 for each number, shall equal the principal amount of
such Bonds to be redeemed. The Bonds to be redeemed shall be the Bonds to which
were assigned numbers so selected. Provided, however, that only so much of the
principal amount of such Bond of a denomination of more than $5,000 shall be
redeemed as shall equal $5,000 for each number for each number assigned to it
and so selected. If a Bond may be redeemed only in part, it shall be surrendered
to the Trustee (with, if the Issuer or the Trustee so requires, a written
instrument of transfer in form satisfactory to the Issuer and the Trustee duly
executed by the Holder thereof or his attorney duly authorized in writing) and
the Issuer shall execute and the Trustee shall authenticate and deliver to the
Holder of such Bond, without service charge, a new Bond or Bonds of the same
series, of any authorized denomination or denominations, as requested by such
Holder, having the same stated maturity and interest rate of any authorized
denomination in aggregate principal amount equal to and in exchange for the
unredeemed portion of the principal of the Bond so surrendered.
In addition to the foregoing, if under certain circumstances an Event of
Default, as defined in the Indenture shall occur, the principal of all Bonds and
all interest accrued thereon (including all unpaid Base Interest, Contingent
Interest and Deferred Interest) shall be declared due and payable in the manner
and with the effect provided in the Loan Agreement and Indenture.
If the date for payment of the principal of, premium, if any, or Interest
on this Bond shall be a Saturday, Sunday, legal holiday or a day on which
banking institutions in the city where the principal corporate trust office of
the Trustee or Bank is located are authorized by law or executive order to
close, then the date
13
<PAGE>
for such payment shall be the next succeeding day which is not a Saturday,
Sunday, legal holiday or a day on which such banking institutions are authorized
to close.
Notice of redemption or purchase shall be published (if required by law) at
least once before the redemption date in daily or weekly financial journals or
newspapers of general circulation in Saint Paul or Minneapolis, Minnesota and
New York, New York, and shall be mailed to each Registered Holder of a Bond to
be redeemed but, if published notice is given, no defect in or failure to give
such mailed notice of redemption shall affect the validity of the proceedings
for redemption of any Bond. All Bonds so called for redemption, provided funds
for their redemption have been duly deposited as set forth in the Indenture,
will cease to bear interest on the specified redemption date and (except for the
purpose of payment) shall no longer be protected by the Indenture and shall not
be deemed Outstanding under the Indenture, and shall thereafter be payable
solely from the funds provided for payment.
This Bond and the series of which it forms a part were issued pursuant to
and in full compliance with the Constitution and laws of the State of Minnesota,
particularly Minnesota Statutes, Chapter 462C, and pursuant to resolutions
adopted and approved by the City and the Issuer, which resolutions authorized
the Project and the execution and delivery of the Indenture, and the issuance of
the Bonds as special, limited obligations payable solely from revenues derived
from the Loan Agreement except that under certain circumstances the Bonds may be
payable from Bond proceeds, insurance proceeds, Condemnation proceeds, and the
proceeds of any other security given for the Loan. The Loan repayments under the
Loan Agreement are scheduled to be sufficient to pay the principal of, premium,
if any, and interest on the Bonds as the same become due and payable and are to
be paid to the Trustee for the account of the Issuer and credited to the Bond
Fund as a special trust fund account created by the Issuer and have been and are
hereby pledged for that purpose. The Bonds and the interest due thereon are
issued without moral obligation on the part of the Issuer, the City, the State
of Minnesota or any of its political subdivisions, and do not and shall never
constitute a general indebtedness of the Issuer or the City within the meaning
of any state constitutional or statutory provision and do not and shall not
constitute or give rise to a pecuniary liability or moral obligation of the
Issuer or the City or a charge against their general credit or taxing powers, or
to the extent permitted by law, any pecuniary liability of any officer, employee
or agent of the Issuer or the City.
The Registered Holder of the Bond shall have no right to enforce the
provisions of the Indenture or to institute action to enforce the covenants
therein, or to take any action with respect to any Event of Default under the
Indenture, or to institute, appear in or defend any suit or other proceedings
with respect
14
<PAGE>
thereto, except as provided in the Indenture. Modifications or alterations of
the Indenture, or of any indenture supplemental thereto, may be made only to the
extent and in the circumstances permitted by the Indenture.
Except where prohibited, to the extent permitted by and as provided in the
Indenture, certain amendments or modifications can be made to the Indenture, the
Loan Agreement and the Mortgage without Bondholder consent. Except as
specifically provided, the terms and provisions of the Indenture, the Loan
Agreement, or of any instrument supplemental thereto, may not be modified or
altered except with the consent of the Registered Holders of at least 51% in
aggregate principal amount of the Bonds then Outstanding thereunder, and with
the consent of the City, the Issuer, the Company and the Trustee, as
appropriate.
The Indenture also contains provisions permitting Holders of a majority in
aggregate principal amount of the Bonds at the time Outstanding, on behalf of
all the Holders of all the Bonds, to waive compliance by the Issuer with certain
provisions of the Indenture and certain past defaults under the Indenture and
their consequences. Any such consent or waiver by the Registered Holder of this
Bond shall be conclusive and binding upon such Registered Holder and on all
future Registered Holders of this Bond and of any Bond issued in lieu hereof
whether or not notation of such consent or waiver is made upon this Bond.
The Bonds are issued as fully registered Bonds without coupons in the
denomination of $5,000 or any whole multiple thereof. The Bonds are
interchangeable for one or more Bonds in authorized denominations and of the
same series, aggregate principal amount, interest rate and maturity date, upon
surrender thereof by the Holder at the principal office of the Trustee, in the
manner and subject to the limitations provided in the Indenture. The Issuer, the
Trustee and any additional paying agents may deem and treat the Registered
Holder hereof as the absolute owner hereof (whether or not this Bond shall be
overdue) for the purpose of receiving payment of or on account of principal
hereof and Interest (except as otherwise hereinabove provided with respect to
the Record Date and Special Record Date) due hereon and for all other purposes,
and the City, the Trustee and any additional paying agents shall not be affected
by any notice to the contrary.
This Bond is transferable by the registered owner hereof in person or by
his attorney duly authorized in writing at the office of the Trustee as
registrar, but only in the manner, subject to the limitations and upon payment
of the charges provided in the Indenture, and upon surrender and cancellation of
this Bond. Upon such transfer a new registered Bond or Bonds, of any authorized
denomination or denominations, of the same maturity and for the same aggregate
principal amount will be issued to the transferee in exchange herefor.
15
<PAGE>
Prior to the Initial Remarketing Date, a Bond may only be transferred (i)
to any affiliate of the Fund, an affiliate of one of the general partners of the
Fund, any entity arising out of any merger or consolidation of the Fund, by
operation of law, or to a trustee in bankruptcy of the Fund; (ii) by an
assignment to a bank or other financial institution issuing a letter of credit
or like instrument in connection with the Loan; or (iii) to one or more
Institutional Investors if, in each instance, the Issuer and the Trustee receive
from the transferee (A) its agreement to the transfer restrictions set forth in
this paragraph in connection with subsequent transfers of the Bond and (B)
evidence of the Assignment by the transferor to the transferee (or, if there is
to be thereafter more than one Holder of the Bonds, evidence of the appointment
and acceptance of a Trustee and assignment to the Trustee) of the transferor's
rights in and to the Loan and the other rights and interest as theretofore
conveyed to it by the Assignment, or an assignment of the Assignment. Subject to
the limitations provided in the Indenture, this Bond is transferable by the
Registered Holder hereof upon surrender of this Bond for transfer at the
principal corporate trust office of the Trustee, duly endorsed or accompanied by
a written instrument or instruments of transfer in the form printed on this Bond
or in another form satisfactory to the Trustee and executed and with guaranty of
signature of the Registered Holder hereof or his attorney duly authorized in
writing, containing written instructions as to the details of the transfer of
the Bond. Thereupon the Issuer shall execute (if necessary) and the Trustee
shall authenticate and deliver, in exchange for this Bond, one or more new Bonds
in the name of the transferee, of an authorized denomination, in aggregate
principal amount equal to the principal amount of this Bond, of the same
maturity, and bearing interest at the same rate.
No service charge shall be made to the Registered Holder for any
registration, transfer or exchange hereinbefore referred to, but the Trustee may
require payment of a sum sufficient to cover any tax, fee or other governmental
charge that may be imposed in connection with any transfer or exchange of Bonds,
other than exchanges expressly provided in the Indenture to be made without
charge to Bondholders.
IT IS HEREBY CERFIFIED, RECITED AND DECLARED that all acts, conditions and
things required to exist, to happen and to be performed precedent to and in the
execution and delivery of the Indenture and the issuance of this Bond do exist,
have happened and have been performed in due time, form and manner, as required
by law, and that the issuance of this Bond and the series of which it forms a
part, together with all other obligations of the Issuer, does not exceed or
violate any constitutional or statutory limitation.
16
<PAGE>
This Bond shall not be valid or become obligatory for any purpose or be
entitled to any security or benefit under the Indenture unless the Certificate
of Authentication hereon shall have been executed by the Trustee.
17
<PAGE>
IN WITNESS WHEREOF, the Housing and Redevelopment Authority of the City of
Saint Paul, Ramsey County, has caused this Bond to be executed in its name by
the facsimile signatures of its Chairman, countersigned by its Director of
Finance and Management Services and attested by its Secretary, and by the manual
signature of a Responsible Agent of the Trustee acting as authenticating agent,
and has caused this Bond to be sealed with a facsimile of its official seal
printed hereon.
Date of Registration: Registrable by:
April 20, 1998 -----------------------------
- - ---------------------- Payable at:
---------------------------------
---------------------------------
---------------------------------
---------------------------------
HOUSING AND REDEVELOPMENT
AUTHORITY OF THE CITY OF
SAINT PAUL, RAMSEY COUNTY,
MINNESOTA
/s/ D.B. Bostrom
--------------------------------------------
Chairman
Countersigned:
/s/ Joseph M. Reid
--------------------------------------------
Director of Finance and Management
Attest:
/s/ J. Benanav
--------------------------------------------
Secretary
TRUSTEE'S CERTIFICATE OF
AUTHENTICATION
This Bond is one of the Bonds
described in the within mentioned Indenture.
National City Bank of Minneapolis,
Trustee
By: /s/ Timothy M. Murphy
-------------------------------
Authorized Officer
<PAGE>
ASSIGNMENT
For value received, the undersigned hereby sells, assigns and transfers
unto ______________________________________________________________the within
Bond and does hereby irrevocable constitute and appoint ________________________
attorney to transfer the Bond on the books kept for the registration thereof,
with full power of substitution in the premises.
Dated: ____________________________ ___________________________________________
Notice: The assignor's signature to this assignment must
correspond with the name as it appears upon the face of
the within Bond in every particular, without alteration or
any change whatever.
Signature Guaranteed:
_______________________________
Signature's must be guaranteed by a national bank or trust company or by a
brokerage firm having a membership in one of the major stock exchanges.
The Trustee will not effect transfer of this Bond unless the
information concerning the transferee requested below is provided.
Name and Address: _____________________________________________________________
_____________________________________________________________
_____________________________________________________________
(Include information for all joint owners
if the Bond is held by a joint account)
<PAGE>
DEFINITIONAL APPENDIX
---------------------
Amendment Date: means January 1, 1998.
Interest: means all Base Interest (including the Base Deferred Interest
Amount), Contingent Interest, Deferred Interest (including the Primary Deferred
Interest Amount), any interest thereon, and, subject to paragraph (h) of the
Bonds, any and all amounts paid other than principal of and premium with respect
to the Bonds.
Maximum Primary Contingent Interest: means, on any payment date for
Contingent Interest and Deferred Interest specified in paragraph (d) hereof, 0%
for the first six months of the Second Period, and 1.0% for that portion of the
Second Period commencing on the first day of the seventh month thereof and
continuing to (but not including) the Amendment Date, of the aggregate principal
amount of the Bonds on which Contingent Interest and Deferred Interest are then
payable, times a fraction, the numerator of which is the number of days since
the last date of calculation during the Second Period of Contingent Interest and
Deferred Interest payable on such Bonds (or the first date of the Second Period
if there is no previous date of such calculation and, in the case of the first
date of such calculation after the date which is 549 days after the end of the
Initial Period, the date that is 549 days after the end of the Initial Period)
and the denominator of which is 365 . The Maximum Primary Contingent Interest
shall be 0%, and no Maximum Primary Contingent Interest (other than the Primary
Deferred Interest Amount) shall accrue or be payable, from and after the
Amendment Date.
Maximum Supplemental Contingent Interest: means, on any payment date for
Contingent Interest and Deferred Interest specified in paragraph (d) hereof,
seven percent (7%) of the aggregate principal amount of the Bonds on which
Contingent and Deferred Interest are then payable, times a fraction, the
numerator of which is the number of days since the last date of calculation
during the Second period of Contingent Interest and Deferred Interest payable on
such Bonds (or the first date of the Second Period if there is no previous date
of such calculation) and the denominator of which is 365.
Primary Contingent Interest Rate: means an interest rate of 0% per annum
for the first six months of the Second Period, and 1.0% per annum for that
portion of the Second Period commencing on the first day of the seventh month
thereof and continuing to (but not including) the Amendment Date.
Supplemental Contingent Interest Rate: means an interest rate of 7.0% per
annum.
UNITED STATES OF AMERICA
THE IOWA FINANCE AUTHORITY
MULTIFAMILY HOUSING REVENUE BOND
(MORTENSON I PROJECT)
SERIES 1987
Number: R-2
Dated Date: March 2, 1987
Maturity Date: June 30, 2022
Registered Owner: Charter Municipal Mortgage Acceptance Company
Principal Amount: $6,100,000
The Iowa Finance Authority (the "Issuer"), for value received, promises to pay
to the registered owner hereof stated above, or registered assigns, at the
maturity date stated above, but only from the sources and as hereinafter
provided, upon presentation and surrender of this Bond at the principal office
of Boone Bank & Trust Co. in Boone, Iowa, as successor in trust to Brenton
National Bank of Des Moines, or its successor as Trustee (the "Trustee"), under
the Indenture (described below), the principal amount stated above, and to pay
Interest on said principal amount, from and including the dated date hereof
until the principal amount shall have been paid in accordance with the terms of
this Bond and the Indenture, as and when set forth below, but only from the
sources and as hereinafter provided, by wire transfer if there be one Owner of
all of the Bonds or otherwise by check or draft mailed to the record Owners of
Bonds as the same appear upon the books of registry to be maintained by the
Trustee, as registrar. Payments made on the Mortgage Loan to the Owner of this
Bond shall be for the account of the Issuer and shall discharge the Issuer's
obligations on this Bond to the extent of such payments, applying any payments
first to the Interest payable on the due date of such payment and thereafter to
principal and premium, if any.
This Bond is one of an authorized series of bonds in the aggregate principal
amount of $6,100,000 (the "Bonds") issued for the purpose of refunding an issue
of bonds previously issued by the Issuer in 1985 (the "1985 Bonds") for the
purpose of funding a loan by the Issuer to Mortenson I, A Limited Partnership
(the "Developer"), an Iowa limited partnership, for the purpose of financing the
acquisition, construction, improving and equipping of a multifamily housing
facility to be located in Ames, Iowa (the "Project") and the payment of
necessary costs incidental thereto. Capitalized terms used herein and not
defined herein shall have the meanings ascribed to them in the Indenture. The
terms and conditions of the Developers obligations with respect to the Project,
the loan of the proceeds of the Bonds to the Developer for such purpose, and the
repayment of said loan are contained in a Loan Agreement, dated as of January 1,
1987, as amended by a First Amendment to Loan Documents dated as of January 1,
1998 (the "Amendment") (which agreement, as amended by the Amendment and as from
time to time further amended and supplemented, is herein referred to as the
"Loan Agreement").
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Pursuant to the Loan Agreement, the Developer has executed and delivered to the
Trustee a Building Loan Mortgage and Security Agreement, dated as of January 1,
1987 (as amended by the Amendment, the "Mortgage") which creates a lien on and
security interest in the Mortgaged Property, as defined in the Mortgage, and an
Assignment of Leases, Rents and Other Income, dated as of January 1, 1987 (as
amended by the Amendment, the "Assignment of Leases").
The Bonds are all issued under and are equally and ratable secured by and
entitled to the protection of a Trust Indenture dated as of January 1, 1987, as
amended by a First Supplemental Indenture (the "Supplemental Indenture") dated
as of January 1, 1998 (which indenture, as amended by the Supplemental Indenture
and as from time to time further amended and supplemented, is herein referred to
as the "Indenture"), duly executed and delivered by the Issuer to the Trustee.
Reference is hereby made to the Indenture for a description of the rights,
duties and obligations of the Issuer, the Trustee and the Owners of the Bonds
and the terms upon which the Bonds are issued and secured.
This Bond and the series of which it forms a part as may be outstanding from
time to time are issued pursuant to and in full compliance with the Constitution
and laws of the State of Iowa, particularly Chapter 16 (formerly Chapter 220) of
the Code of Iowa, 1997, as amended (the "Act"), and pursuant to a duly adopted
Resolution of the governing body of the Issuer, which Resolution authorizes the
execution and delivery of the Indenture. THE BONDS ARE NOT GENERAL OBLIGATIONS
OF THE ISSUER NOR AN INDEBTEDNESS OF THE ISSUER OR THE STATE OF IOWA OR ANY
SUBDIVISION THEREOF WITHIN ANY CONSTITUTIONAL OR STATUTORY LIMITATIONS, BUT ARE
LIMITED, SPECIAL OBLIGATIONS PAYABLE SOLELY FROM REVENUES DERIVED FROM THE
PROJECT, INCLUDING THE DEBT OBLIGATION OF THE DEVELOPER UNDER THE LOAN AGREEMENT
AND THE DEVELOPER NOTE, DATED THE DATE HEREOF (THE "ORIGINAL NOTE"), AS AMENDED
BY AN ALLONGE TO PROMISSORY NOTE DATED AS OF JANUARY 1, 1998 (THE "ALLONGE")
(THE ORIGINAL NOTE AND THE ALLONGE BEING HEREIN REFERRED TO AS THE "DEVELOPER
NOTE"), WHICH OBLIGATION WILL BE SUFFICIENT TO PAY THE PRINCIPAL OF AND INTEREST
AND PREMIUM, IF ANY, ON THE BONDS AS THE SAME BECOME DUE AND PAYABLE. THE BONDS
AND INTEREST AND PREMIUM, IF ANY, THEREON DO NOT CONSTITUTE AN INDEBTEDNESS OF
THE STATE OF IOWA OR ANY SUBDIVISION THEREOF, INCLUDING THE ISSUER WITHIN THE
MEANING OF ANY CONSTITUTIONAL OR STATUTORY LIMITATION AND DO NOT CONSTITUTE NOR
GIVE RISE TO A PECUNIARY LIABILTITY OF THE STATE OF IOWA OR ANY SUBDIVISION
THEREOF, INCLUDING THE ISSUER OR A CHARGE AGAINST THEIR GENERAL CREDIT OR
GENERAL FUNDS. The rights of the Issuer under the Loan Agreement and the
Developer Note have been assigned to the Trustee to secure the payment of such
principal, interest and premium, if any, under the Indenture. The loan repayment
installments of the Developer under the Loan Agreement and the Developer Note
are to be paid to the Trustee for the account of the
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<PAGE>
Issuer and deposited in a special trust fund account created by the Issuer,
maintained by the Trustee and designated "Iowa Finance Authority, Multifamily
Housing Revenue Bonds (Mortenson I Project) Revenue Fund," and have been and are
hereby duly pledged for that purpose. Additional payments are required to be
made by the Developer under the Loan Agreement sufficient to pay the fees and
expenses of the Trustee, bond registrar and paying agent, in connection with the
Bonds, taxes and assessments relating to the Project and reasonable expenses of
the Issuer relating to the Project.
Interest on the Bonds.
- - ----------------------
(a) General. The Bonds shall bear interest as provided below.
(b) Base Interest. Until the Conversion Date, the Bonds shall bear base
interest calculated and payable as follows (which interest is referred to herein
as "Base Interest"):
(1) During the Initial Period, the Bonds shall bear Base Interest at
a rate equal to 9.75% per annum payable on each payment date specified in
paragraph (e)(1) below.
(2) During the Second Period, the Bonds shall bear Base Interest at a
rate equal to 9.0% per annum for the first 549 days; 8.0% per annum from
the 550th day to (but not including) the Amendment Date; and 7.25% per
annum thereafter, payable on each payment date specified in paragraph
(e)(1) below.
(3) During the period of time of the Initial Period between the
issuance of the Bonds and the first Interest Payment Date for Base
Interest, the Bonds shall also bear interest such that there shall be
payable (to or upon the order of the registered Owners of the Bonds) Base
Interest on the Bonds on the first Interest Payment Date for Base Interest
in the amount of $244,000.
(4) In addition to the Base Interest which accrues and is payable as
described in paragraph (b)(1), (2) and (3) above, an additional fee shall
accrue on the Bonds from the Amendment Date to December 31, 1998 in the
amount of $25,000, and shall be payable at the rate of $2,083.33 monthly
commencing on the first Interest Payment Date for Base Interest in April,
1998 and continuing through the first Interest Payment Date for Base
Interest in March, 1999. Such fee will not be treated as interest.
Subject to the foregoing, Base Interest shall be calculated on the basis of a
year of 365 days, actual days elapsed.
(c) Contingent Interest. After the Initial Period and until the Conversion
Date, the Bonds also shall bear interest calculated and payable as follows:
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<PAGE>
(1) During each year or part thereof of the Second Period, to (but
not including) the Amendment Date, the Bonds shall bear interest at an
annual rate equal to the Primary Contingent Interest Rate payable on the
basis and to the extent of 100% of Net Cash Flow for each such year, or
part thereof, or, to the extent not fully paid on or before the Amendment
Date because 100% of Net Cash Flow is insufficient, on the basis and to the
extent of 100% of Net Sale or Refinancing Proceeds, all as provided below.
Contingent Interest equal to Maximum Primary Contingent Interest shall
be payable on the Bonds on each payment date prior to the Amendment Date
specified in paragraph (e)(2) below on the basis and to the extent of 100%
of Net Cash Flow, measured for purposes of such payment and subject to the
adjustments and reconciliation as specified in paragraph (f) below. If 100%
of Net Cash Flow is insufficient to pay the Maximum Primary Contingent
Interest on such dates, then there shall be payable the maximum amount
possible to the extent of 100% of Net Cash Flow (which amount is referred
to as the "Primary Contingent Interest"). The difference between the
Maximum Primary Contingent Interest and the Primary Contingent Interest
shall be deferred with interest thereon at 9.0% per annum, compounded
annually, with respect to all such interest accrued and unpaid to (but not
including) the Amendment Date, and without interest thereafter, until paid
(such difference together with the compounded interest thereon is referred
to collectively with all such amounts previously deferred and unpaid as
"Primary Deferred Interest"). Primary Deferred Interest in the amount of
$657,070 which remains accrued and unpaid as of the Amendment Date (which
amount is referred to as the "Primary Deferred Interest Amount") shall be
deferred without interest until paid, and shall thereafter be payable on
the earliest possible payment dates specified in paragraph (e)(3) hereof on
the basis and to the extent of 100% of Net Sale or Refinancing Proceeds,
after the payment of accrued Base Interest (and interest thereon), and
prior to the payment of Supplemental Deferred Interest and Supplemental
Contingent Interest payable from Net Sale or Refinancing Proceeds.
From and after the Amendment Date, no further Maximum Primary
Contingent Interest (other than the Primary Deferred Interest Amount) shall
be due or payable.
(2) During each year or part thereof of the Second Period, the Bonds
shall also bear Contingent Interest at an annual rate equal to the
Supplemental Contingent Interest Rate payable on the basis and to the
extent of 25% of so much of Net Cash Flow for each such year, or part
thereof, as remains after reducing Net Cash Flow by the amount of any
payments on the basis of Net Cash Flow specified above in paragraph (c)(1)
or, to the extent not fully paid because 25% of Net Cash Flow remaining
after reducing Net Cash Flow by the amount of such
Page 4
<PAGE>
payments is insufficient, on the basis and to the extent of 25% of so much
of Net Cash Flow as remains after reducing Net Cash Flow by the amount of
any payments on the basis of Net Cash Flow specified above in paragraph
(c)(1) and 25% of so much of Net Sale or Refinancing Proceeds as remains
after reducing Net Sale or Refinancing Proceeds by the amount of any
payments on the basis of Net Sale or Refinancing Proceeds specified above
in paragraph (c)(1), all as provided below.
Contingent Interest equal to Maximum Supplemental Contingent Interest
shall be payable on the Bonds on each payment date specified in paragraph
(e)(2) below on the basis and to the extent of 25% of so much of Net Cash
Flow as remains after reducing Net Cash Flow by the amount of any payments
on the basis of Net Cash Flow specified above in paragraph (c)(1), measured
for purposes of such payment and subject to the adjustments and
reconciliation as specified in paragraph (f) below. If 25% of Net Cash Flow
after such payments is insufficient to pay the Maximum Supplemental
Contingent Interest payable on any payment date specified in paragraph
(e)(2) below, then there shall be payable the maximum amount possible on
the basis and to the extent of 25% of Net Cash Flow after such payments
(which amount is referred to as the "Supplemental Contingent Interest").
The difference between the Maximum Supplemental Contingent Interest and the
Supplemental Contingent Interest shall be deferred without interest (such
difference is referred to collectively with all such amounts previously
deferred and unpaid as the "Supplemental Deferred Interest") and shall
thereafter be payable on the earliest possible payment dates specified in
paragraph (e)(2) below on the basis and to the extent of 25% of so much of
Net Cash Flow as remains after reducing Net Cash Flow by the amount of any
such payments on the basis of Net Cash Flow specified above in paragraph
(c)(1), measured for purposes of such payment and subject to the
adjustments and reconciliation as specified in paragraph (f) below.
Supplemental Deferred Interest shall be paid on the basis and to the extent
of 25% of Net Cash Flow remaining after reducing Net Cash Flow by the
amount of such payments specified in paragraph (c)(1) before any
Supplemental Contingent Interest is paid on such basis.
To the extent that Maximum Supplemental Contingent Interest and all
Supplemental Deferred Interest are not fully paid on the basis and to the
extent of 25% of Net Cash Flow remaining after reducing Net Cash Flow by
the amount of such payments on payment dates specified in paragraph (e)(2)
below, they shall be payable on the basis and to the extent of 25% of so
much of Net Sale or Refinancing Proceeds as remains after reducing Net Sale
or Refinancing Proceeds by the amount of any payments on the basis of Net
Sale or Refinancing Proceeds specified above in paragraph (c)(1) on the
earliest possible payment dates specified in paragraph (e)(3) below,
including a then current payment date for Contingent Interest and Deferred
Interest payable on the basis and to the extent of Net Cash Flow specified
in paragraph (e)(2)(iii) below.
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<PAGE>
(d) Reserved.
(e) Payment Dates for Interest. The Interest payable on the Bonds as
provided above shall be payable on the following dates:
(1) Base Interest shall be payable (i) on each Interest Payment Date
for Base Interest, (ii) on each redemption date before the Conversion Date
(but only with respect to the Bonds redeemed), and (iii) on the Conversion
Date.
(2) Contingent Interest and Deferred Interest that is payable on the
basis of Net Cash Flow shall be payable (i) on each Interest Payment Date
for Contingent Interest and Deferred Interest to and including the
Conversion Date, (ii) on each redemption date during the Second Period (but
only with respect to the Bonds redeemed), (iii) on each date on which
Contingent Interest and Deferred Interest is payable from Net Sale or
Refinancing Proceeds (as provided in paragraph (e)(3) below), and (iv) on
the Conversion Date.
(3) Contingent Interest and Deferred Interest that is payable on the
basis of Net Sale or Refinancing Proceeds shall be payable on the next
Interest Payment Date for any interest succeeding by at least thirty (30)
days the date of the Event of Sale or Refinancing relating to the Sale of
the Project or Refinancing of the Project, except in the case of (x) a
Refinancing of the Project described in clause (i) or (iv) of the
definition thereof, in which case it shall be payable on the redemption
date or payment date, as the case may be, (y) a Sale of the Project
described in clause (i) of the definition thereof resulting in a call of
the Bonds for redemption pursuant to Section 4.01(f) of the Indenture, in
which case it shall be payable on the redemption date, or (z) a Refinancing
of the Project described in clause (ii) of the definition thereof, in which
case it shall be payable on the Initial Remarketing Date.
(f) Calculation of Net Cash Flow.
(1) (i) No later than thirty (30) days before each payment date for
Contingent Interest and Deferred Interest specified in paragraph (e) (2)
above (or such lesser number of days as shall be the maximum number of days
possible if the payment date was not known until less than forty (40) days
before the payment date), the Developer shall calculate Net Cash Flow for
the three-month period ending on the last day of the third preceding month
before such payment date and shall provide the Trustee (but only after the
Trustee has accepted the duty to calculate interest pursuant to the
Indenture) and the Owners (if fewer than three) (i) the analysis of such
Net Cash Flow, (ii) unaudited financial statements of the Project for such
three-month period and (iii) a calculation of the amount of Contingent
Interest and Deferred Interest then payable.
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<PAGE>
(ii) Notwithstanding the foregoing in clause (i), (A) except as
may result from adjustments and reconciliation provided below in this
paragraph (f), the period of time for which Net Cash Flow is measured for
purposes of a payment date for Contingent Interest and Deferred Interest on
any Bonds specified in paragraph (e)(2) hereof shall not include any time
for which Net Cash Flow has been measured for purposes of a previous
payment date for Contingent Interest and Deferred Interest on such Bonds
specified in paragraph (e)(2) hereof, and (B) the calculation of Net Cash
Flow and the amount of Contingent Interest and Deferred Interest payable
therefrom on the Conversion Date shall be reconciled and adjusted to give
effect to the actual amount of Net Cash Flow for the current calendar year
(and the preceding calendar year if the Conversion Date falls before
delivery of the audit referred to in paragraph (f)(2) hereof in the current
calendar year) up to but not including the Conversion Date (such actual
amount of Net Cash Flow being measured by the actual amount known as of the
most recent possible date and an amount reasonably estimated to be earned
between such date and the Conversion Date) and all Contingent Interest and
Deferred Interest paid during the current calendar year (and the preceding
calendar year if the Conversion Date falls before delivery of the audit
referred to in paragraph (f)(2) hereof in the current calendar year) in the
manner described in paragraph (f)(3) below, except that any underpayments
or overpayments of Contingent Interest and Deferred Interest shall be paid
or refunded, as the case may be, on the Conversion Date.
(iii) The amount of Net Cash Flow reflected in the analysis
described above, as adjusted in the case of the analysis in connection with
the Conversion Date, shall provide the basis for the calculation of
Contingent Interest and Deferred Interest payable on the basis of Net Cash
Flow on each payment date therefor specified in paragraph (e)(2) hereof,
except as provided below. The Trustee, upon direction of the owners of a
majority in principal amount of the Bonds (if it has accepted the duty to
calculate interest thereon pursuant to the Indenture), or the Owners of a
majority in principal amount of Bonds themselves, may request further
substantiation of the Developer's calculation of Net Cash Flow and may
verify and correct as necessary the calculations thereof. If the Trustee or
the Owners of a majority in principal amount of the Bonds do so reasonably
modify such calculation, the Trustee or such Owners shall notify the
Developer of such modified calculation no later than ten (10) Business Days
before such payment date (or such lesser number of days as shall be the
maximum number of days practicable if the Trustee or such Owners received
the calculation of Net Cash Flow less than thirty (30) days before the
payment date) and such modified calculation shall be the basis for the
calculation of Contingent Interest and Deferred Interest payable on the
basis of Net Cash Flow on the payment date. Except to the extent provided
in this paragraph (f)(1) with respect to the Conversion Date, the analysis
and payment on the basis of Net Cash Flow
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<PAGE>
described in this paragraph (f)(1) is intended to provide a preliminary
payment of Contingent Interest and Deferred Interest on the basis of Net
Cash Flow prior and subject to the adjustment and reconciliation process
described in paragraphs (f)(2) and (f)(3) hereof.
(2) No later than February 28 of each calendar year (up to and,
unless the Conversion Date falls before delivery of the audit, including
the calendar year in which the Conversion Date occurs) the Developer shall
provide to the Trustee and the Owners of the Bonds (if fewer than three) an
audit of the operations of the Project for the preceding calendar year
prepared and certified by an Accountant acceptable to the Trustee (if it
has accepted the duty to calculate interest pursuant to the Indenture) and
the Owners (if fewer than three) in accordance with generally accepted
auditing standards. The audit shall state the actual amount of Net Cash
Flow for that calendar year and shall calculate all Contingent Interest and
Deferred Interest paid and payable from Net Cash Flow during such calendar
year pursuant hereto.
(3) The audit prepared as described in paragraph (f)(2) shall state
the amount of Contingent Interest and Deferred Interest payable and paid
during the subject calendar year. If the amounts of Contingent Interest and
Deferred Interest payable on the basis of Net Cash Flow (measured on the
basis of actual Net Cash Flow for such calendar year according to the
audit) exceeded the amount paid, then there shall be payable to the Owners
of the Bonds any such payable and unpaid amounts on the payment date for
Contingent Interest and Deferred Interest specified in paragraph (e)(2)
hereof immediately following the receipt by the Trustee and the said Owners
of the audit. If the amount of Contingent Interest and Deferred Interest
payable on the basis of Net Cash Flow (measured on the basis of actual Net
Cash Flow for such calendar year according to the audit) is less than the
amount actually paid, such overpaid amount shall be credited against any
other interest payments (whether Base Interest or Contingent Interest and
Deferred Interest) or other payments due from the Issuer to the Owners of
the Bonds on the Bond Payment Date (or Bond Payment Dates) immediately
following the receipt by the Trustee and the said Owners of the audit and
the Owners shall not be required to refund any such amount unless the
crediting does not exhaust the overpayment, in which case the balance of
the overpayment will be refunded by the Owners on the Conversion Date.
(g) Fair Market Value of the Project for Purposes of Determining Refinancing
Proceeds.
(1) In order to calculate the fair market value of the Project for
purposes of determining Sale or Refinancing Proceeds in the event of a
Refinancing of the Project (other than a Refinancing of the Project
described in clause (iii) of the definition thereof) the fair market value
of the Project is required
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<PAGE>
to be determined as set forth below, such determination to be completed no
later than fifteen (15) days before the date on which Contingent Interest
and Deferred Interest are payable on the basis and to the extent of Net
Sale or Refinancing Proceeds or as soon thereafter as possible (but not
after the said payment date if the notice described in the following
sentence cannot be given at the time specified). The Developer shall give
notice to the Trustee and to the Owners of the Bonds of the impending
Refinancing of the Project at least ninety (90) days before the expected
date of Refinancing of the Project or as much notice as is possible,
promptly upon learning of the impending Refinancing of the Project. The
Owners of all of the Bonds and the Developer may jointly determine and
agree upon the fair market value of the Project but must do so at least
sixty (60) days before the proposed date of the Refinancing of the Project;
failing such agreement the Owners of a majority in principal amount of the
Bonds shall select an independent M.A.I. appraiser and the Developer shall
select an independent M.A.I. appraiser. The appraisers shall jointly
determine and agree upon the fair market value of the Project. If the two
appraisers are unable to agree upon the fair market value of the Project at
least thirty (30) days before the proposed date of the Refinancing of the
Project, the Owners and the Developer shall select a third independent
M.A.I. appraiser. If such Owners and the Developer are unable to agree upon
a third appraiser by such date, the two appraisers shall select the third
appraiser. If the two appraisers are unable to agree upon the third
appraiser at least twenty-five (25) days before the proposed date of the
Refinancing of the Project, such Owners or Developer may petition any court
of competent jurisdiction for the appointment of the third independent
appraiser. As early as practicable, but prior to the expected date of the
Refinancing of the Project, the third appraiser shall select from between
the two appraisals the one which the third appraiser believes to assess
more accurately the fair market value of the Project and the appraisal so
selected shall be the fair market value of the Project, shall provide the
basis for the calculation of Contingent Interest and Deferred Interest
payable on the basis of Net Sale or Refinancing Proceeds in the event of a
Refinancing of the Project (other than a Refinancing of the Project
described in clause (iii) of the definition thereof) on each payment date
therefor specified in paragraph (e)(3) hereof and shall be binding upon the
Developer and the Owners of the Bonds. The fees and expenses of the
appraiser selected by each party shall be borne by the party selecting the
appraiser and the cost of the third appraiser shall be borne equally by the
Developer and the Owners of the Bonds.
(2) The fair market value of the Project for purposes of this
paragraph (g) shall reflect the amount each appraiser believes an informed
and willing purchaser under no compulsion to purchase the Project would pay
to an informed and willing seller under no compulsion to sell the Project,
less those costs of a sale appropriate to the marketplace within which the
Project would be sold. Such determination shall take into consideration
such factors as the appraisers may deem relevant. Except as provided below,
the fair market value of the Project set
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<PAGE>
forth in an appraisal shall be determined as of the date of such appraisal.
(3) If the Refinancing of the Project is based upon a redemption of
Bonds pursuant to Section 4.01(d) of the Indenture, the fair market value
of the Project shall be determined as of the day before the occurrence of
any events requiring the payment of Insurance Proceeds or a Condemnation
Award, as if such events had not occurred and were not anticipated.
(h) Interest During a Variable Rate Period. From and after the Initial
Remarketing Date, if all of the Bonds then Outstanding have been remarketed in
accordance herewith, the Bonds shall bear interest at a rate determined as
follows:
(1) On a Business Day not prior to ten (10) Business Days prior to
the Initial Remarketing Date and each subsequent Remarketing Date, the
Remarketing Agent, having due regard to prevailing market conditions, shall
determine the interest rate (the "Variable Rate") which, if borne by the
Remarketed Bonds on such date, would be the interest rate, but would not
exceed the interest rate, which would result in the market value of the
Remarketed Bonds on such day (as if such day were the first day of such
Remarketing Period) being 100% of the principal amount thereof (together
with interest if any, accrued thereon; provided, however, that in no event
shall the Variable Rate exceed 14.5% per annum or the maximum lawful rate,
whichever is less. If for any reason the Variable Rate so determined by the
Remarketing Agent shall be held to be invalid or unenforceable by a court
of competent jurisdiction, the Remarketing Agent shall determine the
interest rate for such Remarketing Period, which shall be a percentage of
the 11-Bond Index (as published in The Bond Buyer; or if such Index is not
available, an index comparable to such Index, in the judgment of the
Remarketing Agent) for the most recent period for which information is
available, computed in accordance with the following table:
<TABLE>
<CAPTION>
If the length But the length of the The applicable
of the Remarketing Remarketing Period percentage of the
Period (in years) (in years) is less 11-Bond Index
is at least: than: is:
---------------------------------------------------------------------------
<S> <C> <C>
5 or greater (N.A.) 85%
1 5 80
</TABLE>
The Remarketing Agent shall promptly, upon the determination of the
Variable Rate, notify the Issuer, the Developer, the Owners and the Trustee
of the Variable Rate. The determination of the Variable Rate for a
Remarketing Period shall be conclusive and binding upon the Owners of the
Bonds, the Issuer, the Trustee and the Developer. The Trustee shall
immediately give written notice (which may include written notice by
electronic means) to the Owners of all of the Bonds of
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<PAGE>
the Variable Rate for the period between the next succeeding Remarketing
Date and the second succeeding Remarketing Date.
(2) No more than sixty (60) days, but at least forty-five (45) days
prior to the Initial Remarketing Date, the Developer shall notify the
Owners (if no more than three), the Trustee and the Remarketing Agent of
the length of the proposed Remarketing Period commencing on the Initial
Remarketing Date, which shall extend for one (1) or more years. Subsequent
to the Initial Remarketing Date, the Developer will establish subsequent
Remarketing Dates as follows: no more than sixty (60) days, but at least
forty-five (45) days, prior to each Remarketing Date, the Developer will
notify the Owners of the Bonds, the Issuer, the Trustee and the Remarketing
Agent of the proposed subsequent Remarketing Date, which shall be one (1)
or more years from the next Remarketing Date. The Developer shall also
specify the interest payment dates if different than January 1 and July 1;
provided that the interest payment dates specified may be no more frequent
than once each month.
(3) Notice of the Remarketing Date shall be given by the Trustee not
later than the twenty-fifth (25th) day preceding such Remarketing Date by
registered or certified mail to the Owners of all Outstanding Bonds and
such notice shall state that the Bonds are subject to mandatory tender on
the Remarketing Date, unless the Owner thereof waives such tender, shall
indicate the subsequent Remarketing Date, if any, and shall include a form
to indicate the election not to tender Bonds.
(4) Interest on the Bonds during the Variable Rate Period shall be
payable on each Interest Payment Date therefor and shall be calculated, to
the extent allowed by applicable law, on the basis of a year of 365 days
and the actual number of days elapsed.
Notwithstanding anything elsewhere contained in this Bond, (a) total Interest
paid on this Bond (including any Interest payable in accordance with Section
7.10 of the Indenture), cumulative from the original date of issuance of the
Bond, shall not exceed the sum of 14.5% per annum, simple and noncompounded for
each year (calculated on the basis of a 365-day year, actual number of days
elapsed) from such date of issuance to the date of calculation; and (b) if the
interest rate on this Bond shall at any time be deemed to be in excess of the
maximum rate allowed by law then the Bond shall instead bear interest at the
maximum rate permitted by such law. Any excess payment of such interest shall be
deemed to be a credit against the unpaid principal amount of this Bond.
The foregoing interest provisions are a summary of those contained in the
Indenture, and reference is hereby made to the Indenture for a full statement of
their terms, which are incorporated herein by reference.
Limited Recourse. Pursuant to a Loan Agreement and Developer Note, the
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Developer has agreed to make payments to the Issuer in amounts equal to amounts
of principal of and premium, if any, and Interest on the Bonds. THE OBLIGATIONS
OF THE ISSUER ON THIS BOND ARE EXPRESSLY LIMITED TO AND ARE PAYABLE SOLELY FROM
(I) THE PAYMENTS MADE PURSUANT TO THE LOAN AGREEMENT AND THE DEVELOPER NOTE BY
THE DEVELOPER, AND THE SECURITY THEREFOR PROVIDED BY THE MORTGAGE AND THE
ASSIGNMENT OF LEASES AND (II) ANY ADDITIONAL SECURITY PROVIDED IN THE INDENTURE.
THE OBLIGATIONS OF THE DEVELOPER UNDER THE LOAN AGREEMENT, THE DEVELOPER NOTE
AND THE MORTGAGE ARE NON-RECOURSE TO THE DEVELOPER, AND ARE ENFORCEABLE SOLELY
AGAINST THE PROJECT, EXCEPT AS OTHERWISE PROVIDED THEREIN. ANY PAYMENTS MADE ON
THE MORTGAGE LOAN TO THE OWNER OF THIS BOND SHALL BE FOR THE ACCOUNT OF THE
ISSUER AND SHALL DISCHARGE THE ISSUERS OBLIGATIONS ON THIS BOND TO THE EXTENT OF
SUCH PAYMENT, APPLYING ANY PAYMENT TO INTEREST FIRST.
Transfer. This Bond is transferable by the registered owner hereof in
person or by his attorney duly authorized in writing at the office of the
Trustee as registrar, but only in the manner, subject to the limitations and
upon payment of the charges provided in the Indenture, and upon surrender and
cancellation of this Bond. Upon such transfer a new registered Bond or Bonds, of
any authorized denomination or denominations, of the same maturity and for the
same aggregate principal amount will be issued to the transferee in exchange
hereto.
Prior to the Conversion Date a Bond may only be transferred (i) to any
affiliate of the Partnership, to an affiliate with the same or substantially the
same general partners as the Partnership, to any entity arising out of any
merger or consolidation of the Partnership, by operation of law, or to a trustee
in bankruptcy of the Partnership; (ii) by an assignment to a bank or other
financial institution issuing a letter of credit or like instrument in
connection with the Mortgage Loan; or (iii) to one or more Institutional
Investors if, in each instance, the Issuer and the Trustee receive from the
transferee its agreement to the transfer restrictions set forth in this
paragraph in connection with subsequent transfers of the Bond.
The Bonds are issuable as fully registered Bonds in Authorized
Denominations as provided in the Indenture.
Redemption of Bonds. The Bonds are subject to redemption by the Issuer
prior to maturity as a whole or in part at such time or times, under such
circumstances, at such redemption prices and in such manner as is set forth in
the Indenture.
Remarketing in Lieu of Redemption of Bonds on Initial Remarketing Date.
Upon an election by the Owner of a redemption in whole of the Bonds pursuant to
Section 4.01(h) of the Indenture, at the direction of the Developer given not
less than sixty (60)
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<PAGE>
days in advance, either (i) the Bonds shall be redeemed on the date specified in
the notice to the Issuer, the Trustee, and the Developer from the Owners
described in Section 4.01(h) of the Indenture or (ii) the Bonds will be deemed
tendered for purchase and remarketed as provided in Article V of the Indenture
on the date specified in the notice to the Issuer, the Trustee, and the
Developer from the Owner described in Section 4.01(h), or on such earlier
Interest Payment Date selected by the Developer in its direction to remarket the
Bonds but in no event before the first Interest Payment Date following the
Reference Month in 2008. The purchase price of Bonds so remarketed in lieu of
redemption shall be the principal amount thereof together with all accrued and
unpaid Interest (including all Base Interest, Contingent Interest and Deferred
Interest then payable) and shall be payable on the Initial Remarketing Date.
Such purchase price, regardless of the amount of Net Cash Flow and Net Sale or
Refinancing Proceeds available to be applied to such purchase, shall be not less
than the principal amount of such Bonds together with all accrued and unpaid
Base Interest and the Primary Deferred Interest Amount. If the conditions to
remarketing of the Bonds set forth in Article V of the Indenture are not
satisfied, or if the Bonds are not successfully remarketed, or if the full
purchase price thereof is not paid on the Initial Remarketing Date, or if all
Interest (including Contingent Interest and Deferred Interest then payable) and
principal payable on the Bonds up to and including the Initial Remarketing Date
has not been fully paid, then all Bonds tendered shall be redeemed and not
remarketed pursuant to Section 4.01(e) of the Indenture.
Mandatory Tender of Bonds. The Bonds shall be subject to mandatory tender
to the Remarketing Agent on each Remarketing Date after the Initial Remarketing
Date for purchase by the Remarketing Agent, at a purchase price equal to the
principal amount thereof plus accrued Interest to the purchase date; provided,
however, that there need not be tendered on such Remarketing Date any Bonds with
respect to which the Remarketing Agent shall have received from the Owners
thereof a written notice at least five (5) Business Days prior to the applicable
Remarketing Date expressly electing not to tender their Bonds for purchase. Such
purchase price, regardless of the amount of Net Cash Flow and Net Sale or
Refinancing Proceeds available to be applied to such purchase, shall be not less
than the principal amount of such Bonds together with all accrued and unpaid
Base Interest and the Primary Deferred Interest Amount. Any such election may
not relate to a portion of any Bond held by the Owner, such election may apply
only to the entire principal amount of any Bond or Bonds.
Tendered Bonds. Any Bonds that are the subject of mandatory tender for
purchase but are not the subject of elections to retain the Bonds received by
the Remarketing Agent in a timely fashion shall be conclusively deemed tendered
for purchase on the Remarketing Date. If the Owner selects a redemption date for
redemption of the Bonds in accordance with Section 4.01(h) of the Indenture and
the Developer makes the remarketing election permitted by Section 4.04 of the
Indenture, all Bonds shall be conclusively deemed tendered for purchase on the
Initial Remarketing Date. All Bonds that are actually tendered for purchase
pursuant to the Indenture or are
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<PAGE>
deemed tendered for purchase on a Remarketing Date, including the Initial
Remarketing Date, shall constitute tendered Bonds for purposes of the Indenture;
all tendered Bonds that are not actually delivered for purchase on a Remarketing
Date, including the Initial Remarketing Date shall constitute "Undelivered
Bonds" for purposes of the Indenture. Undelivered Bonds that have been
remarketed in accordance with the Indenture shall be deemed to have been
purchased if the purchase price therefor shall have been deposited therefor and
held by the Remarketing Agent; and the parties to whom the Remarketing Agent
shall have remarketed Undelivered Bonds so remarketed shall be the owners of
such Undelivered Bonds for all purposes under the Indenture, including without
limitation the right to transfer such Bonds. Interest accruing from and after
the Remarketing Date on such Undelivered Bonds shall no longer be payable to the
former Owners thereof but shall be paid to the new registered owners thereof.
Former Owners of Undelivered Bonds so remarketed shall not be deemed to be
Owners of Bonds under the Indenture, and such Undelivered Bonds shall not be
deemed Outstanding for purposes of the Indenture, except for purposes of payment
of the purchase price of such Undelivered Bonds upon surrender thereof to the
Remarketing Agent.
Enforcement. Only the Acting Party shall have the right to enforce the
provisions of this Bond or the Indenture or to institute any action to enforce
the covenants herein or therein, or to take any action with respect to any Event
of Default under the Indenture, or to institute, appear in or defend any suit or
other proceedings with respect thereto, except as provided in the Indenture. If
an Event of Default occurs and is continuing, the principal of all Bonds then
outstanding (together with all unpaid Interest thereon) may be declared due and
payable by the Acting Party upon the conditions and in the manner and with the
effect provided in the Indenture.
The Issuer, the Trustee, and any other person may treat the person in whose
name this Bond is registered on the books of registry as the Owner hereof for
the purpose of receiving payment as herein provided and for all other purposes,
whether or not this Bond be overdue, and no person shall be affected by notice
to the contrary.
Discharge. The Indenture prescribes the manner in which it may be
discharged and after which the Bonds shall be deemed to be paid and no longer be
secured by or entitled to the benefits of the Indenture, except for certain
purposes, including the purposes of registration and exchange of Bonds and of
such payment.
Modifications. Modifications or alterations of the Indenture, or of any
supplements thereto, may be made only to the extent and in the circumstances
permitted by the Indenture.
By its acceptance of this Bond, the Owner hereof agrees that it will be
bound by and accepts the provisions of the Indenture and the Loan Documents (as
defined in the Loan Agreement). This Bond shall not be valid or obligatory for
any purpose until it shall have been signed on behalf of the Issuer and such
signature attested, by the officer, and in
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<PAGE>
the manner, provided in the Indenture, and authenticated by a duly authorized
officer of the Trustee, as Authenticating Agent.
It is hereby certified and recited that all conditions, acts and things
required by the Constitution or statutes of the State or by the Act or the
Indenture to exist, to have happened or to have been performed precedent to or
in the issuance of this Bond exist, have happened and have been performed.
Page 15
<PAGE>
IN WITNESS WHEREOF, the Iowa Finance Authority has caused this Bond to be
executed in its name with the fascimile signature of its Chairman and attested
by the facsimile signature of its Secretary, and its corporate seal to be
hereunto imprinted, all as of the first day of January, 1998.
IOWA FINANCE AUTHORITY
(SEAL)
By: /s/ James W. Balmer
-------------------------------
Chairman
Attest:
/s/ Ted R. Chapler
- - ---------------------------
Its: Secretary
CERTIFICATE OF AUTHENTICATION
-----------------------------
This Bond is one of the Bonds described in the within mentioned Indenture
and is one of the Multifamily Housing Revenue Bonds (Mortenson I Project) Series
1987 as modified and restated, of the Iowa Finance Authority.
BOONE BANK & TRUST CO.
(SEAL)
By: /s/ Mark A. Gustafson
------------------------------
Authorized Officer
Date of Authentication:
April 20, 1998
Page 16
<PAGE>
FORM OF ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto ________________________________ the within Multifamily Housing Revenue
Bond (Mortenson I Project) Series 1987, of the Iowa Finance Authority, and
hereby authorizes the transfer of this Bond on the registration books of the
Fiduciary.
Dated:
------------------------------------
------------------------------------------
Authorized Signature
------------------------------------------
Name of Transferee
Signature Guaranteed by:
------------------------------------------
------------------------------------------
Name of Bank
By:
---------------------------------------
Title:
------------------------------------
Page 17
<PAGE>
DEFINITIONAL APPENDIX
"Amendment Date" shall mean January 1, 1998.
"Interest" shall mean all Base Interest, Contingent Interest, Deferred
Interest (including the Primary Deferred Interest Amount), any interest thereon,
and, subject to paragraph (h) hereof, any and all other amounts paid other than
principal of and premium with respect to the Bonds.
"Maximum Primary Contingent Interest" shall mean, on any payment date for
Contingent Interest and Deferred Interest specified in paragraph (e) of Section
3.06 of the Indenture, 0% for the first 549 days of the Second Period, and 1.0%
for that portion of the Second Period commencing on the 550th day thereof and
continuing to (but not including) the Amendment Date, of the aggregate principal
amount of the Bonds on which Contingent Interest and Deferred Interest are then
payable, times a fraction, the numerator of which is the number of days since
the last date of calculation hereunder during the Second Period of Contingent
Interest and Deferred Interest payable on such Bonds (or the first date of the
Second Period if there is no previous date of such calculation and, in the case
of the first date of such calculation after the date which is 549 days after the
end of the Initial Period, the date that is 549 days after the end of the
Initial Period) and the denominator of which is 365. The Maximum Primary
Contingent Interest shall be 0%, and no Maximum Primary Contingent Interest
(other than the Primary Deferred Interest Amount) shall be due or payable, from
and after the Amendment Date.
"Maximum Supplemental Contingent Interest" shall mean, on any payment date
for Contingent Interest and Deferred Interest specified in paragraph (e) hereof,
7.0% of the aggregate principal amount of the Bonds on which Contingent Interest
and Deferred Interest are then payable, times a fraction, the numerator of which
is the number of days since the last date of calculation during the Second
Period of Contingent Interest and Deferred Interest payable on such Bonds (or
the first date of the Second Period of there is no previous date of such
calculation) and the denominator of which is 365.
"Primary Contingent Interest Rate" shall mean an interest rate of 0% per
annum for the first 549 days of the Second Period, and 1.0% per annum for that
portion of the Second Period commencing on the 550th day thereof and continuing
to (but not including) the Amendment Date.
"Supplemental Contingent Interest Rate" shall mean an interest rate of 7.0%
per annum.
Page 18
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The Schedule contains summary financial information
extracted from the financial statements for Charter
Municipal Mortgage Acceptance Company and is
qualified in its entirety by reference to such
financial statements
</LEGEND>
<CIK> 0001043325
<NAME> Charter Municipal Mortgage Acceptance Company
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-1-1998
<PERIOD-END> MAR-31-1998
<CASH> 733,925
<SECURITIES> 345,653,614
<RECEIVABLES> 8,271,762
<ALLOWANCES> 382,694
<INVENTORY> 0
<CURRENT-ASSETS> 5,285,105
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 361,844,129
<CURRENT-LIABILITIES> 5,968,763
<BONDS> 21,540,245
0
0
<COMMON> 0
<OTHER-SE> 331,186,707
<TOTAL-LIABILITY-AND-EQUITY> 361,844,129
<SALES> 0
<TOTAL-REVENUES> 6,077,589
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 484,857
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 344,770
<INCOME-PRETAX> 5,247,962
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,247,962
<EPS-PRIMARY> .24
<EPS-DILUTED> 0
</TABLE>
