SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 1997
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 governing instrument)
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
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (212) 421-5333
Securities registered pursuant to Section 12(b) of the Act:
Shares of Beneficial Interest
Securities registered pursuant to Section 12(g) of the Act:
None
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 ___
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
The approximate market value of the voting stock held by non-affiliates
of the Registrant as of March 9, 1998 was $279,250,282, based on a price of $13
13/16 per share, the closing sales price for the Registrant's shares of
beneficial interest on the American Stock Exchange on that date.
As of March 9, 1998 there were 20,587,476 outstanding shares of the
Registrant's shares of beneficial interest.
DOCUMENTS INCORPORATED BY REFERENCE
Part III Proxy Statement for Annual Meeting of Shareholders to be held on
June 18, 1998.
Index to exhibits may be found on page 30
Page 1 of 133
<PAGE>
CAUTIONARY STATEMENT FOR PURPOSES OF
THE "SAFE HARBOR" PROVISIONS OF
THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
WHEN USED IN THIS ANNUAL REPORT ON FORM 10-K, THE WORDS "BELIEVES,"
"ANTICIPATES," "EXPECTS" AND SIMILAR EXPRESSIONS ARE INTENDED TO IDENTIFY
FORWARD-LOOKING STATEMENTS. STATEMENTS LOOKING FORWARD IN TIME ARE INCLUDED IN
THIS ANNUAL REPORT ON FORM 10-K 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 OCCURENCE OF
UNANTICIPATED EVENTS.
<PAGE>
PART I
Item 1. Business.
General
Charter Municipal Mortgage Acceptance Company, a Delaware business trust ("the
Company"), was formed by the consolidation (the "Consolidation"), on October 1,
1997, of Summit Tax Exempt Bond Fund, L.P. ("Tax Exempt I"), Summit Tax Exempt
L.P. II ("Tax Exempt II") and Summit Tax Exempt L.P. III ("Tax Exempt III"),
three limited partnerships (the "Partnerships", and each individually a
"Partnership") co-sponsored by affiliates of Related Capital Company
("Related"), as part of the settlement of class action litigation described
below. See "Other Events - Settlement of Class Action Litigation". Unless
otherwise indicated, the "Company", as hereinafter used, refers to Charter
Municipal Mortgage Acceptance Company and, prior to October 1, 1997, Tax Exempt
II.
The Company is a publicly traded Delaware business trust specializing in the
financing of tax-exempt multi-family housing. 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, which Shares commenced trading on the
American Stock Exchange on October 1, 1997, under the stock symbol "CHC". There
are 20,587,476 Shares currently outstanding.
The Company has engaged Related Charter LP, a Delaware limited partnership and
an affiliate of Related (the "Manager"), to manage its day-to-day affairs. The
Manager will provide to the Company substantially the same services that were
provided to the Partnerships by their general partners. The Manager will also
serve as the general partner of the Company for tax purposes. As part of the
Consolidation, the Manager acquired the general partner interests held by
Prudential-Bache Properties, Inc., a Delaware corporation ("PBP"), in each of
the Partnerships, and contributed one-half of such interests back to the
Partnerships prior to the Consolidation.
The Company's principal objective is to generate tax-exempt income and stock
appreciation through 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 developed by third
party developers or affiliates of the Manager. To finance its growth, the
Company is permitted to reinvest the proceeds of asset sales, if any, and
mortgage repayments and to incur debt of up to 50% of the Company's total market
value (measured at the time such debt is incurred).
The Company presently owns a diversified portfolio of 32 seasoned tax-exempt
bonds secured by first mortgages. The properties securing the bonds are garden
apartments located in 16 major metro markets in 11 states. The properties range
in size from 148 units to 550 units with an average size of 268 units. The
properties can generally be categorized as B to B+ with respect to their overall
quality. All of the properties have a comprehensive amenity package, competitive
for their respect markets, including swimming pools, clubhouses, exercise rooms
and tennis courts. The properties currently in the portfolio average 8-10 years
in age. The portfolio reports an average occupancy of 97.9% as of February 22,
1998. Net operating income, in the aggregate, at the property level has
increased an average of 3% per annum since 1992.
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 is positioned to market its Direct Purchase Program as a result of
the Manager's affiliation with Related. Related and its predecessor companies
have specialized in offering debt and equity products to mid-market multifamily
owners and developers for over 25 years. Related has provided debt and equity
financing to properties valued at over $7.8 billion. In addition, since 1987
Related has been the nations leading provider of equity to developers of
multifamily housing which benefits from tax credits. The Company believes that
the Manager's affiliation with Related will allow it to become one of the
dominant lenders to developers and owners of affordable housing financed with
tax-exempt bonds.
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 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 years ended December 31, 1997, 1996 and 1995
include information for the entire periods presented with respect to Tax Exempt
II, but only include information for the period October 1, 1997 to December 31,
1997 with respect to the other Partnerships.
Prior to the Consolidation, Tax Exempt II was a limited partnership which was
formed under the laws of the State of Delaware on April 11, 1986. The general
partners of Tax Exempt II were Related Tax Exempt Associates II, Inc., a
Delaware corporation (the
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<PAGE>
"Related General Partner"), and PBP. The general partners of Tax Exempt II
managed and controlled the affairs of Tax Exempt II prior to the Consolidation.
Structure of Existing First Mortgage Bonds
The principal and interest payments on each FMB are payable only from the cash
flows of the Properties underlying the FMBs (the "Underlying Properties"),
including proceeds from a sale of an Underlying Property or the refinancing of
the mortgage loan securing such FMBs (the "Mortgage Loans"). None of the FMBs
constitute a general obligation of any state or local government, agency or
authority. The structure of each Mortgage Loan mirrors the structure of the
corresponding FMB which it secures.
Unless otherwise modified, the principal of currently existing FMBs will not be
amortized during their respective terms (which are generally up to 24 years) and
will be required to be repaid in lump sum "balloon" payments at the expiration
of the respective terms or at such earlier times as the Company may require
pursuant to the terms of the FMB documents. The Company has a right to require
redemption of the FMBs approximately twelve years after their issuance or may
elect to hold them up to their maturity.
In addition to the stated base rates of interest of the FMBs which range from
4.87% to 8.5% per annum, 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 years ended December 31, 1997, 1996 and
1995, five, two and one FMBs, paid contingent interest amounting to
approximately $352,000, $220,000 and $68,000, respectively.
Structure of Modified First Mortgage Bonds
Certain of the FMB's have been modified reflecting current market conditions.
These modifications have generally encompassed an extension of the maturity
(10-20 years) together with a prepayment lock or penalties and an extension of
the mandatory redemption feature (5-10 years from modification). Rates have been
adjusted together with a change in 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.
Structure of New First Mortgage Bonds
Newly acquired FMB's will generally bear a fixed base interest rate and, to the
extent permitted by existing regulations, and other features, they may or may
not also provide for contingent interest. Terms are expected to be for up to 5
to 35 years although the Company may have the right to cause repayment prior to
maturity through a mandatory redemption feature (5 to 7 years with up to 6
month's notice). In some cases, the principal of an FMB may amortize.
New FMB's are generally not expected to be subject to optional prepayment during
the first 5-10 years of the Company's ownership of the bonds and may carry
prepayment penalties thereafter beginning at 5% of the principal outstanding
balance, declining by 1% per annum. Certain new FMB's may be purchased at a
discount from their face value. Up to 15% of the Total Market Value of the
Company may be invested in FMB's in which affiliates of the Manager have a
controlling interest, equity interest or security interest. In selected
circumstances and only in connection with the acquisition of tax exempt FMB's
the Company may acquire a small amount of taxable bonds to fund certain costs
associated with the issuance of FMB's, that under current law cannot be funded
by FMB's.
First Mortgage Bonds - General
In order to protect the tax exempt status of the FMBs, the owners of the
Underlying Properties are required to enter into certain agreements to own,
manage and operate such Underlying Properties in accordance with requirements of
the Internal Revenue Code of 1986, as amended (the "Code").
No single FMB provided interest income which exceeded 15% of the Company's total
revenue for the years ended December 31, 1997, 1996 or 1995.
From time to time the Company has advanced funds to owners of certain underlying
properties in the form of promissory notes when deemed appropriate when
properties have operating difficulties including past due real estate taxes
and/or deferred maintenance items. As of December 31, 1997, the face amount of
promissory notes outstanding was $12,075,921, and their carrying value was
$7,080,265, which is net of purchase accounting adjustments, and a reserve for
collectibility of $138,000.
As of December 31, 1997, 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. Although certain of the Underlying Properties are not
producing sufficient cash flow to fully service the debt, the Company has no
present intention to declare a default on these FMBs.
From time to time the Company enters into forbearance agreements with the
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
mortgage proceeds, 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 legal costs. Payments under each of the existing forbearance
agreements are current as of December 31, 1997.
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<PAGE>
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 $2,415,000, $1,407,000 and $704,000 for the years ended December
31, 1997, 1996 and 1995, respectively.
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<PAGE>
CHARTER MUNICIPAL MORTGAGE ACCEPTANCE COMPANY
(a limited partnership)
The following table lists the FMBs that the Company owns together with the
occupancy and rental rates of the Underlying Properties:
<TABLE>
<CAPTION>
Carrying Average
Face Amount Interest Stated
Closing Amount at December Rate Paid Interest
Property Date of Bond 31, 1997 (G) for 1997* Rate*
- - -------- ------ ------------ ------------ --------- --------
<S> <C> <C> <C> <C> <C>
The Mansion,
Independence, MO 5/13/86 $ 19,450,000 $ 14,536,000 6.88%(C) 5.23%
Martin's Creek,
Summerville, SC 5/20/86 7,300,000 7,300,000 8.16 (A) 8.25
East Ridge,
Mt. Pleasant, SC 5/20/86 8,700,000 9,943,000 8.25 (A) 8.25
Highpointe Club,
Harrisburg, PA 7/29/86 8,900,000 9,278,000 6.74 8.50
Cypress Run,
Tampa, FL 8/14/86 15,402,428 14,191,000 5.84 8.50
Thomas Lake,
Eagan, MN 9/02/86 12,975,000 13,902,000 9.07 (D) 8.50
North Glen,
Atlanta, GA 9/30/86 12,400,000 12,400,000 6.00 7.00
Greenway Manor,
St. Louis, MO 10/09/86 12,850,000 15,604,000 9.00 (D) 8.50
Clarendon Hills,
Hayward, CA 12/08/86 17,600,000 13,886,000 6.04 (I) 5.52
Cedar Creek,
McKinney, TX 12/29/86 8,100,000 9,836,000 8.00 8.50
Sunset Terrace,
Lancaster, CA 2/12/87 10,350,000 9,108,000 5.04 8.00
Bay Club,
Mt. Pleasant, SC 9/11/86 6,400,000 7,314,000 8.09 (A) 8.25
Loveridge,
Contra Costa, CA 11/13/86 8,550,000 6,153,000 5.33 8.00
The Lakes,
Kansas City, MO 12/30/86 13,650,000 9,500,000 5.54 (E) 4.87
Crowne Pointe,
Olympia, WA 12/31/86 5,075,000 5,800,000 8.00 8.00
Orchard Hills,
Tacoma, WA 12/31/86 5,650,000 6,457,000 8.00 8.00
Highland Ridge,
St. Paul, MN 2/02/87 15,000,000 15,536,000 7.30 8.00
Newport Village,
Tacoma, WA 2/11/87 13,000,000 14,857,000 8.51 (D) 8.00
Sunset Downs,
Lancaster, CA 2/11/87 15,000,000 12,660,000 4.79 8.00
Pelican Cove,
St. Louis, MO 2/27/87 18,000,000 20,571,000 7.50 8.00
Willow Creek,
Ames, IA 2/27/87 6,100,000 6,971,000 8.00 8.00
Cedar Pointe,
Nashville, TN 4/22/87 9,500,000 9,500,000 7.00 (H) 7.00
Shannon Lake,
Atlanta, GA 6/26/87 12,000,000 11,571,000 6.00 6.00
<CAPTION>
Minimum
Pay Rate at Occupancy at Rental Rates No. of
December 31, February 22, at December Rental
Property 1997* 1998 31, 1997 Units
- - -------- ---------- ------------- ------------ -----
<S> <C> <C> <C> <C>
The Mansion,
Independence, MO 5.23% 95.0% $ 460-765 550
Martin's Creek,
Summerville, SC 8.25 (A) 99.5 435-680 200
East Ridge,
Mt. Pleasant, SC 8.25 (A) 98.5 545-790 200
Highpointe Club,
Harrisburg, PA (B) 99.2 520-710 240
Cypress Run,
Tampa, FL (B) 89.1 445-670 408
Thomas Lake,
Eagan, MN 8.50 97.2 736-1,247 216
North Glen,
Atlanta, GA 7.00 (K) 95.4 550-810 284
Greenway Manor,
St. Louis, MO 1 8.50 92.9 495-595 312
Clarendon Hills,
Hayward, CA 1 5.52 99.6 925-1,325 285
Cedar Creek,
McKinney, TX 1 (B) 97.5 520-840 250
Sunset Terrace,
Lancaster, CA (B) 93.4 465-740 184
Bay Club,
Mt. Pleasant, SC 8.25 (A) 98.1 520-725 164
Loveridge,
Contra Costa, CA 1 (B) 95.9 570-830 148
The Lakes,
Kansas City, MO 1 4.87 86.5 435-620 400
Crowne Pointe,
Olympia, WA 1 8.00 87.1 495-795 160
Orchard Hills,
Tacoma, WA 1 8.00 97.7 465-750 174
Highland Ridge,
St. Paul, MN 7.50 (F) 100.0 765-1,310 228
Newport Village,
Tacoma, WA 8.00 92.3 435-600 402
Sunset Downs,
Lancaster, CA (B) 95.4 465-685 264
Pelican Cove,
St. Louis, MO (B) 87.1 510-655 402
Willow Creek,
Ames, IA 8.00 100.0 525-800 138
Cedar Pointe,
Nashville, TN 7.00 (H) 94.7 525-845 210
Shannon Lake,
Atlanta, GA 6.00 (M) 93.9 448-785 294
</TABLE>
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CHARTER MUNICIPAL MORTGAGE ACCEPTANCE COMPANY
(a limited partnership)
<TABLE>
<CAPTION>
Carrying Average Minimum
Face Amount Interest Stated Pay Rate at Occupancy at Rental Rates No. of
Closing Amount at December Rate Paid Interest December 31, February 22, at December Rental
Property Date of Bond 31, 1997 (G) for 1997* Rate* 1997* 1998 31, 1997 Units
- - -------- ------- --------- ------------ --------- ----- ----------- ------------ ---------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Bristol Village,
Bloomington, MN 7/31/87 17,000,000 18,214,000 8.68 (D) 8.00 8.00 (F) 97.5 699-1,199 290
Suntree,
Ft. Myers, FL 7/31/87 7,500,000 7,768,000 6.68 8.00 6.50 (F) 98.3 431-575 240
River Run,
Miami, FL 8/07/87 7,200,000 8,229,000 9.11 (I) 8.00 8.00 96.9 619-879 164
Players Club,
Ft. Myers, FL 8/14/87 9,700,000 9,146,000 6.35 8.00 6.25 (F) 90.5 425-645 288
Lakepoint,
Dekalb City, GA 11/18/87 15,100,000 12,943,000 6.00 6.00 6.00 (L) 91.1 565-810 360
Sunset Village,
Lancaster, CA 3/25/88 11,375,000 10,559,000 6.03 8.50 (B) 98.0 465-685 204
Sunset Creek,
Lancaster, CA 3/25/88 8,275,000 6,317,000 5.13 8.50 (B) 92.3 465-685 148
Orchard Mill,
Atlanta, GA 5/1/89 10,500,000 11,250,000 6.29 (J) 7.50 5.00 94.9 530-705 238
Countryside North
Memphis, TN 12/11/97 5,000,000 5,000,000 7.50 7.50 7.50 86.0 431-586 152
------------ ------------
$353,602,428 $346,300,000
------------ ------------
</TABLE>
*The average interest rate paid represents the interest recorded by the Company
while the stated interest rate represents the coupon rate of the FMB and the
minimum pay rate represents the minimum rate payable pursuant to the applicable
forbearance agreement, if any.
(A) The minimum pay rate on the FMB increases in increments from 6.0% in 1990 to
8.25% in 1997. The actual pay rate is adjusted as of the property's fiscal
year-end based on audited financial statements to no less than the minimum
pay rate.
(B) The minimum pay rate is the current cash flow of the property.
(C) Includes contingent interest paid during 1997.
(D) Includes receipt of deferred base interest relating to prior periods.
(E) Includes receipt of primary and supplemental contingent interest.
(F) The minimum pay rate on the FMB is scheduled to increase to the stated
interest rate over the remaining term of the FMB.
(G) The FMBs are carried at their estimated fair values at December 31, 1997.
(H) Reflects payments accrued at December 31, 1996 that were received pursuant
to a bond modification entered as of February 1, 1997, which lowered the
base interest rate to 7% effective September 16, 1996.
(I) Includes receipt of primary contingent interest.
(J) Pursuant to a bond modification entered as of October 1, 1997 which lowered
the base interest rate to 7.50% effective October 1, 1997, subject to a
minimum pay rate of 5% through June 30, 2000.
(K) Pursuant to a forbearance agreement entered as of October 1, 1997 which
lowered the base interest rate to 7% through June 30, 2000 and 7.50%
thereafter.
(L) Pursuant to a bond modification entered as of October 1, 1997 which lowered
the base interest rate to 6% effective October 1, 1997.
(M) Pursuant to a bond modification entered as of October 1, 1997 which lowered
the base interest rate to 6% through July 31, 2000 and 7% thereafter.
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<PAGE>
Credit Facility
Upon the consummation of the Consolidation on October 1, 1997, the Company
increased an existing $15 million Credit Facility in the amount of $2,500,000
over the existing outstanding balance of $13,681,866. Proceeds of the additional
borrowing were used to pay costs incurred in the Consolidation. Other terms and
conditions of the Credit Facility remained substantially the same.
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. 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 December 31, 1997, the rate was 6.34%
and the outstanding balance was $21,445,340. The Interim Credit Facility will be
repaid with proceeds from the Facility, however it is payable on demand. On
December 30, 1997 the $15,000,000 Credit Facility was repaid with proceeds of
the Interim Credit Facility and certain of the Company's FMBs with a carrying
value of approximately $67 million were pledged as collateral.
Indebtedness under the Facility and the Interim Credit Facility, together with
any other indebtedness of the Company, will not exceed 50% of the Company's
total market value as of the date such debt is incurred.
Competition
The Manager and/or its affiliates have formed, and may continue to form, various
entities to engage in businesses which may be competitive with the Company.
The Company's business is affected by competition to the extent that the
Underlying Properties from which it derives interest and, ultimately, principal
payments may be subject to competition relating to rental rates and relative
levels of amenities from offered by comparable neighboring properties.
Employees
The Company has no employees. Management and administrative services for the
Company are performed by the Manager and its affiliates pursuant to the
Management Agreement between the Company and the Manager dated October 1, 1997
(the "Management Agreement"). The Manager receives compensation for such
services and the Company reimburses the Manager and certain of its affiliates
for expenses incurred in connection with the performance by their employees of
services for the Company in accordance with the Management Agreement. See "Note
6 to the Company's Financial Statements" included in Item 8.
Other Events - Settlement of Class Action Litigation
On August 28, 1997, the United States District Court for the Southern District
of New York (the "Court") issued its final approval order with respect to the
settlement (the "Related Settlement") of a putative class action (the "Class
Action") brought against, among others, the general partners of the Partnerships
and certain of their affiliates under the original caption Kinnes et al. v.
Prudential Securities Group, Inc. et al. The Related Settlement was applicable
only to the general partners of the Partnerships affiliated with Related and
certain of their affiliates, since the other defendants in the Class Action had
previously entered into their own settlement agreement.
The Related Settlement was subject to objections by the holders of beneficial
unit certificates ("BUCs") representing assignments of limited partnership
interests and the limited partners of the Partnerships (collectively, the
"BUC$holders"), and to final approval by the Court following a review of the
settlement proposal at a fairness hearing.
The Related Settlement included, among other matters, the Consolidation, the
acquisition by the Manager of the general partner interests held by PBP in each
of the Partnerships (collectively, the "PBP Interest"), the transfer to the
BUC$holders of one-half of the PBP Interest prior to the Consolidation and the
reduction of certain fees which were then payable to the general partners of the
Partnerships by 25%.
On October 1, 1997, as part of the Related Settlement, Tax Exempt I, Tax Exempt
II and Tax Exempt III consolidated to form the Company.
As part of the Related Settlement and in the Court's sole discretion, counsel to
the BUC$holders may receive additional attorney's fees payable in the Company's
Shares, based upon 25% of the increase in value of the Company's shares during
the first year following the Consolidation. The number of Shares so issued shall
be limited to a maximum of 3.95% of the total number of shares outstanding on
the first anniversary of the Consolidation. The amount of shares to be issued
under this provision cannot presently be determined.
Forward-Looking Statements
Certain statements made in this report may constitute "forward-looking
statements" within the meaning of Section 27A of the Securities Act of 1933, as
amended and Section 21E of the Securities Exchange Act of 1934, as amended. Such
forward-looking statements include statements regarding the intent, belief or
current expectations of the Company and its management and involve known and
unknown risks, uncertainties and other factors which may cause the actual
results, performance or achievements of the Company to be materially different
from any future results, performance or achievements expressed or implied by
such forward-looking statements. Such factors include, among other things, the
following: general economic and business conditions, which will,
-8-
<PAGE>
among other things, affect the availability and creditworthiness of prospective
tenants, lease rents and the terms and availability of financing; adverse
changes in the real estate markets including, among other things, competition
with other companies; risks of real estate development and acquisition;
governmental actions and initiatives; and environment/safety requirements.
Item 2. Properties
The Company does not own or lease any property.
Item 3. Legal Proceedings
See "Item 1. Business - Other Events - Settlement of Class Action Litigation"
which information is incorporated herein by reference.
Item 4. Submission of Matters to a Vote of Shareholders
See "Item 1. Business - Other Events - Settlement of Class Action Litigation"
which information is incorporated herein by reference.
PART II
Item 5. Market for the Company's Common Stock and Related Shareholder Matters.
As of March 17, 1998, there were 4,758 holders of record owning 20,587,476
Shares. The Company's Shares have been listed on the American Stock Exchange
since October 1, 1997 under the symbol "CHC". Prior to October 1, 1997, there
was no established public trading market for the Company's Shares.
The high and low prices for the quarterly period in which the Shares were traded
is as follows:
Quarter Ended Low High
- - ------------- --- ----
December 31, 1997 11 1/8 13 5/16
Distribution Information
Charter Municipal Mortgage Acceptance Company (After the Consolidation)
Distributions Per Share
The cash distribution Per Share for the quarter ended December 31, 1997 was as
set forth in the following table:
Cash Distribution Total Amount
for Quarter Ended Date Paid Per Share Distributed
- - ----------------- ------------ --------- -----------
December 31, 1997 2/14/98 $ .23 $4,735,120
======= ==========
There are no material legal restrictions upon the Company's present or future
ability to make distributions in accordance with the provisions of the Company's
Amended and Restated Trust Agreement.
Tax Exempt II (Prior to the Consolidation)
Distributions per BUC
Cash distributions per BUC were paid from Tax Exempt II for the following
calendar quarters.
Quarter Ended 1997 1996
- - ------------- ---- ----
March 31 $0.26 $0.26
June 30 0.26 0.26
September 30 0.26 0.26
December 31 0.00 0.26
---- ----
Total $0.78 $1.04
==== ====
There were no material restrictions upon Tax Exempt II's ability to make
distributions in accordance with the provisions of Tax Exempt II's Agreement of
Limited Partnership. Approximately $2,400,000 of the $9,518,000 and $3,790,000
of the $9,518,000 paid to the BUC$holders of Tax Exempt II in 1997 and 1996,
respectively, represented a return of capital on a generally accepted accounting
principles ("GAAP") basis. The return of capital on a GAAP basis is calculated
as BUC$holder distributions less net income allocated to BUC$holders.
-9-
<PAGE>
Item 6. Selected Financial Data.
The information set forth below presents selected financial data of the Company.
Additional financial information is set forth in the financial statements and
notes thereto contained in Item 8 hereof.
<TABLE>
<CAPTION>
Year ended December 31,
-------------------------------------------------------------------
OPERATIONS 1997* 1996* 1995* 1994* 1993*
- - ---------- ----------- ----------- ----------- ----------- -----------
Interest income from participating first mortgage
bonds $14,087,443 $11,647,431 $11,895,439 $11,765,112 $11,543,922
=========== =========== =========== =========== ===========
Interest expense $ 429,012
===========
Loss on impairment of assets $ 1,843,135 $ 4,000,000 $ 1,000,000 $ 500,000 $ 1,000,000
=========== =========== =========== =========== ===========
Net income $10,055,808 $ 5,845,041 $ 9,187,803 $ 9,623,049 $ 8,285,673
=========== =========== =========== =========== ===========
For the three months ended December 31, 1997:
Net income applicable to shareholders of
beneficial interest $ 2,437,538
===========
Net income per share (basic and diluted) (1) $ .12
===========
<CAPTION>
December 31,
------------------------------------------------------------------------
FINANCIAL POSITION 1997* 1996* 1995* 1994* 1993*
- - ------------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Total assets $362,390,563 $154,896,475 $157,019,314 $157,436,945 $165,778,624
============ ============ ============ ============ ============
Notes payable $21,445,340
============
Total shareholders' equity/partners' capital $331,668,199 $154,322,601 $156,366,964 $156,348,207 $164,918,079
============ ============ ============ ============ ============
Distributions to BUC$holders $ 9,517,685 $ 9,517,685 $ 9,517,685 $ 9,517,685 $ 9,517,685
============ ============ ============ ============ ============
Distributions to shareholders of beneficial
interest $ 4,735,120
============
Distribution per share (1) $ .23
============
</TABLE>
*Information prior to October 1, 1997 (the date of the Consolidation) is only
with respect to Tax Exempt II. Information subsequent to September 30, 1997
includes Tax Exempt II and the other Partnerships pursuant to the Consolidation.
(1) Net income and distribution per unit information for periods prior to
October 1, 1997 is not presented because it is not indicative of the Company's
continuing capital structure.
-10-
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Liquidity and Capital Resources
The Company is a Delaware business trust which may issue additional debt and
equity securities. The Company will originate, acquire and hold tax-exempt bonds
for investment on a national basis, the proceeds of which will finance the
development of multi-family housing or the refinancing of indebtedness on such
properties. The Company intends to provide quarterly tax-exempt distributions to
shareholders.
The Company's principal objective is to generate tax-exempt income and stock
appreciation through 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 developed by third
party developers or affiliates of the Manager. To finance its growth, the
Company is permitted to reinvest the proceeds of asset sales, if any, and
mortgage repayments and to incur debt of up to 50% of the Company's total market
value (measured at the time such debt is incurred).
The Company owns investments in thirty two FMBs and has net assets of
approximately $332 million at December 31, 1997. One of the FMBs was acquired
during 1997 (after the Consolidation) for $5,000,000, excluding bond selection
fees and expenses of approximately $115,000. The properties securing the FMBs
are garden apartments located in 16 major metro markets in 11 states. The
properties range in size from 148 units to 550 units with an average size of 268
units. The properties can generally be categorized as B to B+ with respect to
their overall quality. All of the properties have a comprehensive amenity
package, competitive for their respective markets, including swimming pools,
clubhouses, exercise rooms and tennis courts. The properties currently in the
portfolio average 8-10 years in age. The portfolio reports an average occupancy
of 97.9% as of February 22, 1998. Net operating income, in the aggregate, at the
property level has increased an average of 3% per annum since 1992.
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.
During the year ended December 31, 1997, cash and cash equivalents of the
Company increased approximately $2,048,000. This increase was due to cash
provided by operating activities ($12,412,000), the net sale of temporary
investments ($100,000), principal payments received from loans made to
properties ($129,000), net proceeds from notes payable ($7,764,000) and the cash
effect of the Consolidation and issuance of shares ($2,341,000) which exceeded
the purchase of an FMB ($5,000,000), an increase in deferred bond selection
costs ($130,000), loans made to properties ($324,000), an increase in deferred
loan costs ($584,000) Consolidation costs ($2,498,000) and distributions paid
($12,164,000). Included in the adjustments to reconcile the net income to cash
provided by operating activities is a loss on impairment of assets in the amount
of $1,843,000 and amortization in the amount of $77,000.
During December of 1997, an unrelated publicly-registered partnership sold a
portfolio of nine bonds similar to the Company's FMBs. Based on the information
available to Company management regarding the pricing of this sale, management
determined that market conditions for the Company's FMBs were much more
favorable than was previously believed. Accordingly, the estimated fair values
of the FMBs calculated by management at December 31, 1997 increased by a total
of approximately $22,700,000.
In February 1998, a distribution of $4,735,120 (.23 per share) which was
declared in December 1997 was paid to the shareholders from cash flow from
operations for the quarter ended December 31, 1997. In March 1998, a dividend in
the amount of .23 per share was declared for the quarter ended March 31, 1998.
Future liquidity is expected to result from cash generated from the Company's
portfolio of thirty two 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.
In October, 1997 the North Glen, Shannon Lakes, Lakepointe and Orchard Mills
FMBs were modified to reflect a change in their stated interest rate, allow for
deferred base and other interest accrued and unpaid through September 1997 to be
paid at maturity or upon event of sale or refinancing and extend the mandatory
call date eight years and the maturity date to 2017. In addition to these
changed terms, the borrowers would also be subject to prepayment lockouts for
eight years. The Company is currently anticipating modifying certain other FMBs,
with terms generally similar to those listed above where appropriate.
For a discussion of the settlement of the Class Action relating to the
Partnerships which resulted in the formation of the Company, see "Item 1.
Business - Other Events - Settlement of Class Action Litigation".
-11-
<PAGE>
In order to carry out its business plan of acquiring FMBs, the Company intends
to raise additional investment capital by incurring additional debt.
Upon the consummation of the Consolidation on October 1, 1997, the Company
increased an existing $15 million Credit Facility in the amount of $2,500,000
over the existing outstanding balance of $13,681,866. Proceeds of the additional
borrowing were used to pay costs incurred in the Consolidation. Other terms and
conditions of the Credit Facility remained substantially the same.
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. 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 December 31, 1997, the rate was 6.34%
and the outstanding balance was $21,445,340. The Interim Credit Facility will be
repaid with proceeds from the Facility, however it is payable on demand. On
December 30, 1997 the $15,000,000 Credit Facility was repaid with proceeds of
the Interim Credit Facility and certain of the Company's FMBs with a carrying
value of approximately $67 million were pledged as collateral.
Indebtedness under the Facility and the Interim Credit Facility, together with
any other indebtedness of the Company, will not exceed 50% of the Company's
total market value as of the date such debt is incurred.
Management is not aware of any trends or events, commitments or uncertainties,
which have not otherwise been disclosed that will or are likely to impact
liquidity in a material way. The Company's investments in FMBs are secured by a
partnership interest in the Underlying Properties which are geographically
diversified so that if one area of the country is experiencing downturns in the
economy, the remaining Underlying Properties may be experiencing upswings.
However, the geographic diversification of the portfolio may not protect against
a general downturn in the national economy.
Results of Operations
The Company accounts for its investments in the FMBs as debt securities under
the provisions of Statement of Financial Accounting Standards No. 115,
"Accounting for Certain Investments in Debt and Equity Securities" ("SFAS 115").
The Company has a right to require redemption of the FMBs approximately twelve
years after their issuance or may elect to hold them up to their maturity. As
such, SFAS 115 requires the Company to classify these investments as "available
for sale." Accordingly, investments in FMBs are carried at their estimated fair
values, with unrealized gains and losses reported in a separate component of
shareholders' equity. Unrealized gains or losses do not affect the cash flow
generated from property operations, distributions to shareholders, the
characterization of the tax-exempt income stream or the financial obligations
under the FMBs.
The Company periodically evaluates each FMB to determine whether a decline in
fair value below the FMB's cost basis is other than temporary. Such a decline is
considered to be other than temporary if, based on current information and
events, it is probable that the Company will be unable to collect all amounts
due according to the existing contractual terms of the FMB's. If the decline is
judged to be other than temporary, the cost basis of the FMB is written down to
its then estimated fair value, with the amount of the write-down accounted for
as a realized loss.
Because the FMBs are not readily marketable, the Company estimates fair value
for each FMB using 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 underlying properties, such as 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.
1997 vs. 1996
During the year ended December 31, 1997, total revenues, total expenses
(excluding loss on impairment of assets) and net income increased and the
results of operations are not comparable due to the consolidation of Tax Exempt
II with the two other Partnerships on October 1, 1997, which resulted in the
formation of the Company. The Company's results of operations for the year ended
December 31, 1997 consisted primarily of the results of the Company's investment
in fifteen FMBs for the nine months ended September 30, 1997 and the results of
the Company's investment in thirty two FMBs for the three months ended December
31, 1997. The Company's results of operations for the year ended December 31,
1996 consisted primarily of the results of the Company's investment in fifteen
FMBs. In addition, the results of operations are not reflective of future
operations due to the anticipated continued acquisition of FMBs funded by a
revolving credit facility.
A $1,843,135 loss on impairment of assets was recorded during the year ended
December 31, 1997 to recognize other than temporary impairment of three FMBs
based upon continuing operating difficulties begin experienced at the properties
securing the FMBs which have or will likely result in modifications.
1996 vs. 1995
Net income decreased approximately $3,343,000 for the year ended December 31,
1996 as compared to the corresponding period in 1995 primarily due to the loss
on impairment of assets of $4,000,000 and $1,000,000 recorded in 1996 and 1995,
respectively, and for the reasons discussed below.
-12-
<PAGE>
Interest income from participating FMBs decreased by approximately $248,000 as
compared to the corresponding period in 1995 primarily due to reduced interest
payments received from the Loveridge and Sunset Downs FMBs as a result of
payments being based on the monthly cash flow generated by the operations of the
Underlying Properties effective with the May 1, 1995 payment date, and a
reduction in the minimum monthly debt service payments from the Highland Ridge
FMB as a result of a forbearance agreement retroactive to October 1995. These
decreases were partially offset by the receipt of contingent interest from the
River Run FMB and an increase in deferred base interest received from the
Bristol Village FMB in 1996.
Interest income from temporary investments increased approximately $18,000 for
the year ended December 31, 1996 as compared to the corresponding period in 1995
primarily due to higher invested cash balances in 1996.
Interest income from promissory notes increased approximately $3,000 for the
year ended December 31, 1996 as compared to the corresponding period in 1995
primarily due to a $300,000 increase in a second mortgage loan in July 1996
which was partially offset by a decrease due to the maturity of another second
mortgage loan in January 1996.
General and administrative expenses increased approximately $116,000 for the
year ended December 31, 1996 as compared to the corresponding period in 1995
primarily due to increases in legal costs, most of which relate to the Kinnes
litigation described in Note 10 to the Company's financial statements as well as
an increase in non-recurring legal expenses, partially offset by the cost of
obtaining appraisals in 1995.
A $4,000,000 loss on impairment of assets was recorded during the year ended
December 31, 1996 to recognize other than temporary impairment of three FMBs
based upon continuing operating difficulties being experienced at the Underlying
Properties securing the 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 foreclosures, is based upon several
factors. Including 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 $2,415,000, $1,407,000 and $704,000 was not recognized for the
years ended December 31, 1997, 1996 and 1995, respectively.
Recently Issued Accounting Standards
In June 1997, SFAS No. 130, Reporting Comprehensive Income, and SFAS No. 131,
Disclosures about Segments of an Enterprise and Related Information, were
issued. SFAS No. 130 establishes standards for reporting and displaying
comprehensive income and its components in a financial statement that is
displayed with the same prominence as other financial statements.
SFAS No. 131 establishes standards for reporting information about operating
segments in annual and interim financial statements. Operating segments are
defined as components of an enterprise about which separate financial
information is available that is evaluated regularly by the chief operating
decision maker in deciding how to allocate resources and in assessing
performance. SFAS No. 130 and No. 131 are effective for fiscal years beginning
after December 15, 1997.
Both SFAS No. 130 and 131 are disclosure related only and therefore will have no
impact on the Company's financial position, results of operations or cash flows.
Statement No. 132, "Employers' Disclosures about Pensions and other
Post-retirement Benefits" will not affect the Company, because it has no
employees.
Year 2000 Compliance
As the year 2000 approaches, an issue has emerged regarding how existing
application software programs and operating systems can accommodate this date
value. The Advisor is in the process of working with the Company's service
providers to prepare for the year 2000. Based on information currently
available, the Company does not expect that it will incur significant operating
expenses or be required to incur material costs to be year 2000 compliant.
Inflation
Inflation did not have a material effect on the Company's results for the
periods presented.
-13-
<PAGE>
Item 8. Financial Statements and Supplementary Data.
Page
----
(a) 1. Financial Statements
--------------------
Independent Auditors' Report 15
Balance Sheets as of December 31, 1997 and 1996 16
Statements of Income for the years ended December 31,
1997, 1996 and 1995 17
Statements of Changes in Shareholders' Equity/Partners'
Capital (Deficit) for the years ended December 31, 1997,
1996 and 1995 18
Statements of Cash Flows for the years ended December 31,
1997, 1996 and 1995 19
Notes to Financial Statements 21
-14-
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Trustees and Shareholders of
Charter Municipal Mortgage Acceptance Company
New York, New York
We have audited the accompanying balance sheets of Charter Municipal Mortgage
Acceptance Company as of December 31, 1997 and 1996, and the related statements
of income, changes in shareholders' equity/partners' capital (deficit) and cash
flows for each of the three years in the period ended December 31, 1997. Our
audits also included the financial statement schedule listed in Item 14(a)2.
These financial statements and the financial statement schedule are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements and the financial statement schedule based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by the
Company's management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of Charter Municipal Mortgage Acceptance
Company as of December 31, 1997 and 1996, and the results of its operations and
its cash flows for each of the three years in the period ended December 31, 1997
in conformity with generally accepted accounting principles. Also, in our
opinion, such financial statement schedule, when considered in relation to the
basic financial statements taken as a whole, presents fairly, in all material
respects, the information set forth therein.
DELOITTE & TOUCHE LLP
New York, New York
March 30, 1998
-15-
<PAGE>
CHARTER MUNICIPAL MORTGAGE ACCEPTANCE COMPANY
BALANCE SHEETS
<TABLE>
<CAPTION>
December 31,
--------------------------
1997 1996
------------ ------------
ASSETS
<S> <C> <C>
Participating first mortgage bonds-at fair value $346,300,000 $148,123,426
Temporary investments 3,500,000 3,600,000
Cash and cash equivalents 2,296,899 249,192
Interest receivable, net 879,519 735,343
Promissory notes receivable 7,080,265 275,572
Deferred costs, net 2,292,409 1,804,942
Due from affiliates 0 84,225
Other assets 41,471 23,775
------------ ------------
Total assets $362,390,563 $154,896,475
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY/PARTNERS' CAPITAL (DEFICIT)
Liabilities:
Notes payable $ 21,445,340 $ 0
Accounts payable, accrued expenses and other liabilities 635,691 501,680
Due to affiliates 674,949 72,194
Distributions payable 4,735,117 0
Excess of acquired net assets over cost 3,231,267 0
------------ ------------
Total liabilities 30,722,364 573,874
============ ============
Commitments and Contingencies
Shareholders' equity:
Beneficial owner's equity-manager 24,788
Beneficial owners' equity-other shareholders
(50,000,000 shares authorized;
20,587,465 shares issued and outstanding) 311,322,765
Net unrealized gain on first mortgage bonds 20,320,646
------------
Total Shareholders' Equity 331,668,199
------------
Total Liabilities and Shareholders' Equity $362,390,563
============
Partners' capital (deficit):
BUC$holders (9,151,620 BUC$
issued and outstanding) 160,622,463
General partners (184,260)
Net unrealized loss on
participating first mortgage bonds (6,115,602)
------------
Total partners' capital 154,322,601
------------
Total liabilities and partners' capital $154,896,475
============
</TABLE>
See accompanying notes to financial statements
-16-
<PAGE>
CHARTER MUNICIPAL MORTGAGE ACCEPTANCE COMPANY
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Years Ended December 31,
---------------------------------------
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
Revenues:
Interest income:
Participating first mortgage bonds $14,087,443 $11,647,431 $11,895,439
Temporary investments 155,460 138,088 120,370
Promissory notes 171,722 26,797 23,478
----------- ----------- -----------
Total revenues 14,414,625 11,812,316 12,039,287
----------- ----------- -----------
Expenses:
Interest expense 429,012 0 0
Management fees 607,969 810,625 810,625
Loan servicing fees 523,538 405,313 405,313
General and administrative 728,812 566,616 450,823
Amortization 226,351 184,721 184,723
Loss on impairment of assets 1,843,135 4,000,000 1,000,000
----------- ----------- -----------
Total expenses 4,358,817 5,967,275 2,851,484
----------- ----------- -----------
Net income $10,055,808 $5,845,041 $9,187,803
=========== ========== ==========
</TABLE>
See accompanying notes to financial statements
-17-
<PAGE>
CHARTER MUNICIPAL MORTGAGE ACCEPTANCE COMPANY
STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY/PARTNERS' CAPITAL (DEFICIT)
<TABLE>
<CAPTION>
Beneficial
Beneficial Owners'
Owners' Equity-
General Equity - Other
BUC$holders Partners Manager Shareholders
----------- -------- ------- ------------
<S> <C> <C> <C> <C>
Balance at January 1, 1995 $164,925,646 $ (96,441) $ 0 $ 0
Net income 9,004,047 183,756 0 0
Distributions (9,517,685) (194,238) 0 0
Realization of loss on impairment of assets 0 0 0 0
Net change in fair value of participating first mortgage bonds 0 0 0 0
------------ --------- --------- ------------
Balance at December 31, 1995 164,412,008 (106,923) 0 0
Net income 5,728,140 116,901 0 0
Distributions (9,517,685) (194,238) 0
Realization of loss on impairment of assets 0 0 0 0
Net change in fair value of participating first mortgage bonds 0 0 0 0
------------ --------- --------- ------------
Balance at December 31, 1996 160,622,463 (184,260) 0 0
Net income - January 1, 1997 to September 30, 1997 7,117,807 145,261 0 0
Distributions - January 1, 1997 to September 30, 1997 (9,517,685) (194,238) 0 0
Consolidation and issuance of shares (158,222,585) 233,237 168 313,620,344
Distributions - October 1, 1997 to December 31, 1997 0 0 (330,582) (4,735,117)
Net income - October 1, 1997 to December 31, 1997 0 0 355,202 2,437,538
Realization of loss on impairment of assets 0 0 0 0
Net change in fair value of participating first mortgage bonds 0 0 0 0
------------ --------- --------- ------------
Balance at December 31, 1997 $ 0 $ 0 $ 24,788 $311,322,765
============ ========= ========= ============
</TABLE>
<TABLE>
<CAPTION>
Net Unrealized
Gain (Loss) on
Participating
First
Mortgage
Bonds Total
----- -----
<S> <C> <C>
Balance at January 1, 1995 $(8,480,998) $156,348,207
Net income 0 9,187,803
Distributions 0 (9,711,923)
Realization of loss on impairment of assets 1,000,000 1,000,000
Net change in fair value of participating first mortgage bonds (457,123) (457,123)
----------- ------------
Balance at December 31, 1995 (7,938,121) 156,366,964
Net income 0 5,845,041
Distributions 0 (9,711,923)
Realization of loss on impairment of assets 4,000,000 4,000,000
Net change in fair value of participating first mortgage bonds (2,177,481) (2,177,481)
----------- ------------
Balance at December 31, 1996 (6,115,602) 154,322,601
Net income - January 1, 1997 to September 30, 1997 0 7,263,068
Distributions - January 1, 1997 to September 30, 1997 0 (9,711,923)
Consolidation and issuance of shares 0 155,631,164
Distributions - October 1, 1997 to December 31, 1997 0 (5,065,699)
Net income - October 1, 1997 to December 31, 1997 0 2,792,740
Realization of loss on impairment of assets 1,843,135 1,843,135
Net change in fair value of participating first mortgage bonds 24,593,113 24,593,113
----------- ------------
Balance at December 31, 1997 $20,320,646 $331,668,199
=========== ============
</TABLE>
See accompanying notes to financial statements
-18-
<PAGE>
CHARTER MUNICIPAL MORTGAGE ACCEPTANCE COMPANY
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Years Ended December 31,
-------------------------------------------------------------------
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $10,055,808 $ 5,845,041 $ 9,187,803
Adjustments to reconcile net income to net cash
provided by operating activities:
Loss on impairment of assets 1,843,135 4,000,000 1,000,000
Amortization 226,351 184,721 184,723
Amortization of excess of acquired net
assets over cost (82,853) 0 0
Amortization of deferred income (66,212) (66,212) (66,212)
Changes in assets and liabilities:
Decrease in cash held in escrow 0 0 520,677
Decrease (increase) in interest receivable, net 449,808 163,956 (101,898)
Decrease in promissory notes receivable, net 0 21,620 73,560
(Increase) decrease in other assets (5,503) (11,277) 3,305
Reserve for disputed claim 0 0 (422,287)
Increase (decrease) in accounts payable,
accrued expenses and other liabilities 69,393 (25,232) 65,636)
Decrease in deferred income 0 (21,620) (73,560)
Increase (decrease) in due from affiliates 84,225 (84,225) 0
(Decrease) increase in due to affiliates (162,178) 8,133 33,580
----------- ----------- -----------
Total adjustments 2,356,166 4,169,864 1,217,524
----------- ----------- -----------
Net cash provided by operating activities 12,411,974 10,014,905 10,405,327
----------- ----------- -----------
Cash flows from investing activities:
Purchase of participating first mortgage bond (5,000,000) 0 0
Increase in deferred bond selection costs (130,091) 0 0
Net sale (purchase) of temporary investments 100,000 (800,000) (624,510)
Loans made to properties (324,000) (300,000) 0
Principal payments received from loans made to
properties 129,257 73,321 31,333
----------- ----------- -----------
Net cash used in investing activities (5,224,834) (1,026,679) (593,177)
----------- ----------- -----------
Cash flows from financing activities:
Distributions paid (12,164,011) (9,711,923) (9,711,923)
Proceeds from notes payable 23,945,340 0 0
Repayments of notes payable (16,180,866) 0 0
Increase in deferred loan costs (583,727) 0 0
Consolidation costs (2,497,603) 0 0
Cash effect of Consolidation and issuance
of shares 2,341,434 0 0
----------- ----------- -----------
Net cash used in financing activities (5,139,433) (9,711,923) (9,711,923)
----------- ----------- -----------
Net increase (decrease) in cash and
cash equivalents 2,047,707 (723,697) 100,227
Cash and cash equivalents at the
beginning of year 249,192 972,889 872,662
----------- ----------- -----------
Cash and cash equivalents at the
end of the year $2,296,899 $ 249,192 $ 972,889
========== ============ ============
</TABLE>
(continued)
-19-
<PAGE>
CHARTER MUNICIPAL MORTGAGE ACCEPTANCE COMPANY
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Years Ended December 31,
-------------------------------------------------------------------
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
Supplemental information:
Interest paid $ 400,009
=============
Supplemental disclosure of noncash investing activities:
Consolidation and issuance of shares:
Increase in participating first mortgage
bonds $(168,557,007)
Increase in interest receivable (593,984)
Increase in promissory notes receivable (6,609,950)
Increase in other assets (12,193)
Increase in notes payable 13,680,866
Increase in accounts payable, accrued
expenses and other liabilities 104,376
Increase in due to affiliates 434,351
Increase in distributions payable 2,452,088
Increase in excess of acquired net assets over cost 3,314,120
Decrease in BUC$holders' capital (158,222,585)
Increase in general partners' capital 233,237
Issuance of shares of common stock 313,776,681
-------------
$ 0
=============
Supplemental disclosure of noncash financing activities:
Distributions declared $ (14,777,622)
Increase in distributions payable to the Manager 330,582
Increase in distributions payable to other
shareholders 2,283,029
-------------
Distributions paid $ (12,164,011)
=============
</TABLE>
See accompanying notes to financial statements
-20-
<PAGE>
CHARTER MUNICIPAL MORTGAGE ACCEPTANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - General
Charter Municipal Mortgage Acceptance 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. ("Tax Exempt I"), Summit Tax Exempt L.P. II
("Tax Exempt II") and Summit Tax Exempt L.P. III ("Tax Exempt III"), three
limited partnerships (the "Partnerships", and each individually a "Partnership")
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, which
Shares commenced trading on the American Stock Exchange on October 1, 1997,
under the stock symbol "CHC". There are 20,587,476 Shares currently outstanding.
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. To finance its
growth, the Company is permitted to reinvest the proceeds of asset sales, if
any, and mortgage repayments and to incur debt of up to 50% of the Company's
total market value (measured at the time such debt is incurred).
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.
NOTE 2 - Summary of Significant Accounting Policies
a) Basis of Accounting
The books and records of the Company are maintained on the accrual basis of
accounting in accordance with generally accepted accounting principles ("GAAP").
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
years ended December 31, 1997, 1996 and 1995 include information for the entire
periods presented with respect to Tax Exempt II, but only include information
for the period October 1, 1997 to December 31, 1997 with respect to the other
Partnerships. Prior to the Consolidation, Tax Exempt II was a limited
partnership which was formed under the laws of the State of Delaware on April
11, 1986.
b) Participating FMBs and promissory notes receivable
The Company accounts for its investments in the FMBs as debt securities under
the provisions of Statement of Financial Accounting Standards No. 115,
"Accounting for Certain Investments in Debt and Equity Securities" ("SFAS 115").
In most cases the Company has a right to require redemption of the FMBs prior to
their maturity, although it can and may elect to hold them up to their maturity
dates unless otherwise modified. As such, SFAS 115 requires the Company to
classify these investments as "available for sale." Accordingly, investments in
FMBs are carried at their estimated fair values, with unrealized gains and
losses reported in a separate component of shareholders' equity. Unrealized
gains or losses do not affect the cash flow generated from property operations,
distributions to shareholders, the characterization of the tax-exempt income
stream or the financial obligations under the FMBs.
The Company periodically evaluates each FMB to determine whether a decline in
fair value below the FMB's cost basis is other than temporary. Such a decline is
considered to be other than temporary if, based on current information and
events, it is probable that the Company will be unable to collect all amounts
due according to the existing contractual terms of the FMBs. If the decline is
judged to be other than temporary, the cost basis of the FMB is written down to
its then estimated fair value, with the amount of the write-down accounted for
as a realized loss.
Because the FMBs are not readily marketable, the Company estimates fair value
for each FMB using its expected cash flows and an interest rate for comparable
tax exempt investments. This process is based upon projections of future
economic events affecting the properties underlying the FMBs (the "Underlying
Properties"), such as 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.
-21-
<PAGE>
CHARTER MUNICIPAL MORTGAGE ACCEPTANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
From time to time, the Company has advanced funds to the owners of certain
underlying properties in the form of promissory notes collateralized by second
mortgages on such properties. These promissory notes are carried at cost less a
valuation allowance where appropriate. The Company periodically evaluates the
collectibility of both interest and principal of these investments to determine
whether a reserve is necessary.
For both FMBs and promissory notes, interest income is recognized at the stated
rate when collectibility of future amounts is reasonably assured. Interest
income from FMBs with modified terms where the collectibility of future amounts
is uncertain is recognized based upon expected cash receipts.
c) Temporary Investments
Temporary investments at December 31, 1997 represent tax-exempt municipal
preferred stock which is carried at cost which approximates market value.
Temporary investments at December 31, 1996 represent tax exempt municipal
preferred stock and tax exempt floating rate municipal bonds which are carried
at cost which approximates market value.
d) Cash and Cash Equivalents
Cash and cash equivalents include cash in banks, and investments in short-term
instruments with an original maturity of three months or less, for which cost
approximates market value.
e) Consolidation Costs
Costs incurred in the Consolidation including, legal, accounting and
registration fees, in the amount of approximately $2.5 million were charged
directly to shareholders' equity.
f) Income Taxes
The Company is not required to provide for, or pay, any federal income taxes.
Income tax attributes that arise from its operations are passed directly to the
Company's shareholders. The Company may be subject to other state and local
taxes in jurisdictions in which it operates. At December 31, 1997, the net tax
basis of the Company's assets and liabilities exceeded the net tax basis by
approximately $55,754,000.
g) Profit and Loss Allocations and Distributions
Charter Municipal Mortgage Acceptance Company (After the Consolidation)
Pursuant to the Management Agreement between the Company and the Manager dated
October 1, 1997 (the "Management Agreement"), the Manager receives a special
distribution equal to a .375% per annum of the total invested assets of the
Company (which equals the face amount of the FMBs), payable quarterly, for
managing the affairs of the Company. After payment of the special distribution,
distributions are made to the shareholders in accordance with their percentage
interests.
Income is allocated first to the Manager in an amount equal to the special
distribution. The net remaining profits or losses, after a special allocation of
1% to the Manager, are then allocated to shareholders in accordance with their
percentage interests.
Basic income per share is computed based on the net income for the three months
ended December 31, 1997 ($2,792,740), less the special allocations to the
Manager ($355,202), divided by the number of Shares outstanding for the period
(20,587,465). Net income per unit information for prior periods is not presented
because it is not indicative of the Company's continuing capital structure.
As the Company has no securities that can convert at December 31, 1997, diluted
net income per share is the same as basic net income per share.
Tax Exempt II (Prior to the Consolidation)
Net profits or losses and distributions were allocated 98% to the BUC$holders
and 2% to the general partners of Tax Exempt II in accordance with the Agreement
of Limited Partnership of Tax Exempt II (the "Partnership Agreement").
h) Deferred Bond Selection Fees
Prior to the Consolidation the general partners of Tax Exempt II were paid and
after the Consolidation the Advisor is paid bond selection fees (equal to 2% of
the gross proceeds from the initial offering and 2% of the principal amount of
each FMB, respectively) for evaluating and selecting FMBs, negotiating the terms
of mortgage loans and coordinating the development effort with property
developers and government agencies. These fees have been capitalized and are
being amortized over the terms of the FMBs.
-22-
<PAGE>
CHARTER MUNICIPAL MORTGAGE ACCEPTANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
i) Deferred Loan Costs
Financing costs incurred in connection with the Company's $15 million credit
facility were capitalized and were amortized on a straight line basis over the
life of the credit facility. Financing costs incurred in connection with the
Company's commitment for a $150 million revolving credit enhancement facility
have been capitalized and will be amortized upon closing of the facility over
its life.
j) Excess of Acquired Net Assets Over Cost
The application of purchase accounting to the Consolidation resulted in the
Company recording a deferred credit for the excess of the fair value of the net
assets acquired from Tax Exempt I and Tax Exempt III over their cost. This
deferred credit is being amortized to interest income from participating first
mortgage bonds using the straight line method over 10 years, which approximates
the average remaining term to maturity of the participating first mortgage
bonds. Amortization recorded during 1997 was $82,853.
k) Fair Value of Financial Instruments
As described above, the Company's investments in FMBs are carried at estimated
fair values. The Company has determined that the fair value of its remaining
financial instruments, including its temporary investments, cash and cash
equivalents and promissory notes receivable and notes payable approximates their
carrying values at December 31, 1997 and 1996.
l) Use of Estimates
The preparation of financial statements in conformity with GAAP requires the
Manager to make estimates and assumptions that affect the reported amounts of
assets and liabilities and the disclosure of contingent assets and liabilities
at the date of the financial statements as well as the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from those estimates.
m) New Pronouncements
The Financial Accounting Standards Board has recently issued several new
accounting pronouncements. Statement No. 128, "Earnings per Share" establishes
standards for computing and presenting earnings per share. Statement No. 129,
"Disclosure of Information about Capital Structure" establishes standards for
disclosing information about an entity's capital structure. The adoption of
these standards in 1997 has not materially affected the Company's reported
operating results, per share amounts, financial position or cash flow.
n) Reclassifications
Certain amounts in the 1995 and 1996 financial statements have been reclassified
to conform to the 1997 presentation.
NOTE 3 - Participating First Mortgage Bonds
The principal and interest payments on each FMB are payable only from the cash
flows of the Properties underlying the FMBs (the "Underlying Properties"),
including proceeds from a sale of an Underlying Property or the refinancing of
the mortgage loan securing such FMBs (the "Mortgage Loans"). None of the FMBs
constitute a general obligation of any state or local government, agency or
authority. The structure of each Mortgage Loan mirrors the structure of the
corresponding FMB which it secures.
Unless otherwise modified, the principal of currently existing FMBs will not be
amortized during their respective terms (which are generally up to 24 years) and
will be required to be repaid in lump sum "balloon" payments at the expiration
of the respective terms or at such earlier times as the Company may require
pursuant to the terms of the FMB documents. The Company has a right to require
redemption of the FMBs approximately twelve years after their issuance or may
elect to hold them up to their maturity.
At December 31, 1997, 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 to June 2017, however, they are callable from June 1998 to
December 2006. The stated interest rates range from 4.87% to 8.5%, however,
eight of the FMBs have been modified to allow the borrower to pay an amount
equal to the cash flow from the underlying property. The weighted average
interest rate recognized on the face amount of the portfolio of FMBs for the
years ended December 31, 1997, 1996 and 1995 was 6.75%, 7.18%, and 7.34%,
respectively.
In October, 1997 the North Glen, Shannon Lakes, Lakepointe and Orchard Mills
FMBs were modified to reflect a change in their stated interest rate, allow for
deferred base and other interest accrued and unpaid through September 1997 to be
paid at maturity or upon event of sale or refinancing and extend the mandatory
call date eight years and the maturity date to 2017. In addition to these
changed terms, the borrowers would also be subject to prepayment lockouts for
eight years. The Company is currently anticipating modifying certain other FMBs,
with terms generally similar to those listed 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
-23-
<PAGE>
CHARTER MUNICIPAL MORTGAGE ACCEPTANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
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 years ended
December 31, 1997, 1996 and 1995, five, two and one FMBs, paid contingent
interest amounting to approximately $352,000, $220,000 and $68,000,
respectively.
Certain of the FMB's have been modified. These modifications have generally
encompassed an extension of the maturity (10-20 years) together with a
prepayment lock or prepayment penalties and 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.
Newly acquired FMB's will generally bear a fixed base interest rate and, to the
extent permitted by existing regulations, and other features, they may or may
not also provide for contingent interest. Terms are expected to be for up to 5
to 35 years although the Company may have the right to cause repayment prior to
maturity through a mandatory redemption features (5 to 7 years with up to 6
month's notice). In some cases, the principal of an FMB may amortize.
New FMB's are generally not expected to be subject to optional prepayment during
the first 5-10 years of the Company's ownership of the bonds and may carry
prepayment penalties thereafter beginning at 5% of the principal outstanding
balance, declining by 1% per annum. Certain new FMB's may be purchased at a
discount from their face value. Up to 15% of the Total Market Value of the
Company may be invested in FMB's in which affiliates of the Manager have a
controlling interest, equity interest or security interest. In selected
circumstances and only in connection with the acquisition of tax exempt FMB's
the Company may acquire a small amount of taxable bonds to fund certain costs
associated with the issuance of FMB's, that under current law cannot be funded
by FMB's.
In order to protect the tax exempt status of the FMBs, the owners of the
Properties are required to enter into certain agreements to own, manage and
operate such Properties in accordance with requirements of the Internal Revenue
Code of 1986, as amended.
From time to time, the Company enters into forbearance agreements with the
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 legal
costs. Payments under each of the existing forbearance agreements are current as
of December 31, 1997.
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 $2,415,000, $1,407,000 and $704,000 for the years ended December
31, 1997, 1996 and 1995, respectively.
No single FMB provided interest income which exceeded 15% of the Company's total
revenue for the years ended December 31, 1997, 1996 or 1995.
From time to time the Company has advanced funds to owners of certain underlying
properties in the form of promissory notes when deemed appropriate when
properties have operating difficulties including past due real estate taxes
and/or deferred maintenance items. As of December 31, 1997, the face amount of
promissory notes outstanding was $12,075,921, and their carrying value was
$7,080,265, which is net of purchase accounting adjustments, and a reserve for
collectibility of $138,000.
The cost basis of the FMBs at December 31, 1997 and 1996 was $325,979,355 and
$154,239,028, 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, at December 31, 1997. The net unrealized loss on FMBs at December
31, 1996 consists of gross unrealized gains and losses of $951,666 and
$7,067,268, respectively.
During December of 1997, an unrelated publicly-registered partnership sold a
portfolio of nine bonds similar to the Company's FMBs. Based on the information
available to Company management regarding the pricing of this sale, management
determined that market conditions for the Company's FMBs were much more
favorable than was previously believed. Accordingly, the estimated fair values
of the FMBs calculated by management at December 31, 1997 increased by a total
of approximately. $22,700,000.
-24-
<PAGE>
CHARTER MUNICIPAL MORTGAGE ACCEPTANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
NOTE 4 - Deferred Costs
The components of Deferred Costs are as follows:
December 31,
------------------------------
1997* 1996*
---------- ----------
Deferred bond selection costs $3,756,964 $3,626,868
Deferred loan costs 542,227 0
--------- ---------
4,299,191 3,626,868
Less: Accumulated amortization (2,006,782) (1,821,926)
--------- ---------
$2,292,409 $1,804,942
========= =========
*Information for 1996 (Prior to the Consolidation) is only with respect to Tax
Exempt II (the Acquirer). Information for 1997 is with respect to the Company
and its subsidiaries which includes Tax Exempt II and the Partnerships pursuant
to the Consolidation.
NOTE 5 - Notes Payable
Upon the consummation of the Consolidation, the Company increased an existing
$15 million Credit Facility by $2,500,000 over the existing outstanding balance
of $13,681,866. Proceeds of the additional borrowing were used to pay costs
incurred in the Consolidation. Other terms and conditions of the Credit Facility
remained substantially the same.
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 December 31, 1997, the rate was 6.34%
and the outstanding balance was $21,445,340. The Interim Credit Facility will be
repaid with proceeds from the Facility, however it is payable on demand. On
December 30, 1997 the $15,000,000 Credit Facility was repaid with proceeds of
the Interim Credit Facility and certain of the Company's FMBs with a carrying
value of approximately $67 million were pledged as collateral.
Indebtedness under the Facility and the Interim Credit Facility, together with
any other indebtedness of the Company, will not exceed 50% of the Company's
total market value as of the date such debt is incurred.
NOTE 6 - Related Parties
Charter Municipal Mortgage Acceptance Company (After the Consolidation)
Pursuant to the Management Agreement, the Manager will receive (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 original term of the Management Agreement will terminate on October 1, 2001.
Thereafter, the Management Agreement will be renewed annually by the Company,
subject to majority approval of the Company's Board of Trustees. The Management
Agreement cannot be terminated by the Company prior to October 1, 2001, other
than for gross negligence or willful misconduct of the Manager and by a majority
vote of the Company's independent trustees. The Management Agreement may be
terminated without cause by a majority vote of the Company's independent
trustees following October 1, 2001 or by the Manager at any time.
The costs, expenses and the special distribution earned by the Manager for the
three months ended December 31, 1997 (after the Consolidation) were as follows:
Bond Selection Fee $ 100,000
Expense reimbursement 36,747
Loan servicing fees 220,386
Special distribution 330,580
--------
$ 687,713
========
-25-
<PAGE>
CHARTER MUNICIPAL MORTGAGE ACCEPTANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
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 the
Company prior to the Consolidation.
The general partners of Tax Exempt II 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. 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.
The costs and expenses incurred to related parties for the nine months ended
September 30, 1997 and the years ended December 31, 1996 and 1995 were:
<TABLE>
<CAPTION>
1997 1996 1995
------------ ----------- ------------
<S> <C> <C> <C>
PBP and affiliates
General and administrative $ 58,170 $ 67,483 $ 103,839
Management fee 303,984 405,312 405,312
---------- ---------- ----------
362,154 472,795 509,151
---------- ---------- ----------
Related General Partner and affiliates
General and administrative 66,222 46,725 49,073
Management fee 303,984 405,313 405,313
Loan servicing fee 303,152 405,313 405,313
---------- ---------- ----------
673,358 857,351 859,699
---------- ---------- ----------
$1,035,512 $1,330,146 $1,368,850
========== ========== ==========
</TABLE>
General
The original obligors of the Suntree, Players Club and River Run FMBs are
affiliates of the Manager.
As of December 31, 1997, 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 7 - Stock Option Plan
The Board of Trustees have adopted an incentive stock option plan (the
"Incentive Stock Option Plan"), the purpose of which is to (i) attract and
retain qualified persons as trustees and officers and (ii) to incentivize and
more closely align the financial interests of the Manager and its employees and
officers with the interests of the shareholders by providing the Advisor with
substantial financial interest in the Company's success. The Compensation
Committee shall be authorized and directed to administer the Incentive Stock
Option Plan. Pursuant to the Incentive Stock Option Plan, if the Company's
distributions per share of common stock in the immediately preceding calendar
year exceed $0.9869 per share, the Compensation Committee will have the
authority to issue options to purchase, in the aggregate, that number of shares
of common stock which is equal to three percent of the shares outstanding as of
December 31 of the immediately preceding calendar year (or, in the initial year,
as of October 1, 1997, provided, that the Compensation Committee may only issue,
in the aggregate, options to purchase a maximum number of shares of common stock
over the life of the Incentive Stock Option Plan equal to 10% of the shares
outstanding on October 1, 1997).
Subject to the limitations described in the preceding paragraph, if the
Compensation Committee does not grant the maximum number of options in any year,
then the excess of the number of authorized options over the number of options
granted in such year will be added to the number of authorized options in the
next succeeding year and will be available for grant to Potential Optionees by
the Compensation Committee in such succeeding year.
Pursuant to the Incentive Stock Option Plan, the Compensation Committee is not
authorized to grant any options until six months after the common stock has been
listed on the American Stock Exchange, so no options have been granted as of
December 31, 1997. All options granted by the Compensation Committee will have
an exercise price equal to or greater than the fair market value of the shares
of common stock on the date of the grant. The maximum option term is ten years
from the date of grant. All stock options granted pursuant to the Incentive
Stock Option Plan will vest immediately upon issuance.
-26-
<PAGE>
CHARTER MUNICIPAL MORTGAGE ACCEPTANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
NOTE 8 - Selected Quarterly Financial Data (unaudited)
1997 Quarter
ended
December 31
-----------
Revenues:
Interest income:
Participating first mortgage bonds $5,560,321
Temporary investments 49,483
Promissory notes 140,180
---------
Total revenues 5,749,984
---------
Expenses:
Interest expense 429,012
Loan servicing fees 220,387
General and administrative 376,900
Amortization 87,810
Loss on impairment of assets 1,843,135
---------
Total expenses 2,957,244
---------
Net income $2,792,740
=========
Special allocation of net income to the Manager $ 355,202
=========
Net income applicable to shareholders $2,437,538
=========
Net income per share (basic and diluted) $ .12
=========
NOTE 9 - Pro Forma Information (unaudited)
The unaudited pro forma information set forth below presents the condensed
statements of income for the Company for the years ended December 31, 1997 and
1996 as if the acquisition had occurred on January 1, 1996. This pro forma
financial data does not purport to represent what the Company's results of
operations would actually have been had the Consolidation in fact occurred on
such date or is such data necessarily indicative of the Company's results of
operations for any future date or period.
<TABLE>
<CAPTION>
Pro Forma (Unaudited)
Year Ended
December 31,
-------------------------
1997 1996
-------- ---------
<S> <C> <C>
Revenues $24,076,000 $24,769,000
=========== ===========
Net income $18,260,000 $16,756,000
=========== ===========
Net income applicable to shareholders $16,941,000 $15,438,000
=========== ===========
Net income per share (basic and diluted) $0.82 $0.75
=========== ===========
</TABLE>
NOTE 10 - Settlement of Class Action Litigation
On August 28, 1997, the United States District Court for the Southern District
of New York (the "Court") issued its final approval order with respect to the
settlement (the "Related Settlement") of a putative class action (the "Class
Action") brought against, among others, the general partners of the Partnerships
and certain of their affiliates under the original caption Kinnes et al. v.
Prudential Securities Group, Inc. et al. The Related Settlement was applicable
only to the general partners of the Partnerships affiliated with Related and
certain of their affiliates, since the other defendants in the Class Action had
previously entered into their own settlement agreement.
The Related Settlement was subject to objections by the holders of beneficial
unit certificates ("BUCs") representing assignments of limited partnership
interests and the limited partners of the Partnerships (collectively, the
"BUC$holders"), and to final approval by the Court following a review of the
settlement proposal at a fairness hearing.
The Related Settlement included, among other matters, the Consolidation, the
acquisition by the Manager of the general partner interests held by PBP in each
of the Partnerships (collectively, the "PBP Interest"), the transfer to the
BUC$holders of one-half of the PBP Interest prior to the Consolidation and the
reduction of certain fees which were then payable to the general partners of the
Partnerships by 25%.
-27-
<PAGE>
CHARTER MUNICIPAL MORTGAGE ACCEPTANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
On October 1, 1997, as part of the Related Settlement, Tax Exempt I, Tax Exempt
II and Tax Exempt III consolidated to form the Company.
As part of the Related Settlement and in the Court's sole discretion, counsel to
the BUC$holders ("Class Counsel") may receive additional attorney's fees payable
in the Company's Shares, based upon 25% of the increase in value of the
Company's shares during the first year following the Consolidation. The number
of Shares so issued shall be limited to a maximum of 3.95% of the total number
of shares outstanding on the first anniversary of the Consolidation (the
"Anniversary Date"). The amount of shares to be issued under this provision
cannot presently be determined.
-28-
<PAGE>
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
None.
PART III
Item 10. Directors and Executive Officers of the Company.
Incorporated by reference to the Company's definitive proxy statement to be
filed pursuant to Regulation 14A under the Securities Exchange Act of 1934, as
amended (the "Exchange Act").
Item 11. Executive Compensation.
Incorporated by reference to the Company's definitive proxy statement to be
filed pursuant to Regulation 14A under the Exchange Act.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
Incorporated by reference to the Company's definitive proxy statement to be
filed pursuant to Regulation 14A under the Exchange Act.
Item 13. Certain Relationships and Related Transactions.
Incorporated by reference to the Company's definitive proxy statement to be
filed pursuant to Regulation 14A under the Exchange Act.
-29-
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
Sequential
Page
----------
(a) 1. Financial Statements
Independent Auditors' Report 15
Balance Sheets as of December 31, 1997 and 1996 16
Statements of Income for the years ended December 31,
1997, 1996 and 1995 17
Statements of Changes in Shareholders' Equity/Partners'
Capital (Deficit) for the years ended December 31, 1997,
1996 and 1995 18
Statements of Cash Flows for the years ended December
31, 1997, 1996 and 1995 19
Notes to Financial Statements 21
(a) 2. Financial Statement Schedules
Schedule IV - Mortgage Loans on Real Estate at December
31, 1997 42
All other schedules have been omitted because they are
not applicable or the required information is included
in the financial statements and the notes thereto.
(a) 3. Exhibits
3.1(a) Certificate of Business Trust dated as of August 12,
1996 (incorporated by reference to the Company's
Registration Statement on Form 10, File No. 001-13237)
3.1(b) Certificate of Amendment of Certificate of Business
Trust dated as of April 30, 1997 (incorporated by
reference to the Company's Registration Statement on
Form 10, File No. 001-13237)
3.1(c) Trust Agreement dated as of August 12, 1996
(incorporated by reference to the Company's Registration
Statement on Form 10, File No. 001-13237)
3.1(d) Amendment No. 1 to Trust Agreement dated as of April 30,
1997 (incorporated by reference to the Company's
Registration Statement on Form 10, File No. 001-13237)
3.1(e) Amended and Restated Trust Agreement dated as of
September 30, 1997 (incorporated by reference to the
Company's Current Report on Form 8-K, filed with the
Commission on March 19, 1998)
3.2 Bylaws ((incorporated by reference to the Company's
Current Report on Form 8-K, filed with the Commission on
March 19, 1998)
-30-
<PAGE>
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(continued)
Sequential
Page
----------
4.1 Specimen Copy of Share Certificate for shares of
beneficial interest of the Company (incorporated by
reference to the Company's Amendment No. 1 on Form 10/A
to the Company's Registration Statement on Form 10, File
No. 001-13237)
10(a) First Mortgage Bond, dated May 13, 1986, with respect to
The Mansion project, in the principal amount of
$19,450,000 (incorporated by reference to Exhibit 10(a)
in Tax Exempt I's Current Report on Form 8-K dated May
13, 1986)
10(b) First Mortgage Bond, dated May 20, 1986, with respect to
the Martin's Creek project, in the principal amount of
$7,300,000 (incorporated by reference to Exhibit 10(c)
in Tax Exempt I's Current Report on Form 8-K dated May
20, 1986)
10(c) First Mortgage Bond, dated May 20, 1986, with respect to
the East Ridge project, in the principal amount of
$8,700,000 (incorporated by reference to Exhibit 10(b)
in Tax Exempt I's Current Report on Form 8-K dated May
20, 1986)
10(d) First Mortgage Bond, dated July 29, 1986, with respect
to the High Pointe Club project (formerly named
Greenhill), in the principal amount of $8,900,000
(incorporated by reference to Exhibit 10(a) in Tax
Exempt I's Current Report on Form 8-K dated July 29,
1986)
10(e) First Mortgage Bond, dated August 14, 1986, with respect
to the Cypress Run project at Tampa Palms, in the
principal amount of $15,750,000 (incorporated by
reference to Exhibit 10(a) in Tax Exempt I's Current
Report on Form 8-K dated August 14, 1986)
10(f) First Mortgage Bond, dated September 2, 1986, with
respect to the Thomas Lake Place Apartments project, in
the principal amount of $12,975,000 (incorporated by
reference to Exhibit 10(a) in Tax Exempt I's Current
Report on Form 8-K dated September 2, 1986)
10(g) First Mortgage Bond, dated September 30, 1986, with
respect to the North Glen Apartments project (formerly
named Tempo Northridge), in the principal amount of
$12,400,000 (incorporated by reference to Exhibit 10(a)
in Tax Exempt I's Current report on Form 8-K dated
September 30, 1986)
10(h) First Mortgage Bond, dated October 9, 1986, with respect
to Greenway Manor project, in the principal amount of
$12,850,000 (incorporated by reference to Exhibit 10(a)
in Tax Exempt I's Current Report on Form 8-K dated
October 9, 1986)
10(i) First Mortgage Bond, dated December 8, 1986, with
respect to the Clarendon Hills Apartments project, in
the principal amount of $17,600,000 (incorporated by
reference to Exhibit 10(a) in Tax Exempt I's Current
Report on Form 8-K dated December 8, 1986)
-31-
<PAGE>
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(continued)
Sequential
Page
----------
10(j) First Mortgage Bond, dated December 29, 1986, with
respect to the Cedar Creek Village Apartments project,
in the principal amount of $8,100,000 (incorporated by
reference to Exhibit 10(a) in Tax Exempt I's Current
Report on Form 8-K dated December 29, 1986)
10(k) First Mortgage Bond, dated February 12, 1987, with
respect to the Sunset Terrace project, in the principal
amount of $10,350,000 (incorporated by reference to
Exhibit 10(a) in Tax Exempt I's Current Report on Form
8-K dated February 12, 1987)
10(l) Loan Agreement dated September 19, 1990 between River
Bank America and the Tax Exempt I (incorporated by
reference to Exhibit 10(a) in Tax Exempt I's Current
Report on Form 8-K dated September 19, 1990)
10(m) Note dated September 19, 1990 from the Tax Exempt I to
River Bank America (incorporated by reference to Exhibit
10(b) in Tax Exempt I's Current Report on Form 8-K dated
September 19, 1990)
10(n) Pledge Agreement dated September 19, 1990 between River
Bank America and the Tax Exempt I (incorporated by
reference to Exhibit 10(c) in Tax Exempt I's Current
Report on Form 8-K dated September 19, 1990)
10(o) Indemnity and Reimbursement Agreement dated September
19, 1990 between Stephen M. Ross and the Tax Exempt I
(incorporated by reference to Exhibit 10(d) in Tax
Exempt I's Current Report on Form 8-K dated September
19, 1990)
10(p) Settlement Agreement for the North Glen First Mortgage
Bond dated December 3, 1990 (incorporated by reference
to Exhibit 10(p) in Tax Exempt I's Annual Report on Form
10-K dated December 31, 1991)
10(q) Settlement Agreement for the Thomas Lake Mortgage Bond
dated July 11, 1991 (incorporated by reference to
Exhibit 10(q) in Tax Exempt I's Annual Report on Form
10-K dated December 31, 1991)
10(r) Settlement Agreement for the Sunset Terrace First
Mortgage Bond dated July 10, 1992 (incorporated by
reference to Exhibit 10(r) in Tax Exempt I's Annual
Report on Form 10-K dated December 31, 1992)
10(s) Assignment and Assumption Agreement for the Clarendon
Hills First Mortgage Bond dated May 1, 1992
(incorporated by reference to Exhibit 10 (s) in Tax
Exempt I's Annual report on Form 10-K dated December 31,
1992)
10(t) First Supplemental Indenture between City of Hayward and
Seattle-First National Bank relating to the Clarendon
Hills First Mortgage Bond dated May 1, 1992
(incorporated by reference to Exhibit 10(t) in Tax
Exempt I's Annual Report on Form 10-K dated December 31,
1992)
-32-
<PAGE>
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(continued)
Sequential
Page
----------
10(u) Loan Agreement dated as of January 14, 1993 between Tax
Exempt I and U.S. West Financial Services, Inc.
(incorporated by reference to Exhibit 10(u) in Tax
Exempt I's Quarterly Report on Form 10-Q dated June 30,
1993)
10(v) Pledge and Security Agreement dated as of January 14,
1993 between Tax Exempt I and U.S. West Financial
Service, Inc. (incorporated by reference to Exhibit
10(v) in Tax Exempt I's Quarterly Report on Form 10-Q
dated June 30, 1993)
10(w) Secured Promissory Note dated January 14, 1993 between
Tax Exempt I and U.S. West Financial Services, Inc.
(incorporated by reference to Exhibit 10(w) in Tax
Exempt I's Quarterly Report on Form 10-Q dated June 30,
1993)
10(x) Promissory Note dated January 15, 1993 between Tax
Exempt I and RHA Inc. (incorporated be reference to
Exhibit 10(x) in Tax Exempt I's Quarterly Report on Form
10-Q dated June 30, 1993)
10(y) Nonrecourse Promissory Note Secured by Deed of Trust
dated January 28, 1993 between Stephen P. Diamond and
Clarendon Hills Investors, Inc. assigned to Tax Exempt I
(incorporated by reference to Exhibit 10(y) in Tax
Exempt I's Quarterly Report on Form 10-Q dated June 30,
1993)
10(z) Assignment Agreement dated January 15, 1993 between
Summit Tax Exempt Funding Corporation and Tax Exempt I
(incorporated by reference to Exhibit 10(z) in Tax
Exempt I's Quarterly Report on Form 10-Q dated June 30,
1993)
10(aa) Amended Settlement Agreement for the North Glen First
Mortgage dated June 1, 1993 (incorporated by reference
to Exhibit 10 (aa) in Tax Exempt I's Annual Report on
Form 10-K dated December 31, 1993)
10(ab) Sale-Purchase Agreement between Mansion Apartment
Project Investors, Inc., Seller and Independence
Apartments Associates, L.P., Purchaser dated November
30,1993 (incorporated by reference to Exhibit 10 (ab) in
Tax Exempt I's Quarterly Report on Form-Q dated March
31, 1994)
10(ac) Addendum to Sale-Purchase Agreement between Mansion
Apartment Project Investors, Inc., Seller and
Independence Apartments Associates, L.P., Purchase dated
March 31, 1994 (incorporated by reference to Exhibit
10(ac) in Tax Exempt I's Quarterly Report on Form 10-Q
dated March 31, 1994)
-33-
<PAGE>
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(continued)
Sequential
Page
----------
10(ad) First Supplemental Indenture, dated as of October 18,
1994, between The Industrial Development Authority of
the City of Independence, Missouri and Boatman's First
National Bank of Kansas City relating to The Mansion
project (incorporated by reference to Exhibit 10(ad) in
Tax Exempt I's Annual Report on Form 10-K dated December
31, 1994)
10(ae) First Mortgage Bond, dated May 13, 1986 and revised as
of October 18, 1994 with respect to The Mansion project,
in the principal amount of $19,450,000 (incorporated by
reference to Exhibit 10(ae) in Tax Exempt I's Annual
Report on Form 10-K dated December 31, 1994)
10(af) Amended Settlement Agreement for the North Glen First
Mortgage dated May 1, 1996 (incorporated by reference to
Exhibit 10(af) in Tax Exempt I's Annual Report on Form
10-K/A-1 dated December 31, 1995)
10(ag) First Mortgage Bond, dated September 11, 1986, with
respect to the Bay Club project, in the principal amount
of $6,400,000 (incorporated by reference to exhibit
10(a) in Tax Exempt II's Current Report on Form 8-K
dated September 11, 1986)
10(ah) First Mortgage Bond, dated November 13, 1986, with
respect to the Loveridge project, in the principal
amount of $8,550,000 (incorporated by reference to
exhibit 10(d) in Tax Exempt II's Form 8 Amendment No. 1
to Current Report on Form 8-K, dated February 10, 1987)
10(ai) First Mortgage Bond, dated December 30, 1986 with
respect to The Lakes project, in the principal amount of
$13,650,000 (incorporated by reference to exhibit 10(a)
in Tax Exempt II's Current Report on Form 8-K dated
December 30, 1986)
10(aj) First Mortgage Bond, dated December 31, 1986, with
respect to the Crowne Pointe project, in the principal
amount of $5,075,000 (incorporated by reference to
exhibit 10(b) in Tax Exempt II's Current Report on Form
8-K dated December 31, 1986)
10(ak) First Mortgage Bond, dated December 31, 1986, with
respect to the Orchard Hills project, in the principal
amount of $5,650,000 (incorporated by reference to
exhibit 10(c) in Tax Exempt II's Current Report on Form
8-K dated December 31, 1986)
10(al) First Mortgage Bond, dated February 2, 1987, with
respect to the Highland Ridge project, in the principal
amount of $15,000,000 (incorporated by reference to
exhibit 10(a) in Tax Exempt II's Current Report on Form
8-K dated February 2, 1987)
10(am) First Mortgage Bond, dated February 11, 1987, with
respect to the Newport Village project, in the principal
amount of $13,000,000 (incorporated by reference to
exhibit 10(a) in Tax Exempt II's Current Report on Form
8-K dated February 11, 1987)
-34-
<PAGE>
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(continued)
Sequential
Page
----------
10(an) First Mortgage Bond, dated February 11, 1987, with
respect to the Sunset Downs project, in the principal
amount of $15,000,000 (incorporated by reference to
exhibit 10(b) in Tax Exempt II's Current Report on Form
8-K dated February 11, 1987)
10(ao) First Mortgage Bond, dated February 27, 1987, with
respect to the Pelican Cove project, in the principal
amount of $18,000,000 (incorporated by reference to
exhibit 10(a) in Tax Exempt II's Current Report on Form
8-K dated February 27, 1987)
10(ap) First Mortgage Bond, dated February 27, 1987, with
respect to the Willow Creek project, in the principal
amount of $6,100,000 (incorporated by reference to
exhibit 10(c) in Tax Exempt II's Current Report on Form
8-K dated February 27, 1987)
10(aq) First Mortgage Bond, dated April 22, 1987, with respect
to the Cedar Pointe project, in the principal amount of
$9,500,000 (incorporated by reference to exhibit 10(a)
in Tax Exempt II's Current Report on Form 8-K dated
April 22, 1987)
10(ar) First Mortgage Bond, dated June 26, 1987, with respect
to the Shannon Lake project, in the principal amount of
$12,000,000 (incorporated by reference to exhibit 10(a)
in Tax Exempt II's Current Report on Form 8-K dated June
26, 1987)
10(as) First Mortgage Bond, dated July 31, 1987, with respect
to the Bristol Village project, in the principal amount
of $17,000,000 (incorporated by reference to exhibit
10(a) in Tax Exempt II's Current Report on Form 8-K
dated July 31,1987)
10(at) First Mortgage Bond, dated July 31, 1987, with respect
to the Suntree project, in the principal amount of
$7,500,000 (incorporated by reference to exhibit 10(b)
in Tax Exempt II's Current Report on Form 8-K dated July
31, 1987)
10(au) First Mortgage Bond, dated August 7, 1987, with respect
to the River Run project, in the principal amount of
$6,700,000 (incorporated by reference to exhibit 10(b)
in Tax Exempt II's Current Report on Form 8-K dated
August 7, 1987)
10(av) First Mortgage Bond, dated August 14, 1987, with respect
to the Players Club project, in the principal amount of
$2,500,000 (incorporated by reference to exhibit 10(a)
in Tax Exempt II's Current Report on Form 8-K dated
August 14, 1987)
10(aw) Settlement Agreement for the Shannon Lake First Mortgage
Bond dated December 3, 1990 (incorporated by reference
to Exhibit 10(q) in Tax Exempt II's 1991 Annual Report
on Form 10K)
-35-
<PAGE>
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(continued)
Sequential
Page
----------
10(ax) Settlement Agreement for the Newport Village First
Mortgage Bond dated October 9, 1992 (incorporated by
reference to Exhibit 10(r) in Tax Exempt II's 1992
Annual Report on Form 10K)
10(ay) Settlement Agreement for the Sunset Downs First Mortgage
Bond dated July 10, 1992 (incorporated by reference to
Exhibit 10(s) in Tax Exempt II's 1992 Annual Report on
Form 10K)
10(az) Settlement Agreement for the Suntree First Mortgage Bond
dated February 1, 1992 (incorporated by reference to
Exhibit 10(t) in Tax Exempt II's 1992 Annual Report on
Form 10K)
10(aaa) Settlement Agreement for the Players Club First Mortgage
Bond dated February 1, 1992 (incorporated by reference
to Exhibit 10(w) in Tax Exempt II's 1992 Annual Report
on Form 10K)
10(aab) Settlement Agreement for the Bristol Village First
Mortgage Bond dated March 2, 1993 (incorporated by
reference to Exhibit 10(x) in Tax Exempt II's 1992
Annual Report on Form 10K)
10(aac) Amended Settlement Agreement for the Shannon Lake First
Mortgage Bond dated June 1, 1993 (incorporated by
reference to Exhibit 10(y) in Tax Exempt II's 1993
Annual Report on Form 10K)
10(aad) Amended Settlement Agreement for the Player's Club First
Mortgage Bond dated December 1, 1993 (incorporated by
reference to Exhibit 10(z) in Tax Exempt II's 1993
Annual Report on Form 10K)
10(aae) Amended Settlement Agreement for the Suntree First
Mortgage Bond dated December 1, 1993 (incorporated by
reference to Exhibit 10(aa) in Tax Exempt II's 1993
Annual Report on Form 10K)
10(aaf) First Supplemental Indenture between The Industrial
Development Authority of the City of Kansas City,
Missouri and Boatmen's First National Bank of Kansas
City dated January 24, 1994 (incorporated by reference
to Exhibit 10(ab) in Tax Exempt II's Quarterly Report on
Form 10Q dated March 31, 1994)
10(aag) Option Agreement between The Lakes Project Investors,
Inc., Seller and ZIPCO, Inc., Purchaser, dated January
27, 1994 (incorporated by reference to Exhibit 10(ac) in
Tax Exempt II's Quarterly Report on Form 10Q dated
September 30, 1994)
-36-
<PAGE>
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(continued)
Sequential
Page
----------
10(aah) Assignment and Assumption Agreements between The Lakes
Apartments, Inc., Seller, and ZIPCO, Inc., Purchaser,
dated August 31, 1994 (incorporated by reference to
Exhibit 10(ad) in Tax Exempt II's Quarterly Report on
Form 10Q dated September 30, 1994)
10(aai) Sale-Purchase Agreement between The Lakes Project
Investors, Inc., Seller, and ZIPCO, Inc., Purchaser,
dated August 31, 1994 (incorporated by reference to
Exhibit 10(ae) in Tax Exempt II's Quarterly Report on
Form 10Q dated September 30, 1994)
10(aaj) Amended Settlement Agreement for the Player's Club First
Mortgage Bond dated December 1, 1994 (incorporated by
reference to Exhibit 10(af) in Tax Exempt II's 1994
Annual Report on Form 10K)
10(aak) Amended Settlement Agreement for the Suntree First
Mortgage Bond dated December 1, 1994 (incorporated by
reference to Exhibit 10(ag) in Tax Exempt II's 1994
Annual Report on Form 10K)
10(aal) Amended Settlement Agreement for the Loveridge First
Mortgage Bond dated July 31, 1995 (incorporated by
reference to Exhibit 10(ah) in Tax Exempt II's Quarterly
Report on Form 10Q dated September 30, 1995)
10(aam) Amended Settlement and Forbearance Agreement for the
Sunset Downs First Mortgage Bond dated July 31, 1995
(incorporated by reference to Exhibit 10(ai) in Tax
Exempt II's Quarterly Report on Form 10Q dated September
30, 1995)
10(aan) Amended Settlement Agreement for the Suntree First
Mortgage Bond dated January 26, 1996 (incorporated by
reference to Exhibit 10(aj) in Tax Exempt II's 1995
Annual Report on Form 10K/A-1)
10(aao) Amended Settlement Agreement for the Shannon Lake First
Mortgage Bond dated May 1, 1996 (incorporated by
reference to Exhibit 10(ak) in Tax Exempt II's 1995
Annual Report on Form 10K/A-1)
10(aap) Amended Settlement Agreement for the Player's Club First
Mortgage Bond date January 26, 1996 (incorporated by
reference to Exhibit 10(al) in Tax Exempt II's 1995
Annual Report on Form 10K/A-1)
10(aaq) Forbearance Agreement for the Highland Ridge First
Mortgage Bond dated May 14, 1996 (incorporated by
reference to Exhibit 10(am) in Tax Exempt II's 1995
Annual Report on Form 10K/A-1)
10(aar) Forbearance Agreement for the Cedar Pointe First
Mortgage Bond dated February 1, 1997 (incorporated by
reference to Exhibit 10(an) in Tax Exempt II's 1996
Annual Report on Form 10-K)
10(aas) First Mortgage Bond, dated as of August 14, 1987, with
respect to the Players Club project at Fort Myers in the
principal amount of $7,200,000 (incorporated by
reference to Exhibit 10(a) in Tax Exempt III's Current
Report on Form 8-K dated August 14, 1987)
10(aat) First Mortgage Bond, dated as of November 18, 1987, with
respect to the Lakepoint project, in the principal
amount of $15,100,000 (incorpo-
-37-
<PAGE>
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(continued)
Sequential
Page
----------
rated by reference to Exhibit 10(a) in Tax Exempt III's
Current Report on Form 8-K dated November 18, 1987)
10(aau) First Mortgage Bonds, dated March 25, 1988, with respect
to the Sunset Village and Sunset Creek projects in the
principal amounts of $11,375,000 and $8,275,000,
respectively (incorporated by reference to Exhibits
10(a) and 10(b) in Tax Exempt III's Current Report on
Form 8-K dated March 25, 1988)
10(aav) First Mortgage Bond, dated as of May 1, 1989, with
respect to the Ashley Knoll project (now named Orchard
Mill) in the principal amount of $10,500,000
(incorporated by reference to Exhibits 10(a), 10(b) and
10(c) in Tax Exempt III's Current Report on Form 8-K
dated May 1, 1989)
10(aaw) Settlement Agreement for the Lakepoint First Mortgage
Bond dated June 28, 1991 (incorporated by reference to
Exhibit 10(e) in Tax Exempt III's 1991 Annual Report on
Form 10-K)
10(aax) Settlement Agreement for the Players Club First Mortgage
Bond dated February 1, 1992 (incorporated by reference
to exhibit 10(f) in Tax Exempt III's 1992 Annual Report
on Form 10-K)
10(aay) Settlement Agreement for the Sunset Village First
Mortgage Bond dated July 10, 1992 (incorporated by
reference to Exhibit 10(g) in Tax Exempt III's 1992
Annual Report in Form 10-K)
10(aaz) Settlement Agreement for the Sunset Creek First Mortgage
Bond dated July 10,1992 (incorporated by reference to
exhibit 10(h) in Tax Exempt III's 1992 Annual Report on
Form 10-K)
10(aaaa) Amended Settlement Agreement for the Lakepoint First
Mortgage Bond dated June 1, 1993 (incorporated by
reference to Exhibit 10(i) in Tax Exempt III's 1993
Annual Report on Form 10-K)
10(aaab) Amended Settlement Agreement for the Players Club First
Mortgage Bond dated December 1, 1993 (incorporated by
reference to Exhibit 10(j) in Tax Exempt III's 1993
Annual Report on Form 10-K)
10(aaac) Amended Settlement Agreement for the Players Club First
Mortgage Bond dated December 1, 1994 (incorporated by
reference to Exhibit 10(k) in Tax Exempt III's 1994
Annual Report on Form 10-K)
10(aaad) Amended Settlement Agreement for the Lakepoint First
Mortgage Bond dated May 1, 1996 (incorporated by
reference to Exhibit 10(l) in Tax Exempt III's 1995
Annual Report on Form 10-K/A-1)
10(aaae) Settlement Agreement for Orchard Mill First Mortgage
Bond dated May 1, 1995 (incorporated by reference to
Exhibit 10(m) in Tax Exempt III's September 30, 1996
Quarterly Report on Form 10-Q)
-38-
<PAGE>
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(continued)
Sequential
Page
----------
10(aaaf) Management Agreement dated as of October 1, 1997,
between the Company and Related Charter L.P.
(incorporated by reference to the Company's Current
Report on Form 8-K, filed with the Commission on March
19, 1998)
10(aaag) Agreement and Plan of Merger dated as of October 1,
1997, by and among the Company, Summit Tax Exempt Bond
Fund, L.P., Summit Tax Exempt L.P. II and Summit Tax
Exempt L.P. III (incorporated by reference to the
Company's Current Report on Form 8-K, filed with the
Commission on March 19, 1998)
10(aaah) Incentive Share Option Plan (incorporated by reference
to the Company's Current Report on Form 8-K, filed with
the Commission on March 19, 1998)
10(aaai) First Mortgage Bond, dated as of September 30, 1986, with
respect to the Tempo Northridge Apartments Project in
the principal amount of $12,400,000 (filed herewith) 45
10(aaaj) First Mortgage Bond, dated as of June 26, 1987, with
respect to the Shannon Lake Project in the principal
amount of $12,000,000 (filed herewith) 67
10(aaak) First Mortgage Bond, dated as of November 18, 1987, with
respect to the Lakepointe Project in the principal
amount of $15,100,000 (filed herewith) 87
10(aaal) First Mortgage Bond, dated as of May 1, 1989, with
respect to the Ashley Knoll Project in the principal
amount of $10,500,000 (filed herewith) 107
10(aaam) First Mortgage Bond, dated as of December 11, 1997, with
respect to the Countryside Apartments Project in the
principal amount of $5,000,000 (filed herewith) 126
27 Financial Data Schedule (filed herewith) 133
(b) Reports on Form 8-K
Current Report on Form 8-K relating to the settlement of
class action litigation which resulted in the formation
of the Company was dated October 1, 1997 and filed on
October 14, 1997.
Current Report on Form 8-K relating to the signing of a
conditional commitment letter with Capital Markets
Assurance Corporation for up to a $150,000,000 revolving
credit enhancement facility was dated October 2, 1997
and filed on November 6, 1997.
-39-
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Company has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
CHARTER MUNICIPAL MORTGAGE ACCEPTANCE COMPANY
(COMPANY)
Date: March 30, 1998 By: /s/ Stuart J. Boesky
---------------------------
Stuart J. Boesky
Managing Trustee, President,
Chief Executive Officer and
Chief Operating Officer
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended,
this report has been signed by the following persons on behalf of the Company
and in the capacities and on the dates indicated:
Signature Title Date
---------------------- ------------------------------ ---------------
/s/ J. Michael Fried Managing Trustee and Chairman
- - ---------------------- of the Board
J. Michael Fried March 30, 1998
/s/ Peter T. Allen
- - ----------------------
Peter T. Allen Managing Trustee March 30, 1998
/s/ Arthur P. Fisch
- - ----------------------
Arthur P. Fisch Managing Trustee March 30, 1998
Managing Trustee, President,
/s/ Stuart J. Boesky Chief Executive Officer
- - ----------------------- and Chief Operating Officer March 30, 1998
Stuart J. Boesky
Managing Trustee, Executive Vice
/s/ Alan P. Hirmes President, Secretary, Chief
- - ----------------------- Financial Officer and Chief March 30, 1998
Alan P. Hirmes Accounting Officer
<PAGE>
CHARTER MUNICIPAL MORTGAGE ACCEPTANCE COMPANY
ITEM 14, SCHEDULE IV
MORTGAGE LOANS ON REAL ESTATE
DECEMBER 31, 1997
Participating First Mortgage Bonds
Descriptions of the various FMBs owned by the Company at December 31, 1997 are
as follows:
<TABLE>
<CAPTION>
Minimum Carrying
Average Pay Rate Stated Amount
Interest Rate at December Interest at December
Property Location Paid for 1997* 31, 1997* Rate* Call Date Maturity Date Face Amount 31, 1997 (G)
- - -------- -------- -------------- ----------- -------- --------- ------------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
The Mansion Independence, MO 6.88% (C) 5.23% 5.23% April 2006 April 2008 $ 19,450,000 $ 14,536,000
Martin's Creek Summerville, SC 8.16 8.25 8.25 Mar. 2000 May 2010 7,300,000 7,300,000
East Ridge Mt. Pleasant, SC 8.25 8.25 (D) 8.25 Mar. 2000 May 2010 8,700,000 9,943,000
Highpointe Club Harrisburg, PA 6.74 (B) 8.50 June 1998 June 2006 8,900,000 9,278,000
Cypress Run Tampa, FL 5.84 (B) 8.50 Aug. 1998 Aug. 2006 15,402,428 14,191,000
Thomas Lake Eagan, MN 9.07 (D) 8.50 8.50 Aug. 1998 Aug. 2006 12,975,000 13,902,000
North Glen Atlanta, GA 6.00 7.00 (K) 7.00 Jul. 2005 Jun. 2017 12,400,000 12,400,000
Greenway Manor St. Louis, MO 9.00 (D) 8.50 8.50 Oct. 1998 Sept. 2006 12,850,000 15,604,000
Clarendon Hills Hayward, CA 6.04 (I) 5.52 5.52 Dec. 2003 Dec. 2003 17,600,000 13,886,000
Cedar Creek McKinney, TX 8.00 (B) 8.50 Dec. 1998 Dec. 2006 8,100,000 9,836,000
Sunset Terrace Lancaster, CA 5.04 (B) 8.00 Feb. 1999 May 2007 10,350,000 9,108,000
Bay Club Mt. Pleasant, SC 8.09 (A) 8.25 (A) 8.25 Sep. 2000 Sep. 2006 6,400,000 7,314,000
Loveridge Contra Costa, CA 5.33 (B) 8.00 Nov. 1998 Nov. 2006 8,550,000 6,153,000
The Lakes Kansas City, MO 5.54 (E) 4.87 4.87 Dec. 2006 Dec. 2006 13,650,000 9,500,000
Crowne Pointe Olympia, WA 8.00 8.00 8.00 Dec. 1998 Dec. 2006 5,075,000 5,800,000
Orchard Hills Tacoma, WA 8.00 8.00 8.00 Dec. 1998 Dec. 2006 5,650,000 6,457,000
Highland Ridge St. Paul, MN 7.30 7.50 (F) 8.00 Feb. 1999 Feb. 2007 15,000,000 15,536,000
Newport Village Tacoma, WA 8.51 (D) 8.00 8.00 Jan. 1999 Jan. 2007 13,000,000 14,857,000
Sunset Downs Lancaster, CA 4.79 (B) 8.00 May 1999 May 2007 15,000,000 12,660,000
Pelican Cove St Louis, MO 7.50 (B) 8.00 Feb. 1999 Feb. 2007 18,000,000 20,571,000
Willow Creek Ames, IA 8.00 8.00 8.00 Oct. 1999 Oct. 2006 6,100,000 6,971,000
Cedar Pointe Nashville, TN 7.00 (H) 7.00 (H) 7.00 Apr. 2006 Apr. 2017 9,500,000 9,500,000
Shannon Lake Atlanta, GA 6.00 6.00 (M) 6.00 Jul. 2005 Jun. 2017 12,000,000 11,571,000
Bristol Village Bloomington, MN 8.68 (D) 8.00 (F) 8.00 Jun. 1999 Jun. 2005 17,000,000 18,214,000
Suntree Ft. Myers, FL 6.68 6.50 (F) 8.00 Jul. 1999 Jul. 2007 7,500,000 7,768,000
River Run Miami, FL 9.11 (I) 8.00 8.00 Aug. 1999 Aug. 2007 7,200,000 8,229,000
Players Club Ft. Myers, FL 6.35 6.25 (F) 8.00 Aug. 1999 Aug. 2007 9,700,000 9,146,000
Lakepoint Dekalb City, GA 6.00 6.00 (L) 6.00 Jul. 2005 Jun. 2017 15,100,000 12,943,000
</TABLE>
<PAGE>
CHARTER MUNICIPAL MORTGAGE ACCEPTANCE COMPANY
ITEM 14, SCHEDULE IV
MORTGAGE LOANS ON REAL ESTATE
DECEMBER 31, 1997
Participating First Mortgage Bonds
<TABLE>
<CAPTION>
Minimum Carrying
Average Pay Rate Stated Amount
Interest Rate at December Interest at December
Property Location Paid for 1997* 31, 1997* Rate* Call Date Maturity Date Face Amount 31, 1997 (G) (N)
- - -------- -------- -------------- ----------- ------- --------- ------------- ----------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Sunset Village Lancaster, CA 6.03 (B) 8.50 Mar. 2000 Mar. 2008 11,375,000 10,559,000
Sunset Creek Lancaster, CA 5.13 (B) 8.50 Mar. 2000 Mar. 2008 8,275,000 6,317,000
Orchard Mill Atlanta, GA 6.29 (J) 5.00 7.50 Jul. 2005 Jun. 2017 10,500,000 11,250,000
Countryside
North Memphis, TN 7.50% 7.50% 7.50% Dec. 2017 Dec. 2034 5,000,000 5,000,000
----------- -----------
$353,602,428 $346,300,000
=========== ===========
</TABLE>
*The average interest rate paid represents the interest recorded by the Company
while the stated interest rate represents the coupon rate of the FMB and the
minimum pay rate represents the minimum rate payable pursuant to the applicable
forbearance agreement, if any.
(A) The minimum pay rate on the FMB increased in increments from 6.0% in 1990 to
8.25% in 1997. The actual pay rate is adjusted as of the Underlying
Properties fiscal year-end based on audited financial statements to no less
than the minimum pay rate.
(B) The minimum pay rate is the current cash flow of the property.
(C) Includes contingent interest paid during 1997.
(D) Includes receipt of deferred base interest relating to prior periods.
(E) Includes receipt of primary and supplemental contingent interest.
(F) The minimum pay rate on the FMB is scheduled to increase to the stated
interest rate over the remaining term of the FMB.
(G) The FMBs are carried at their estimated fair values at December 31, 1997.
(H) Reflects payments accrued at December 31, 1996 that were received pursuant
to a bond modification entered as of February 1, 1997, which lowered the
base interest rate to 7% effective September 16, 1996.
(I) Includes receipt of primary contingent interest.
(J) Pursuant to a bond modification entered as of October 1, 1997 which lowered
the base interest rate to 7.50% effective October 1, 1997, subject to a
minimum pay rate of 5% through June 30, 2000.
(K) Pursuant to a forbearance agreement entered as of October 1, 1997 which
lowered the base interest rate to 7% through June 30, 2000 and 7.50%
thereafter.
(L) Pursuant to a bond modification entered as of October 1, 1997 which lowered
the base interest rate to 6% effective October 1, 1997.
(M) Pursuant to a bond modification entered as of October 1, 1997 which lowered
the base interest rate to 6% through July 31, 2000 and 7% thereafter.
(N) Aggregate cost for federal income tax purposes is $353,602,429
<PAGE>
CHARTER MUNICIPAL MORTGAGE ACCEPTANCE COMPANY
ITEM 14, SCHEDULE IV
MORTGAGE LOANS ON REAL ESTATE
DECEMBER 31, 1997
Participating First Mortgage Bonds
<TABLE>
<CAPTION>
Reconciliation of FMBs:
1997 1996 1995
-------------- ------------ ------------
<S> <C> <C> <C>
Balance at beginning of period: $148,123,426 $150,274,452 $150,705,121
Acquisitions 173,557,007 0 0
Realized loss on impairment
of assets (1,843,135) (4,000,000) (1,000,000)
Net change in fair value of
participating first mortgage bonds 26,436,248 1,822,519 542,877
Accretion of deferred income 26,454 26,455 26,454
----------- ----------- -----------
Balance at close of period: $346,300,000 $148,123,426 $150,274,452
=========== =========== ===========
</TABLE>
UNITED STATES OF AMERICA
STATE OF GEORGIA
HOUSING AUTHORITY OF GWINNETT COUNTY
MULTIFAMILY HOUSING REVENUE BOND
(TEMPO NORTHRIDGE APARTMENTS PROJECT), SERIES 1986
Number: R-1
Dated Date: September 30, 1986
Maturity Date: June 30, 2017
Registered Owner: Charter Municipal Mortgage Acceptance Company
Principal Amount: $12,400,000
The Housing Authority of Gwinnett County (the "Issuer"), a public body corporate
and politic organized and existing under the laws of the State of Georgia (the
"State"), created and existing under and by virtue of the laws of the State,
hereby acknowledges itself indebted and for value received promises to pay to
the registered owner hereof stated above, or registered assigns, at the maturity
date stated above, or earlier upon redemption or acceleration, but only from the
sources and as hereinafter provided, upon presentation and surrender of this
Bond at the principal office of Reliance Trust Company, as successor in interest
to Citizens and Southern National Bank (now NationsBank, N.A.), or its successor
as Trustee (the "Trustee"), under the Resolution (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 Resolution, 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,
shall constitute payments on this Bond 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 a series of bonds (the "Bonds") issued pursuant to the
Multifamily Housing Revenue Bond (Tempo Northridge Apartments Project)
Resolution of the Issuer adopted on July 7, 1986, as amended and restated on
August 12, 1986, as further amended by the First Supplemental Resolution adopted
October 7, 1997 (as the same may be further amended or supplemented from time to
time, the "Resolution"), and the Housing
Page 1
<PAGE>
Authorities Law of the State of Georgia, O.C.G.A. Section 8-3-1, et seq., as
amended (the "Act"). Reference is made to the Resolution and the Act for a full
statement of their respective terms. Capitalized terms used herein and not
otherwise defined herein or in the definitional appendix attached hereto have
the respective meanings accorded such terms in the Resolution, which definitions
are expressly incorporated herein by reference. The Bonds issued under the
Resolution are expressly limited to $12,400,000 principal amount at any time
Outstanding and are all of like tenor, except as to numbers and denominations,
and are issued for the purpose of providing construction and permanent financing
for qualified multifamily rental housing units in the State and of paying
certain expenses incidental thereto.
THIS BOND AND THE INTEREST HEREON SHALL NOT BE DEEMED TO CONSTITUTE A DEBT OR A
GENERAL OBLIGATION OR A PLEDGE OF THE FAITH AND CREDIT OF THE STATE OF GEORGIA
OR OF GWINNETT COUNTY, AND DO NOT DIRECTLY, INDIRECTLY OR CONTINGENTLY OBLIGATE
SAID STATE OR COUNTY TO LEVY OR TO PLEDGE ANY FORM OF TAXATION WHATEVER FOR THE
PAYMENT OF SUCH PRINCIPAL AND INTEREST.
Interest on the Bonds.
(a) General. The Bonds including this bond shall bear interest as provided
below.
(b) Base Interest. Through 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 10.0% 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 8.5% per annum to (but not including) the Amendment Date;
7.0% per annum from the Amendment Date through and including June 30, 2000;
and 7.5% per annum thereafter, payable on each payment date specified in
paragraph (e)(1) below.
(3) Accrued and unpaid Base Interest in the amount of $2,281,509 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 (e)(3) hereof
on the basis and to the extent of 100% of Net
Page 2
<PAGE>
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 (b)(3), 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 as provided in Section 7.10 of the
Resolution.
Subject to the foregoing, Base Interest shall be calculated on the basis of a
year of 360 days, actual days elapsed.
(c) Contingent Interest. After the Initial Period and through the
Conversion Date, the Bonds also shall bear interest calculated and payable as
follows:
(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 50% 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
50% of Net Cash Flow is insufficient, on the basis and to the extent of 50%
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 (e)(2) below on the basis and to the extent of 50%
of Net Cash Flow, measured for purposes of such payment and subject to the
adjustments and reconciliation as specified in paragraph (f) below. If 50%
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 50% 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 9.25% 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
Page 3
<PAGE>
"Primary Deferred Interest"). Primary Deferred Interest in the amount of
$994,528 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 50% 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 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 50% 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 50% 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 50% 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 50%
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 (b)(3)
and (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 50% 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 50% 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 50% of Net Cash Flow after such payments
(which amount is referred to as the "Supplemental Contingent Interest").
The difference between
Page 4
<PAGE>
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 50% 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 50% 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 50% 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 50% 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 (b)(3) and
(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.
(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
Page 5
<PAGE>
Sale or Refinancing Proceeds (as provided in paragraph (e)(3) below), and
(iv) on the Conversion Date.
(3) The Base 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
4.01(f) of the Resolution, 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
Resolution) 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.
(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
Page 6
<PAGE>
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 Resolution), 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 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 March 15 of each calendar year (up to and, unless
the Conversion Date falls before delivery of the audit, including
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<PAGE>
the calendar year in which the Conversion Date occurs) the Developer shall
provide to the Issuer, 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
Resolution) 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 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
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<PAGE>
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
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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.
(3) If the Refinancing of the Project is based upon a redemption of
Bonds pursuant to Section 4.01(d) of the Resolution, 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 16% 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:
If the length of the But the length of the The applicable
Remarketing Period (in Remarketing Period (in percentage of
years) is at least: years) is less than: the 11-Bond Index is:
----------------------------------------------------------------------------
5 or greater (N.A.) 85%
1 5 80
Page 10
<PAGE>
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 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 Resolution), cumulative from the original date of issuance of the
Bond, shall not exceed the sum of 16% per annum, simple and noncompounded for
each year (calculated on the basis of a 365-day year, actual
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<PAGE>
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
Resolution, and reference is hereby made to the Resolution for a full statement
of their terms, which are incorporated herein by reference.
Limited Recourse. Pursuant to a Loan Agreement dated as of July 1, 1986
(the "Loan Agreement"), and a Note dated September 30, 1986 (the "Note"), both
amended as of October 1, 1997, Arc Way Associates, a Georgia limited partnership
(the "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 NOTE BY
THE DEVELOPER, AND THE SECURITY THEREFOR PROVIDED BY THE BUILDING LOAN DEED TO
SECURE DEBT AND SECURITY AGREEMENT FROM THE DEVELOPER TO THE ISSUER, DATED AS OF
JULY 1, 1986, AS AMENDED (THE "MORTGAGE"), AND THE ASSIGNMENT OF LEASES, RENTS
AND OTHER INCOME FROM THE DEVELOPER TO THE ISSUER, DATED AS OF JULY 1, 1986, AS
AMENDED (THE "ASSIGNMENT OF LEASES"), ALL OF WHICH HAVE BEEN ASSIGNED TO CHARTER
MUNICIPAL MORTGAGE ACCEPTANCE COMPANY PURSUANT TO THE RESOLUTION AND (II) ANY
ADDITIONAL SECURITY PROVIDED IN THE RESOLUTION. THE OBLIGATIONS OF THE DEVELOPER
UNDER THE LOAN AGREEMENT, THE 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 ISSUER'S
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 Resolution, 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
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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 Resolution.
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 Resolution.
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 Resolution, at the direction of the Developer given not
less than sixty (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 Developer
from the Owners described in Section 4.01(h) of the Resolution or (ii) the Bonds
will be deemed tendered for purchase and remarketed as provided in Article V of
the Resolution 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 2005. 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, the Base Deferred
Interest Amount, 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, the
Base Deferred Interest Amount, and the Primary Deferred Interest Amount. If the
conditions to remarketing of the Bonds set forth in Article V of the Resolution
are not satisfied, or if the Bonds are not successfully remarketed, or if the
full purchase price thereof is
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<PAGE>
not paid on the Initial Remarketing Date, or if all Interest (including the Base
Deferred Interest Amount, 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 Resolution.
Failure of the Developer to give direction as aforesaid shall be conclusively
deemed a direction to have the Bonds redeemed as elected by the Owners.
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, the Base Deferred Interest Amount, 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 Resolution and
the Developer makes the remarketing election permitted by Section 4.04 of the
Resolution, 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 Resolution or are deemed tendered for purchase on a Remarketing
Date, including the Initial Remarketing Date, shall constitute tendered Bonds
for purposes of the Resolution; 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 Resolution.
Undelivered Bonds that have been remarketed in accordance with the Resolution
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
Resolution, including without limitation the right to transfer such Bonds.
Interest accruing from and after the Remarketing Date on such Undelivered
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<PAGE>
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 Resolution, and
such Undelivered Bonds shall not be deemed Outstanding for purposes of the
Resolution, 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 Resolution 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 Resolution, or to institute, appear in or defend any suit
or other proceedings with respect thereto, except as provided in the Resolution.
If an Event of Default occurs and is continuing, the principal of all Bonds then
outstanding may be declared due and payable by the Acting Party upon the
conditions and in the manner and with the effect provided in the Resolution.
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 Resolution 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 Resolution, except for certain
purposes, including the purposes of registration and exchange of Bonds and of
such payment.
Modifications. Modifications or alterations of the Resolution, or of any
supplements thereto, may be made only to the extent and in the circumstances
permitted by the Resolution.
By its acceptance of this Bond, the Owner hereof agrees that it will be
bound by and accepts the provisions of the Resolution 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 the manner, provided in the
Resolution, 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
Resolution 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
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<PAGE>
and that the issue of the Bonds, together with all other indebtedness of the
Issuer, is within every debt and other limit prescribed by said Constitution or
statutes.
[The remainder of this page is intentionally left blank.]
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<PAGE>
IN WITNESS WHEREOF, the Issuer has caused this Bond to be executed as of the
Dated Date stated above.
HOUSING AUTHORITY
OF GWINNETT COUNTY
(Seal)
By: /s/ ILLEGIBLE
--------------------------------
Chairman
Attest:
/s/ ILLEGIBLE
- - --------------------------
Its: Secretary
Page 17
<PAGE>
FORM OF CERTIFICATE OF AUTHENTICATION
This Bond is one of the Bonds described in the within mentioned Resolution
and is one of the Multifamily Housing Revenue Bonds (Tempo Northridge Apartments
Project) Series 1986 of the Housing Authority of Gwinnett County.
Reliance Trust Company
By: /s/ ILLEGIBLE
---------------------------
Authorized Officer
Date of Authentication:
January 13, 1998
Page 18
<PAGE>
VALIDATION CERTIFICATE
STATE OF GEORGIA
COUNTY OF GWINNET
The undersigned Clerk of the Superior Court of Gwinnett County, Georgia
HEREBY CERTIFIES that the within bond was confirmed and validated by judgement
of the Superior Court of Gwinnett County, Georgia, rendered on the 21st day of
July, 1986, that an intervention or objection was taken thereto and that such
intervening party has executed a dismissal withdrawing from said validation
proceeding for all purposes.
WITNESS a facsimilie of my signature and the seal of said Court.
/s/ ILLEGIBLE 8/20/86
---------------------------------------
Clerk, Superior Court,
Gwinnett County, Georgia
-17-
<PAGE>
FORM OF ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto ___________________________________ the within Multifamily Housing Revenue
Bond (Tempo Northridge Apartments Project) Series 1986, of the Housing Authority
of Gwinnett County and hereby authorizes the transfer of this Bond on the
registration books of the Trustee.
Dated: ____________________________________
___________________________________________
Authorized Signature
___________________________________________
Name of Transferee
Signature Guaranteed by:
___________________________________________
___________________________________________
Name of Bank
By: _______________________________________
Title: ____________________________________
Page 19
<PAGE>
DEFINITIONAL APPENDIX
"Amendment Date" shall mean October 1, 1997.
"Maximum Primary Contingent Interest" shall mean, on any payment date for
Contingent Interest and Deferred Interest specified in paragraph (e) hereof,
0.75% 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 the denominator of which
is 360. There shall be no Maximum Primary Contingent Interest 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,
6.75% commencing on the first day of the Second Period and continuing to (but
not including) the Amendment Date, and 7.0% thereafter, 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 the
denominator of which is 360.
"Primary Contingent Interest Rate" shall mean an interest rate of 0.75% per
annum continuing to (but not including) the Amendment Date.
"Supplemental Contingent Interest Rate" shall mean an interest rate of
6.75% per annum commencing on the first day of the Second Period and continuing
to (but not including) the Amendment Date, and 7.0% per annum thereafter.
Page 20
UNITED STATES OF AMERICA
STATE OF GEORGIA
Union City Housing Authority
Multifamily Housing Revenue Bond
(Shannon Lake Project), Series 1987
Number: R-1
Dated Date: June 26, 1987
Maturity Date: June 30, 2017
Registered Owner: Charter Municipal Mortgage Acceptance Company
Principal Amount: $12,000,000.00
The Union City Housing Authority (the "Issuer"), a public body corporate and
politic organized and existing under the laws of the State of Georgia (the
"State"), created and existing under and by virtue of the laws of the State,
hereby acknowledges itself indebted and for value received promises to pay to
the registered owner hereof stated above, or registered assigns, at the maturity
date stated above, or earlier upon redemption or acceleration, but only from the
sources and as hereinafter provided, upon presentation and surrender of this
Bond at the principal office of Reliance Trust Company, as successor in interest
to Citizens and Southern Trust Company (Georgia), National Association (now
NationsBank, N.A.,) 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, shall constitute payments on this
Bond 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 a series of bonds (the "Bonds") issued pursuant to the
Resolution of the Issuer adopted on June 9, 1987 (the "Resolution"), the
Multifamily Housing Revenue Bond (Shannon Lake Project) Indenture dated as of
June 1, 1987, as amended by a First Supplemental Indenture dated as of October
1, 1997 (as further amended and supplemented from time to time, the
"Indenture"), and the Housing Authorities Law of the State of Georgia,
Page 1
<PAGE>
O.C.G.A. Section 8-3-1, et seq., as amended (the "Act"). Reference is made to
the Indenture, the Resolution and the Act for a full statement of their
respective terms. Capitalized terms used herein and not otherwise defined herein
or in the definitional appendix attached hereto have the respective meanings
accorded such terms in the Indenture, which are expressly incorporated herein by
reference. The Bonds issued under the Indenture are expressly limited to
$12,000,000 principal amount at any time Outstanding and are all of like tenor,
except as to numbers and denominations, and are issued for the purpose of
providing construction and permanent financing for qualified multifamily rental
housing units in the State and of paying certain expenses incidental thereto.
THIS BOND AND THE INTEREST HEREON SHALL NOT BE DEEMED TO CONSTITUTE A DEBT OR A
GENERAL OBLIGATION OR A PLEDGE OF THE FAITH AND CREDIT OF THE STATE OF GEORGIA
OR OF UNION CITY, GEORGIA, AND DO NOT DIRECTLY, INDIRECTLY OR CONTINGENTLY
OBLIGATE SAID STATE OR CITY TO LEVY OR TO PLEDGE ANY FORM OF TAXATION WHATEVER
FOR THE PAYMENT OF SUCH PRINCIPAL AND INTEREST.
Interest on the Bonds.
(a) General. The Bonds including this bond shall bear interest as provided
below.
(b) Base Interest. Through 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 9.25% 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; 6.0% per annum
from the Amendment Date through and including July 31, 2000; and 7.0% per
annum thereafter, payable on each payment date specified in paragraph
(e)(1) below.
(3) Accrued and unpaid Base Interest in the amount of $1,522,415 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
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<PAGE>
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 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 (b)(3), 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 as provided in Section 7.10 of the
Indenture.
Subject to the foregoing, Base Interest shall be calculated on the basis of a
year of 360 days, actual days elapsed.
(c) Contingent Interest. After the Initial Period and through the
Conversion Date, the Bonds also shall bear interest calculated and payable as
follows:
(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 (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 (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
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collectively with all such amounts previously deferred and unpaid as
"Primary Deferred Interest"). Primary Deferred Interest in the amount of
$1,013,950 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 the
Base Deferred Interest Amount, 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 50% 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 50% 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 50% 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 50%
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 (b)(3)
and (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 50% 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 50% 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 50% of Net Cash Flow after such payments
(which amount is referred to
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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 50% 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 50% 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 50% 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 50% 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 (b)(3) and
(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.
(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
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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) The Base 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
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.
(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
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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 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.
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(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 Developer shall
provide to the Issuer, 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 to be determined as set forth below, such
determination to be completed no later than fifteen (15) days before the
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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
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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.
(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 16% 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:
If the length of the But the length of the The applicable
Remarketing Period (in Remarketing Period (in percentage of
years) is at least: years) is less than: the 11-Bond Index is:
---------------------------------------------------------------------------
5 or greater (N.A.) 85%
1 5 80
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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 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 16% per annum, simple and noncompounded for
each year (calculated on the basis of a 365-day year, actual
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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 dated as of June 1, 1987
(the "Loan Agreement"), and a Note dated June 26, 1987 (the "Note"), both
amended as of October 1, 1997, BRA Ltd., a Georgia limited partnership (the
"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 NOTE BY
THE DEVELOPER, AND THE SECURITY THEREFOR PROVIDED BY THE BUILDING LOAN DEED TO
SECURE DEBT AND SECURITY AGREEMENT FROM THE DEVELOPER TO THE ISSUER, DATED AS OF
JUNE 1, 1987, AS AMENDED (THE "MORTGAGE"), AND THE ASSIGNMENT OF LEASES, RENTS
AND OTHER INCOME FROM THE DEVELOPER TO THE ISSUER, DATED AS OF JUNE 1, 1987, AS
AMENDED (THE "ASSIGNMENT OF LEASES"), ALL OF WHICH HAVE BEEN ASSIGNED TO THE
TRUSTEE PURSUANT TO THE INDENTURE AND (II) ANY ADDITIONAL SECURITY PROVIDED IN
THE INDENTURE. THE OBLIGATIONS OF THE DEVELOPER UNDER THE LOAN AGREEMENT, THE
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 ISSUER'S 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.
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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) 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 2005. 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, the Base Deferred
Interest Amount, 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, the
Base Deferred Interest Amount, 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 the Base Deferred Interest Amount, Contingent Interest
and Deferred Interest then payable) and
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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. Failure of the
Developer to give direction as aforesaid shall be conclusively deemed a
direction to have the Bonds redeemed as elected by the Owners.
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, the Base Deferred Interest Amount, 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 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
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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 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 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 and
that the issue of the Bonds, together with all other indebtedness of the Issuer,
is within every debt and other limit prescribed by said Constitution or
statutes.
Page 15
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IN WITNESS WHEREOF, the Issuer has caused this Bond to be executed as of
the Dated Date stated above.
UNION CITY HOUSING AUTHORITY
(Seal)
By: /s/ ILLEGIBLE
------------------------------
Chairman
Attest:
/s/ ILLEGIBLE
- - ---------------------------------
Its: Secretary
Page 16
<PAGE>
FORM OF 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 (Shannon Lake Project)
Series 1987 of the Union City Housing Authority.
Reliance Trust Company
By: /s/ ILLEGIBLE
------------------------------
Authorized Officer
Date of Authentication:
January 13, 1998
Page 17
<PAGE>
FORM OF ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto _______________________________ the within Multifamily Housing Revenue Bond
(Shannon Lake Project) Series 1987, of the Union City Housing Authority and
hereby authorizes the transfer of this Bond on the registration books of the
Trustee.
Dated: ____________________________________
___________________________________________
Authorized Signature
___________________________________________
Name of Transferee
Signature Guaranteed by:
___________________________________________
___________________________________________
Name of Bank
By: _______________________________________
Title: ____________________________________
Page 18
<PAGE>
VALIDATION CERTIFICATE
STATE OF GEORGIA
COUNTY OF FULTON
The undersigned Clerk of the Superior Court of Fulton County, Georgia
HEREBY CERTIFIES that the within bond was confirmed and validated by judgement
of the Superior Court of Fulton County, Georgia, rendered on the 22nd day of
June, 1987, Civil Action File No. D-43013, that an intervention or objection was
filed thereto and that no appeal has been taken therefrom.
WITNESS my signature and the seal of said Court.
(SEAL) /s/ BARBARA PRICE
---------------------------------------
Clerk, Superior Court,
Fulton County, Georgia
-19-
<PAGE>
DEFINITIONAL APPENDIX
"Amendment Date" shall mean October 1, 1997.
"Maximum Primary Contingent Interest" shall mean, on any payment date for
Contingent Interest and Deferred Interest specified in paragraph (e) hereof, 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 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 360 . There shall be no Maximum Primary Contingent
Interest 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% commencing on the first day of the Second Period and continuing to (but not
including) the Amendment Date, and 6.75% thereafter, 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 the denominator of which
is 360.
"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%
per annum commencing on the first day of the Second Period and continuing to
(but not including) the Amendment Date, and 6.75% per annum thereafter.
Page 19
UNITED STATES OF AMERICA
STATE OF GEORGIA
HOUSING AUTHORITY OF THE COUNTY OF DEKALB, GEORGIA
MULTIFAMILY HOUSING REVENUE BOND
(LAKEPOINT PROJECT), SERIES 1987
Number: R-1
Dated Date: November 18, 1987
Maturity Date: June 30, 2017
Registered Owner: Charter Municipal Mortgage Acceptance Company
Principal Amount: $15,100,000.00
The Housing Authority of the County of DeKalb, Georgia (the "Issuer"), a public
body corporate and politic organized and existing under the laws of the State of
Georgia (the "State"), created and existing under and by virtue of the laws of
the State, hereby acknowledges itself indebted and for value received promises
to pay to the registered owner hereof stated above, or registered assigns, at
the maturity date stated above, or earlier upon redemption or acceleration, but
only from the sources and as hereinafter provided, upon presentation and
surrender of this Bond at the principal office of Reliance Trust Company, as
successor in interest to Citizens and Southern Trust Company (Georgia), National
Association (now NationsBank, N.A.), 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, shall constitute
payments on this Bond 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 a series of bonds (the "Bonds") issued pursuant to the
Resolution of the Issuer adopted on October 26, 1987 (the "Resolution"), the
Multifamily Housing Revenue Bond (Lakepoint Project) Indenture dated as of
November 1, 1987, as amended by a First Supplemental Indenture dated as of
October 1, 1997 (as further amended and supplemented from time to time, the
"Indenture"), and the Housing Authorities Law of the State of Georgia,
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<PAGE>
O.C.G.A. Section 8-3-1, et seq., as amended (the "Act"). Reference is made to
the Indenture, the Resolution and the Act for a full statement of their
respective terms. Capitalized terms used herein and not otherwise defined herein
or in the definitional appendix attached hereto have the respective meanings
accorded such terms in the Indenture, which definitions are expressly
incorporated herein by reference. The Bonds issued under the Indenture are
expressly limited to $15,100,000 principal amount at any time Outstanding and
are all of like tenor, except as to numbers and denominations, and are issued
for the purpose of providing construction and permanent financing for qualified
multifamily rental housing units in the State and of paying certain expenses
incidental thereto.
THIS BOND AND THE INTEREST HEREON SHALL NOT BE DEEMED TO CONSTITUTE A DEBT OR A
GENERAL OBLIGATION OR A PLEDGE OF THE FAITH AND CREDIT OF THE STATE OF GEORGIA
OR OF DEKALB COUNTY, GEORGIA, AND DO NOT DIRECTLY, INDIRECTLY OR CONTINGENTLY
OBLIGATE SAID STATE OR COUNTY TO LEVY OR TO PLEDGE ANY FORM OF TAXATION WHATEVER
FOR THE PAYMENT OF SUCH PRINCIPAL AND INTEREST.
Interest on the Bonds.
(a) General. The Bonds including this bond shall bear interest as provided
below.
(b) Base Interest. Through 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 9.5% 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; 8.5% per annum from
the 550th day to (but not including) the Amendment Date; and 6.0% per annum
thereafter, payable on each payment date specified in paragraph (e)(1)
below.
(3) Accrued and unpaid Base Interest in the amount of $2,985,190 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 (e)(3) hereof
on the basis and to the extent of 100% of Net
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<PAGE>
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 (b)(3), 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 as provided in Section 7.10 of the
Indenture.
Subject to the foregoing, Base Interest shall be calculated on the basis of a
year of 360 days, actual days elapsed.
(c) Contingent Interest. After the Initial Period and through the
Conversion Date, the Bonds also shall bear interest calculated and payable as
follows:
(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 (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 (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
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<PAGE>
"Primary Deferred Interest"). Primary Deferred Interest in the amount of
$607,753 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 the
Base Deferred Interest Amount, 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 50% 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 50% 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 50% 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 50%
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 (b)(3)
and (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 50% 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 50% 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 50% of Net Cash Flow after such payments
(which amount is referred to as the "Supplemental Contingent Interest").
The difference between
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<PAGE>
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 50% 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 50% 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 50% 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 50% 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 (b)(3) and
(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.
(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
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Sale or Refinancing Proceeds (as provided in paragraph (e)(3) below), and
(iv) on the Conversion Date.
(3) The Base 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
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.
(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
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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 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 March 15 of each calendar year (up to and, unless
the Conversion Date falls before delivery of the audit, including
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the calendar year in which the Conversion Date occurs) the Developer shall
provide to the Issuer, 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 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
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<PAGE>
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
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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.
(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 16% 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:
If the length of the But the length of the The applicable
Remarketing Period (in Remarketing Period (in percentage of
years) is at least: years) is less than: the 11-Bond Index is:
------------------------------------------------------------------------------
5 or greater (N.A.) 85%
1 5 80
Page 10
<PAGE>
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 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 16% per annum, simple and noncompounded for
each year (calculated on the basis of a 365-day year, actual
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<PAGE>
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 dated as of November 1, 1987
(the "Loan Agreement"), and a Note dated November 18, 1987 (the "Note"), both
amended as of October 1, 1997, HRA Ltd., a Georgia limited partnership (the
"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 NOTE BY
THE DEVELOPER, AND THE SECURITY THEREFOR PROVIDED BY THE BUILDING LOAN DEED TO
SECURE DEBT AND SECURITY AGREEMENT FROM THE DEVELOPER TO THE ISSUER, DATED AS OF
NOVEMBER 1, 1987, AS AMENDED (THE "MORTGAGE"), AND THE ASSIGNMENT OF LEASES,
RENTS AND OTHER INCOME FROM THE DEVELOPER TO THE ISSUER, DATED AS OF NOVEMBER 1,
1987, AS AMENDED (THE "ASSIGNMENT OF LEASES"), ALL OF WHICH HAVE BEEN ASSIGNED
TO THE TRUSTEE PURSUANT TO THE INDENTURE AND (II) ANY ADDITIONAL SECURITY
PROVIDED IN THE INDENTURE. THE OBLIGATIONS OF THE DEVELOPER UNDER THE LOAN
AGREEMENT, THE 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 ISSUER'S 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
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<PAGE>
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) 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 2005. 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, the Base Deferred
Interest Amount, 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, the
Base Deferred Interest Amount, 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
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<PAGE>
Initial Remarketing Date, or if all Interest (including the Base Deferred
Interest Amount, 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. Failure of the
Developer to give direction as aforesaid shall be conclusively deemed a
direction to have the Bonds redeemed as elected by the Owners.
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, the Base Deferred Interest Amount, 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 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
Page 14
<PAGE>
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 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 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
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<PAGE>
and that the issue of the Bonds, together with all other indebtedness of the
Issuer, is within every debt and other limit prescribed by said Constitution or
statutes.
Page 16
<PAGE>
IN WITNESS WHEREOF, the Issuer has caused this Bond to be executed as of the
Dated Date stated above.
HOUSING AUTHORITY OF THE
COUNTY OF DEKALB, GEORGIA
(Seal)
By: /s/ ILLEGIBLE
--------------------------------
Chairman
Attest:
/s/ ILLEGIBLE
- - -----------------------------
Its: Secretary
Page 17
<PAGE>
FORM OF 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 (Lakepoint Project) Series
1987 of the Housing Authority of the County of DeKalb, Georgia.
Reliance Trust Company
By: /s/ ILLEGIBLE
--------------------------------
Authorized Officer
Date of Authentication:
January 13, 1998
Page 18
<PAGE>
FORM OF ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto _______________________________ the within Multifamily Housing Revenue Bond
(Lakepoint Project) Series 1987, of the Housing Authority of the County of
DeKalb, Georgia and hereby authorizes the transfer of this Bond on the
registration books of the Trustee.
Dated: ____________________________________
___________________________________________
Authorized Signature
___________________________________________
Name of Transferee
Signature Guaranteed by:
___________________________________________
___________________________________________
Name of Bank
By: _______________________________________
Title: ____________________________________
Page 19
<PAGE>
VALIDATION CERTIFICATE
STATE OF GEORGIA
COUNTY OF DEKALB
The undersigned Clerk of the Superior Court of DeKalb County, Georgia
HEREBY CERTIFIES that the within bond was confirmed and validated by judgement
of the Superior Court of DeKalb County, Georgia, rendered on the 10th day of
November, 1987, and that no intervention was filed therein.
WITNESS a facsimilie of my signature and the seal of said Court.
(SEAL) /s/ ILLEGIBLE
---------------------------------------
Clerk, Superior Court,
DeKalb County, Georgia
-19-
<PAGE>
DEFINITIONAL APPENDIX
"Amendment Date" shall mean October 1, 1997.
"Maximum Primary Contingent Interest" shall mean, on any payment date for
Contingent Interest and Deferred Interest specified in paragraph (e) hereof, 0%
for the first 549 days of the Second Period, and 0.5% 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 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 360. There shall be no Maximum Primary Contingent
Interest 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% commencing on the first day of the Second Period and continuing to (but not
including) the Amendment Date, and 6.0% thereafter, 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 the denominator of which
is 360.
"Primary Contingent Interest Rate" shall mean an interest rate of 0% per
annum for the first 549 days of the Second Period, and 0.5% 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%
per annum commencing on the first day of the Second Period and continuing to
(but not including) the Amendment Date, and 6.0% per annum thereafter.
Page 20
UNITED STATES OF AMERICA
STATE OF GEORGIA
HOUSING AUTHORITY OF COBB COUNTY
MULTIFAMILY HOUSING REVENUE BOND
(ASHLEY KNOLL PROJECT), SERIES 1989
Number: R-1
Dated Date: May 1, 1989
Maturity Date: June 30, 2017
Registered Owner: Charter Municipal Mortgage Acceptance Company
Principal Amount: $10,500,000.00
The Housing Authority of Cobb County (the "Issuer"), a public body corporate and
politic organized and existing under the laws of the State of Georgia (the
"State"), created and existing under and by virtue of the laws of the State,
hereby acknowledges itself indebted and for value received promises to pay to
the registered owner hereof stated above, or registered assigns, at the maturity
date stated above, or earlier upon redemption or acceleration, but only from the
sources and as hereinafter provided, upon presentation and surrender of this
Bond at the principal office of Reliance Trust Company, as successor in interest
to Citizens and Southern Trust Company (Georgia), National Association (now
NationsBank, N.A.), 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, shall constitute payments on this
Bond 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 a series of bonds entitled Housing Authority of Cobb County
Multifamily Housing Revenue Bonds (Ashley Knoll Project), Series 1989 (the
"Bonds") issued pursuant to the Resolution of the Issuer adopted on April 4,
1989 (the "Resolution"), the Multifamily Housing Revenue Bond (Ashley Knoll
Project) Trust Indenture dated as of April 1, 1989, as amended by an Assignment,
Assumption and Amendment Agreement dated as of May
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<PAGE>
1, 1990 (the "Assumption Agreement"), as further amended by a First Supplemental
Indenture dated as of October 1, 1997 (as further amended and supplemented from
time to time, the "Indenture"), and the Housing Authorities Law of the State of
Georgia, O.C.G.A. Section 8-3-1, et seq., as amended (the "Act"). Reference is
made to the Indenture, the Resolution and the Act for a full statement of their
respective terms. Capitalized terms used herein and not otherwise defined herein
or in the definitional appendix attached hereto have the respective meanings
accorded such terms in the Indenture, which definitions are expressly
incorporated herein by reference. The Bonds issued under the Indenture are
expressly limited to $10,500,000 principal amount at any time Outstanding and
are all of like tenor, except as to numbers and denominations, and are issued
for the purpose of providing construction and permanent financing for qualified
multifamily rental housing units in the State and of paying certain expenses
incidental thereto.
THIS BOND AND THE INTEREST HEREON SHALL NOT BE DEEMED TO CONSTITUTE A DEBT OR A
GENERAL OBLIGATION OR A PLEDGE OF THE FAITH AND CREDIT OF THE STATE OF GEORGIA
OR OF COBB COUNTY, GEORGIA, AND DO NOT DIRECTLY, INDIRECTLY OR CONTINGENTLY
OBLIGATE SAID STATE OR COUNTY TO LEVY OR TO PLEDGE ANY FORM OF TAXATION WHATEVER
FOR THE PAYMENT OF SUCH PRINCIPAL AND INTEREST.
Interest on the Bonds.
(a) General. The Bonds including this bond shall bear interest as provided
below.
(b) Base Interest. Through the Conversion Date, the Bonds shall bear base
interest calculated and payable as follows (which interest is referred to herein
as "Base Interest"):
(1) Reserved.
(2) During the Second Period, the Bonds shall bear Base Interest at a
rate equal to 9.0% per annum to (but not including) the Amendment Date (as
defined herein); and 7.5% per annum thereafter, payable on each payment
date specified in paragraph (e)(1) below.
(3) Accrued and unpaid Base Interest in the amount of $2,988,453 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 (e)(3) hereof
on the basis and to the extent of 100% of Net
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<PAGE>
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 (b)(3), 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 as provided in Section 7.10 of the
Indenture.
Subject to the foregoing, Base Interest shall be calculated on the basis of a
year of 360 days, actual days elapsed.
(c) Contingent Interest. After the Initial Period and through the
Conversion Date, the Bonds also shall bear interest calculated and payable as
follows:
(1) Reserved.
(2) Commencing on the Amendment Date and continuing through each year
or part thereof of the Second Period, the Bonds shall bear Contingent
Interest at an annual rate equal to the Supplemental Contingent Interest
Rate payable on the basis and to the extent of 50% of Net Cash Flow for
each such year, or part thereof, or, to the extent not fully paid because
50% of Net Cash Flow is insufficient, on the basis and to the extent of 50%
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 (b)(3),
all as provided below.
From and after the Amendment Date, 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 50% of Net Cash Flow, measured for purposes of such payment
and subject to the adjustments and reconciliation as specified in paragraph
(f) below. If 50% of Net Cash Flow 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 50% of Net Cash Flow (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
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<PAGE>
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 50% of Net Cash Flow,
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 50% of Net Cash
Flow 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 50% 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 50% 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 (b)(3) 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.
(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) The Base Deferred Interest Amount, Contingent Interest and
Deferred Interest that is payable on the basis of Net Sale or Refinancing
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<PAGE>
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.
(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
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<PAGE>
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 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 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 Developer shall
provide to the Issuer, 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
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<PAGE>
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 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
Page 7
<PAGE>
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 forth in an appraisal shall be
determined as of the date of such appraisal.
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<PAGE>
(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 as
provided in the Indenture, 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 16% 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:
If the length of the But the length of the The applicable
Remarketing Period (in Remarketing Period (in percentage of
years) is at least: years) is less than: the 11-Bond Index is:
------------------------------------------------------------------------------
5 or greater (N.A.) 85%
1 5 80
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
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<PAGE>
written notice by electronic means) to the Owners of all of the Bonds of
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 16% 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.
Page 10
<PAGE>
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 dated as of April 1, 1989
(the "Loan Agreement"), and a Note dated May 1, 1989 (the "Note"), both amended
by the Assumption Agreement and further amended as of October 1, 1997, Ashley
Knoll Associates, L.P., a Georgia limited partnership (the "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 NOTE BY THE DEVELOPER, AND
THE SECURITY THEREFOR PROVIDED BY THE BUILDING LOAN DEED TO SECURE DEBT AND
SECURITY AGREEMENT DATED AS OF MAY 1, 1989, AS AMENDED (THE "MORTGAGE"), AND THE
ASSIGNMENT OF LEASES, RENTS AND OTHER INCOME DATED AS OF APRIL 1, 1989, AS
AMENDED (THE "ASSIGNMENT OF LEASES"), ALL OF WHICH HAVE BEEN ASSIGNED TO THE
TRUSTEE PURSUANT TO THE INDENTURE AND (II) ANY ADDITIONAL SECURITY PROVIDED IN
THE INDENTURE. THE OBLIGATIONS OF THE DEVELOPER UNDER THE LOAN AGREEMENT, THE
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 ISSUER'S 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
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<PAGE>
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) 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 2005. 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, the Base Deferred
Interest Amount, 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, the
Base Deferred Interest Amount, 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 the Base Deferred Interest Amount, 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. Failure of the Developer to give direction as aforesaid shall be
conclusively deemed a direction to have the Bonds redeemed as elected by the
Owners.
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<PAGE>
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, the Base Deferred Interest Amount, 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 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.
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<PAGE>
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 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 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 and
that the issue of the Bonds, together with all other indebtedness of the Issuer,
is within every debt and other limit prescribed by said Constitution or
statutes.
Page 14
<PAGE>
IN WITNESS WHEREOF, the Issuer has caused this Bond to be executed as of
the Dated Date stated above.
HOUSING AUTHORITY
OF COBB COUNTY
(Seal)
By: /s/ ILLEGIBLE
---------------------------
Chairman
Attest:
/s/ ILLEGIBLE
- - -----------------------------
Its: Secretary
15
<PAGE>
FORM OF 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 (Ashley Knoll Project)
Series 1989 of the Housing Authority of Cobb County.
Reliance Trust Company
By: /s/ ILLEGIBLE
----------------------------
Authorized Officer
Date of Authentication:
January 13, 1998
16
<PAGE>
FORM OF ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto __________________________ the within Multifamily Housing Revenue Bond
(Ashley Knoll Project) Series 1989, of the Housing Authority of Cobb County and
hereby authorizes the transfer of this Bond on the registration books of the
Trustee.
Dated: ____________________________________
___________________________________________
Authorized Signature
___________________________________________
Name of Transferee
Signature Guaranteed by:
___________________________________________
___________________________________________
Name of Bank
By: _______________________________________
Title: ____________________________________
17
<PAGE>
VALIDATION CERTIFICATE
STATE OF GEORGIA
COUNTY OF COBB
The undersigned Clerk of the Superior Court of Cobb County, Georgia HEREBY
CERTIFIES that the within bond was confirmed and validated by judgement of the
Superior Court of Cobb County, Georgia, rendered on the 17th day of April, 1989,
and that no intervention was filed therein.
WITNESS a facsimilie of my signature and the seal of said Court.
(SEAL) /s/ Jay C. Stephenson
---------------------------------------
Clerk, Superior Court,
Cobb County, Georgia
-18-
<PAGE>
DEFINITIONAL APPENDIX
"Amendment Date" shall mean October 1, 1997.
"Maximum Supplemental Contingent Interest" shall mean, on any payment date
for Contingent Interest and Deferred Interest specified in paragraph (e) hereof
from and after the Amendment Date, 6.5% 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 Amendment Date if there is no previous
date of such calculation) and the denominator of which is 360.
"Supplemental Contingent Interest Rate" shall mean an interest rate of 6.5%
per annum commencing on the Amendment Date and continuing through the Second
Period.
18
THIS BOND MAY BE OFFERED, SOLD, TRANSFERRED, PLEDGED OR
HYPOTHECATED ONLY TO ACCREDITED INVESTORS OR QUALIFIED INSTITUTIONAL
BUYERS, AS DEFINED IN THE INDENTURE. THIS BOND IS ISSUABLE ONLY IN
DENOMINATIONS OF $100,000 OR MORE OF PRINCIPAL AMOUNT.
UNITED STATES OF AMERICA
STATE OF TENNESSEE
THE HEALTH, EDUCATIONAL AND HOUSING FACILITY BOARD
OF THE COUNTY OF SHELBY, TENNESSEE
MULTIFAMILY HOUSING REVENUE BOND
(COUNTRYSIDE APARTMENTS PROJECT)
SERIES 1997
No. R-1
Registered Maturity Date: December 1, 2034
Owner: Goldman, Sachs & Co.
Dated Date: December 11, 1997 Interest Rate: 7.5%
CUSPID No.: 821697 SD2 Principal $5,000,000
Amount:
The Health, Educational and Housing Facility Board of the County of Shelby,
Tennessee, a public nonprofit corporation, duly organized and existing under the
constitution and laws of the State of Tennessee (the "Issuer"), for value
received, promises to pay to the Registered Owner stated above or registered
assigns (the "Holder"), but solely form the sources and in the manner referred
to herein, the principal amount set forth above on the Maturity Date stated
above, unless this Bond is called for earlier redemption, and to pay from those
sources interest thereon at the Interest Rate specified above, payable on the
first day of each month commencing February 1, 1998 (an "Interest Payment Date")
(or if any such day is not a Business Day, as hereinafter defined, on the next
succeeding Business Day), until the principal amount is paid or duly provided
for. Interest shall be calculated on the basis of a 360-day year and twelve
30-day months. The term Business Day, as used herein, means any day, other than
a Saturday or Sunday, on which commercial banks located in the city in which the
principal corporate trust office of the Trustee is located are not required or
authorized to remain closed. This Bond will bear interest from the most recent
date to which interest has been paid or duly provided for or, if no interest has
been paid or duly provided for, from the Dated Date referenced above.
The principal of and premium on this Bond is payable upon presentation and
surrender hereof at the principal corporate trust office of the trustee under
the Indenture (defined below), presently First Tennessee Bank National
Association, Memphis, Tennessee (together with its successors and assigns, the
"Trustee") unless otherwise provided in the Indenture. Interest is payable on
each Interest Payment Date (or one or more predecessor bonds) is registered at
the close of business on the day of the next preceding applicable Interest
Payment Date (the "Regular Record Date") on the registration books for this
issue maintained by the Trustee, as Registrar, at the address appearing therein,
or at the written request of the Holder of not less than the lesser of
$1,000,000 in aggregate principal amount of the Bonds (defined below) or all
outstanding Bonds delivered to the Trustee on or before the date of
presentation, by wire transfer in same day funds to the account of such Holder
<PAGE>
whose account number is on file with the Trustee as of the applicable Regular
Record Date. Any interest which is not timely paid or duly provided for shall
cease to be payable to the Holder hereof (or of one ore more predecessor bonds),
and shall be payable to the Holder hereof (or of one or more predecessor bonds)
at the close of business on a special record date to be fixed by the Trustee for
the payment of that overdue interest. Notice of such special record date shall
be mailed to Holders not less than ten days prior thereto. The principal of and
interest on this Bond are payable in lawful money of the United States of
America, without deduction for the services of the paying agent.
Section 67-5-205. Tennessee Code Annotated, as amended, provides that
neither the principal nor the interest of any bonds or notes issued by any
county, or any agency thereof, shall be taxed by the State of Tennessee or by
any county or municipality of said State, and such shall be so stated on the
face of the bonds or notes when issued. Other provisions of the Code indicates,
however, that such exception from taxation may not be available with respect to
certain taxes imposed by the State of Tennessee.
No recourse under or upon any obligation, covenant or agreement contained
in the Indenture or in any Bond, or under any judgment obtained against the
Issuer, or by the enforcement of any assessment or by any legal or equitable
proceeding by virtue of any constitution or statute or otherwise or under any
circumstances, under or independent of the Indenture, shall be had against any
member or officer, as such, past, present or future, of the Issuer, either
directly or through the Issuer, or otherwise, for the payment for or to the
Issuer, or for or to the Holder of any Bond or otherwise of any sum that may be
due and unpaid by the issuer upon any such Bond. Any and all personal liability
of every nature, whether at common law or in equity, or by statute or by
constitution or otherwise, of any such member or officer, as such, to respond by
reason of any act or omission on his part or otherwise, for the payment for or
to the Holder of any Bond or otherwise, of any sum that may remain due and
unpaid upon the Bonds thereby secured or any of them, is hereby expressly waived
and released as a condition of and consideration for the execution of the
Indenture and the issuance of the Bonds. The Bonds shall not constitute the
personal obligation, either jointly or severally, of the officers or members of
the Issuer.
This Bond shall not be entitled to any security or benefit under the
Indenture or be valid or become obligatory for nay purpose until the certificate
of authentication hereon shall have been signed.
This Bond is one of a duly authorized series of Multifamily Housing Revenue
Bonds (Countryside North Apartments Project) Series 1997 in the aggregate
principal amount of $5,000,000 (the "Series 1997 Bonds") issued by the Issuer.
The Series 1997 Bonds are issuable under the Trust Indenture dated as of
December 1, 1997 (as amended and supplemented from time to time, the "Indenture"
between the Issuer and the Trustee and are issued for the purpose of making a
loan (the "Loan") to assist Countryside North Apartments, L.P., a Tennessee
limited partnership (the "Borrower"), in financing costs of the Project, which
is a multifamily rental housing project to be located within the corporate
limits of the County of Shelby, Tennessee and is defined in the Loan Agreement
dated as of even date with the Indenture (as amended and supplemented from time
to time, the "Agreement") between the Issuer and the Owner. The Series 1997
Bonds, together with Additional Bonds which may be issued on a parity therewith
under the Indenture (as defined in the Indenture and collectively, the "Bonds"),
are special obligations of the Issuer, issued or to be issued under and to be
secured and entitled equally and ratably to the protection given by the
Indenture.
The Series 1997 Bonds are subject to tender for purchase, at the option of
the Bond Purchaser, in whole and not in part, on any Interest Payment Date on or
after December 1, 2014, upon six (6) months prior written notice to the Trustee
and the Borrower, at a purchase price equal to the principal amount thereof,
plus accrued interest thereon. If the Series 1997 Bonds have been called for
redemption on or prior to the purchase date, or if any Event of Default exists
and the Bonds have been declared to be and are due and payable as of the
purchase date, the Series 1997 Bonds will not be purchased.
2
<PAGE>
Reference is made to the Indenture for a more complete description of the
Project, the provisions, among others, with respect to the nature and extent of
the security for the Bonds, the rights, duties and obligations of the Issuer,
the Trustee and the Holder of the Bonds, the terms and conditions upon which the
Bonds are issued and secured and the terms and conditions upon which Additional
Bonds (as defined in the Indenture) may be issued and secured on a parity with
the Bonds. Each Holders assents, by its acceptance hereof, to all of the
provisions of the Indenture.
Pursuant to the Agreement, the Borrower has executed and delivered to the
Trustee the Borrower's promissory note dated as of even date with the Series
1997 Bonds (the "Note"), in the principal amount of $5,000,000. The Borrower is
required by the Agreement and the Note to make payments to the Trustee in the
amounts and at the times necessary to pay the principal of, premium, if any, on
the Series 1997 Bonds whether due at maturity or upon acceleration, redemption
or tender by the Bond Purchaser (the "Bond Service Charges"). The Borrower's
obligations thereunder are secured by the Deed of Trust, Security Agreement,
Assignment of Leases and Rents and Fixture Financing Statement dated as of
December 1, 1997 (the "Deed of Trust"), from the Borrower to the Trustee and
certain other documents as provided in the Indenture. In the Indenture, the
Issuer has assigned to the Trustee, to provide for the payment of the Bond
Service Charges on Bonds, the Issuer's right, title and interest in and to the
Agreement, except for Unassigned Issuer's Rights, as defined in the Agreement
and other documents defined by the Borrower as security for the loan.
Copies of the Indenture, the Agreement, the Deed of Trust and the Note are
on file in the principal corporate trust office of the Trustee.
The Series 1997 Bonds are issuable only as fully registered bonds in the
denominations of $100,000 and any integral multiple of $5,000 in excess thereof
and are exchangeable for Series 1997 Bonds of the applicable issue for other
authorized denominations in equal aggregate principal amounts at the office of
the Registrar, but only in the manner and subject to the limitations provided in
the Indenture. This Bond is transferable at the office of the Registrar, by the
Holder in person or by his attorney, duly authorized in writing, upon
presentation and surrender hereof to the Registrar. The Registrar is not
required to transfer or exchange (i) any Series 1997 Bond during a period
beginning at the opening of business 15 days before the day of the mailing of a
notice of redemption of Bonds and ending at the close of business on the day of
such mailing, or (ii) any series 1997 Bonds so selected for redemption in whole
or in part.
The Indenture permits certain amendments or supplements to the Agreement,
the Indenture, the Deed of Trust and the Note not prejudicial to the Holders of
Bonds to be made without the consent of or notice to the Holders, and other
amendments or supplements thereto to be made with the consent of the Holders of
not less than a majority in aggregate principal amount of the Bonds then
outstanding.
The Holder of each Bond has only those remedies provided in the Indenture.
THE BONDS SHALL BE LIMITED OBLIGATIONS OF THE ISSUER PAYABLE, AS TO
PRINCIPAL, PURCHASE PRICE, PREMIUM, IF ANY, AND INTEREST SOLELY FROM THE TRUST
ESTATE. THE BONDS SHALL CONSTITUTE A VALID CLAIM OF THE RESPECTlVE HOLDERS
THEREOF AGAINST THE TRUST ESTATE, WHICH IS PLEDGED TO SECURE THE PAYMENT OF THE
PRINCIPAL OR PURCHASE PRICE OF, PREMIUM, IF ANY, AND INTEREST ON THE BONDS, AND
WHICH SHALL BE UTILIZED FOR NO OTHER PURPOSE EXCEPT AS EXPRESSLY AUTHORIZED IN
THIS INDENTURE. THE BONDS DO NOT CONSTITUTE WITHIN THE MEANING OF ANY STATUTORY
OR CONSTITUTIONAL PROVISION, AN INDEBTEDNESS, AN OBLIGATION OR A LOAN OF CREDIT,
EITHER GENERAL OR SPECIAL, OF THE STATE, THE COUNTY, THE ISSUER OR ANY OTHER
POLITICAL SUBDIVISION THEREOF. NEITHER THE ISSUER, THE COUNTY, THE STATE
3
<PAGE>
NOR ANY OTHER POLITICAL SUBDIVISION SHALL BE LIABLE ON THE BONDS, NOR SHALL THE
FAITH, REVENUES, CREDIT OR TAXING POWER OF THE COUNTY OR THE STATE BE PLEDGED TO
THE PAYMENT OF THE PRINCIPAL OF, PREMIUM, IF ANY, OR INTEREST ON THE BONDS. THE
ISSUER HAS NO TAXING POWER.
The Series 1997 Bonds are subject to redemption prior to stated maturity as
follows:
1. Subject to paragraph 6 below, the Series 1997 Bonds are subject to
mandatory sinking fund redemption at a redemption price of 100% of the principal
amount redeemed plus interest accrued to the redemption date, on the dates and
in the principal amounts, as set forth in Exhibit B to the Indenture. Such
mandatory sinking fund redemption obligations are subject to reduction for
Series 1997 Bonds otherwise redeemed or delivered for cancellation as provided
in the Indenture.
2. The Series 1997 Bonds are subject to redemption in whole at the option
of the Majority Holder upon a Determination of Taxability (defined in the
Indenture) at the redemption price (expressed as percentages of their principal
amount) set forth in the table below, plus interest accrued to the redemption
date at the earliest practicable date selected by the Trustee:
Redemption Dates Redemption
Prices
JanuarY 1, 1998 through December 31, 1998 103%
January 1, 1999 through December 31, 1999 102%
January 1, 2000 through December 31, 2000 101%
January 1, 2001 and thereafter 100%
3. The Series 1997 Bonds are subject to optional redemption or prepayment
in whole on any date or in part on any Interest Payment Date, in integral
multiples of $5, 000 at the option of the Issuer, upon the direction of the
Borrower, at the redemption prices (expressed as percentages of their principal
amount) set forth in the table below, plus interest accrued to the redemption
date:
Redemption Dates Redemption
Prices
JanuarY 1, 1998 through December 31, 1998 103%
January 1, 1999 through December 31, 1999 102%
January 1, 2000 through December 31, 2000 101%
January 1, 2001 and thereafter 100%
4. The Series 1997 Bonds are also subject to mandatory redemption by the
Issuer in the event and to the extent that any Insurance Proceeds (defined in
the Indenture) with respect to damage or destruction of all or a portion of the
Project, any Awards (defined in the Indenture) with respect to a governmental
taking of all or a portion of the Project or any Title insurance proceeds, are
made available for the redemption of Series 1997 Bonds, on any date in whole, or
on any Interest Payment Date in part, in each case, at a redemption price of
100% of the principal amount of the Bonds to be redeemed, plus interest accrued
to the redemption date.
5. All Bond are subject to prepayment by acceleration at 100% of the
principal amount upon the occurence of an Event of Default.
6. In lieu of the mandatory redemption referenced in paragraph 1 above, the
Trustee shall, at the option of the Borrower purchase the Bonds in lieu of
redemption. Any Bonds purchased in lieu of redemption shall be subordinate to
any other Bonds Outstanding and
4
<PAGE>
shall have no voting or consent rights under the Indenture.
Except as otherwise provided in the Indenture, notice of redemption, unless
waived by any Holder of Bonds to be redeemed, is to be given by the Trustee by
mailing an official redemption notice by registered or certified mail, postage
prepaid, return receipt requested, to the Holder of each Bond to be redeemed at
the address of such Holder as shown on the Trustee's registration records at the
close of business on the day prior to such mailing, not less than ten (10) nor
more than thirty (30) days prior to the date fixed for redemption. A second
notice of redemption shall be given, as soon as practicable, by registered or
certified mail to the Holder of each Bond which has been called for redemption
but has not been presented or surrendered to the Trustee within sixty (60) days
following the date fixed for redemption of that Bond. Notice of redemption
having been given as aforesaid, the Bonds or portions of Bonds so to be redeemed
shall, on the redemption date, become due and payable at the redemption price
therein specified, and from and after such date (unless the Issuer shall default
in the payment of the redemption price) such Bonds or portions of Bonds shall
cease to bear interest. Failure to duly give such notice by mail or any defect
therein shall not affect the validity of the proceedings for the redemption of
any Bond with respect to which no such failure or defect has occurred. Any
notice mailed as provided in this paragraph shall be conclusively presumed to
have been duly given, whether or not the registered Holder receives notice.
If Series 1997 Bonds or portions thereof are called for redemption and if
on the redemption date moneys for the redemption thereof are held by the
Trustee, thereafter those Series 1997 Bonds or portions thereof to be redeemed
shall cease to bear interest, and shall cease to be secured by, and shall not be
deemed to be outstanding under the Indenture.
It is certified and recited that there have been performed and have
happened in regular and due form, as required by law, all acts and conditions
necessary to be done or performed by the Issuer or to have happened (i)
precedent to and in the issuing of the Series 1997 Bonds in order to make them
legal, valid and binding special obligations of the Issuer, and (ii) precedent
to and in the execution and delivery of the Indenture and the Agreement; that
payment in full for the Series 1997 Bonds has been received; and that the Series
1997 Bonds do not exceed or violate any constitutional or statutory limitation.
5
<PAGE>
IN WITNESS OF THE ABOVE, the Issuer has caused this Bond to be executed in
the name of the Issuer by the manual or facsimile signatures of the Chairman or
Vice Chairman and the Secretary of the Issuer, and the official seal of the
Issuer to be impressed hereon or a facsimile thereof to be placed hereon, as of
the date of original delivery hereof.
THE HEALTH, EDUCATIONAL AND
HOUSING FACILITY BOARD OF THE
COUNTY OF SHELBY, TENNESSEE.
as Issuer
By: /s/ ILLEGIBLE
-------------------------
Title: Chairman
Attest:
By: /s/ KENNETH W. PLUNK
Title: Secretary
CERTIFICATE OF AUTHENTICATION
This is one of the Bonds described in the within-mentioned Indenture and
has been registered on this date: December 11, 1997
FIRST TENNESSEE BANK
NATIONAL ASSOCIATION, as Trustee
/s/ ILLEGIBLE
---------------------------
Authorized Signator
6
<PAGE>
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned sells, assigns and transfers unto
_____________________________________ the within Bond and all rights thereunder
and hereby irrevocably constitutes and appoints ________________________________
to transfer the within-mentioned Bond on the books kept for registration thereof
with full power of substitution in the premises.
(PLEASE INSERT SOCIAL SECURITY
OR OTHER IDENTIFYING NUMBER
OF ASSIGNEE)
_________________________________
_________________________________
____________________________________________________________
(Please Print or Typewrite Name and Address of Assignee)
Signature Guaranteed
________________________________________________________________________________
NOTICE: Signature(s) must be guaranteed by an institution which is a participant
in the Securities Transfer Agent Medallion Program ("STAMP") or similar program.
________________________________________________________________________________
NOTICE: The signature on this Assignment must correspond with the name as it
appears on the face of the within Bond in every particular, without alteration
or enlargement or any change whatsoever.
7
<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> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-1-1997
<PERIOD-END> DEC-31-1997
<CASH> 2,296,899
<SECURITIES> 346,300,000
<RECEIVABLES> 8,097,784
<ALLOWANCES> 138,000
<INVENTORY> 0
<CURRENT-ASSETS> 41,471
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 362,390,563
<CURRENT-LIABILITIES> 6,045,757
<BONDS> 21,445,340
0
0
<COMMON> 0
<OTHER-SE> 331,668,199
<TOTAL-LIABILITY-AND-EQUITY> 362,390,563
<SALES> 0
<TOTAL-REVENUES> 14,414,625
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 2,086,670
<LOSS-PROVISION> 1,843,135
<INTEREST-EXPENSE> 429,012
<INCOME-PRETAX> 10,055,808
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 10,055,808
<EPS-PRIMARY> .12
<EPS-DILUTED> 0
</TABLE>
