SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1999
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 Trust Agreement)
Delaware 13-3949418
- ------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
625 Madison Avenue, New York, New York 10022
- ---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (212) 421-5333
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes |X| No |_|
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
CHARTER MUNICIPAL MORTGAGE ACCEPTANCE COMPANY
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
============= =============
June 30, December 31,
1999 1998
------------- -------------
<S> <C> <C>
ASSETS
First mortgage bonds-at fair value $ 496,090,828 $ 458,662,600
Other bond related investments-at fair value 560,000 0
Temporary investments 51,581,000 0
Cash and cash equivalents 62,583,866 13,093,023
Cash and cash equivalents-restricted 614,320 0
Interest receivable, net 1,790,567 1,512,562
Promissory notes receivable 7,846,654 7,628,920
Deferred costs, net 11,463,540 7,005,965
Goodwill, net 2,848,647 4,671,236
Other assets 598,593 11,500
------------- -------------
Total assets $ 635,978,015 $ 492,585,806
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Secured borrowings $52,807,000 $ 0
Accounts payable, accrued expenses and
other liabilities 1,469,011 8,993,174
Due to Manager and affiliates 1,143,894 1,159,358
Distributions payable 5,042,342 4,939,068
------------- -------------
Total liabilities 60,462,247 15,091,600
------------- -------------
Minority interest in subsidiary
(subject to mandatory redemption) 157,000,000 150,000,000
------------- -------------
Preferred shares of subsidiary (subject to mandatory
repurchase) 90,000,000 0
------------- -------------
Shareholders' equity:
Beneficial owner's equity-manager 340,889 230,259
Beneficial owners' equity-other shareholders
(50,000,000 shares authorized; 20,589,375 issued
and 20,580,975 outstanding and 20,587,837
shares issued and 20,579,437 outstanding in
1999 and 1998, respectively) 313,298,225 312,307,115
Treasury shares of beneficial interest (8,400 shares) (103,359) (103,359)
Accumulated other comprehensive income 14,980,013 15,060,191
------------- -------------
Total shareholders' equity 328,515,768 327,494,206
------------- -------------
Total liabilities and shareholders' equity $ 635,978,015 $ 492,585,806
============= =============
</TABLE>
See accompanying notes to consolidated financial statements
2
<PAGE>
CHARTER MUNICIPAL MORTGAGE ACCEPTANCE COMPANY
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
=============================== ===============================
Three Months Ended Six Months Ended
June 30, June 30,
------------------------------- -------------------------------
1999 1998 1999 1998
------------------------------- -------------------------------
<S> <C> <C> <C> <C>
Revenues:
Interest income:
First mortgage bonds $ 8,586,652 $ 6,561,808 $ 16,586,672 $ 12,452,072
Other bond related
investments 22,378 0 22,378 0
Temporary investments 155,475 62,868 257,997 104,394
Promissory notes 166,654 144,631 331,813 290,430
------------ ------------ ------------ ------------
Total revenues 8,931,159 6,769,307 17,198,860 12,846,896
------------ ------------ ------------ ------------
Expenses:
Interest expense 365,110 328,875 373,478 673,645
Loan servicing fees 307,107 233,604 594,856 451,578
General and administrative 691,326 347,854 1,371,638 567,881
Amortization 172,525 74,134 330,054 120,990
------------ ------------ ------------ ------------
Total expenses 1,536,068 984,467 2,670,026 1,814,094
------------ ------------ ------------ ------------
Income before minority interests 7,395,091 5,784,840 14,528,834 11,032,802
Distribution on preferred shares
of subsidiary (33,125) 0 (33,125) 0
Minority interest in income of
subsidiary (1,409,729) (256,757) (2,537,950) (256,757)
------------ ------------ ------------ ------------
Net income 5,952,237 5,528,083 11,957,759 10,776,045
Special allocation of net income to
the Manager (517,514) (402,183) (1,004,876) (778,354)
------------ ------------ ------------ ------------
Net income applicable to
shareholders $ 5,434,723 $ 5,125,900 $ 10,952,883 $ 9,997,691
============ ============ ============ ============
Net income per share (basic and
diluted) $ .26 $ .25 $ .53 $ .49
============ ============ ============ ============
Weighted average shares
outstanding (basic and
diluted) 20,580,975 20,587,575 20,580,533 20,587,520
============ ============ ============ ============
</TABLE>
See accompanying notes to consolidated financial statements
3
<PAGE>
CHARTER MUNICIPAL MORTGAGE ACCEPTANCE COMPANY
AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN
SHAREHOLDERS' EQUITY
(Unaudited)
<TABLE>
<CAPTION>
Beneficial
Beneficial Owners' Treasury
Owner's Equity- Shares of
Equity - Other Beneficial
Manager Shareholders Interest
----------- ------------ ---------
<S> <C> <C> <C>
Balance at January 1, 1999 $ 230,259 $312,307,115 $(103,359)
Comprehensive income:
Net income 1,004,876 10,952,883 0
Other comprehensive loss:
Net unrealized loss on first mortgage bonds
and bond related investments:
Net unrealized holding loss arising
during the period
Add: Reclassification adjustment for losses
included in net income
Other comprehensive loss
Comprehensive income
Issuance of shares of beneficial interest 0 20,000 0
Distributions (894,246) (9,981,773) 0
----------- ------------ ---------
Balance at June 30, 1999 $ 340,889 $313,298,225 $(103,359)
=========== ============ =========
<CAPTION>
Accumulated
Other
Comprehensive Comprehensive
Income Income Total
----------- ------------ ------------
<S> <C> <C> <C>
Balance at January 1, 1999 $15,060,191 $327,494,206
Comprehensive income:
Net income $11,957,759 0 11,957,759
-----------
Other comprehensive loss:
Net unrealized loss on first mortgage bonds
and bond related investments:
Net unrealized holding loss arising
during the period (105,671)
Add: Reclassification adjustment for losses
included in net income 25,493
-----------
Other comprehensive loss (80,178) (80,178) (80,178)
-----------
Comprehensive income $11,877,581
===========
Issuance of shares of beneficial interest 0 20,000
Distributions 0 (10,876,019)
------------ ------------
Balance at June 30, 1999 $ 14,980,013 $328,515,768
============ ============
</TABLE>
See accompanying notes to consolidated financial statements
4
<PAGE>
CHARTER MUNICIPAL MORTGAGE ACCEPTANCE COMPANY
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
===============================
Six Months Ended
June 30,
-------------------------------
1999 1998
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 11,957,759 $ 10,776,045
------------ ------------
Adjustments to reconcile net income to net cash
provided by operating activities:
Loss on repayment of first mortgage bond 25,493 0
Amortization 330,054 120,990
Amortization of goodwill 123,603 0
Accretion of excess of acquired net
assets over cost 0 (165,706)
Accretion of deferred income (33,106) (33,106)
Distribution on preferred shares of subsidiary 33,125 0
Changes in operating assets and liabilities:
Interest receivable (278,005) (139,176)
Other assets (335,593) (33,845)
Accounts payable, accrued expenses and
other liabilities (5,838,424) 276,696
Due to Manager and
affiliates (17,192) 243,908
------------ ------------
Total adjustments (5,990,045) 269,761
------------ ------------
Net cash provided by operating activities 5,967,714 11,045,806
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from repayment of first mortgage bond 5,100,000 0
Purchase of first mortgage bonds (42,515,000) (30,960,000)
Purchase of other bond related investments (540,178) 0
Increase in deferred bond selection costs (1,201,186) (644,787)
Net purchase of temporary investments (51,581,000) (4,750,000)
Increase in cash and cash equivalents-restricted (614,320) 0
Increase in other assets (251,500) 0
Loans made to property (307,185) (529,972)
Principal payments received from loans made to
properties 89,451 96,250
------------ ------------
Net cash used in investing activities (91,820,918) (36,788,509)
------------ ------------
(continued)
</TABLE>
See accompanying notes to consolidated financial statements
5
<PAGE>
CHARTER MUNICIPAL MORTGAGE ACCEPTANCE COMPANY
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
=================================
Six Months Ended
June 30,
---------------------------------
1999 1998
------------- -------------
<S> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Distributions paid to Manager and shareholders (10,751,017) (10,127,780)
Proceeds from note payable 0 33,423,898
Repayments of note payable 0 (54,869,238)
Proceeds from secured borrowings 52,807,000 0
Increase in minority interest 7,000,000 58,000,000
Increase in deferred costs relating to the
Private Label Tender Option Program (311,936) (1,569,930)
Issuance of preferred stock of subsidiary 90,000,000 0
Deferred costs relating to the issuance of preferred
stock of subsidiary (3,400,000) 0
Consolidation costs 0 (14,628)
------------- -------------
Net cash provided by financing activities 135,344,047 24,842,322
------------- -------------
Net increase (decrease) in cash and
cash equivalents 49,490,843 (900,381)
Cash and cash equivalents at the
beginning of the period 13,093,023 2,296,899
------------- -------------
Cash and cash equivalents at the
end of the period $ 62,583,866 $ 1,396,518
============= =============
SUPPLEMENTAL INFORMATION:
Interest paid $ 147,596 $ 673,958
============= =============
(continued)
</TABLE>
See accompanying notes to consolidated financial statements
6
<PAGE>
CHARTER MUNICIPAL MORTGAGE ACCEPTANCE COMPANY
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
===============================
Six Months Ended
June 30,
-------------------------------
1999 1998
------------ ------------
<S> <C> <C>
SUPPLEMENTAL DISCLOSURE OF NONCASH
INVESTING AND FINANCING ACTIVITIES:
Issuance of shares of beneficial
interest for trustee fees $ 20,000 $ 5,000
============ ============
Adjustment to goodwill due to the Discounted Cash Settlement:
Decrease in goodwill $ 1,698,986 $ 0
Decrease in accounts payable, accrued
expenses and other liabilities (1,698,986) 0
------------ ------------
$ 0 $ 0
============ ============
Distributions $(10,876,019) $(10,147,691)
Increase in special distribution payable
to the Manager 21,728 19,826
Increase in distributions payable to shareholders 103,274 85
------------ ------------
Distributions paid $(10,751,017) $(10,127,780)
============ ============
</TABLE>
7
<PAGE>
CHARTER MUNICIPAL MORTGAGE ACCEPTANCE COMPANY
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1999
(Unaudited)
NOTE 1 - General
Charter Municipal Mortgage Acceptance Company (the "Company") is a Delaware
business trust which is engaged in the acquisition and ownership (either
directly or indirectly) of tax-exempt participating and non-participating First
Mortgage Bonds ("FMBs") 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 ("Underlying Properties"). As of
June 30, 1999 the Company owned a portfolio of 56 FMBs.
The Company was formed on October 1, 1997 as the result of the consolidation
(the "Consolidation") of three publicly registered limited partnerships, Summit
Tax Exempt Bond Fund, L.P., Summit Tax Exempt L.P. II and Summit Tax Exempt L.P.
III (the "Partnerships", and each individually a "Partnership"). One of the
general partners of the Partnerships was an affiliate of Related Capital Company
("Related"). 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 their Partnership.
The Company is governed by a board of trustees comprised of two independent
managing trustees and three managing trustees who are affiliated with Related.
The Company has engaged Related Charter LP (the "Manager"), an affiliate of
Related, to manage its day-to-day affairs.
As part of the settlement of class action litigation relating to the
Partnerships, counsel ("Class Counsel") for the partners of the Partnerships had
the right to petition the United States District Court for the Southern District
of New York (the "Court") for additional attorneys' fees ("Counsel's Fee
Shares") in an amount to be determined in the Court's sole discretion. The
Counsel's Fee Shares were based upon a percentage (which Class Counsel proposed
to be 25%) of the increase in value of the Company, ("the Added Value") if any,
as of October 1, 1998 based upon the difference between (i) the trading prices
of the Company's shares of beneficial interest during the six month period ended
October 1, 1998 and (ii) the trading prices of the limited partnership units and
the asset values of the Partnerships prior to October 1, 1997. As of October 1,
1998, 25% of the Added Value amounted to $7,788,536 and, in accordance with an
Order and Stipulation of Settlement by the Court on February 18, 1999 (the
"Order"), Class Counsel was entitled to receive 608,955 shares of beneficial
interest in the Company. On April 15, 1999, the Company successfully negotiated
a discounted cash settlement (the "Discounted Cash Settlement") of $6,089,550
with Class Counsel in lieu of the issuance of shares. On April 26, 1999, the
Discounted Cash Settlement was approved by the Board of Trustees and it was paid
on May 3, 1999.
The Company had previously recorded an accrual of $7,788,536 as its liability to
issue Counsel Fee Shares under the Order and adjusted the goodwill recorded in
the Consolidation accordingly. The Discounted Cash Settlement results in a
decrease of $1,698,986 in this liability and in goodwill in 1999.
8
<PAGE>
CHARTER MUNICIPAL MORTGAGE ACCEPTANCE COMPANY
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1999
(Unaudited)
The consolidated financial statements at June 30, 1999 include the accounts of
the Company and three business trusts created to hold certain assets: Charter
Mac Equity Issuer Trust, Charter Mac Origination Trust I and Charter Mac Owner
Trust I (see Notes 6 and 7). All intercompany accounts and transactions have
been eliminated in consolidation.
The accompanying financial statements have been prepared without audit. In the
opinion of management, the financial statements contain all adjustments
(consisting of only normal recurring adjustments) necessary to present fairly
the financial position of the Company as of June 30, 1999, the results of its
operations for the three and six months ended June 30, 1999 and 1998 and its
cash flows for the six months ended June 30, 1999 and 1998. However, the
operating results for the interim periods may not be indicative of the results
for the full year.
Certain information and footnote disclosures normally included in annual
financial statements prepared in accordance with generally accepted accounting
principles ("GAAP") have been condensed or omitted. It is suggested that these
financial statements should be read in conjunction with the financial statements
and notes thereto included in the Company's Form 10-K for the year ended
December 31, 1998.
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.
The Financial Accounting Standards Board has issued Statement of Financial
Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging
Activities". This statement establishes accounting and reporting standards for
derivative instruments, including certain derivative instruments embedded in
other contracts, and for hedging activities. It is effective for the Company
beginning with the first quarter of 2001. Because the Company does not currently
utilize derivatives or engage in hedging activities, management does not
anticipate that implementation of this statement will have a material effect on
the Company's financial statements.
Certain amounts in the 1998 financial statements have been reclassified to
conform to the 1999 presentation.
9
<PAGE>
CHARTER MUNICIPAL MORTGAGE ACCEPTANCE COMPANY
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1999
(Unaudited)
NOTE 2 - First Mortgage Bonds ("FMBs")
As of June 30, 1999, the Company and its consolidated subsidiaries owned 56 FMBs
(28 participating FMBs and 28 non-participating FMBs). One of the FMBs is a
taxable FMB acquired in connection with the purchase of a tax-exempt FMB, both
of which are secured by the same Underlying Property. The following table
provides certain information with respect to each of the FMBs.
<TABLE>
<CAPTION>
Stated Fair Value
Closing Interest Face Amount at June
Property Location Date Rate Call Date Maturity Date of FMB 30, 1999 (A)
- -------- -------- ------ ---- --------- ------------- ----------- -----------
Tax-Exempt First Mortgage Bonds
Owned by the Company (not including its consolidated subsidiaries)
Casa Ramon Orange County, CA 6/8/99 7.50 Oct. 2015 Sep. 2035 $ 50,000(Q) $ 50,000
Del Monte Pines (R) Fresno, CA 5/6/99 6.8% May 2017 May 2036 11,000,000 11,000,000
Greenbriar Concord, CA 5/6/99 6.875 May 2017 May 2036 9,585,000 9,585,000
Highpointe Club (K)(N) Harrisburg, PA 7/29/86 8.50 June 1998 June 2006 8,900,000 5,888,000
Lake Park Turlock, CA 6/8/99 7.25 Oct. 2015 Sep. 2035 50,000(P) 50,000
Lewis Place Gainsville, FL 6/22/99 (I) June 2016 June 2041 4,000,000 4,000,000
Sycamore Woods (R) Antioch, CA 5/6/99 6.875 May 2017 May 2036 9,415,000 9,415,000
----------- -----------
43,000,000 39,988,000
----------- -----------
<CAPTION>
Owned by Charter Mac Equity Issuer Trust (H)
<S> <C> <C> <C> <C> <C> <C> <C>
Forest Hills (R) Garner, NC 12/15/98 7.125 June 2016 June 2034 5,930,000 5,930,000
Hamilton Gardens (R) Hamilton, NJ 3/26/99 7.625 Apr. 2015 Mar. 2035 6,400,000 6,400,000
Lake Jackson (R) Lake Jackson, TX 12/22/98 7.00 Jan. 2018 Jan. 2041 10,934,000 10,934,000
Mountain Ranch (R) Austin, TX 12/23/98 7.125 Jan. 2018 Jan. 2041 9,128,000 9,128,000
Players Club (M)(K) Ft. Myers, FL 8/14/87 8.00 Aug. 1999 Aug. 2007 9,700,000 8,704,000
Sunset Creek (M)(K)(N) Lancaster, CA 3/25/88 8.50 Mar. 2000 Mar. 2008 8,275,000 6,381,000
Sunset Village (M)(K)(N) Lancaster, CA 3/25/88 8.50 Mar. 2000 Mar. 2008 11,375,000 8,771,000
Suntree (M)(K) Ft. Myers, FL 7/31/87 8.00 Jul. 1999 Jul. 2007 7,500,000 7,586,000
----------- -----------
69,242,000 63,834,000
----------- -----------
</TABLE>
10
<PAGE>
CHARTER MUNICIPAL MORTGAGE ACCEPTANCE COMPANY
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1999
(Unaudited)
NOTE 2 - First Mortgage Bonds ("FMBs") (continued)
<TABLE>
<CAPTION>
Stated Fair Value
Closing Interest Face Amount at June
Property Location Date Rate Call Date Maturity Date of FMB 30, 1999 (A)
- -------- -------- ------ ---- --------- ------------- ----------- -----------
Owned by Charter Mac Origination Trust I (H)(L)
<S> <C> <C> <C> <C> <C> <C> <C>
Bay Club (K) Mt. Pleasant, SC 9/11/86 8.25 Sep. 2000 Sep. 2006 6,400,000 7,416,228
Cedar Creek (K)(N) McKinney, TX 12/29/86 8.50 Dec. 1998 Dec. 2006 8,100,000 9,653,000
Clarendon Hills (K) Hayward, CA 12/08/86 5.52 Dec. 2003 Dec. 2003 17,600,000 13,880,000
Cypress Run (K)(N) Tampa, FL 8/14/86 8.50 Aug. 1998 Aug. 2006 15,402,428 13,067,000
East Ridge (K) Mt. Pleasant, SC 5/20/86 8.25 Mar. 2000 May 2010 8,700,000 10,063,000
Greenway Manor (K)(N) St. Louis, MO 10/09/86 8.50 Oct. 1998 Sept. 2006 12,850,000 15,313,000
The Lakes (K) Kansas City, MO 12/30/86 4.87 Dec. 2006 Dec. 2006 13,650,000 10,024,000
Loveridge (K)(N) Contra Costa, CA 11/13/86 8.00 Nov. 1998 Nov. 2006 8,550,000 6,593,000
The Mansion Independence, MO 5/13/86 7.25 Jan. 2011 April 2025 19,450,000 20,084,000
Martin's Creek (K) Summerville, SC 5/20/86 8.25 Mar. 2000 May 2010 7,300,000 8,443,000
Pelican Cove (K)(N) St Louis, MO 2/27/87 8.00 Feb. 1999 Feb. 2007 18,000,000 20,189,000
Sunset Downs (K)(N) Lancaster, CA 2/11/87 8.00 May 1999 May 2007 15,000,000 11,566,000
Sunset Terrace (K)(N) Lancaster, CA 2/12/87 8.00 Feb. 1999 May 2007 10,350,000 7,981,000
----------- -----------
161,352,428 154,272,228
----------- -----------
</TABLE>
11
<PAGE>
CHARTER MUNICIPAL MORTGAGE ACCEPTANCE COMPANY
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1999
(Unaudited)
NOTE 2 - First Mortgage Bonds ("FMBs") (continued)
<TABLE>
<CAPTION>
Stated Fair Value
Closing Interest Face Amount at June
Property Location Date Rate Call Date Maturity Date of FMB 30, 1999 (A)
- -------- -------- ------ ---- --------- ------------- ----------- -----------
Owned by Charter Mac Owner Trust I (J) (H)
<S> <C> <C> <C> <C> <C> <C> <C>
Bedford Square (O) Clovis, CA 8/25/98 (D) Sep. 2017 Aug. 2040 3,850,000 3,850,000
Bristol Village Bloomington, MN 7/31/87 7.50 Jan. 2010 Dec. 2027 17,000,000 17,875,000
Carrington Pointe (O) Los Banos, CA 9/24/98 6.375 Oct. 2017 Sep. 2040 3,375,000 3,375,000
Cedarbrook Hanford, CA 4/28/98 7.125 May 2017 May 2040 2,840,000 2,840,000
Cedar Pointe (K) Nashville, TN 4/22/87 7.00 Apr. 2006 Apr. 2017 9,500,000 9,323,000
College Park (O) Naples, FL 7/15/98 (C) Jul. 2025 Jul. 2040 10,100,000 10,100,000
Crowne Pointe (K) Olympia, WA 12/31/86 8.00 Dec. 1998 Dec. 2006 5,075,000 5,692,000
Falcon Creek (O) Indianapolis, IN 9/14/98 (F) Sep. 2016 Aug. 2038 6,144,600 6,144,600
Gulfstream (O) Dania, FL 7/22,98 7.25 Apr. 2016 Jul. 2038 3,500,000 3,500,000
Highland Ridge (K) St. Paul, MN 2/02/87 7.25 Jun. 2010 Jun. 2018 15,000,000 15,247,000
Jubilee Courtyards (O) Florida City, FL 9/15/98 (G) Oct. 2025 Sep. 2040 4,150,000 4,150,000
Lakepoint (K) Dekalb City, GA 11/18/87 6.00 Jul. 2005 Jun. 2017 15,100,000 12,702,000
Madalyn Landing (O) Palm Bay, FL 11/13/98 7.00 Dec. 2017 Nov. 2040 14,000,000 14,000,000
Marsh Landings (O) Portsmouth, VA 5/20/98 7.25 Jul. 2017 Jul. 2030 6,050,000 6,050,000
Newport Village (K) Tacoma, WA 2/11/87 8.00 Jan. 1999 Jan. 2007 13,000,000 14,581,000
North Glen (K) Atlanta, GA 9/30/86 7.00 Jul. 2005 Jun. 2017 12,400,000 12,914,000
Northpointe Village (O) Fresno, CA 8/25/98 (E) Sep. 2017 Aug. 2040 13,250,000 13,250,000
Ocean Air (O) Norfolk, VA 4/20/98 7.25 Jan. 2016 Nov. 2030 10,000,000 10,000,000
Orchard Hills (K) Tacoma, WA 12/31/86 8.00 Dec. 1998 Dec. 2006 5,650,000 6,337,000
Orchard Mill (K) Atlanta, GA 12/31/86 7.50 Jul. 2005 Jun. 2017 10,500,000 10,252,000
Phoenix (O) Stockton, CA 4/28/98 7.125 Nov. 2016 Oct. 2029 3,250,000 3,250,000
River Run (K) Miami, FL 8/7/87 8.00 Aug. 1999 Aug. 2007 7,200,000 8,075,000
Shannon Lake (K) Atlanta, GA 6/26/87 (B) Jul. 2005 Jun. 2017 12,000,000 11,536,000
Silvercrest (O) Clovis, CA 9/24/98 7.125 Oct. 2017 Sep. 2040 2,275,000 2,275,000
Stone Creek (O) Watsonville, CA 4/28/98 7.125 May 2017 Apr. 2040 8,820,000 8,820,000
Thomas Lake Eagan, MN 9/02/86 7.50 Jan. 2010 Dec. 2027 12,975,000 13,643,000
Willow Creek (K) Ames, IA 2/27/87 7.25 Jan. 2010 Jun. 2022 6,100,000 6,200,000
----------- -----------
233,104,600 235,981,600
----------- -----------
Subtotal - Tax-Exempt First Mortgage Bonds 506,699,028 494,075,828
----------- -----------
</TABLE>
12
<PAGE>
CHARTER MUNICIPAL MORTGAGE ACCEPTANCE COMPANY
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1999
(Unaudited)
NOTE 2 - First Mortgage Bonds ("FMBs") (continued)
<TABLE>
<CAPTION>
Stated Fair Value
Closing Interest Face Amount at June
Property Location Date Rate Call Date Maturity Date of FMB 30, 1999 (A)
- -------- -------- ------ ---- --------- ------------- ----------- -----------
Taxable First Mortgage Bonds
Owned by the Company (not including its consolidated subsidiaries)
<S> <C> <C> <C> <C> <C> <C> <C>
Greenbriar Concord, CA 5/6/99 9.00% May 2017 May 2036 2,015,000 2,015,000
------------ ------------
Total First Mortgage Bonds $508,714,028 $496,090,828
============ ============
</TABLE>
(A) The FMBs are carried at their estimated fair values at June 30, 1999.
(B) Pursuant to a bond modification as of October 1, 1997, the base interest
rate was lowered to 6% through July 31, 2000 and 7% thereafter.
(C) The interest rates for College Park are 7% during the construction period
and 7.25% thereafter.
(D) The interest rates for Bedford Square are 7% during the construction
period and 6.375% thereafter.
(E) The interest rates for Northpointe Village are 7.965% through September
23, 1998, 8.125% during the remainder of the construction period and 7.5%
thereafter.
(F) The interest rates for Falcon Creek are 7% through August 31, 2000 and
7.25% thereafter.
(G) The interest rates for Jubilee Courtyards are 7% through September 30,
2000 and 7.125% thereafter.
(H) This entity is a consolidated subsidiary of the Company (see Notes 6 and
7).
(I) The interest rates for Lewis Place are 6.75% through May 31, 2001 and
7.00% thereafter.
(J) These FMBs have been transferred to Charter Mac Owner Trust I in
connection with the Company's Private Label Tender Option Program (TOP)
(see Note 6).
(K) These FMBs are participating FMBs which contain additional interest
features contingent on available cash flow.
(L) The FMBs are held as collateral in connection with the TOP (see Note 6).
(M) These FMBs were pledged as collateral at June 30, 1999 in connection with
the Merrill Lynch RITES/P-FLOATS Program (see Note 3).
(N) The original owners of the Underlying Properties and the obligors of these
FMBs have been replaced with affiliates of the Manager.
(O) The Underlying Property is either under construction or undergoing
substantial rehabilitation. In the event construction/rehabilitation is
not completed in a timely manner, the owner of the FMB may "put" the FMB
to the construction lender at par. All of the "puts" are secured by a
letter of credit issued by the construction lender to the Company.
(P) Initial advance on an FMB which will have a face amount of $3,638,000 when
it is fully funded. The balance of $3,588,000 was funded in July 1999.
(Q) Initial advance on an FMB which will have a face amount of $4,744,000 when
it is fully funded. The balance of $4,694,000 is expected to be funded in
November 1999.
(R) Held by Merrill Lynch as collateral for secured borrowings (see Note 3).
13
<PAGE>
CHARTER MUNICIPAL MORTGAGE ACCEPTANCE COMPANY
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1999
(Unaudited)
NOTE 2 - First Mortgage Bonds ("FMBs") (continued)
The weighted average interest rates recognized on the face amount of the
portfolio of FMBs for the three and six months ended June 30, 1999 and 1998 were
6.99% and 7.02% and 6.97% and 6.89%, respectively, based on weighted average
face amounts of approximately $122,898,000 and $93,442,000 and $237,956,000 and
$180,631,000, respectively.
The Company accounts for its investments in the FMBs as "available for sale"
debt securities under the provisions of Statement of Financial Accounting
Standards No. 115, "Accounting for Certain Investments in Debt and Equity
Securities" ("SFAS 115"). Accordingly, investments in FMBs are carried at their
estimated fair values, with unrealized gains and losses reported in other
comprehensive income.
Because the FMBs are not readily marketable, the Company estimates fair value
for each bond as the present value of its expected cash flows using a discount
rate for comparable tax-exempt investments. This process is based upon
projections of future economic events affecting the real estate collateralizing
the bonds, such as property occupancy rates, rental rates, operating cost
inflation, 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 Manager. 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.
The original obligors and owners of the Underlying Properties of the Cedar
Creek, Cypress Run, Highpointe, Greenway Manor, Sunset Terrace, Pelican Cove,
Loveridge, Sunset Downs, Sunset Creek and Sunset Village FMBs have been replaced
with affiliates of the Manager who have not made equity investments. These
entities have assumed the day-to-day responsibilities and obligations of the
Underlying Properties. Buyers are being sought who would make equity investments
in the Underlying Properties and assume the nonrecourse obligations for the FMB.
These properties are generally paying as interest an amount equal to the net
cash flow generated by operations, which in some cases is less than the stated
rate of the FMB. The Company has no present intention of declaring a default on
these FMBs. The aggregate carrying value of these 10 FMBs at June 30, 1999 and
December 31, 1998 was approximately $105,402,000 and the income earned from them
for the three and six months ended June 30, 1999 and 1998 was approximately
$1,845,000 and $1,910,000 and $3,644,000 and $3,525,000, respectively.
From time to time, the Company enters into forbearance agreements and/or
permanent modifications with certain borrowers. The determination as to whether
it is in the best interest of the Company to enter into permanent modifications
or 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, Underlying Property performance, owner cooperation and projected
costs of foreclosure and litigation. Payments under each of the existing
forbearance agreements are current as of June 30, 1999.
Certain of the Company's FMBs have been previously modified. These modifications
have generally encompassed an extension of the maturity together with a
prepayment lock out fea-
14
<PAGE>
CHARTER MUNICIPAL MORTGAGE ACCEPTANCE COMPANY
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1999
(Unaudited)
ture and/or prepayment penalties together with an extension of the mandatory
redemption feature (5-10 years from modification). Stated interest rates have
also been adjusted together with a change in the participation and contingent
interest features. Base interest rates, contingent interest, prepayment
lock-outs, mandatory redemption and maturity features vary dependent on the
facts of a particular FMB, the developer, the Underlying Property's performance
and requirements of bond counsel and local issuers.
In addition to the stated base rates of interest, certain of the FMBs provide
for "contingent interest". During the six months ended June 30, 1999 and 1998,
four and five FMBs paid contingent interest amounting to approximately $344,000
and $404,000, respectively.
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 an Underlying Property's ability to pay the stated rate
has been adequately demonstrated. Unrecorded contractual interest income was
approximately $1,426,000 and $1,670,000 for the six months ended June 30, 1999
and 1998, respectively.
From time to time the Company has advanced funds to owners of certain Underlying
Properties in order to preserve the underlying asset including completion of
construction and/or when Underlying Properties have experienced operating
difficulties including past due real estate taxes and/or deferred maintenance
items. Such advances typically are secured by promissory notes and/or second
mortgages. As of June 30, 1999, the face amount of such advances was
$13,046,220, and their carrying value was $7,846,654, which is net of purchase
accounting adjustments, and a reserve for collectibility of $138,000.
On January 4, 1999, the obligor of the Countryside North FMB (the "Countryside
North Obligor") completed a refinancing with an unaffiliated third party. The
Countryside North Obligor then fully repaid its outstanding debt due to the
Company totaling $5,135,417 including the FMB in the amount of $5,000,000, a
$100,000 prepayment penalty and accrued interest due through the repayment date
of $35,417 resulting in a loss on the repayment (including the prepayment
penalty and the write off of bond selection fees and expenses), in the amount of
$25,493 which is included in general and administrative expenses.
The amortized cost basis of the Company's portfolio of 56 FMBs at June 30, 1999
and December 31, 1998 was $481,130,637 and $443,602,409, respectively. The net
unrealized gain on FMBs in the amount of $14,960,191 at June 30, 1999 consisted
of gross unrealized gains and losses of $22,156,064 and $7,195,873,
respectively. The net unrealized gain on FMBs at December 31, 1998 consisted of
gross unrealized gains and losses of $22,256,064 and $7,195,873, respectively.
NOTE 3 - Securitization Transactions
To raise additional capital to acquire additional FMBs, the Company has
securitized certain FMBs through the Merrill Lynch Pierce Fenner & Smith
Incorporated ("Merrill Lynch") P-FLOATS/RITES program. Under this program, the
Company transfers certain FMBs to Merrill Lynch. Merrill Lynch then deposits
each FMB into an individual special purpose trust created
15
<PAGE>
CHARTER MUNICIPAL MORTGAGE ACCEPTANCE COMPANY
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1999
(Unaudited)
to hold such asset, together with a Credit Enhancement Guarantee ("Guarantee").
Two types of securities are then issued by each trust, evidencing ownership in
the FMBs and the Guarantee: (1) Puttable Floating Option Tax-Exempt Receipts
("P-FLOATS"), a short-term senior security which bears interest at a floating
rate that is reset weekly by the Remarketing Agent, Merrill Lynch, to result in
the sale of the P-FLOAT security at par (up to 99% of the underlying face amount
of the FMB); and (2) Residual Interest Tax Exempt Securities ("RITES), a
subordinate security which receives the residual interest payment after payment
of P-FLOAT interest and ongoing transaction fees. The P-FLOATS are sold to
qualified third party, tax-exempt investors and the RITES are sold back to the
Company. The Company has the right, with 14 days notice to the trustee, to
purchase the outstanding P-FLOATS and withdraw the underlying FMBs from the
trust. When the FMBs are deposited into the P-FLOAT Trust, the Company receives
the proceeds from the sale of the P-FLOATS less certain transaction costs. In
certain other cases, Merrill Lynch may directly buy the FMBs from local issuers
on behalf of the Company, deposit them in the trust, sell the P-FLOAT security
to qualified investors and then the RITES to the Company.
For financial reporting purposes, due to the repurchase right, the Company
accounts for the net proceeds received upon the transfer of its FMBs to Merrill
Lynch through the P-FLOATS/RITES program as secured borrowings and, accordingly,
continues to account for the FMBs as its assets in the accompanying consolidated
balance sheets. When Merrill Lynch purchases FMBs directly and sells the RITES
to the Company, such RITES are classified as other bond related investments in
the accompanying consolidated balance sheets (See Note 4).
In order to facilitate the securitization, the Company has pledged certain
additional FMBs, cash and cash equivalents and temporary investments as
collateral for the benefit of credit enhancer or liquidity provider. At June 30,
1999, the total carrying amount of such additional FMBs, cash and cash
equivalents and temporary investments pledged as collateral was $31,442,000,
$614,320 and $19,790,000, respectively.
During May and June 1999, the Company transferred six FMBs with an aggregate
face amount of $52,807,000 to Merrill Lynch through the Merrill Lynch
P-FLOATS/RITES program and received proceeds of $52,807,000.
During June 1999, Merrill Lynch purchased, from local issuers on behalf of the
Company, three FMBs with an aggregate face amount of $22,430,000. The FMBs were
placed into a trust by Merrill Lynch whereby P-FLOATS and RITES were sold. The
Company purchased the related RITES interests with an aggregate face amount of
$15,000 for an aggregate purchase price of $540,178 which includes bond
selection fees and other transaction costs.
NOTE 4 - Other Bond Related Investments
The Company's other bond related investments consist of investment in RITES (see
Note 3). The Company accounts for its investments in RITES as "available for
sale" debt securities under the provisions of SFAS 115. Accordingly, investments
in RITES are carried at their estimated fair values, with unrealized gains and
losses reported in other comprehensive income, while other than temporary
impairments are recorded in operations. Interest income is recognized as it
accrues. The fair value of the RITES, which have a limited market, is estimated
by manage-
16
<PAGE>
CHARTER MUNICIPAL MORTGAGE ACCEPTANCE COMPANY
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1999
(Unaudited)
ment, utilizing quotes from external sources, such as brokers, for these or
similar investments, as necessary. The following table provides certain
information with respect to each of the RITES.
<TABLE>
<CAPTION>
Face
Amount Amortized
of RITES Cost Basis Fair Value
FMB Date Face Amount Interest at June at June
Description/Location Purchased of FMB Purchased 30, 1999 30, 1999
- -------------------- --------- ----------- ----------- ----------- -----------
Owned by the Company (not including its consolidated subsidiaries)
<S> <C> <C> <C> <C> <C>
RITES-Avalon Court/
Oakley, CA 6/17/99 $ 8,240,000 $ 5,000 $ 197,616 $ 200,000
RITES-Meadowview Park/
Santa Rosa, CA 6/17/99 6,250,000 5,000 151,846 160,000
RITES-The Courtyards/
Santa Rosa, CA 6/17/99 7,940,000 5,000 190,716 200,000
----------- ----------- ----------- -----------
$22,430,000 $ 15,000 $ 540,178 $ 560,000
=========== =========== =========== ===========
</TABLE>
NOTE 5 - Deferred Costs
The components of deferred costs are as follows:
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
<S> <C> <C>
Deferred bond selection costs $ 7,422,792 $ 6,355,252
Deferred costs relating to the Private Label Tender
Option Program 3,366,931 3,054,995
Deferred costs relating to the issuance of preferred
shares of subsidiary 3,400,000 0
------------ ------------
14,189,723 9,410,247
Less: Accumulated amortization (2,726,183) (2,404,282)
------------ ------------
$ 11,463,540 $ 7,005,965
============ ============
</TABLE>
NOTE 6 - Minority Interest In Subsidiary
On May 21, 1998, the Company closed on its Private Label Tender Option Program
("TOP") in order to raise additional capital to acquire additional FMBs. As of
March 31, 1999, the maximum amount of capital which could be raised under the
TOP ($150,000,000) had been raised. In April 1999, the Company successfully
negotiated an increase in its TOP to $200,000,000. As of June 30, 1999, the
Company has contributed 40 issues of FMBs in the aggregate principal amount of
approximately $394,457,000 to Charter Mac Origination Trust I (the "Origination
Trust"), a wholly-owned, indirect subsidiary of the Company, which has
contributed 27 of those FMBs, with an aggregate principal amount of
approximately $233,105,000, to Charter
17
<PAGE>
CHARTER MUNICIPAL MORTGAGE ACCEPTANCE COMPANY
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1999
(Unaudited)
Mac Owner Trust I (the "Owner Trust"). The Owner Trust has issued two equity
certificates: (i) a Senior Certificate, with an outstanding face amount of
$157,000,000 at June 30, 1999, which has been deposited into another Delaware
business trust (the "Certificate Trust") which issued and sold Floater
Certificates representing proportional interests in the Senior Certificate to
new investors and (ii) a Residual Certificate representing the remaining
beneficial ownership interest in the Owner Trust, which has been issued to the
Origination Trust. The FMBs remaining in the Origination Trust (aggregate
principal amount of approximately $161,352,000) are a collateral pool for the
Owner Trust's obligations under the Senior Certificate. In addition, the Owner
Trust obtained a municipal bond insurance policy from MBIA to credit enhance
Certificate distributions for the benefit of the holders of the Floater
Certificates and has also arranged for a liquidity facility, issued by a
consortium of highly rated European banks, with respect to the Floater
Certificates.
The effect of the TOP structure is that a portion of the interest received by
the Owner Trust on the FMBs it holds is distributed through the Senior
Certificate to the holders of the Floater Certificates in an amount determined
each week by the remarketing agent, Goldman Sachs & Co., at the distribution
amount that is required to enable the remarketing agent to sell the Floater
Certificates at par on any weekly determination date, with the residual interest
remitted to the Origination Trust via the Residual Certificate.
For financial accounting and reporting purposes, the equity in the Owner Trust
represented by the Senior Certificate is classified as "minority interest in
subsidiary (subject to mandatory redemption)" in the accompanying consolidated
balance sheets. Income earned by the Owner Trust is allocated to the minority
interest in an amount equal to the distributions through the Senior Certificate
to the holders of the Floater Certificates. Such allocation of income is
classified as "minority interest in income of subsidiary" in the accompanying
consolidated statements of income. Deferred costs relating to the TOP are being
amortized using the straight line method over 10 years, which approximates the
average remaining term to maturity of the FMBs contributed or expected to be
contributed to the Owner Trust.
The Company's cost of funds relating to the TOP (calculated as income allocated
to the minority interest plus current fees as a percentage of the weighted
average amount of the outstanding Senior Certificate) was approximately 4.2% for
the period January 1, 1999 through June 30, 1999.
NOTE 7 - Preferred Shares of Subsidiary
On June 29, 1999 a subsidiary of the Company completed a $90 million tax exempt
preferred equity offering (the "Preferred Offering") comprising 45 shares
("Series A Cumulative Preferred Shares") which were purchased by Merrill Lynch,
Legg Mason Wood Walker, Inc. and McDonald Investments, Inc. (the "Initial
Purchasers"). The Initial Purchasers then sold the Series A Cumulative Preferred
Shares to qualified institutional investors.
In connection with this transaction, the Company caused 100% of the ownership of
the Origination Trust to be transferred to Charter Mac Equity Issuer Trust (the
"Issuer"), a newly formed Delaware business trust and an indirectly owned
subsidiary in which the Company owns 100% of the common equity. The Issuer then
issued the Series A Cumulative Preferred Shares. As a
18
<PAGE>
CHARTER MUNICIPAL MORTGAGE ACCEPTANCE COMPANY
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1999
(Unaudited)
result of such transaction, the Issuer became the direct and indirect owner of
the entire outstanding issue of 40 FMBs held by the Origination Trust. In
addition to ownership of the Origination Trust, the Company also contributed
eight FMBs to the Issuer. As of the closing, the aggregate par value of FMBs
held directly or indirectly by the Issuer or its subsidiaries was $463,699,028.
Net proceeds of approximately $86,600,000 from the Preferred Offering will be
used to acquire and originate additional tax exempt assets for the Issuer.
As of the closing of the Preferred Offering, the Issuer's directly and
indirectly-owned subsidiaries include the Origination Trust and the Owner Trust
(see Note 6). It also owns directly eight FMBs. In the future, other FMBs, RITES
or other directly or indirectly owned investments of the Company or its
subsidiaries may be contributed to the Issuer.
The Series A Cumulative Preferred Shares have an annual preferred dividend rate
of 6 5/8% through June 30, 2009, payable quarterly in arrears on January 31,
April 30, July 31 and October 31 of each year, commencing October 31, 1999 and
payable upon declaration thereof by the Issuer's Board of Trustees, but only to
the extent of the Issuer's tax-exempt income (net of expenses) for the
particular quarter ("Quarterly Net Income"). The Series A Cumulative Preferred
Shares are subject to mandatory tender by the holders thereof for remarketing
and purchase on June 30, 2009 and each remarketing date thereafter at a price
equal to the $2,000,000 per share plus, to the extent of the Issuer's Quarterly
Net Income, an amount equal to all distributions accrued but unpaid on the
Series A Cumulative Preferred Shares.
Holders of the Series A Cumulative Preferred Shares may elect to retain their
shares upon a remarketing, with a distribution rate to be determined immediately
prior to the remarketing date by the remarketing agent. Each holder of the
Series A Cumulative Preferred Shares will be required to tender its shares to
the Issuer for mandatory repurchase on June 30, 2049, unless the Issuer decides
to remarket the shares on such date. The Issuer may not redeem the Series A
Cumulative Preferred Shares before June 30, 2009. After that date, all or a
portion of the shares may be redeemed, subject to certain conditions. The Series
A Cumulative Preferred Shares are not convertible into common Shares of the
Issuer or the Company.
The Series A Cumulative Preferred Shares rank, with respect to payment of
distributions and amounts upon liquidation, dissolution or winding-up of the
Issuer, senior to all classes or series of common shares of the Issuer and
therefore, of the Company.
For financial accounting and reporting purposes, the Series A Cumulative
Preferred Shares are classified as "Preferred shares of subsidiary (subject to
mandatory repurchase)" in the accompanying consolidated balance sheets.
Distributions to the holders of the Series A Cumulative Preferred Shares are
classified as "Distributions on Preferred Shares of Subsidiary" in the
accompanying consolidated statements of income. Deferred costs relating to the
issuance of the Series A Cumulative Preferred Shares are included in "Deferred
Costs" (see Note 5) and are being amortized using the straight line method over
50 years which is the term to the mandatory repurchase in 2049.
19
<PAGE>
CHARTER MUNICIPAL MORTGAGE ACCEPTANCE COMPANY
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1999
(Unaudited)
NOTE 8 - Capital Shares
Each independent trustee is entitled to receive annual compensation for serving
as a trustee in the aggregate amount of $15,000 payable in cash (maximum of
$5,000 per year) and/or Shares valued based on the fair market value at the date
of issuance. As of June 30, 1999 and December 31, 1998, 955 and 186 Shares,
respectively, having an aggregate value of $12,500 and $2,500, respectively,
were issued to each independent trustee relating to their services.
NOTE 9 - Related Party Transactions
Pursuant to the Management Agreement, the Manager receives (inclusive of fees
paid directly to the Manager by subsidiaries of the Company) (i) bond selection
fees equal to 2% of the principal amount of each FMB or other instrument
acquired or originated by the Company; (ii) special distributions equal to .375%
of the 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 and its affiliates on behalf of the
Company. Fees payable to the Manager which are based on FMBs or assets of the
Company include such FMBs or assets which are either held directly by the
Company or held by other entities to whom the Company has transferred such FMBs
or assets to facilitate financing. In addition, the Manager receives bond
placement fees from the borrower in an amount equal to 1% to 1.5% of the
principal amount of each FMB or other tax-exempt instrument acquired or
originated by the Company, and affiliates of the Manager are part of a joint
venture which has a development services agreement with the obligors of five
FMBs.
The costs, expenses and the special distributions incurred to the Manager and
its affiliates for the three and six months ended June 30, 1999 and 1998 were as
follows:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
-------------------------- --------------------------
1999 1998 1999 1998
-------------------------- --------------------------
<S> <C> <C> <C> <C>
Bond selection fees $1,170,900 $ 619,200 $1,298,900 $ 619,200
Expense reimbursement 107,584 114,000 168,050 162,734
Loan servicing fees 307,107 233,604 594,856 451,578
Special distribution 462,618 350,406 894,241 677,367
---------- ---------- ---------- ----------
$2,048,209 $1,317,210 $2,956,047 $1,910,879
========== ========== ========== ==========
</TABLE>
General
The obligors of the Suntree, Players Club, River Run, Ocean Air, Phoenix, Stone
Creek, Cedarbrook, Marsh Landings, Gulfstream, Bedford Square, Northpointe
Village, Falcon Creek, Jubilee Courtyards, Silvercrest, Carrington Pointe,
Madalyn Landing, Forest Hills, Lake Jackson, Mountain Ranch, Hamilton Garden,
Del Monte Pines, Greenbriar, Sycamore Woods, Avalon Court, The Courtyards,
Meadowview Park, Casa Ramon, Lake Park and Lewis Place FMBs are local
partnerships in which investment partnerships, whose general partners are
affiliates of
20
<PAGE>
CHARTER MUNICIPAL MORTGAGE ACCEPTANCE COMPANY
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1999
(Unaudited)
the Manager, own a controlling partnership interest. With respect to three of
the above FMBs, the Company owns the RITES (see Note 4).
As of June 30, 1999, 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 or otherwise buy the property and payoff all or most of
the FMB obligation.
NOTE 10 - Earnings Per Share
Basic net income per Share in the amount of $.26 and $.25 and $.53 and $.49 for
the three and six months ended June 30, 1999 and 1998, respectively, equals net
income for the periods ($5,952,237 and $5,528,083 and $11,957,759 and
$10,776,045, respectively), less the special allocations to the Manager
($517,514 and $402,183 and $1,004,876 and $778,354, respectively), divided by
the weighted average number of Shares outstanding for the periods (20,580,975
and 20,587,575 and 20,580,533 and 20,587,520, respectively).
As the Company has no contingently-issuable Shares or potentially dilutive
securities outstanding at June 30, 1999, diluted net income per share is the
same as basic net income per share.
21
<PAGE>
CHARTER MUNICIPAL MORTGAGE ACCEPTANCE COMPANY
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1999
(Unaudited)
NOTE 11 - Subsequent Events
During the period July 1, 1999 through August 13, 1999 the Company acquired four
FMBs for a purchase price of $33,825,000, not including bond selection fees and
expenses of approximately $676,500. One of the FMBs is a taxable FMB acquired in
connection with a tax-exempt FMB, both of which are secured by the same
Underlying Property. The obligor of the Lennox Park Apartments FMB is a local
partnership in which an investment partnership, whose general partner is an
affiliate of the Manager, owns a controlling partnership interest. Further
information regarding the FMBs are as follows:
<TABLE>
<CAPTION>
Stated Face No. of
Closing Interest Call Date/ Amount Rental
Property/Location Date Rate Maturity Date of FMB Units
- ----------------- ------- -------- ------------- ------ ------
Tax-Exempt First Mortgage Bonds
Owned by Charter Mac Equity Issuer Trust
<S> <C> <C> <C> <C> <C>
Lakes Edge at Walden 7/1/99 8.50% (a) $14,850,000 400
/Miami, FL 12/1/15
Lenox Park 7/29/99 6.8 8/1/21 $13,000,000 292
Apartments 7/1/41
/Gainesville, FL
Chapel Ridge of
Little Rock
/Little Rock, AR 8/12/99 7.125 8/1/15 $5,600,000 128
8/1/39
</TABLE>
(a) The FMB is presently callable.
On July 15, 1999, Charter Mac Equity Issuer Trust funded the balance of the Lake
Park FMB in the amount of $3,588,000 (see Note 2 for further information
regarding this FMB).
Taxable First Mortgage Bonds
Owned by the Company (not including its consolidated subsidiaries)
<TABLE>
<S> <C> <C> <C> <C> <C>
Lake Park 7/15/99 9.00 10/1/15 $ 375,000 104
/Turlock, CA 9/1/35
</TABLE>
22
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Liquidity and Capital Resources
Charter Municipal Mortgage Acceptance Company (the "Company") is a Delaware
business trust which is engaged in the acquisition and ownership (either
directly or indirectly) of tax-exempt participating and non-participating First
Mortgage Bonds ("FMBs") 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 ("Underlying Properties"). As of
June 30, 1999, the Company owned 56 FMBs and had net assets of approximately
$328,515,768.
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 publicly registered limited partnerships (the "Partnerships"). One of the
general partners of the Partnerships was an affiliate of Related Capital Company
("Related").
In order to generate increased tax exempt income and, as a result, enhance the
value of the Company's Shares, the Company intends to 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 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 one of the nation's leading providers of equity to developers
of multifamily housing which benefit from tax credits. The Manager's affiliation
with Related has allowed it to become one of the dominant lenders to developers
and owners of affordable housing financed with tax-exempt bonds.
The Company does not operate as a mortgage REIT, which generally utilize high
levels of leverage and acquire subordinated interests in commercial and/or
residential mortgage-backed securities. Rather, the Company utilizes low levels
of leverage and generally originates and acquires long-term, fixed-rate,
tax-exempt FMBs. As a result, the Company did not experience the ill effects
associated with the volatile interest rate environment during 1998.
Pursuant to its Trust Agreement, the Company is only able to incur leverage or
other financing up to 50% of the Company's Total Market Value (as defined in the
Trust Agreement) as of the
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<PAGE>
date incurred. Mortgage REITs typically incur leverage at ratios ranging from
between 3:1 to 10:1.
Due to the Company's low level of leverage, the Company has not been affected by
the recent lack of liquidity that is currently impairing mortgage REITs and its
portfolio does not contain assets that are especially vulnerable to volatility
during periods of interest rate fluctuations. In general, the FMBs that the
Company either originates or acquires call for ten-year restrictions from
prepayments, eliminating the Company's susceptibility to significant levels of
repayment risk as a result of interest rate reductions. Consistent with the
foregoing, the Company focuses on providing investors with a stable level of
distributions, even through unstable markets.
On May 21, 1998, the Company closed on its Private Label Tender Option Program
("TOP") in order to raise additional capital to acquire additional FMBs. As of
March 31, 1999, the maximum amount of capital which could be raised under the
TOP ($150,000,000) had been raised. In April 1999, the Company successfully
negotiated an increase in its TOP to $200,000,000. As of June 30, 1999, the
Company has contributed 40 issues of FMBs in the aggregate principal amount of
approximately $394,457,000 to Charter Mac Origination Trust I (the "Origination
Trust"), a wholly-owned, indirect subsidiary of the Company, which has
contributed 27 of those FMBs, with an aggregate principal amount of
approximately $233,105,000, to Charter Mac Owner Trust I (the "Owner Trust").
The Owner Trust has issued two equity certificates: (i) a Senior Certificate,
with an outstanding face amount of $157,000,000 at June 30, 1999, which has been
deposited into another Delaware business trust (the "Certificate Trust") which
issued and sold Floater Certificates representing proportional interests in the
Senior Certificate to new investors and (ii) a Residual Certificate representing
the remaining beneficial ownership interest in the Owner Trust, which has been
issued to the Origination Trust. The FMBs remaining in the Origination Trust
(aggregate principal amount of approximately $161,352,000) are a collateral pool
for the Owner Trust's obligations under the Senior Certificate. In addition, the
Owner Trust obtained a municipal bond insurance policy from MBIA to credit
enhance Certificate distributions for the benefit of the holders of the Floater
Certificates and has also arranged for a liquidity facility, issued by a
consortium of highly rated European banks, with respect to the Floater
Certificates.
The effect of the TOP structure is that a portion of the interest received by
the Owner Trust on the FMBs it holds is distributed through the Senior
Certificate to the holders of the Floater Certificates in an amount determined
each week by the remarketing agent, Goldman Sachs & Co., at the distribution
amount that is required to enable the remarketing agent to sell the Floater
Certificates at par on any weekly determination date, with the residual interest
remitted to the Origination Trust via the Residual Certificate.
The Company's cost of funds relating to the TOP (calculated as income allocated
to the minority interest plus current fees as a percentage of the weighted
average amount of the outstanding Senior Certificate) was approximately 4.2% for
the period January 1, 1999 through June 30, 1999.
On June 29, 1999 a subsidiary of the Company completed a $90 million tax exempt
preferred equity offering (the "Preferred Offering") comprising 45 shares
("Series A Cumulative Preferred Shares") which were purchased by Merrill Lynch,
Legg Mason Wood Walker, Inc. and McDonald Investments, Inc. (the "Initial
Purchasers"). The Initial Purchasers then sold the Series A Cumulative Preferred
Shares to qualified institutional investors.
In connection with this transaction, the Company caused 100% of the ownership of
the Origination Trust to be transferred to Charter Mac Equity Issuer Trust (the
"Issuer"), a newly formed Delaware business trust and an indirectly owned
subsidiary in which the Company owns 100%
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<PAGE>
of the common equity. The Issuer then issued the Series A Cumulative Preferred
Shares. As a result of such transaction, the Issuer became the direct and
indirect owner of the entire outstanding issue of 40 FMBs held by the
Origination Trust. In addition to ownership of the Origination Trust, the
Company also contributed eight FMBs to the Issuer. As of the closing, the
aggregate par value of FMBs held directly or indirectly by the Issuer or its
subsidiaries was $463,699,028. Net proceeds of approximately $86,600,000 from
the Preferred Offering will be used to acquire and originate additional tax
exempt assets for the Issuer.
As of the closing of the Preferred Offering, the Issuer's directly and
indirectly-owned subsidiaries include the Origination Trust and the Owner Trust
(see Note 6). It also owns directly eight FMBs. In the future, other FMBs, RITES
or other directly or indirectly owned investments of the Company or its
subsidiaries may be contributed to the Issuer.
The Series A Cumulative Preferred Shares have an annual preferred dividend rate
of 6 5/8% through June 30, 2009, payable quarterly in arrears on January 31,
April 30, July 31 and October 31 of each year, commencing October 31, 1999 and
payable upon declaration thereof by the Issuer's Board of Trustees, but only to
the extent of the Issuer's tax-exempt income (net of expenses) for the
particular quarter ("Quarterly Net Income"). The Series A Cumulative Preferred
Shares are subject to mandatory tender by the holders thereof for remarketing
and purchase on June 30, 2009 and each remarketing date thereafter at a price
equal to the $2,000,000 per share plus, to the extent of the Issuer's Quarterly
Net Income, an amount equal to all distributions accrued but unpaid on the
Series A Cumulative Preferred Shares.
Holders of the Series A Cumulative Preferred Shares may elect to retain their
shares upon a remarketing, with a distribution rate to be determined immediately
prior to the remarketing date by the remarketing agent. Each holder of the
Series A Cumulative Preferred Shares will be required to tender its shares to
the Issuer for mandatory repurchase on June 30, 2049, unless the Issuer decides
to remarket the shares on such date. The Issuer may not redeem the Series A
Cumulative Preferred Shares before June 30, 2009. After that date, all or a
portion of the shares may be redeemed, subject to certain conditions. The Series
A Cumulative Preferred Shares are not convertible into common Shares of the
Issuer or the Company.
The Series A Cumulative Preferred Shares rank, with respect to payment of
distributions and amounts upon liquidation, dissolution or winding-up of the
Issuer, senior to all classes or series of common shares of the Issuer and
therefore, of the Company.
During the period January 1, 1999 through August 13, 1999 the Company acquired
twelve FMBs for an aggregate purchase price of approximately $79,928,000, not
including bond selection fees and expenses of approximately $1,599,000. The
purchases were financed by the TOP and the Preferred Offering.
To raise additional capital to acquire additional FMBs, the Company has
securitized certain FMBs through the Merrill Lynch Pierce Fenner & Smith
Incorporated ("Merrill Lynch") P-FLOATS/RITES program. Under this program, the
Company transfers certain FMBs to Merrill Lynch. Merrill Lynch then deposits
each FMB into an individual special purpose trust created to hold such asset,
together with a Credit Enhancement Guarantee ("Guarantee"). Two types of
securities are then issued by each trust, evidencing ownership in the FMBs and
the Guarantee: (1) Puttable Floating Option Tax-Exempt Receipts ("P-FLOATS"), a
short-term senior security which bears interest at a floating rate that is reset
weekly by the Remarketing Agent, Merrill Lynch, to result in the sale of the
P-FLOAT security at par (up to 99% of the underlying face amount of the FMB);
and (2) Residual Interest Tax Exempt Securities ("RITES), a subordinate security
which receives the residual interest payment after payment of P-FLOAT interest
and
25
<PAGE>
ongoing transaction fees. The P-FLOATS are sold to qualified third party,
tax-exempt investors and the RITES are sold back to the Company. The Company has
the right, with 14 days notice to the trustee, to purchase the outstanding
P-FLOATS and withdraw the underlying FMBs from the trust. When the FMBs are
deposited into the P-FLOAT Trust, the Company receives the proceeds from the
sale of the P-FLOATS less certain transaction costs. In certain other cases,
Merrill Lynch may directly buy the FMBs from local issuers on behalf of the
Company, deposit them in the trust, sell the P-FLOAT security to qualified
investors and then the RITES to the Company.
In order to facilitate the securitization, the Company has pledged certain
additional FMBs, cash and cash equivalents and temporary investments as
collateral for the benefit of credit enhancer or liquidity provider. At June 30,
1999, the total carrying amount of such additional FMBs, cash and cash
equivalents and temporary investments pledged as collateral was $31,442,000,
$614,320 and $19,790,000, respectively.
During May and June 1999, the Company transferred six FMBs with an aggregate
face amount of $52,807,000 to Merrill Lynch through the Merrill Lynch
P-FLOATS/RITES program and received proceeds of $52,807,000.
During June 1999, Merrill Lynch purchased, from local issuers on behalf of the
Company, three FMBs with an aggregate face amount of $22,430,000. The FMBs were
placed into a trust by Merrill Lynch whereby P-FLOATS and RITES were sold. The
Company purchased the related RITES interests with an aggregate face amount of
$15,000 for an aggregate purchase price of $540,178 which includes bond
selection fees and other transaction costs.
On January 4, 1999, the obligor of the Countryside North FMB (the "Countryside
North Obligor") completed a refinancing with an unaffiliated third party. The
Countryside North Obligor then fully repaid its outstanding debt due to the
Company totaling $5,135,417 including the FMB in the amount of $5,000,000, a
$100,000 prepayment penalty and accrued interest due through the repayment date
of $35,417 resulting in a loss on the repayment (including the prepayment
penalty and the write off of bond selection fees and expenses), in the amount of
$25,493 which is included in general and administrative expenses.
During the six months ended June 30, 1999 cash and cash equivalents of the
Company and its consolidated subsidiaries increased approximately $49,491,000.
The increase was primarily due to cash provided by operating activities
($5,968,000), proceeds from repayment of an FMB ($5,100,000), an increase in
minority interest ($7,000,000), proceeds from secured borrowings ($52,807,000)
and the issuance of preferred stock of subsidiary ($90,000,000) which exceeded
the purchase of FMBs ($42,515,000), purchase of other bond related investments
($540,000), increase in deferred bond selection costs ($1,201,000), the net
purchase of temporary investments ($51,581,000), an increase in restricted cash
and cash equivalents ($614,000), an increase in other assets relating to
investing activities, ($252,000), loans made to property ($307,000),
distributions paid ($10,751,000), an increase in deferred costs relating to the
Private Label Tender Option Program ($312,000) and deferred costs relating to
the issuance of preferred stock of subsidiary ($3,400,000). Included in the
adjustments to reconcile the net income to cash provided by operating activities
is a loss on repayment of an FMB ($25,000) and net amortization ($421,000).
The Company's growth will be financed by the TOP or similar programs, the
Preferred Offering, funds generated from operations in excess of distributions
and by placements of equity. 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
26
<PAGE>
adversely impact liquidity; however, interest payments from FMBs and RITES are
anticipated to provide sufficient liquidity to fund the Company's operating
expenditures, debt service and distributions in future years.
As part of the settlement of class action litigation relating to the
Partnerships, counsel ("Class Counsel") for the partners of the Partnerships had
the right to petition the United States District Court for the Southern District
of New York (the "Court") for additional attorneys' fees ("Counsel's Fee
Shares") in an amount to be determined in the Court's sole discretion. The
Counsel's Fee Shares were based upon a percentage (which Class Counsel proposed
to be 25%) of the increase in value of the Company, ("the Added Value") if any,
as of October 1, 1998 based upon the difference between (i) the trading prices
of the Company's shares of beneficial interest during the six month period ended
October 1, 1998 and (ii) the trading prices of the limited partnership units and
the asset values of the Partnerships prior to October 1, 1997. As of October 1,
1998, 25% of the Added Value amounted to $7,788,536 and, in accordance with an
Order and Stipulation of Settlement by the Court on February 18, 1999 (the
"Order"), Class Counsel was entitled to receive 608,955 shares of beneficial
interest in the Company. On April 15, 1999, the Company successfully negotiated
a discounted cash settlement (the "Discounted Cash Settlement") of $6,089,550
with Class Counsel in lieu of the issuance of shares. On April 26, 1999, the
Discounted Cash Settlement was approved by the Board of Trustees and it was paid
on May 3, 1999.
In August 1999, a distribution of $5,042,342 ($.245 per share), which was
declared in June 1999, was paid to the shareholders from cash flow from
operations for the quarter ended June 30, 1999.
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.
Results of Operations
For the three and six months ended June 30, 1999 as compared to 1998, total
revenues, total expenses and net income increased due to the net result of the
acquisition of 25 FMBs during 1999 and 1998, the acquisition of three RITES
during 1999 and the repayment of one FMB during 1999. The Company's results of
operations for the three and six months ended June 30, 1999 consisted primarily
of the results of the Company's investment in 56 FMBs and three RITES. The
Company's results of operations for the three and six months ended June 30, 1998
consisted primarily of the results of the Company's investment in 37 FMBs.
Interest income from FMBs increased approximately $2,025,000 and $4,135,000 for
the three and six months ended June 30, 1999 as compared to 1998. Increases of
$2,200,000 and $4,323,000 were due to the acquisition of 25 FMBs during 1999 and
1998 (the "1999 and 1998 Acquisitions"), decreases of $90,000 and $183,000 were
due to the repayment of one FMB during 1999 (the "1999 Repayment") and decreases
of $169,000 and $290,000 were due to the amortization of goodwill in 1999 and
the accretion of excess of acquired net assets over cost in 1998, both relating
to the Consolidation (see Note 1 to the consolidated financial statements).
Excluding the above increases and decreases, interest income from FMBs increased
approximately 1% and 2% for the three and six months ended June 30, 1999 as
compared to 1998.
Interest income from other bond related investments was recorded for the three
months ended June 30, 1999 relating to three RITES purchased during the period.
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<PAGE>
Interest income from temporary investments increased approximately $93,000 and
$154,000 for the three and six months ended June 30, 1999 as compared to 1998
primarily due to higher invested cash balances in 1999.
Interest income from promissory notes increased approximately $22,000 and
$41,000 for the three and six months ended June 30, 1999 as compared to 1998
primarily due to loans made to the obligors of the Lakepoint, Shannon Lake and
Bristol Village FMBs since June 30, 1998.
Interest expense increased approximately $36,000 and decreased approximately
$300,000 for the three and six months ended June 30, 1999 as compared to 1998.
The increase during the three months was primarily due to secured borrowings in
1999 which offset the decrease during the six months which was primarily due to
the repayment of the Interim Credit Facility in December 1998.
Loan servicing fees increased approximately $74,000 and $143,000 for the three
and six months ended June 30, 1999 as compared to 1998 due to increases of
$90,000 and $163,000, respectively, and decreases of $16,000 and $20,000,
respectively, relating to the 1999 and 1998 Acquisitions and the 1999 Repayment.
General and administrative expenses increased approximately $343,000 and
$804,000 for the three and six months ended June 30, 1999 as compared to 1998.
These increases were primarily due to current fees relating to the TOP and an
increase in audit/tax fees due to the 1999 and 1998 Acquisitions.
Amortization increased approximately $98,000 and $209,000 for the three and six
months ended June 30, 1999 as compared to 1998 primarily due to amortization of
deferred bond selection costs relating to the 1999 and 1998 Acquisitions and
amortization of deferred costs relating to the TOP.
Minority interest in income of subsidiary increased approximately $1,153,000 and
$2,281,000 for the three and six months ended June 30 1999 as compared to 1998
primarily due to a higher outstanding balance of the TOP during the three and
six months ended June 30, 1999.
The distribution on preferred shares of subsidiary during the three months ended
June 30, 1999 relates to the Preferred Offering executed on June 29, 1999.
General
The determination as to whether it is in the best interest of the Company to
enter into forbearance agreements on the FMBs or, alternatively, to pursue its
remedies under the loan documents, including foreclosure, is based upon several
factors including, but not limited to, Underlying 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 $1,426,000 and $1,670,000 was not recognized for the six months
ended June 30, 1999 and 1998, respectively.
Cash Available for Distribution
The Company uses cash available for distribution ("CAD") as the primary measure
of its dividend paying ability. The difference between CAD and net income
results from variations between generally accepted accounting principles
("GAAP") and cash received. One difference
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between CAD and GAAP is the amortization of loan origination costs, costs
relating to the TOP, costs relating to the issuance of preferred stock of
subsidiary and other intangible assets. These amounts have been excluded from
CAD due to their noncash nature. Another difference is the noncash gain or loss
associated with bond impairments, repayments and sales for GAAP purposes, which
are not included in the calculation of CAD. During the six months ended June 30,
1999, there was a loss on the repayment of one FMB which is included in general
and administrative expenses. CAD should not be considered an alternative to net
income as a measure of the Company's financial performance or to cash flow from
operating activities (computed in accordance with GAAP) as a measure of the
Company's liquidity, nor is it necessarily indicative of sufficient cash flow to
fund all of the Company's needs.
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<PAGE>
Cash available for distribution ("CAD") for the three and six months ended June
30, 1999 and 1998 is summarized in the following table:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
---------------------------------- ----------------------------------
1999 1998 1999 1998
---------------------------------- ----------------------------------
<S> <C> <C> <C> <C>
Sources of Cash
Interest income:
First mortgage bonds $ 8,586,652 $ 6,561,808 $ 16,586,672 $ 12,452,072
Other bond related investments 22,378 0 22,378 0
Temporary investments 155,475 62,868 257,997 104,394
Promissory notes 166,654 144,631 331,813 290,430
Net amortization (accretion)
included in income 69,512 (99,406) 90,496 (198,812)
------------- ------------- ------------- -------------
Total sources of cash 9,000,671 6,669,901 17,289,356 12,648,084
------------- ------------- ------------- -------------
Uses of Cash
Total expenses, minority interest and
distribution on preferred shares of
subsidiary 2,978,922 1,241,224 5,241,101 2,070,851
Less: Amortization included in
expenses (172,525) (74,134) (330,054) (120,990)
Loss on repayment of the
Countryside North FMB 0 0 (25,493) 0
------------- ------------- ------------- -------------
Total uses of cash 2,806,397 1,167,090 4,885,554 1,949,861
------------- ------------- ------------- -------------
Cash available for distribution 6,194,274 5,502,811 12,403,802 10,698,223
Less: distribution to the Manager (462,620) (350,409) (894,246) (677,372)
------------- ------------- ------------- -------------
Cash available for distribution to
shareholders $ 5,731,654 $ 5,152,402 $ 11,509,556 $ 10,020,851
============= ============= ============= =============
Distribution to shareholders $ 5,042,339 $ 4,735,202 $ 9,981,773 $ 9,470,319
============= ============= ============= =============
Payout ratio 88.0% 91.9% 86.7% 94.5%
============= ============= ============= =============
Cash flows from:
Operating activities $ (618,304) $ 5,882,038 $ 5,967,714 $ 11,045,806
============= ============= ============= =============
Investing activities $ (85,080,969) $ (35,047,836) $ (91,820,918) $ (36,788,509)
============= ============= ============= =============
Financing activities $ 140,790,990 $ 29,828,391 $ 135,344,047 $ 24,842,322
============= ============= ============= =============
</TABLE>
Recently Issued Accounting Standards
The Financial Accounting Standards Board has issued Statement of Financial
Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging
Activities". This statement establishes accounting and reporting standards for
derivative instruments, including certain derivative instruments embedded in
other contracts, and for hedging activities. It is effective for the Company
beginning with the first quarter of 2001. Because the Company does
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<PAGE>
not currently utilize derivatives or engage in hedging activities, management
does not anticipate that implementation of this statement will have a material
effect on the Company's financial statements.
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, 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. Readers are
cautioned not to place undue reliance on these forward-looking statements, which
speak only as of the date hereof. The Company undertakes no obligation to
publicly revise these forward-looking statements to reflect events or
circumstances occurring after the date hereof or to reflect the occurrence of
unanticipated events.
Year 2000 Compliance
The Company utilizes the computer services of an affiliate of the Manager. The
affiliate of the Manager has upgraded its computer information systems to be
year 2000 compliant and beyond. The year 2000 compliance issue concerns the
inability of a computerized system to accurately record dates after 1999. The
affiliate of the Manager recently underwent a conversion of its financial
systems applications and upgraded all of its non-compliant, in-house software
and hardware inventory. The work stations which experienced problems during the
testing process were corrected with an upgrade patch. The costs incurred by the
Manager are not being charged to the Company. The most likely worst case
scenario that the Company faces is that computer operations will be suspended
for a few days to a week at January 1, 2000. The Company's contingency plan is
to have a complete backup done on December 31, 1999 and to have both electronic
and printed reports generated for all critical data up to and including December
31, 1999.
With regard to third parties, the Company's Manager is in the process of
evaluating the potential adverse impact that could result from the failure of
material service providers to be year 2000 compliant. A detailed survey and
assessment was sent to material third parties in the fourth quarter of 1998. The
Company has received assurances from a majority of the third parties with which
it interacts that these third parties have addressed the year 2000 issues and is
evaluating these assurances for their adequacy and accuracy. In cases where the
Company has not received assurances from third parties, it is initiating further
mail and/or phone inquiries. The Company relies heavily on third parties and is
vulnerable to the failures of third parties to address their year 2000 issues.
There can be no assurance given that the third parties will adequately address
their issues.
Inflation
Inflation did not have a material effect on the Company's results for the
periods presented.
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<PAGE>
Quantitative and Qualitative Disclosures About Market Risk
The nature of the Company's investments and the instruments used to raise
capital for their acquisition expose the Company to gains and losses due to
fluctuations in market interest rates. Market interest rates are highly
sensitive to many factors, including governmental policies, domestic and
international political considerations and other factors beyond the control of
the Company.
The FMBs generally bear interest at fixed rates, or pay interest according to
the cash flows of the Underlying Properties, which do not fluctuate with changes
in market interest rates. In contrast, payments required under the TOP program
and on the secured borrowings under the P-FLOAT program vary based on market
interest rates, primarily Bond Market Association ("BMA") and are re-set weekly.
Thus, an increase in market interest rates would result in increased payments
under these financing programs, without a corresponding increase in cash flows
from the investments in FMBs. For example, based on the $209,807,000 outstanding
under these financing programs at June 30, 1999, the Company estimates that an
increase of 0.5% in the BMA rate would decrease the Company's annual net income
by approximately $1,049,000; a 1.0% increase in BMA would decrease annual net
income by approximately $2,098,000. For the same reasons, a decrease in market
interest rates would generally benefit the Company, as a result of decreased
allocations to the minority interest and interest expense without corresponding
decreases in interest received on the FMBs, in the same amounts as described
above. During June of 1999, the Company completed a $90 million Preferred
Offering. These preferred shares carry a fixed dividend rate of 6 5/8% through
June 30, 2009, and so are not impacted by changes in market interest rates.
Various financial vehicles exist which would allow Company management to
mitigate the impact of interest rate fluctuations on the Company's cash flows
and earnings. Although management has not engaged in any of these hedging
strategies in the past, it may do so in the future, depending on management's
analysis of the interest rate environment and the costs and risks of such
strategies.
Changes in market interest rates would also impact the estimated fair value of
the Company's portfolio of FMBs and RITES. The Company estimates the fair value
for each FMB or RITE as the present value of its expected cash flows, using a
discount rate for comparable tax-exempt investments. Therefore, as market
interest rates for tax-exempt investments increase, the estimated fair value of
the company's FMBs or RITES will generally decline, and a decline in interest
rates would be expected to result in an increase in the estimated fair values.
For example, the Company projects that a 1% increase in market rates for
tax-exempt investments would decrease the estimated fair value of its portfolio
of FMBs and RITES from its June 30, 1999 value of $496,650,828 to approximately
$432,092,000. A 1% decline in interest rates would increase the value of the
June 30, 1999 portfolio to approximately $581,095,000. Changes in the estimated
fair value of the FMBs and RITES do not impact the Company's reported net
income, earnings per share, distributions or cash flows, but are reported as
components of other comprehensive income and affect reported shareholders'
equity.
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PART II. OTHER INFORMATION
Item 1. Legal Proceedings -
The Company is not a party to any material pending legal proceedings.
Item 2. Changes in Securities and Use of Proceeds
See Note 7 of the financial statements regarding the sale by a subsidiary
of the Company of 45 shares of Series A Cumulative Preferred Shares for
gross proceeds of $90 million.
Item 3. Defaults Upon Senior Securities - None
Item 4. Submission of Matters to a Vote of Security Holders
A proxy and proxy statement soliciting the vote of the Company's
shareholders for the Company's annual meeting of shareholders was sent to
shareholders on or about April 30, 1999. Such meeting was held on June 16, 1999.
Alan P. Hirmes was reelected as trustee for a three-year term expiring in 2002.
The proxy statement incorrectly noted that Stuart J. Boesky's term had expired
and his name was, therefore, listed on the proxy for reelection. Although Mr.
Boseky received sufficient votes for reelection, he will continue to be treated
as a trustee whose term expires in 2000, at which time he will again be eligible
for reelection to a new three-year term. A proposal to amend the Trust Agreement
to permit aggregate financing or leverage in excess of the 50% limit was not
approved.
Item 5. Other Information - None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
3.1(f) Agreement dated as of April 15, 1999 between Charter
Municipal Mortgage Acceptance Company and Melvyn I.
Weiss, Esq. and Lawrence A. Sucharow, Esq., as Class
Counsel co-chairmen (incorporated by reference to the
Company's current report on Form 8-K filed with the
Commission on April 29, 1999
10(aaaar) First Mortgage Bond, dated as of March 26, 1999, with
respect to the Hamilton Garden Apartments Project in the
principal amount of $6,400,000 (incorporated by
reference to Exhibit 10 (aaaar) in the Company's March
31, 1999 Quarterly Report on Form 10-Q)
10(aaaas) First Mortgage Bond, dated as of May 6, 1999, with
respect to the Del Monte Pines Apartments Project in the
principal amount of $11,000,000 (filed herewith)
10(aaaat) First Mortgage Bond, dated as of May 6, 1999, with
respect to the Greenbriar Apartments Project in the
principal amount of $9,585,000 (filed herewith)
33
<PAGE>
10(aaaau) Taxable First Mortgage Bond, dated as of May 6, 1999,
with respect to the Greenbriar Apartments Project in the
principal amount of $2,015,000 (filed herewith)
10(aaaav) First Mortgage Bond, dated as of May 6, 1999, with
respect to the Sycamore Woods Apartments Project in the
principal amount of $9,415,000 (filed herewith)
10(aaaaw) First Mortgage Bond, dated as of June 8, 1999, with
respect to the Lake Park Apartments Project in the
principal amount of $3,638,000 (filed herewith)
10(aaaax) First Mortgage Bond, dated as of June 8, 1999, with
respect to the Casa Ramon Apartments Project in the
principal amount of $4,744,000 (filed herewith)
10(aaaay) First Mortgage Bond, dated as of June 22, 1999, with
respect to the Lewis Place at Ironwood Project in the
principal amount of $4,000,000 (filed herewith)
10(aaaaz) Charter Mac Equity Issuer Trust, 6 5/8% Series A
Cumulative Preferred Shares, Purchase Agreement, dated
June 14, 1999 (filed herewith)
27 Financial Data Schedule (filed herewith).
99 Amended and Restated Trust Agreement by and among J.
Michael Fried, Stuart J. Boesky, Alan P. Hirmes, Robert
W. Grier and Andrew T. Panaccione as Managing Trustees,
Charter Municipal Mortgage Acceptance Company and
Wilmington Trust Company, as Registered Trustee dated
June 22, 1999 relating to Charter Mac Equity Issuer
Trust (filed herewith)
(b) Reports on Form 8-K
Current report on Form 8-K relating to a discounted cash settlement
with class counsel for the partners of the Partnerships in lieu of
the issuance of shares was dated April 15, 1999 and was filed on
April 29, 1999.
34
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
CHARTER MUNICIPAL MORTGAGE ACCEPTANCE COMPANY
(Registrant)
Date: August 13, 1999 By: /s/ Stuart J. Boesky
------------------------------------
Stuart J. Boesky
Managing Trustee, President and
Chief Operating Officer
Date: August 13, 1999 By: /s/ John B. Roche
------------------------------------
John B. Roche
Chief Financial Officer and
Chief Accounting Officer
EX-10.(aaaas)
Number: RQ-1 $11,000,000
California Statewide Communities Development Authority
Multifamily Housing Revenue Bond
(Del Monte Pines Apartments Project) Series 1999Q
Dated Date: Maturity Date: Interest Rate:
----------- -------------- --------------
May 6, 1999 May 1, 2036 6.80%
Registered Owner: CHARTER MUNICIPAL MORTGAGE ACCEPTANCE COMPANY
Principal Amount: ELEVEN MILLION DOLLARS
California Statewide Communities Development Authority (the
"Issuer"), a joint exercise of powers agency duly organized and existing under
the laws of the State of California (the "State"), for value received hereby
promises to pay to the registered owner hereof stated above, or registered
assigns, at the maturity date stated above, but only from the sources and as
hereinafter provided, upon presentation and surrender of this Bond at the
corporate trust office of U.S. Bank Trust National Association in St. Paul,
Minnesota, as agent for U.S. Bank Trust National Association, San Francisco,
California, 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 at the interest rate set forth above, from and including
the date of issuance of this Bond 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 mailed
to the record Owners of Bonds as the same appear upon the books of registry to
be maintained by the Trustee, as registrar.
This Bond is one of a series of bonds (the "Bonds") issued pursuant
to the provisions of Chapter 5 of Division 7 of Title 1 of the California
Government Code, together with the provisions of Chapter 7 of Part 5 of Division
31 of the California Health and Safety Code, as the same may be amended
(collectively, the "Act"), and a Trust Indenture, dated as of May 1, 1999,
between the Issuer and the Trustee (as amended and supplemented from time to
time, the "Indenture"). Reference is made to the Indenture and the Act for a
full statement of their respective terms. Capitalized terms used herein and not
otherwise defined herein have the respective meanings accorded such terms in the
Indenture, which are hereby incorporated herein by reference. The Bonds issued
under the Indenture are expressly limited to $11,000,000 in aggregate principal
amount at any time Outstanding (except for additional bonds issued pursuant to
the Indenture) and are all of like tenor, except as to numbers and
denominations, and are issued for the purposes of providing construction and
permanent financing for a qualified multifamily rental housing development in
the State and paying of certain expenses incidental thereto.
<PAGE>
The Bonds shall be special and limited obligations of the Issuer
payable only from the sources provided in this Indenture and neither the State
nor any other political subdivision thereof shall be liable on the Bonds.
Neither the State nor any political subdivision thereof shall in any event be
liable for the payment of the principal of or interest on any Bonds, or for the
performance of any pledge, deed of trust, obligation or agreement of any kind
whatsoever that may be undertaken by the Issuer, and none of the Bonds or any of
its agreements or obligations shall be construed to constitute a debt or a
pledge of the faith and credit of the State or any political subdivision thereof
within the meaning of any constitutional or statutory provision whatsoever, and
shall not directly, indirectly or contingently obligate the State or any of its
political subdivisions to levy or to pledge any form of taxation whatsoever
therefor or to make an appropriation for the payment thereof; nor shall any
breach of any such pledge, deed of trust, obligation or agreement impose any
pecuniary liability upon any member, officer, employee or agent of the Issuer,
or any charge upon the general credit of the Issuer, or any pecuniary liability
upon the Issuer payable from any moneys, revenues, payments and proceeds other
than those first above specified.
NEITHER THE MEMBERS OF THE ISSUER NOR ANY PERSONS EXECUTING THIS
BOND SHALL BE LIABLE PERSONALLY ON THE BONDS BY REASON OF THE ISSUANCE THEREOF.
THE BONDS SHALL NOT BE A DEBT OF THE STATE OR ANY POLITICAL SUBDIVISION THEREOF
(OTHER THAN THE ISSUER TO THE EXTENT PROVIDED HEREIN), AND NEITHER THE STATE NOR
ANY POLITICAL SUBDIVISION THEREOF (OTHER THAN THE ISSUER) SHALL BE LIABLE
THEREON, NOR IN ANY EVENT SHALL THE BONDS BE PAYABLE OUT OF ANY FUNDS OR
PROPERTIES OTHER THAN THOSE OF THE ISSUER SPECIFICALLY PLEDGED THERETO. THE
BONDS SHALL NOT CONSTITUTE AN INDEBTEDNESS WITHIN THE MEANING OF ANY
CONSTITUTIONAL OR STATUTORY DEBT LIMITATION OR RESTRICTION. THE ISSUER HAS NO
TAXING POWER.
Interest on the Bonds. The Bonds (including this Bond) shall bear
interest on the outstanding principal amount thereof at a rate of six and 80/100
percent (6.80%) per annum calculated on the basis of a 360-day year comprised of
twelve 30-day months from the date of issuance of the Bonds, until paid on the
Maturity Date or upon earlier redemption or acceleration. The interest payable
on the Bonds as provided above shall be payable on the first Business Day of
each month, commencing June 1, 1999, and on each Bond Payment Date.
Limited Recourse. Pursuant to a Loan Agreement dated as of May 1,
1999, and a Promissory Note (the "Note") dated the date of issuance of the
Bonds, Fresno Del Monte Pines Limited, L.P., a California 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 FIRST DEED OF TRUST AND
SECURITY AGREEMENT FROM THE DEVELOPER TO THE BENEFIT OF THE TRUSTEE, TO BE DATED
AS OF MAY 1, 1999 AND THE OTHER LOAN DOCUMENTS, ALL OF WHICH HAVE BEEN ASSIGNED
TO THE TRUSTEE PURSUANT TO THE INDENTURE AND (II) ANY ADDITIONAL SECURITY
PROVIDED IN THE INDENTURE.
2
<PAGE>
Registration and 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 herefor. The Bonds are issuable as fully registered
Bonds in Authorized Denominations as provided in the Indenture.
Redemption of Bonds. The Bonds are subject to optional and mandatory
redemption by the Issuer and purchase in lieu of redemption by the Developer
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.
Enforcement. Only the Majority Owner 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 Majority Owner
upon the conditions and in the manner and with the effect provided in the
Indenture. As provided in the Indenture, and to the extent permitted by law,
interest and a penalty rate of interest shall be payable on unpaid amounts due
hereon.
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 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.
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 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 statutes.
3
<PAGE>
IN WITNESS WHEREOF, the Issuer has caused this Bond to be executed as of
the Dated Date stated above.
CALIFORNIA STATEWIDE COMMUNITIES
DEVELOPMENT AUTHORITY
By: /s/ Gerald P. Burke
------------------------------------
Chairman
Gerald P. Burke
Attest:
/s/ Norma Lamas
Secretary
Norma Lamas
CERTIFICATE OF AUTHENTICATION
This Bond is one of the Bonds described in the within mentioned
Indenture.
U.S. BANK TRUST NATIONAL ASSOCIATION, as
Trustee and Authenticating Agent
By: /s/ Thomas M. Demchuk
------------------------------------
Authorized Signatory
Thomas M. Demchuk
Date of Authentication: 5/5/99
<PAGE>
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto _____________________ the within Bond 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:
---------------------
5
EX-10.(aaaat)
Number: RP-1 $9,585,000
California Statewide Communities Development Authority
Multifamily Housing Revenue Bond
(Greenbriar Apartments Project) Series 1999P
Dated Date: Maturity Date: Interest Rate:
----------- -------------- -------------
May 6, 1999 May 1, 2036 6.875%
Registered Owner: CHARTER MUNICIPAL MORTGAGE ACCEPTANCE COMPANY
Principal Amount: NINE MILLION FIVE HUNDRED AND EIGHTY-FIVE THOUSAND DOLLARS
California Statewide Communities Development Authority (the
"Issuer"), a joint exercise of powers agency duly organized and existing under
the laws of the State of California (the "State"), for value received hereby
promises to pay to the registered owner hereof stated above, or registered
assigns, at the maturity date stated above, but only from the sources and as
hereinafter provided, upon presentation and surrender of this Bond at the
corporate trust office of U.S. Bank Trust National Association in St. Paul,
Minnesota, as agent for U.S. Bank Trust National Association, San Francisco,
California, 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 at the interest rate set forth above, from and including
the date of issuance of this Bond 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 mailed
to the record Owners of Bonds as the same appear upon the books of registry to
be maintained by the Trustee, as registrar.
This Bond is one of a series of bonds (the "Bonds") issued pursuant
to the provisions of Chapter 5 of Division 7 of Title 1 of the California
Government Code, together with the provisions of Chapter 7 of Part 5 of Division
31 of the California Health and Safety Code, as the same may be amended
(collectively, the "Act"), and a Trust Indenture, dated as of May 1, 1999,
between the Issuer and the Trustee (as amended and supplemented from time to
time, the "Indenture"). Reference is made to the Indenture and the Act for a
full statement of their respective terms. Capitalized terms used herein and not
otherwise defined herein have the respective meanings accorded such terms in the
Indenture, which are hereby incorporated herein by reference. The Bonds issued
under the Indenture are expressly limited to $9,585,000 in aggregate principal
amount at any time Outstanding (except for additional bonds issued pursuant to
the Indenture and the $2,015,000 California Statewide Communities Development
Authority Multifamily Housing Revenue Bonds (Greenbriar Apartments Projects)
Series 1999P-T) and are all of like tenor, except as to numbers and
denominations, and are issued for the purposes of providing construction and
permanent financing for a qualified multifamily rental housing development in
the State and paying of certain expenses incidental thereto.
<PAGE>
The Bonds shall be special and limited obligations of the Issuer
payable only from the sources provided in this Indenture and neither the State
nor any other political subdivision thereof shall be liable on the Bonds.
Neither the State nor any political subdivision thereof shall in any event be
liable for the payment of the principal of or interest on any Bonds, or for the
performance of any pledge, deed of trust, obligation or agreement of any kind
whatsoever that may be undertaken by the Issuer, and none of the Bonds or any of
its agreements or obligations shall be construed to constitute a debt or a
pledge of the faith and credit of the State or any political subdivision thereof
within the meaning of any constitutional or statutory provision whatsoever, and
shall not directly, indirectly or contingently obligate the State or any of its
political subdivisions to levy or to pledge any form of taxation whatsoever
therefor or to make an appropriation for the payment thereof; nor shall any
breach of any such pledge, deed of trust, obligation or agreement impose any
pecuniary liability upon any member, officer, employee or agent of the Issuer,
or any charge upon the general credit of the Issuer, or any pecuniary liability
upon the Issuer payable from any moneys, revenues, payments and proceeds other
than those first above specified.
NEITHER THE MEMBERS OF THE ISSUER NOR ANY PERSONS EXECUTING THIS
BOND SHALL BE LIABLE PERSONALLY ON THE BONDS BY REASON OF THE ISSUANCE THEREOF.
THE BONDS SHALL NOT BE A DEBT OF THE STATE OR ANY POLITICAL SUBDIVISION THEREOF
(OTHER THAN THE ISSUER TO THE EXTENT PROVIDED HEREIN), AND NEITHER THE STATE NOR
ANY POLITICAL SUBDIVISION THEREOF (OTHER THAN THE ISSUER) SHALL BE LIABLE
THEREON, NOR IN ANY EVENT SHALL THE BONDS BE PAYABLE OUT OF ANY FUNDS OR
PROPERTIES OTHER THAN THOSE OF THE ISSUER SPECIFICALLY PLEDGED THERETO. THE
BONDS SHALL NOT CONSTITUTE AN INDEBTEDNESS WITHIN THE MEANING OF ANY
CONSTITUTIONAL OR STATUTORY DEBT LIMITATION OR RESTRICTION. THE ISSUER HAS NO
TAXING POWER.
Interest on the Bonds. The Bonds (including this Bond) shall bear
interest on the outstanding principal amount thereof at a rate of six and
875/1000 percent (6.875%) per annum calculated on the basis of a 360-day year
comprised of twelve 30-day months from the date of issuance of the Bonds, until
paid on the Maturity Date or upon earlier redemption or acceleration. The
interest payable on the Bonds as provided above shall be payable on the first
Business Day of each month, commencing June 1, 1999, and on each Bond Payment
Date.
Limited Recourse. Pursuant to a Loan Agreement dated as of May 1,
1999, and a Promissory Note (the "Note") dated the date of issuance of the
Bonds, Concord Greenbriar Limited, L.P., a California 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 FIRST DEED OF TRUST AND
SECURITY AGREEMENT FROM THE DEVELOPER TO THE BENEFIT OF THE TRUSTEE, TO BE DATED
AS OF MAY 1, 1999 AND THE OTHER LOAN DOCUMENTS, ALL OF WHICH HAVE BEEN ASSIGNED
TO THE TRUSTEE PURSUANT TO THE INDENTURE AND (II) ANY ADDITIONAL SECURITY
PROVIDED IN THE INDENTURE.
2
<PAGE>
Registration and 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 herefor. The Bonds are issuable as fully registered
Bonds in Authorized Denominations as provided in the Indenture.
Redemption of Bonds. The Bonds are subject to optional and mandatory
redemption by the Issuer and purchase in lieu of redemption by the Developer
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.
Enforcement. Only the Majority Owner 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 Majority Owner
upon the conditions and in the manner and with the effect provided in the
Indenture. As provided in the Indenture, and to the extent permitted by law,
interest and a penalty rate of interest shall be payable on unpaid amounts due
hereon.
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 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.
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 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 statutes.
3
<PAGE>
IN WITNESS WHEREOF, the Issuer has caused this Bond to be executed
as of the Dated Date stated above.
CALIFORNIA STATEWIDE COMMUNITIES
DEVELOPMENT AUTHORITY
By: /s/ Gerald P. Burke
------------------------------------
Chairman
Gerald P. Burke
Attest:
/s/ Norma Lamas
Secretary
Norma Lamas
CERTIFICATE OF AUTHENTICATION
This Bond is one of the Bonds described in the within mentioned
Indenture.
U.S. BANK TRUST NATIONAL ASSOCIATION, as
Trustee and Authenticating Agent
By: /s/ Thomas M. Demchuk
------------------------------------
Authorized Signatory
Thomas M. Demchuk
Date of Authentication: 5/5/99
<PAGE>
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and
transfers unto ________________ the within Bond 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:
---------------------
5
EX-10.(aaaau)
Number: RP-T-1 $2,015,000
California Statewide Communities Development Authority
Multifamily Housing Revenue Bond
(Greenbriar Apartments Project) Series 1999P-T
Dated Date: Maturity Date: Interest Rate:
----------- -------------- --------------
May 6, 1999 May 1, 2036 9.00%
Registered Owner: CHARTER MUNICIPAL MORTGAGE ACCEPTANCE COMPANY
Principal Amount: TWO MILLION AND FIFTEEN THOUSAND DOLLARS
California Statewide Communities Development Authority (the
"Issuer"), a joint exercise of powers agency duly organized and existing under
the laws of the State of California (the "State"), for value received hereby
promises to pay to the registered owner hereof stated above, or registered
assigns, at the maturity date stated above, but only from the sources and as
hereinafter provided, upon presentation and surrender of this Bond at the
corporate trust office of U.S. Bank Trust National Association in St. Paul,
Minnesota, as agent for U.S. Bank Trust National Association, San Francisco,
California, 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 at the interest rate set forth above, from and including
the date of issuance of this Bond 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 mailed
to the record Owners of Bonds as the same appear upon the books of registry to
be maintained by the Trustee, as registrar.
This Bond is one of a series of bonds (the "Bonds") issued pursuant
to the provisions of Chapter 5 of Division 7 of Tide 1 of the California
Government Code, together with the provisions of Chapter 7 of Part 5 of Division
31 of the California Health and Safety Code, as the same may be amended
(collectively, the "Act"), and a Trust Indenture, dated as of May 1, 1999,
between the Issuer and the Trustee (as amended and supplemented from time to
time, the "Indenture"). Reference is made to the Indenture and the Act for a
full statement of their respective terms. Capitalized terms used herein and not
otherwise defined herein have the respective meanings accorded such terms in the
Indenture, which are hereby incorporated herein by reference. The Bonds issued
under the Indenture are expressly limited to $2,015,000 in aggregate principal
amount at any time Outstanding (except for additional bonds issued pursuant to
the Indenture and the $9,585,000 California Statewide Communities Development
Authority Multifamily Housing Revenue Bonds (Greenbriar Apartments Projects)
Series 1999P) and are all of like tenor, except as to numbers and denominations,
and are issued for the purposes of providing construction and permanent
financing for a qualified multifamily rental housing development in the State
and paying of certain expenses incidental thereto.
<PAGE>
The Bonds shall be special and limited obligations of the Issuer
payable only from the sources provided in this Indenture and neither the State
nor any other political subdivision thereof shall be liable on the Bonds.
Neither the State nor any political subdivision thereof shall in any event be
liable for the payment of the principal of or interest on any Bonds, or for the
performance of any pledge, deed of trust, obligation or agreement of any kind
whatsoever that may be undertaken by the Issuer, and none of the Bonds or any of
its agreements or obligations shall be construed to constitute a debt or a
pledge of the faith and credit of the State or any political subdivision thereof
within the meaning of any constitutional or statutory provision whatsoever, and
shall not directly, indirectly or contingently obligate the State or any of its
political subdivisions to levy or to pledge any form of taxation whatsoever
therefor or to make an appropriation for the payment thereof; nor shall any
breach of any such pledge, deed of trust, obligation or agreement impose any
pecuniary liability upon any member, officer, employee or agent of the Issuer,
or any charge upon the general credit of the Issuer, or any pecuniary liability
upon the Issuer payable from any moneys, revenues, payments and proceeds other
than those first above specified.
NEITHER THE MEMBERS OF THE ISSUER NOR ANY PERSONS EXECUTING THIS
BOND SHALL BE LIABLE PERSONALLY ON THE BONDS BY REASON OF THE ISSUANCE THEREOF.
THE BONDS SHALL NOT BE A DEBT OF THE STATE OR ANY POLITICAL SUBDIVISION THEREOF
(OTHER THAN THE ISSUER TO THE EXTENT PROVIDED HEREIN), AND NEITHER THE STATE
NOR ANY POLITICAL SUBDIVISION THEREOF (OTHER THAN THE ISSUER) SHALL BE LIABLE
THEREON, NOR IN ANY EVENT SHALL THE BONDS BE PAYABLE OUT OF ANY FUNDS OR
PROPERTIES OTHER THAN THOSE OF THE ISSUER SPECIFICALLY PLEDGED THERETO. THE
BONDS SHALL NOT CONSTITUTE AN INDEBTEDNESS WITHIN THE MEANING OF ANY
CONSTITUTIONAL OR STATUTORY DEBT LIMITATION OR RESTRICTION. THE ISSUER HAS NO
TAXING POWER.
Interest on the Bonds. The Bonds (including this Bond) shall bear
interest on the outstanding principal amount thereof at a rate of nine percent
(9.00%) per annum calculated on the basis of a 360-day year comprised of twelve
30-day months from the date of issuance of the Bonds, until paid on the Maturity
Date or upon earlier redemption or acceleration. The interest payable on the
Bonds as provided above shall be payable on the first Business Day of each
month, commencing June 1, 1999, and on each Bond Payment Date.
Limited Recourse. Pursuant to a Loan Agreement dated as of May 1,
1999, and a Promissory Note (the "Note") dated the date of issuance of the
Bonds, Concord Greenbriar Limited, L.P., a California 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 FIRST DEED OF TRUST AND
SECURITY AGREEMENT FROM THE DEVELOPER TO THE BENEFIT OF THE TRUSTEE, TO BE DATED
AS OF MAY 1, 1999 AND THE OTHER LOAN DOCUMENTS, ALL OF WHICH HAVE BEEN ASSIGNED
TO THE TRUSTEE PURSUANT TO THE INDENTURE AND (II) ANY ADDITIONAL SECURITY
PROVIDED IN THE INDENTURE.
2
<PAGE>
Registration and 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 herefor. The Bonds are issuable as fully registered
Bonds in Authorized Denominations as provided in the Indenture.
Redemption of Bonds. The Bonds are subject to optional and mandatory
redemption by the Issuer and purchase in lieu of redemption by the Developer
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.
Enforcement. Only the Majority Owner 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 Majority Owner
upon the conditions and in the manner and with the effect provided in the
Indenture. As provided in the Indenture, and to the extent permitted by law,
interest and a penalty rate of interest shall be payable on unpaid amounts due
hereon.
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 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.
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 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 statutes.
3
<PAGE>
IN WITNESS WHEREOF, the Issuer has caused this Bond to be executed
as of the Dated Date stated above.
CALIFORNIA STATEWIDE COMMUNITIES
DEVELOPMENT AUTHORITY
By: /s/ Gerald P. Burke
------------------------------------
Chairman
Gerald P. Burke
Attest:
/s/ Norma Lamas
Secretary
Norma Lamas
CERTIFICATE OF AUTHENTICATION
This Bond is one of the Bonds described in the within mentioned Indenture.
U.S. BANK TRUST NATIONAL ASSOCIATION, as
Trustee and Authenticating Agent
By: /s/ Thomas M. Demchuk
------------------------------------
Authorized Signatory
Thomas M. Demchuk
Date of Authentication: 5/5/99
<PAGE>
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and
transfers unto ______________________ the within Bond 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:
---------------------
5
EX-10.(aaaav)
Number: RR-1 $9,415,000
California Statewide Communities Development Authority
Multifamily Housing Revenue Bond
(Sycamore Woods Apartments Project) Series 1999R
Dated Date: Maturity Date: Interest Rate:
----------- -------------- --------------
May 6, 1999 May 1, 2036 6.875%
Registered Owner: CHARTER MUNICIPAL MORTGAGE ACCEPTANCE COMPANY
Principal Amount: NINE MILLION FOUR HUNDRED AND FIFTEEN THOUSAND DOLLARS
California Statewide Communities Development Authority (the
"Issuer"), a joint exercise of powers agency duly organized and existing under
the laws of the State of California (the "State"), for value received hereby
promises to pay to the registered owner hereof stated above, or registered
assigns, at the maturity date stated above, but only from the sources and as
hereinafter provided, upon presentation and surrender of this Bond at the
corporate trust office of U.S. Bank Trust National Association in St. Paul,
Minnesota, as agent for U.S. Bank Trust National Association, San Francisco,
California, 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 at the interest rate set forth above, from and including
the date of issuance of this Bond 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 mailed
to the record Owners of Bonds as the same appear upon the books of registry to
be maintained by the Trustee, as registrar.
This Bond is one of a series of bonds (the "Bonds") issued pursuant
to the provisions of Chapter 5 of Division 7 of Title 1 of the California
Government Code, together with the provisions of Chapter 7 of Part 5 of Division
31 of the California Health and Safety Code, as the same may be amended
(collectively, the "Act"), and a Trust Indenture, dated as of May 1, 1999,
between the Issuer and the Trustee (as amended and supplemented from time to
time, the "Indenture"). Reference is made to the Indenture and the Act for a
full statement of their respective terms. Capitalized terms used herein and not
otherwise defined herein have the respective meanings accorded such terms in the
Indenture, which are hereby incorporated herein by reference. The Bonds issued
under the Indenture are expressly limited to $9,415,000 in aggregate principal
amount at any time Outstanding (except for additional bonds issued pursuant to
the Indenture) and are all of like tenor, except as to numbers and
denominations, and are issued for the purposes of providing construction and
permanent financing for a qualified multifamily rental housing development in
the State and paying of certain expenses incidental thereto.
<PAGE>
The Bonds shall be special and limited obligations of the Issuer
payable only from the sources provided in this Indenture and neither the State
nor any other political subdivision thereof shall be liable on the Bonds.
Neither the State nor any political subdivision thereof shall in any event be
liable for the payment of the principal of or interest on any Bonds, or for the
performance of any pledge, deed of trust, obligation or agreement of any kind
whatsoever that may be undertaken by the Issuer, and none of the Bonds or any of
its agreements or obligations shall be construed to constitute a debt or a
pledge of the faith and credit of the State or any political subdivision thereof
within the meaning of any constitutional or statutory provision whatsoever, and
shall not directly, indirectly or contingently obligate the State or any of its
political subdivisions to levy or to pledge any form of taxation whatsoever
therefor or to make an appropriation for the payment thereof; nor shall any
breach of any such pledge, deed of trust, obligation or agreement impose any
pecuniary liability upon any member, officer, employee or agent of the Issuer,
or any charge upon the general credit of the Issuer, or any pecuniary liability
upon the Issuer payable from any moneys, revenues, payments and proceeds other
than those first above specified.
NEITHER THE MEMBERS OF THE ISSUER NOR ANY PERSONS EXECUTING THIS
BOND SHALL BE LIABLE PERSONALLY ON THE BONDS BY REASON OF THE ISSUANCE THEREOF.
THE BONDS SHALL NOT BE A DEBT OF THE STATE OR ANY POLITICAL SUBDIVISION THEREOF
(OTHER THAN THE ISSUER TO THE EXTENT PROVIDED HEREIN), AND NEITHER THE STATE
NOR ANY POLITICAL SUBDIVISION THEREOF (OTHER THAN THE ISSUER) SHALL BE LIABLE
THEREON, NOR IN ANY EVENT SHALL THE BONDS BE PAYABLE OUT OF ANY FUNDS OR
PROPERTIES OTHER THAN THOSE OF THE ISSUER SPECIFICALLY PLEDGED THERETO. THE
BONDS SHALL NOT CONSTITUTE AN INDEBTEDNESS WITHIN THE MEANING OF ANY
CONSTITUTIONAL OR STATUTORY DEBT LIMITATION OR RESTRICTION. THE ISSUER HAS NO
TAXING POWER.
Interest on the Bonds. The Bonds (including this Bond) shall bear
interest on the outstanding principal amount thereof at a rate of six and
875/1000 percent (6.875%) per annum calculated on the basis of a 360-day year
comprised of twelve 30-day months from the date of issuance of the Bonds, until
paid on the Maturity Date or upon earlier redemption or acceleration. The
interest payable on the Bonds as provided above shall be payable on the first
Business Day of each month, commencing June 1, 1999, and on each Bond Payment
Date.
Limited Recourse. Pursuant to a Loan Agreement dated as of May 1,
1999, and a Promissory Note (the "Note") dated the date of issuance of the
Bonds, Antioch Sycamore Grove, L.P., a California 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 FIRST DEED OF TRUST AND
SECURITY AGREEMENT FROM THE DEVELOPER TO THE BENEFIT OF THE TRUSTEE, TO BE DATED
AS OF MAY 1, 1999 AND THE OTHER LOAN DOCUMENTS, ALL OF WHICH HAVE BEEN ASSIGNED
TO THE TRUSTEE PURSUANT TO THE INDENTURE AND (II) ANY ADDITIONAL SECURITY
PROVIDED IN THE INDENTURE.
2
<PAGE>
Registration and 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 herefor. The Bonds are issuable as fully registered
Bonds in Authorized Denominations as provided in the Indenture.
Redemption of Bonds. The Bonds are subject to optional and mandatory
redemption by the Issuer and purchase in lieu of redemption by the Developer
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.
Enforcement. Only the Majority Owner 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 Majority Owner
upon the conditions and in the manner and with the effect provided in the
Indenture. As provided in the Indenture, and to the extent permitted by law,
interest and a penalty rate of interest shall be payable on unpaid amounts due
hereon.
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 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.
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 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 statutes.
3
<PAGE>
IN WITNESS WHEREOF, the Issuer has caused this Bond to be executed as of
the Dated Date stated above.
CALIFORNIA STATEWIDE COMMUNITIES
DEVELOPMENT AUTHORITY
By: /s/ Gerald P. Burke
------------------------------------
Chairman
Gerald P. Burke
Attest:
/s/ Norma Lamas
Secretary
Norma Lamas
CERTIFICATE OF AUTHENTICATION
This Bond is one of the Bonds described in the within mentioned
Indenture.
U.S. BANK TRUST NATIONAL ASSOCIATION, as
Trustee and Authenticating Agent
By: /s/ Thomas M. Demchuk
------------------------------------
Authorized Signatory
Thomas M. Demchuk
Date of Authentication: 5/5/99
<PAGE>
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto _______ the within Bond 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:
---------------------
5
EX-10.(aaaaw)
Series LL Bond
Number: R LL-1 ***$3,638000***
California Statewide Communities Development Authority
Multifamily Housing Revenue Bond
(Lake Park Apartments Project) Series 1999 LL
Dated Date: Maturity Date: Interest Rate:
----------- -------------- --------------
June 8, 1999 September 1, 2035 7.25%
Registered Owner: CHARTER MUNICIPAL MORTGAGE ACCEPTANCE COMPANY
Principal Amount: ***THREE MILLION SIX HUNDRED THIRTY EIGHT THOUSAND DOLLARS***
California Statewide Communities Development Authority (the "Issuer"), a
joint exercise of powers agency duly organized and existing under the laws of
the State of California (the "State"), for value received hereby promises to pay
to the registered owner hereof stated above, or registered assigns, at the
maturity date stated above, but only from the sources and as hereinafter
provided, upon presentation and surrender of this Bond at the corporate trust
office of U.S. Bank Trust National Association in St. Paul, Minnesota, as agent
for U.S. Bank Trust National Association, San Francisco, California, 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 at
the interest rate set forth above, from and including the date of issuance of
this Bond 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 mailed to the record Owners of Bonds
as the same appear upon the books of registry to be maintained by the Trustee,
as registrar.
This Bond is one of a series of bonds (the "Bonds") issued pursuant to the
provisions of Chapter 5 of Division 7 of Title I of the California Government
Code, together with the provisions of Chapter 7 of Part 5 of Division 31 of the
California Health and Safety Code, as the same may be amended (collectively, the
"Act"), and a Trust Indenture, dated as of June 1, 1999, between the Issuer and
the Trustee (as amended and supplemented from time to time, the "Indenture").
Reference is made to the Indenture and the Act for a full statement of their
respective terms. Capitalized terms used herein and not otherwise defined herein
have the respective meanings accorded such terms in the Indenture, which are
hereby incorporated herein by reference. The Bonds issued under the Indenture
are expressly limited to $3,638,000 in aggregate principal amount at any time
Outstanding and are all of like tenor, except as to numbers and denominations,
and are issued for the purposes of providing construction and permanent
financing for a qualified multifamily rental housing development in the State
and paying of certain expenses incidental thereto.
The Bonds shall be special and limited obligations of the Issuer payable
only from the sources provided in this Indenture and neither the State nor any
other political subdivision
Page 1 of 5
<PAGE>
thereof shall be liable on the Bonds. Neither the State nor any political
subdivision thereof shall in any event be liable for the payment of the
principal of or interest on any Bonds, or for the performance of any pledge,
deed of trust, obligation or agreement of any kind whatsoever that may be
undertaken by the Issuer, and none of the Bonds or any of its agreements or
obligations shall be construed to constitute a debt or a pledge of the faith and
credit of the State or any political subdivision thereof within the meaning of
any constitutional or statutory provision whatsoever, and shall not directly,
indirectly or contingently obligate the State or any of its political
subdivisions to levy or to pledge any form of taxation whatsoever therefor or to
make an appropriation for the payment thereof; nor shall any breach of any such
pledge, deed of trust, obligation or agreement impose any pecuniary liability
upon any member, officer, employee or agent of the Issuer, or any charge upon
the general credit of the Issuer, or any pecuniary liability upon the Issuer
payable from any moneys, revenues, payments and proceeds other than those first
above specified.
NEITHER THE MEMBERS OF THE ISSUER NOR ANY PERSONS EXECUTING THIS BOND
SHALL BE LIABLE PERSONALLY ON THE BONDS BY REASON OF THE ISSUANCE THEREOF. THE
BONDS SHALL NOT BE A DEBT OF THE STATE OR ANY POLITICAL SUBDIVISION THEREOF
(OTHER THAN THE ISSUER TO THE EXTENT PROVIDED HEREIN), AND NEITHER THE STATE NOR
ANY POLITICAL SUBDIVISION THEREOF (OTHER THAN THE ISSUER) SHALL BE LIABLE
THEREON, NOR IN ANY EVENT SHALL THE BONDS BE PAYABLE OUT OF ANY FUNDS OR
PROPERTIES OTHER THAN THOSE OF THE ISSUER SPECIFICALLY PLEDGED THERETO. THE
BONDS SHALL NOT CONSTITUTE AN INDEBTEDNESS WITHIN THE MEANING OF ANY
CONSTITUTIONAL OR STATUTORY DEBT LIMITATION OR RESTRICTION. THE ISSUER HAS NO
TAXING POWER
Interest on the Bonds. The Bonds (including this Bond) shall bear interest
on the outstanding principal amount thereof at a rate of seven and one-quarter
percent (7.25%) per annum calculated on the basis of a 360-day year comprised of
twelve 30-day months from the date of issuance of the Bonds, until paid on the
Maturity Date or upon earlier redemption or acceleration. The interest payable
on the Outstanding Bonds at any time as provided above shall be payable on the
first Business Day of each month, commencing July 1, 1999, and on each Bond
Payment Date thereafter.
Limited Recourse. Pursuant to a Loan Agreement dated as of June 1, 1999,
and a Promissory Note (the "Note") dated the date of issuance of the Bonds,
Turlock Lake Park, LP, a California 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 FIRST DEED OF TRUST AND SECURITY AGREEMENT
FROM THE DEVELOPER TO THE BENEFIT OF THE TRUSTEE, TO BE DATED AS OF THE INITIAL
PERIOD EXPIRATION DATE AND THE OTHER LOAN DOCUMENTS, ALL OF WHICH HAVE BEEN
ASSIGNED TO THE TRUSTEE PURSUANT TO THE INDENTURE AND (II) ANY ADDITIONAL
SECURITY PROVIDED IN THE INDENTURE.
Page 2 of 5
<PAGE>
Registration and 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 herefor. The Bonds are issuable as fully registered Bonds
in Authorized Denominations as provided in the Indenture. At any time that the
Bonds (or any series of Bonds) are unrated or rated lower than "A" (or
equivalent), the transfer of such Bonds may be made from time to time only to a
single purchaser who delivers an investor's letter substantially in the form set
forth as Exhibit B to the Indenture.
Redemption of Bonds. The Bonds are subject to optional and mandatory
redemption by the Issuer and purchase in lieu of redemption by the Developer
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.
Enforcement. Only the Majority Owner 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 Majority Owner upon the
conditions and in the manner and with the effect provided in the Indenture. As
provided in the Indenture, and to the extent permitted by law, interest and a
penalty rate of interest shall be payable on unpaid amounts due hereon.
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 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.
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 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 statutes.
Page 3 of 5
<PAGE>
IN WITNESS WHEREOF, the Issuer has caused this Bond to be executed as of
the Dated Date stated above.
CALIFORNIA STATEWIDE COMMUNITIES
DEVELOPMENT AUTHORITY
By: /s/ Gerald P. Burke
------------------------------------
Chairman
Gerald P. Burke
Attest:
/s/ Norma Lamas
---------------
Secretary
Norma Lamas
CERTIFICATE OF AUTHENTICATION
This Bond is one of the Bonds described in the within mentioned
Indenture.
U.S. BANK TRUST NATIONAL ASSOCIATION, as
Trustee and Authenticating Agent
By: /s/ Thomas M. Demchuk
------------------------------------
Authorized Signatory
Date of Authentication: June 8, 1999
Thomas M. Demchuk
Page 4 of 5
<PAGE>
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto _______ the within Bond 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 5 of 5
EX-10.(aaaax)
Series MM Bond
Number RMM-1 ***$4,744000***
California Statewide Communities Development Authority
Multifamily Housing Revenue Bond
(Casa Ramon Apartments Project) Series 1999 MM
Dated Date: Maturity Date: Interest Rate:
----------- -------------- --------------
June 8, 1999 September 1,2035 7.50%
Registered Owner: CHARTER MUNICIPAL MORTGAGE ACCEPTANCE COMPANY
Principal Amount: ***FOUR MILLION SEVEN HUNDRED FORTY-FOUR THOUSAND DOLLARS***
California Statewide Communities Development Authority (the "Issuer"), a
joint exercise of powers agency duly organized and existing under the laws of
the State of California (the "State"), for value received hereby promises to pay
to the registered owner hereof stated above, or registered assigns, at the
maturity date stated above, but only from the sources and as hereinafter
provided, upon presentation and surrender of this Bond at the corporate trust
office of U.S. Bank Trust National Association in St. Paul, Minnesota, as agent
for U.S. Bank Trust National Association, San Francisco, California, 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 at
the interest rate set forth above, from and including the date of issuance of
this Bond 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 mailed to the record Owners of Bonds
as the same appear upon the books of registry to be maintained by the Trustee,
as registrar.
This Bond is one of a series of bonds (the "Bonds") issued pursuant to the
provisions of Chapter 5 of Division 7 of Title 1 of the California Government
Code, together with the provisions of Chapter 7 of Part 5 of Division 31 of the
California Health and Safety Code, as the same may be amended (collectively, the
"Act"), and a Trust Indenture, dated as of June 1, 1999, between the Issuer and
the Trustee (as amended and supplemented from time to time, the "Indenture").
Reference is made to the Indenture and the Act for a full statement of their
respective terms. Capitalized terms used herein and not otherwise defined herein
have the respective meanings accorded such terms in the Indenture, which are
hereby incorporated herein by reference. The Bonds issued under the Indenture
are expressly limited to $4,744,000 in aggregate principal amount at any time
Outstanding and are all of like tenor, except as to numbers and denominations,
and are issued for the purposes of providing construction and permanent
financing for a qualified multifamily rental housing development in the State
and paying of certain expenses incidental thereto.
The Bonds shall be special and limited obligations of the Issuer payable
only from the sources provided in this Indenture and neither the State nor any
other political subdivision
Page 1 of 5
<PAGE>
thereof shall be liable on the Bonds. Neither the State nor any political
subdivision thereof shall in any event be liable for the payment of the
principal of or interest on any Bonds, or for the performance of any pledge,
deed of trust, obligation or agreement of any kind whatsoever that may be
undertaken by the Issuer, and none of the Bonds or any of its agreements or
obligations shall be construed to constitute a debt or a pledge of the faith and
credit of the State or any political subdivision thereof within the meaning of
any constitutional or statutory provision whatsoever, and shall not directly,
indirectly or contingently obligate the State or any of its political
subdivisions to levy or to pledge any form of taxation whatsoever therefor or to
make an appropriation for the payment thereof; nor shall any breach of any such
pledge, deed of trust, obligation or agreement impose any pecuniary liability
upon any member, officer, employee or agent of the Issuer, or any charge upon
the general credit of the Issuer, or any pecuniary liability upon the Issuer
payable from any moneys, revenues, payments and proceeds other than those first
above specified.
NEITHER THE MEMBERS OF THE ISSUER NOR ANY PERSONS EXECUTING THIS BOND
SHALL BE LIABLE PERSONALLY ON THE BONDS BY REASON OF THE ISSUANCE THEREOF. THE
BONDS SHALL NOT BE A DEBT OF THE STATE OR ANY POLITICAL SUBDIVISION THEREOF
(OTHER THAN THE ISSUER TO THE EXTENT PROVIDED HEREIN), AND NEITHER THE STATE NOR
ANY POLITICAL SUBDIVISION THEREOF (OTHER THAN THE ISSUER) SHALL BE LIABLE
THEREON, NOR IN ANY EVENT SHALL THE BONDS BE PAYABLE OUT OF ANY FUNDS OR
PROPERTIES OTHER THAN THOSE OF THE ISSUER SPECIFICALLY PLEDGED THERETO. THE
BONDS SHALL NOT CONSTITUTE AN INDEBTEDNESS WITHIN THE MEANING OF ANY
CONSTITUTIONAL OR STATUTORY DEBT LIMITATION OR RESTRICTION. THE ISSUER HAS NO
TAXING POWER
Interest on the Bonds. The Bonds (including this Bond) shall bear interest
on the outstanding principal amount thereof at a rate of seven and one-half
percent (7.50%) per annum calculated on the basis of a 360-day year comprised of
twelve 30-day months from the date of issuance of the Bonds, until paid on the
Maturity Date or upon earlier redemption or acceleration. The interest payable
on the Outstanding Bonds at any time as provided above shall be payable on the
first Business Day of each month, commencing July 1, 1999, and on each Bond
Payment Date thereafter.
Limited Recourse. Pursuant to a Loan Agreement dated as of June 1, 1999,
and a Promissory Note (the "Note") dated the date of issuance of the Bonds, Casa
Ramon, LP, a California 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 FIRST DEED OF TRUST AND SECURITY AGREEMENT
FROM THE DEVELOPER TO THE BENEFIT OF THE TRUSTEE, TO BE DATED AS OF THE INITIAL
PERIOD EXPIRATION DATE AND THE OTHER LOAN DOCUMENTS, ALL OF WHICH HAVE BEEN
ASSIGNED TO THE TRUSTEE PURSUANT TO THE INDENTURE AND (II) ANY ADDITIONAL
SECURITY PROVIDED IN THE INDENTURE.
Page 2 of 5
<PAGE>
Registration and 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 herefor. The Bonds are issuable as fully registered Bonds
in Authorized Denominations as provided in the Indenture. At any time that the
Bonds (or any series of Bonds) are unrated or rated lower than "A" (or
equivalent), the transfer of such Bonds may be made from time to time only to a
single purchaser who delivers an investor's letter substantially in the form set
forth as Exhibit B to the Indenture.
Redemption of Bonds. The Bonds are subject to optional and mandatory
redemption by the Issuer and purchase in lieu of redemption by the Developer
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.
Enforcement. Only the Majority Owner 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 Majority Owner upon the
conditions and in the manner and with the effect provided in the Indenture. As
provided in the Indenture, and to the extent permitted by law, interest and a
penalty rate of interest shall be payable on unpaid amounts due hereon.
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 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.
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 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 statutes.
Page 3 of 5
<PAGE>
IN WITNESS WHEREOF, the Issuer has caused this Bond to be executed as of
the Dated Date stated above.
CALIFORNIA STATEWIDE COMMUNITIES
DEVELOPMENT AUTHORITY
By: /s/ Gerald P. Burke
------------------------------------
Chairman
Gerald P. Burke
Attest:
/s/ Norma Lamas
Secretary
Norma Lamas
CERTIFICATE OF AUTHENTICATION
This Bond is one of the Bonds described in the within mentioned
Indenture.
U.S. BANK TRUST NATIONAL ASSOCIATION, as
Trustee and Authenticating Agent
By: /s/ Thomas M. Demchuk
------------------------------------
Authorized Signatory
Date of Authentication: June 8, 1999
Thomas M. Demchuk
Page 4 of 5
<PAGE>
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto ______________________ the within Bond 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 5 of 5
EX-10.(aaaay)
UNITED STATES OF AMERICA
STATE OF FLORIDA
Housing Finance Authority of Alachua County, Florida
Multifamily Housing Revenue Bond
Series 1999
(Lewis Place at Ironwood Project)
Dated Date: June 22, 1999
Maturity Date: June 1, 2041
Registered Owner: Charter Municipal Mortgage Acceptance Company
Principal Amount: $4,000,000
Interest Rate: 6.75% until and including May 31, 2001; 7.00% thereafter
The Housing Finance Authority of Alachua County, Florida (the "Issuer"), a
public body corporate and politic of the State of Florida (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,
but only from the sources and as hereinafter provided, upon presentation and
surrender of this Bond at the principal office of SunTrust Bank, Central
Florida, National Association in Orlando, Florida 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 at the interest rate
set forth above, 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.
This Bond is one of a series of bonds (the "Bonds") issued pursuant to,
and is subject to, the Trust Indenture dated as of June 1, 1999 between the
Issuer and the Trustee (as amended and supplemented from time to time, the
"Indenture"), and the provisions of Chapter 159, Part IV, Florida Statutes, as
amended (the "Act"). Reference is made to the Indenture and the Act for a full
statement of their respective terms. Capitalized terms used herein and not
otherwise defined herein have the respective meanings accorded such terms in the
Indenture, which are hereby incorporated herein by reference. The Bonds issued
under the Indenture are expressly limited to $4,000,000 in aggregate principal
amount at any time Outstanding and are all of like tenor, except as to series,
numbers and denominations, and are issued for the purposes of providing
construction and permanent financing for qualified multifamily rental housing
units in the State and of paying certain expenses incidental thereto. Pursuant
to a Loan Agreement dated as of June 1, 1999, and a Promissory Note (the "Note")
dated the date of issuance of the Bonds, Lewis Place Associates, Ltd.,
<PAGE>
a Florida limited partnership (the "Borrower"), 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 Bonds shall be special and limited obligations of the Issuer payable
only from the sources provided in this Indenture and neither the State nor any
other political subdivision thereof shall be liable 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 BORROWER, AND THE SECURITY THEREFOR PROVIDED BY THE FIRST MORTGAGE AND
SECURITY AGREEMENT FROM THE BORROWER FOR THE BENEFIT OF THE TRUSTEE, DATED AS OF
JUNE 1, 1999, AND THE ASSIGNMENT OF LEASES, RENTS AND OTHER INCOME FROM THE
BORROWER TO THE TRUSTEE, DATED AS OF JUNE 1, 1999, ALL OF WHICH HAVE BEEN
ASSIGNED TO THE TRUSTEE PURSUANT TO THE INDENTURE, AND (II) ANY ADDITIONAL
SECURITY PRO VIDED IN THE INDENTURE. Neither the State of Florida nor any
political subdivision thereof shall in any event be liable for the payment of
the principal of or interest on any Bonds, or for the performance of any pledge,
obligation or agreement of any kind whatsoever that may be undertaken by the
Issuer, and none of the Bonds or any of its agreements or obligations shall be
construed to constitute a debt or a pledge of the faith and credit of the State
of Florida or any political subdivision thereof within the meaning of any
constitutional or statutory provision whatsoever, and shall not directly,
indirectly or contingently obligate the State of Florida or any of its political
subdivisions to levy or to pledge any form of taxation whatsoever therefor or to
make an appropriation for the payment thereof nor shall any breach of any such
pledge, deed of trust, obligation or agreement impose any pecuniary liability
upon any member, officer, employee or agent of the Issuer, or any charge upon
the general credit of the Issuer, or any pecuniary liability upon the Issuer
payable from any moneys, revenues, payments and proceeds other than those first
above specified.
Interest on the Bonds. The Bonds (including this Bond) shall bear interest
on the outstanding principal amount thereof from and including the dated date
hereof to and including May 31, 2001 at a rate of six and three-quarters percent
(6.75%) per annum and thereafter at a rate of seven percent (7.00%) per annum,
in each case computed on the basis of a 360-day year comprised of twelve 30-day
months, until paid on the Maturity Date or upon earlier redemption or
acceleration. The interest payable on the Bonds as provided above shall be
payable on the first day of each month commencing August 1, 1999, and on each
Bond Payment Date.
Registration and 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 herefor. The Bonds are issuable as fully registered Bonds
in Authorized Denominations as 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.
2
<PAGE>
Redemption of Bonds. The Bonds are subject to optional and mandatory
redemption by the Issuer and purchase in lieu of redemption by the Borrower
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.
Enforcement. Only the Majority Owner 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 Majority Owner upon the
conditions and in the manner and with the effect provided in the Indenture. As
provided in the Indenture, and to the extent permitted by law', interest and a
penalty rate of interest shall be payable on unpaid amounts due hereon.
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 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.
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 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 statutes.
3
<PAGE>
IN WITNESS WHEREOF, the Issuer has caused this Bond to be executed as of
the Dated Date stated above.
HOUSING FINANCE AUTHORITY OF
ALACHUA COUNTY, FLORIDA
(SEAL)
By: /s/ Fred Schilffarth
------------------------------------
Chairman
Fred Schilffarth
ATTEST:
/s/ Kenneth McGurn
- ----------------------------
Secretary
Kenneth McGurn
<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, Series 1999 (Lewis Place at
Ironwood Project) of the Housing Finance Authority of Alachua County, Florida.
SUNTRUST BANK, CENTRAL
FLORIDA, NATIONAL ASSOCIATION,
as Trustee and Authenticating Agent
By: /s/ Janet Davis
------------------------------------
Authorized Signatory
Janet Davis
Date of Authentication:
4
<PAGE>
FORM OF ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto _________________________ the within and hereby authorizes the transfer of
this Bond on the registration books of the Trustee.
Dated:
----------------------------------------
Authorized Signatory
----------------------------------------
Name of Transferee
----------------------------------------
Signature Guaranteed by
- -------------------------------
Name of Bank
By:
---------------------------
Title:
-------------------------
5
EX-10.(aaaaz)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
CharterMac Equity Issuer Trust
(a Delaware business trust)
6 5/8% Series A Cumulative Preferred Shares
PURCHASE AGREEMENT
Dated: June 14, 1999
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SECTION 1. Representations and Warranties by the Company and CharterMac.....................2
(a) REPRESENTATIONS AND WARRANTIES OF THE COMPANY.......................................2
(i) Final Offering Memorandum..............................................2
(ii) Financial Statements...................................................2
(iii) No Material Adverse Change in Business.................................3
(iv) Good Standing of the Company...........................................3
(v) Good Standing of Designated Subsidiaries...............................3
(vi) Capitalization.........................................................4
(vii) Authorization of Agreement.............................................4
(viii) Authorization of the Securities........................................4
(ix) Description of the Securities..........................................4
(x) Absence of Defaults and Conflicts......................................4
(xi) Absence of Employees...................................................5
(xii) Absence of Proceedings.................................................5
(xiii) Absence of Further Requirements........................................5
(xiv) Possession of Licenses and Permits.....................................5
(xv) Title to Property......................................................5
(xvi) Environmental Laws.....................................................6
(xvii) Tax Matters............................................................6
(xviii) Investment Company Act.................................................6
(xix) Similar Offerings......................................................7
(xx) Rule 144A Eligibility..................................................7
(xxi) No General Solicitation................................................7
(xxii) No Registration Required...............................................7
(b) OFFICER'S CERTIFICATES..............................................................7
(c) REPRESENTATIONS AND WARRANTIES OF CHARTERMAC........................................7
(i) Good Standing of CharterMac............................................7
(ii) Financial Statements...................................................7
(iii) Capitalization.........................................................8
(iv) Absence of Defaults and Conflicts......................................8
(v) Authorization of Agreement.............................................8
(vi) Authorization of Trust Agreement.......................................9
(vii) Transfer...............................................................9
(viii) Final Offering Memorandum..............................................9
(ix) Investment Company Act.................................................9
(d) OFFICER'S CERTIFICATES..............................................................9
SECTION 2. Sale and Delivery to Initial Purchasers; Closing.................................9
(a) SECURITIES..........................................................................9
(b) PAYMENT.............................................................................9
(c) DENOMINATIONS; REGISTRATION........................................................10
SECTION 3. Covenants of the Company........................................................10
(a) OFFERING MEMORANDUM................................................................10
-i-
<PAGE>
(b) NOTICE AND EFFECT OF MATERIAL EVENTS...............................................10
(c) AMENDMENT TO OFFERING MEMORANDUM AND SUPPLEMENTS...................................11
(d) QUALIFICATION OF SECURITIES FOR OFFER AND SALE.....................................11
(e) PORTAL ELIGIBLE....................................................................11
(f) DTC................................................................................11
(g) USE OF PROCEEDS....................................................................11
(h) TRANSFER...........................................................................11
SECTION 4. Payment of Expenses.............................................................11
(a) EXPENSES...........................................................................11
(b) TERMINATION OF AGREEMENT...........................................................12
SECTION 5. Conditions of Initial Purchasers' Obligations...................................12
(a) OPINIONS OF COUNSEL FOR COMPANY....................................................12
(b) CERTAIN TAX MATTERS................................................................12
(c) OPINIONS REGARDING CERTAIN INVESTMENTS.............................................12
(d) OPINION OF COUNSEL FOR INITIAL PURCHASERS..........................................12
(e) DTC/PORTAL.........................................................................13
(f) OFFICERS' CERTIFICATE..............................................................13
(g) ACCOUNTANTS' COMFORT LETTER........................................................13
(h) BRING-DOWN COMFORT LETTER..........................................................13
(i) CONSUMMATION OF TRANSFER...........................................................13
(j) ADDITIONAL DOCUMENTS...............................................................13
(k) TERMINATION OF AGREEMENT...........................................................14
SECTION 6. Subsequent Offers and Resales of the Securities.................................14
(a) OFFER AND SALE PROCEDURES..........................................................14
(i) Initial Offers and Sales Only to Qualified Institutional Buyers.......14
(ii) No General Solicitation...............................................14
(iii) Purchases by Non-Bank Fiduciaries.....................................14
(iv) Subsequent Purchaser Notification.....................................14
(v) Minimum Number of Shares..............................................15
(vi) Restrictions on Transfer..............................................15
(vii) Delivery of Offering Memorandum.......................................15
(b) COVENANTS OF THE COMPANY...........................................................15
(i) Integration...........................................................15
(ii) Rule 144A Information.................................................15
(iii) Restriction on Repurchases............................................15
(c) QUALIFIED INSTITUTIONAL BUYER......................................................15
(d) RESALE PURSUANT TO RULE 144A.......................................................15
SECTION 7. Indemnification.................................................................16
(a) INDEMNIFICATION OF INITIAL PURCHASERS..............................................16
(b) INDEMNIFICATION OF COMPANY.........................................................16
(c) ACTIONS AGAINST PARTIES; NOTIFICATION..............................................17
(d) SETTLEMENT WITHOUT CONSENT IF FAILURE TO REIMBURSE.................................17
-ii-
<PAGE>
SECTION 8. Contribution....................................................................17
SECTION 9. Representations, Warranties and Agreements to Survive Delivery..................19
SECTION 10. Termination of Agreement.......................................................19
(a) TERMINATION; GENERAL...............................................................19
(b) LIABILITIES........................................................................19
SECTION 11. Default by One or More of the Initial Purchasers...............................20
SECTION 12. Notices........................................................................20
SECTION 13. Parties........................................................................20
SECTION 14. GOVERNING LAW AND TIME.........................................................21
SECTION 15. Effect of Headings.............................................................21
</TABLE>
SCHEDULES
Schedule A - List of Initial Purchasers
Schedule B - Pricing Information
EXHIBITS
Exhibit A - Form of Opinion of Company's Counsel
-iii-
<PAGE>
CharterMac Equity Issuer Trust
(a Delaware business trust)
6 5/8% Series A Cumulative Preferred Shares
PURCHASE AGREEMENT
June 14, 1999
MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
Legg Mason Wood Walker, Incorporated
McDonald Investments Inc.
c/o Merrill Lynch & Co.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
North Tower
World Financial Center
New York, New York 10281
Ladies and Gentlemen:
Charter Municipal Mortgage Acceptance Company, a Delaware business
trust ("CharterMac"), and CharterMac Equity Issuer Trust, a Delaware business
trust (the "Company"), each confirms its agreement with Merrill Lynch & Co.,
Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch"), Legg Mason
Wood Walker, Incorporated ("Legg Mason") and McDonald Investments Inc.
("McDonald") (collectively, the "Initial Purchasers," which term shall also
include any initial purchaser substituted as hereinafter provided in Section 11
hereof) with respect to the issue and sale by the Company, and the purchase by
the Initial Purchasers, acting severally and not jointly, of the respective
amounts set forth in Schedule A hereto of 45 shares of the Company's 6 5/8%
Series A Cumulative Preferred Shares (the "Securities"). The Securities will
be issued in book-entry form to Cede & Co. as nominee of The Depository Trust
Company ("DTC") pursuant to a letter agreement, to be dated as of the Closing
Time (as defined in Section 2(b) hereof), between the Company and DTC (the
"DTC Agreement").
The Company understands that the Initial Purchasers propose to make an
offering of the Securities on the terms and in the manner set forth herein and
agrees that the Initial Purchasers may resell, subject to the conditions set
forth herein, all or a portion of the Securities to purchasers ("Subsequent
Purchasers") at any time after this Agreement has been executed and delivered.
The Securities are to be offered and sold through the Initial Purchasers without
being registered under the Securities Act of 1933, as amended (the "1933 Act"),
in reliance upon the exemption afforded by Rule 144A ("Rule 144A") of the rules
and regulations promulgated under the 1933 Act by the Securities and Exchange
Commission (the "Commission"). Pursuant to the
-1-
<PAGE>
terms of the Securities, investors that acquire Securities may only resell or
otherwise transfer such Securities if such Securities are hereafter registered
under the 1933 Act or if an exemption from the registration requirements of the
1933 Act is available.
The Company has prepared and delivered to each Initial Purchaser copies
of a preliminary offering memorandum dated May 25, 1999 (the "Preliminary
Offering Memorandum") and has prepared and will deliver to each Initial
Purchaser, at least five days before the Closing Time, copies of a final
offering memorandum in form and substance reasonably approved by the Initial
Purchasers (the "Final Offering Memorandum"), each for use by such Initial
Purchaser in connection with its solicitation of purchases of, or offering of,
the Securities. "Offering Memorandum" means, with respect to any date or time
referred to in this Agreement, the most recent offering memorandum (whether the
Preliminary Offering Memorandum or the Final Offering Memorandum, or any
amendment or supplement to either such document reasonably approved by the
Initial Purchasers), including exhibits thereto and any documents incorporated
therein by reference, which has been prepared and delivered by the Company to
the Initial Purchasers in connection with their solicitation of purchases of, or
offering of, the Securities.
The Company is an indirect wholly owned subsidiary of CharterMac. Prior
to delivering the Final Offering Memorandum to each Initial Purchaser,
CharterMac contributed certain assets to the Company and its subsidiaries as
described in the Offering Memorandum (collectively, the "Transfer").
All references in this Agreement to financial statements and schedules
and other information which is "contained," "included" or "stated," or words of
similar import, in the Offering Memorandum (or other references of like import)
shall be deemed to mean and include all such financial statements and schedules
and other information which are incorporated by reference in the Offering
Memorandum.
SECTION 1. REPRESENTATIONS AND WARRANTIES BY THE COMPANY AND
CHARTERMAC.
(a) REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to each Initial Purchaser as of the date hereof and as
of the Closing Time, and agrees with each Initial Purchaser, as follows:
(i) FINAL OFFERING MEMORANDUM. The Final Offering Memorandum
will not, at its date of issuance and at the Closing Time, include an
untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading; provided that
this representation, warranty and agreement shall not apply to
statements in or omissions from the Final Offering Memorandum made in
reliance upon and in conformity with information furnished to the
Company in writing by any Initial Purchaser through Merrill Lynch
expressly for use in the Final Offering Memorandum.
(ii) FINANCIAL STATEMENTS. The historical and pro forma
financial information, schedules and notes included in the Final
Offering Memorandum present fairly the financial position and results
of operations of the Company and its consolidated
-2-
<PAGE>
subsidiaries at the dates indicated. Said financial information has
been derived from financial statements which have been prepared in
conformity with generally accepted accounting principles ("GAAP")
applied on a consistent basis throughout the periods involved. The
supporting schedules, if any, included in the Final Offering Memorandum
present fairly in accordance with GAAP the information stated therein.
The pro forma summary balance sheet and pro forma information included
under the heading "Investments" in the Final Offering Memorandum
present fairly the information shown therein, have been prepared in
accordance with the Commission's rules and guidelines with respect to
pro forma financial information and have been properly compiled on the
bases described therein, and the assumptions used in the preparation
thereof are reasonable and the adjustments used therein are appropriate
to give effect to the transactions and circumstances referred to
therein.
(iii) NO MATERIAL ADVERSE CHANGE IN BUSINESS. Since the
respective dates as of which information is given in the Offering
Memorandum, except as otherwise stated therein, (A) there has been no
material adverse change in the financial condition, or in the earnings,
investment portfolio, business affairs or business prospects of the
Company and its subsidiaries considered as one enterprise, whether or
not arising in the ordinary course of business (a "Material Adverse
Effect"), (B) there have been no transactions entered into by the
Company or any of its subsidiaries, other than those in the ordinary
course of business, which are material with respect to the Company and
its subsidiaries considered as one enterprise, and (C) there has been
no dividend or distribution of any kind declared, paid or made by the
Company on any class of its capital stock.
(iv) GOOD STANDING OF THE COMPANY. The Company has been duly
organized and is validly existing as a business trust in good standing
under the laws of the State of Delaware and has full power and
authority to own, lease and operate its properties and to conduct its
business as described in the Final Offering Memorandum and to enter
into and perform its obligations under this Agreement. The Company is
duly qualified as a business trust to transact business and is in good
standing in each other jurisdiction in which such qualification is
required, whether by reason of the ownership or leasing of property or
the conduct of business, except where the failure so to qualify or to
be in good standing would not result in a Material Adverse Effect.
(v) GOOD STANDING OF DESIGNATED SUBSIDIARIES. Each of
CharterMac Origination Trust I and CharterMac Owner Trust I (each, a
"Designated Subsidiary" and, collectively, the "Designated
Subsidiaries") has been duly organized and is validly existing as a
business trust in good standing under the laws of the jurisdiction of
its organization, has full trust power and authority to own, lease and
operate its properties and to conduct its business as described in the
Final Offering Memorandum. Each of the Designated Subsidiaries is duly
qualified as a business trust to transact business and is in good
standing in each other jurisdiction in which such qualification is
required, whether by reason of the ownership or leasing of property or
the conduct of business, except where the failure so to qualify or to
be in good standing would not result in a Material Adverse Effect.
Except as otherwise disclosed in the Final Offering Memorandum, all of
the issued and outstanding shares of each Designated Subsidiary, if
any, have been duly authorized and are validly issued, fully paid and
non-assessable interests in the assets of
-3-
<PAGE>
such Designated Subsidiary and owned by the Company, directly or
through subsidiaries, free and clear of any security interest,
mortgage, pledge, lien, encumbrance, claim or equity. None of the
outstanding shares of the Designated Subsidiaries was issued in
violation of any preemptive or similar rights of any securityholder of
such Designated Subsidiary. The Company owns no equity interests in any
other entity, other than CharterMac Origination Trust I.
(vi) CAPITALIZATION. The outstanding shares of the Company
have been duly authorized and are validly issued, fully paid and
non-assessable interests in the assets of the Company and owned by
CharterMac, directly or through subsidiaries, free and clear of any
security interest, mortgage, pledge, lien, encumbrance, claim or
equity. None of the outstanding shares of the Company were issued in
violation of the preemptive or other similar rights of any
securityholder of the Company.
(vii) AUTHORIZATION OF AGREEMENT. This Agreement has been duly
authorized, executed and delivered by the Company.
(viii) AUTHORIZATION OF THE SECURITIES. The Securities have
been duly authorized for issuance by the Company and, when issued and
delivered to the Initial Purchasers against payment therefor as
provided hereunder, will be validly issued, fully paid and
non-assessable interests in the assets of the Company. The issuance of
the Securities and sale thereof to the Initial Purchasers will not
violate any preemptive or other similar rights of any securityholder of
the Company.
(ix) DESCRIPTION OF THE SECURITIES. The Securities and the
Trust Agreement (as defined in Section 1(c)(vi)) will conform, in all
material respects, to the statements relating thereto contained in the
Final Offering Memorandum.
(x) ABSENCE OF DEFAULTS AND CONFLICTS. Neither the Company
nor any of its subsidiaries is in violation of its trust agreement or
in default in the performance or observance of any obligation,
agreement, covenant or condition contained in any contract, indenture,
mortgage, deed of trust, loan or credit agreement, note, lease or other
agreement or instrument to which the Company or any of its subsidiaries
is a party or by which any of them may be bound, or to which any of the
property or assets of the Company or any of its subsidiaries is subject
(collectively, "Agreements and Instruments") except for such violations
or defaults that would not result in a Material Adverse Effect. The
execution, delivery and performance of this Agreement and any other
agreement or instrument entered into or issued or to be entered into or
issued by the Company in connection with the transactions contemplated
hereby or in the Final Offering Memorandum, the consummation of the
transactions contemplated herein and in the Final Offering Memorandum
(including the issuance and sale of the Securities and the use of the
proceeds from the sale of the Securities as described in the Final
Offering Memorandum under the caption "Use of Proceeds") and the
compliance by the Company with its obligations hereunder have been duly
authorized by all necessary trust action and do not and will not,
whether with or without the giving of notice or passage of time or
both, conflict with or constitute a breach of, or default or a
Repayment Event under, or result in the creation or imposition of any
lien, charge or encumbrance upon any property
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or assets of the Company or any of its subsidiaries pursuant to, the
Agreements and Instruments, nor will such action result in any
violation of the provisions of the trust agreement of the Company or
any of its subsidiaries or any applicable law, statute, rule,
regulation, judgment, order, writ or decree of any government,
government instrumentality or court, domestic or foreign, having
jurisdiction over the Company or any of its subsidiaries or any of
their property or assets. As used herein, a "Repayment Event" means any
event or condition which gives the holder of any note, debenture or
other evidence of indebtedness (or any person acting on such holder's
behalf) the right to require the repurchase, redemption or repayment of
all or a portion of such indebtedness by the Company or any of its
subsidiaries.
(xi) ABSENCE OF EMPLOYEES. The Company does not have any
employees, although the Company does have officers who are officers
and/ or employees of CharterMac or Related Capital Company as described
in the Final Offering Memorandum.
(xii) ABSENCE OF PROCEEDINGS. Except as set forth in the Final
Offering Memorandum there is no action, suit, proceeding, inquiry or
investigation before or brought by any court or governmental agency or
body, domestic or foreign, now pending, or, to the knowledge of the
Company, threatened, against or affecting the Company or any of its
subsidiaries which would result in a Material Adverse Effect, or which
might reasonably be expected to materially and adversely affect the
property or assets of the Company or any of its subsidiaries or the
consummation of the transactions contemplated by this Agreement or the
performance by the Company of its obligations hereunder.
(xiii) ABSENCE OF FURTHER REQUIREMENTS. No filing with, or
authorization, approval, consent, license, order, registration,
qualification or decree of, any court or governmental authority or
agency is necessary or required for the performance by the Company of
its obligations under this Agreement, in connection with the offering,
issuance or sale of the Securities or the consummation of the
transactions contemplated by this Agreement, except such as have been
already obtained.
(xiv) POSSESSION OF LICENSES AND PERMITS. The Company and its
subsidiaries possess such permits, licenses, approvals, consents and
other authorizations (collectively, "Governmental Licenses") issued by
the appropriate federal, state, local or foreign regulatory agencies or
bodies necessary to conduct the business now operated by them; the
Company and its subsidiaries are in compliance with the terms and
conditions of all such Governmental Licenses, except where the failure
so to comply would not, singly or in the aggregate, have a Material
Adverse Effect. All of the Governmental Licenses are valid and in full
force and effect, except where the invalidity of such Governmental
Licenses or the failure of such Governmental Licenses to be in full
force and effect would not have a Material Adverse Effect. Neither the
Company nor any of its subsidiaries has received any notice of
proceedings relating to the revocation or modification of any such
Governmental Licenses which, singly or in the aggregate, if the subject
of an unfavorable decision, ruling or finding, would result in a
Material Adverse Effect.
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(xv) TITLE TO PROPERTY. The Company and its subsidiaries do
not own any real property nor do they have any leases or subleases with
respect to any real property. The Company and its subsidiaries have
good and marketable title to the Investments described in the Final
Offering Memorandum, in each case, free and clear of all mortgages,
pledges, liens, security interests, claims, restrictions or
encumbrances of any kind except such as (a) are described in the Final
Offering Memorandum or (b) do not, singly or in the aggregate,
materially affect the value of any such Investments. Neither the
Company nor any of its subsidiaries has any notice of any material
claim of any sort that has been asserted by anyone adverse to the
rights of the Company or any of its subsidiaries under any of such
Investments, or affecting or questioning the rights of the Company or
any subsidiary thereof to the continued possession of the Investments.
(xvi) ENVIRONMENTAL LAWS. Except as set forth in the Final
Offering Memorandum, to the best of the Company's knowledge, except
such matters as would not, singly or in the aggregate, result in a
Material Adverse Effect, (A) none of the properties securing the
Investments (the "Securing Properties") is in violation of any federal,
state, local or foreign statute, law, rule, regulation, ordinance,
code, policy or rule of common law or any judicial or administrative
interpretation thereof, including any judicial or administrative order,
consent, decree or judgment, relating to pollution or protection of
human health, the environment (including, without limitation, ambient
air, surface water, groundwater, land surface or subsurface strata) or
wildlife, including, without limitation, laws and regulations relating
to the release or threatened release of chemicals, pollutants,
contaminants, wastes, toxic substances, hazardous substances, petroleum
or petroleum products (collectively, "Hazardous Materials") or to the
manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of Hazardous Materials (collectively,
"Environmental Laws"), (B) the Securing Properties have all permits,
authorizations and approvals required under any applicable
Environmental Laws and are each in compliance with their requirements,
(C) there are no pending or threatened administrative, regulatory or
judicial actions, suits, demands, demand letters, claims, liens,
notices of noncompliance or violation, investigation or proceedings
relating to any Environmental Law against the Securing Properties and
(D) there are no events or circumstances that might reasonably be
expected to form the basis of an order for clean-up or remediation, or
an action, suit or proceeding by any private party or governmental body
or agency, against or affecting the Securing Properties relating to
Hazardous Materials or Environmental Laws.
(xvii) TAX MATTERS. Holders of the Securities will be treated
for U.S. federal income tax purposes as receiving an allocation of
income under Section 704 of the Internal Revenue Code of 1986, as
amended, that is excludable from gross income equal to their share of
distributions of Tax-Exempt Income (as defined in the Final Offering
Memorandum).
(xviii) INVESTMENT COMPANY ACT. The Company is not, and upon
the issuance and sale of the Securities as herein contemplated and the
application of the net proceeds therefrom as described in the Final
Offering Memorandum will not be, an "investment company" or an entity
"controlled" by an "investment company" as such terms are defined in
the Investment Company Act of 1940, as amended (the "1940 Act").
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(xix) SIMILAR OFFERINGS. None of the Company, its affiliates,
as such term is defined in Rule 501(b) under the 1933 Act (each, an
"Affiliate"), or any person acting on its or any of their behalf, has,
directly or indirectly, solicited any offer to buy, sold or offered to
sell or otherwise negotiated in respect of, or will solicit any offer
to buy, sell or offer to sell or otherwise negotiate in respect of, in
the United States or to any United States citizen or resident, any
security which is or would be integrated with the sale of the
Securities in a manner that would require the Securities to be
registered under the 1933 Act.
(xx) RULE 144A ELIGIBILITY. The Securities are eligible for
resale pursuant to Rule 144A and will not be, at the Closing Time, (1)
of the same class as securities listed on a national securities
exchange registered under Section 6 of the Securities Exchange Act of
1934 (the "1934 Act"), as amended, or quoted in a U.S. automated
interdealer quotation system or (2) convertible into or exchangeable
for securities so listed or quoted at the Closing Time and having an
effective conversion premium of less than ten percent.
(xxi) NO GENERAL SOLICITATION. None of the Company, its
Affiliates or any person acting on its or any of their behalf (other
than the Initial Purchasers, as to whom the Company makes no
representation) has engaged or will engage, in connection with the
offering of the Securities, in any form of general solicitation or
general advertising within the meaning of Rule 502(c) under the 1933
Act.
(xxii) NO REGISTRATION REQUIRED. Subject to compliance by the
Initial Purchasers with the representations and warranties set forth in
Section 2 and the procedures set forth in Section 6 hereof, it is not
necessary in connection with the offer, sale and delivery of the
Securities to the Initial Purchasers and by the Initial Purchasers to
each Subsequent Purchaser in the manner contemplated by this Agreement
and the Final Offering Memorandum to register the Securities under the
1933 Act.
(b) OFFICER'S CERTIFICATES. Any certificate signed by any officer of
the Company or any of its subsidiaries delivered to the Initial Purchasers or to
counsel for the Initial Purchasers shall be deemed a representation and warranty
by the Company to each Initial Purchaser as to the matters covered thereby.
(c) REPRESENTATIONS AND WARRANTIES OF CHARTERMAC. CharterMac
represents and warrants to each Initial Purchaser as of the date hereof and as
of the Closing Time, and agrees with each Initial Purchaser, as follows:
(i) GOOD STANDING OF CHARTERMAC. CharterMac has been duly
organized and is validly existing as a business trust in good standing
under the laws of the state of Delaware and has full trust power and
authority to own, lease and operate its properties and to conduct its
business as described in the Offering Memorandum and to enter into and
perform its obligations under this Agreement and to consummate the
Transfer.
(ii) FINANCIAL STATEMENTS. The financial statements of
CharterMac, together with the related schedules and notes present
fairly the financial position of the Company and its consolidated
subsidiaries at the dates indicated and the statement of operations,
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stockholders' equity and cash flow of CharterMac and its consolidated
subsidiaries for the periods specified. Said financial statements have
been prepared in conformity with GAAP applied on a consistent basis
throughout the periods involved. The supporting schedules of CharterMac
from which information with respect to the Company included in the
Offering Memorandum was derived present fairly in accordance with GAAP
the information required to be stated therein.
(iii) CAPITALIZATION. The authorized issued and outstanding
shares of CharterMac are as set forth in CharterMac's Annual Report on
Form 10-K for the year ended December 31, 1998 in Item 6. The issued
and outstanding shares of CharterMac have been duly authorized and are
validly issued, fully paid and non-assessable interests in the assets
of CharterMac. None of the outstanding shares of CharterMac were issued
in violation of the preemptive or other similar rights of any security
holder of CharterMac.
(iv) ABSENCE OF DEFAULTS AND CONFLICTS. Neither CharterMac nor
any of its subsidiaries is in violation of its trust agreement or in
default in the performance or observance of any obligation, agreement,
covenant or condition contained in any contract, indenture, mortgage,
deed of trust, loan, or credit agreement, note, lease, or other
agreement or instrument to which CharterMac or any of its subsidiaries
is a party or by which any of them may be bound, or to which any of the
property or assets of CharterMac or any of its subsidiaries is subject
(the "CharterMac Agreements and Instruments") except for such
violations or defaults that would not result in a material adverse
change in the financial condition, or in the earnings, investment
portfolio, business affairs or business prospects of CharterMac and its
subsidiaries considered as one enterprise (a "CharterMac Material
Adverse Affect"); and the execution, delivery and performance of this
Agreement and the Transfer and any other agreement or instrument
entered into or issued or to be entered into or issued by CharterMac in
connection with the transactions contemplated hereby or in the Offering
Memorandum, and the consummation of the transactions contemplated
herein and in the Offering Memorandum and compliance by CharterMac with
its obligations hereunder have been duly authorized by all necessary
trust actions and do not and will not, whether with or without giving
of notice or passage of time or both, conflict with or constitute a
breach of, or default or repayment under, or result in the creation or
imposition of any lien, charge, or encumbrance upon any property or
assets of CharterMac or any of its subsidiaries pursuant to the
CharterMac Agreements and Instruments except for such conflicts,
breaches or defaults or liens, charges or encumbrances that, singly or
in the aggregate, would not result in a CharterMac Material Adverse
Affect nor will such action result in any violation of the provisions
of the trust agreement of CharterMac or any of its subsidiaries or any
applicable law, statute, rule, regulation, judgment, order, writ or
decree of any government, government instrumentality or court, domestic
or foreign, having jurisdiction over CharterMac or any of its
subsidiaries or any of their assets, properties or operations.
(v) AUTHORIZATION OF AGREEMENT. This Agreement has been duly
authorized, executed and delivered by CharterMac.
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(vi) AUTHORIZATION OF TRUST AGREEMENT. The trust agreement
creating the Company (the "Trust Agreement") has been duly authorized
by CM Holding Trust and constitutes a valid and legally binding
agreement of CM Holding Trust, enforceable against CM Holding Trust in
accordance with its terms, except to the extent that enforceability may
be limited by (a) bankruptcy, insolvency, reorganization, moratorium,
fraudulent conveyance or other similar laws now or hereafter in effect
relating to creditors' rights generally and (b) general principles of
equity (regardless of whether enforceability is considered in a
proceeding at law or in equity).
(vii) TRANSFER. Immediately prior to the Transfer, CharterMac
will possess good and marketable title to the assets that were the
subject of the Transfer, free and clear of any security interest,
mortgage, pledge, lien, encumbrance, claim or equity, except as
otherwise described in the Offering Memorandum. The Transfer will have
been duly authorized by CharterMac.
(viii) FINAL OFFERING MEMORANDUM. The Final Offering
Memorandum will not, at its date of issuance and at the Closing Time,
include an untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading;
provided that this representation, warranty and agreement shall not
apply to statements in or omissions from the Final Offering Memorandum
made in reliance upon and in conformity with information furnished to
the Company in writing by the Initial Purchasers expressly for use in
the Final Offering Memorandum.
(ix) INVESTMENT COMPANY ACT. CharterMac is not, and upon the
consummation of the Transfer, and at the Closing Time will not be, an
"investment company" or an entity "controlled" by an "investment
company" as such terms are defined in the 1940 Act.
(d) OFFICER'S CERTIFICATES. Any certificate signed by any officer of
CharterMac delivered to the Initial Purchasers or to counsel for the Initial
Purchasers shall be deemed a representation and warranty by CharterMac to each
Initial Purchaser as to matters covered thereby.
SECTION 2. SALE AND DELIVERY TO INITIAL PURCHASERS; CLOSING.
(a) SECURITIES. On the basis of the representations and warranties
herein contained and subject to the terms and conditions herein set forth, the
Company agrees to sell to each Initial Purchaser, severally and not jointly, and
each Initial Purchaser, severally and not jointly, agrees to purchase from the
Company, at the price set forth in Schedule B, the number of Securities set
forth in Schedule A opposite the name of such Initial Purchaser, plus any
additional Securities which such Initial Purchaser may become obligated to
purchase pursuant to the provisions of Section 11 hereof.
(b) PAYMENT. Payment of the purchase price for, and delivery of
certificates for, the Securities shall be made at the office of Brown & Wood
LLP, One World Trade Center, New York, New York 10048-0557, or at such other
place as shall be agreed upon by the Initial
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Purchasers and the Company, at 9:00 a.m. (eastern time) on June 29, 1999, or
such other time not later than ten business days after such date as shall be
agreed upon by the Initial Purchasers and the Company (such time and date of
payment and delivery being herein called the "Closing Time").
Payment shall be made to the Company by wire transfer of immediately
available funds to a bank account designated by the Company against delivery to
Merrill Lynch for the respective accounts of the Initial Purchasers of the
global certificate for the Securities to be purchased by them. It is understood
that each Initial Purchaser has authorized Merrill Lynch, for its account, to
accept delivery of, receipt for, and make payment of the purchase price for, the
Securities which it has agreed to purchase. Merrill Lynch, individually and not
as representative of the Initial Purchasers, may (but shall not be obligated to)
make payment of the purchase price for the Securities to be purchased by any
Initial Purchaser whose funds have not been received by the Closing Time, but
such payment shall not relieve such Initial Purchaser from its obligations
hereunder.
(c) DENOMINATIONS; REGISTRATION. Certificates for the Securities
shall be in such denominations and registered in such names as Merrill Lynch may
request in writing at least one full business day before the Closing Time. The
certificates representing the Securities shall be made available for examination
and packaging by the Initial Purchasers in The City of New York not later than
10:00 A.M. on the last business day prior to the Closing Time.
SECTION 3. COVENANTS OF THE COMPANY. The Company covenants with each
Initial Purchaser as follows:
(a) OFFERING MEMORANDUM. The Company, as promptly as possible, will
furnish to each Initial Purchaser, without charge, such number of copies of the
Preliminary Offering Memorandum, the Final Offering Memorandum and any
amendments and supplements thereto and documents incorporated by reference
therein as such Initial Purchaser may reasonably request.
(b) NOTICE AND EFFECT OF MATERIAL EVENTS. The Company will
immediately notify each Initial Purchaser, and confirm such notice in writing,
of (x) any filing made by the Company of information relating to the offering of
the Securities with any securities exchange or any other regulatory body in the
United States or any other jurisdiction, and (y) prior to the completion of the
placement of the Securities by the Initial Purchasers as evidenced by a notice
in writing from the Initial Purchasers to the Company, any Material Adverse
Effect which (i) makes any statement in the Offering Memorandum false or
misleading or (ii) is not disclosed in the Offering Memorandum. In such event or
if during such time any event shall occur as a result of which it is necessary,
in the reasonable opinion of any of the Company, its counsel, the Initial
Purchasers or counsel for the Initial Purchasers, to amend or supplement the
Final Offering Memorandum in order that the Final Offering Memorandum not
include any untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements therein not misleading in the light of
the circumstances then existing, the Company will forthwith amend or supplement
the Final Offering Memorandum by preparing and furnishing to each Initial
Purchaser an amendment or amendments of, or a supplement or supplements to, the
Final Offering Memorandum (in form and substance reasonably satisfactory to the
Initial Purchasers) so that, as
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so amended or supplemented, the Final Offering Memorandum will not include an
untrue statement of a material fact or omit to state a material fact necessary
in order to make the statements therein, in the light of the circumstances
existing at the time it is delivered to a Subsequent Purchaser, not misleading.
(c) AMENDMENT TO OFFERING MEMORANDUM AND SUPPLEMENTS. The Company
will advise each Initial Purchaser promptly of any proposal to amend or
supplement the Offering Memorandum and will not effect such amendment or
supplement without the consent of the Initial Purchasers. Neither the consent of
the Initial Purchasers nor the Initial Purchasers' delivery of any such
amendment or supplement shall constitute a waiver of any of the conditions set
forth in Section 5 hereof.
(d) QUALIFICATION OF SECURITIES FOR OFFER AND SALE. The Company will
use commercially reasonable efforts, in cooperation with the Initial Purchasers,
to qualify the Securities for offering and sale under the applicable securities
laws of such states and other jurisdictions as the Initial Purchasers may
designate and will maintain such qualifications in effect as long as required
for the sale of the Securities; provided, however, that the Company shall not be
obligated to file any general consent to service of process or to qualify as a
foreign corporation or as a dealer in securities in any jurisdiction in which it
is not so qualified or to subject itself to taxation in respect of doing
business in any jurisdiction in which it is not otherwise so subject.
(e) PORTAL ELIGIBLE. The Company will cooperate with Merrill Lynch
and use commercially reasonable efforts to make the Securities eligible for
quotation on the Private Offerings, Resales and Trading through Automated
Linkages ("PORTAL") System of the National Association of Securities Dealers,
Inc. (the "NASD").
(f) DTC. The Company will cooperate with Merrill Lynch and use
commercially reasonable efforts to permit the Securities to be eligible for
clearance and settlement through the facilities of DTC.
(g) USE OF PROCEEDS. The Company will use the net proceeds received
by it from the sale of the Securities in the manner specified in the Offering
Memorandum under "Use of Proceeds."
(h) TRANSFER. Prior to delivering the Final Offering Memorandum to
each Initial Purchaser, CharterMac will consummate the Transfer.
SECTION 4. PAYMENT OF EXPENSES.
(a) EXPENSES. The Company will pay all expenses incident to the
performance of its obligations under this Agreement, including (i) the
preparation, printing, delivery to the Initial Purchasers and any filing of the
Offering Memorandum (including financial statements and any schedules or
exhibits and any document incorporated therein by reference) and of each
amendment or supplement thereto, (ii) the preparation, printing and delivery to
the Initial Purchasers of this Agreement, and such other documents as may be
required in connection with the offering, purchase, sale, issuance or delivery
of the Securities, (iii) the preparation, issuance and delivery of the
certificates for the Securities to the Initial Purchasers, including any
transfer
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taxes, any stamp or other duties payable upon the sale, issuance and delivery of
the Securities to the Initial Purchasers and any charges of DTC in connection
therewith, (iv) the fees and disbursements of the Company's counsel, accountants
and other advisors, (v) the qualification of the Securities under securities
laws in accordance with the provisions of Section 3(d) hereof, including filing
fees and the reasonable fees and disbursements of counsel for the Initial
Purchasers in connection therewith and in connection with the preparation of the
Blue Sky Survey and any supplement thereto.
(b) TERMINATION OF AGREEMENT. If this Agreement is terminated by the
Initial Purchasers in accordance with the provisions of Section 5 or Section
10(a)(i) hereof, the Company shall reimburse the Initial Purchasers for all of
its out-of-pocket expenses, including the reasonable fees and disbursements of
counsel for the Initial Purchasers.
SECTION 5. CONDITIONS OF INITIAL PURCHASERS' OBLIGATIONS. The
obligations of the several Initial Purchasers hereunder are subject to the
accuracy of the representations and warranties of the Company and CharterMac
contained in Section 1 hereof or in certificates of any officer of the Company
and CharterMac or any of their subsidiaries delivered pursuant to the provisions
hereof, to the performance by the Company of its covenants and other obligations
hereunder, and to the following further conditions:
(a) OPINIONS OF COUNSEL FOR COMPANY. At the Closing Time, the Initial
Purchasers shall have received the favorable opinions, dated as of the Closing
Time, of Battle Fowler LLP, Greenberg Traurig and Richards, Layton & Finger,
P.A. counsel for the Company and CharterMac, in form and substance reasonably
satisfactory to counsel for the Initial Purchasers, together with signed or
reproduced copies of such letters for each of the other Initial Purchasers to
the effect set forth in Exhibit A hereto.
(b) CERTAIN TAX MATTERS. At the Closing Time, the Initial Purchasers
shall have received the favorable opinion, dated as of the Closing Time, of
Greenberg Traurig, counsel for the Company, in form and substance reasonably
satisfactory to counsel for the Initial Purchasers, to the effect that the
information set forth in the Offering Memorandum under the caption "Certain
Federal Income Tax Considerations," to the extent such information constitutes
matters of law, summaries of legal matters, or legal conclusions, has been
reviewed by them and is correct.
(c) OPINIONS REGARDING CERTAIN INVESTMENTS. At the Closing Time, the
Initial Purchasers shall have received the unqualified opinions, dated as of the
Closing Time, of Greenberg Traurig, in form and substance reasonably
satisfactory to counsel for the Initial Purchasers, to the effect that interest
on the bonds for the following projects is tax-exempt: (1) Cedar Creek, (2)
Greenway, (3) Pelican Cove, (4) Sunset Creek, (5) Sunset Village, (6) Loveridge,
(7) Cypress Run, (8) Sunset Downs and (9) Sunset Terrace.
(d) OPINION OF COUNSEL FOR INITIAL PURCHASERS. At Closing Time, the
Initial Purchasers shall have received the favorable opinion, dated as of the
Closing Time, of Brown & Wood LLP, counsel for the Initial Purchasers, together
with signed or reproduced copies of such letter for each of the other Initial
Purchasers with respect to the matters set forth in the first sentence of
paragraph (i), paragraphs (v), (vii), (viii) and paragraph (xv) of Exhibit A
hereto. In
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giving such opinion such counsel may rely, as to all matters governed by the
laws of jurisdictions other than the law of the State of New York and the
federal law of the United States, upon the opinions of counsel reasonably
satisfactory to the Initial Purchasers. Such counsel may also state that,
insofar as such opinion involves factual matters, they have relied, to the
extent they deem proper, upon certificates of officers of the Company and its
subsidiaries and certificates of public officials.
(e) DTC/PORTAL. At the Closing Time, the Securities will be eligible
for clearance and settlement through the facilities of DTC and for quotation on
the PORTAL System of the NASD.
(f) OFFICERS' CERTIFICATE. At the Closing Time, there shall not have
been, since the date hereof or since the respective dates as of which
information is given in the Offering Memorandum, any Material Adverse Effect
with respect to the Company and its subsidiaries considered as one enterprise,
and the Initial Purchasers shall have received a certificate of a Managing
Trustee and the principal accounting officer of the Company, dated as of the
Closing Time, to the effect that (i) there has been no such Material Adverse
Effect, (ii) the representations and warranties in Section 1(a) hereof are true
and correct with the same force and effect as though expressly made at and as of
the Closing Time, and (iii) the Company has complied with all agreements and
satisfied all conditions on its part to be performed or satisfied at or prior to
the Closing Time. In addition, at the Closing Time, the Initial Purchasers shall
have a certificate of an executive officer of CharterMac, dated as of the
Closing Time, to the effect that the representations and warranties in Section
1(c) hereof are true and correct with the same force and effect as though
expressly made at and as of the Closing Time.
(g) ACCOUNTANTS' COMFORT LETTER. At the time of the execution of this
Agreement, the Initial Purchaser shall have received from Deloitte & Touche LLP
a letter dated such date, in form and substance satisfactory to the Initial
Purchasers, together with signed or reproduced copies of such letter for each of
the other Initial Purchasers containing statements and information of the type
ordinarily included in accountants' "comfort letters" to an initial purchaser
with respect to the financial statements and certain financial information
contained in the Offering Memorandum.
(h) BRING-DOWN COMFORT LETTER. At the Closing Time, the Initial
Purchasers shall have received from Deloitte & Touche LLP a letter, dated as of
the Closing Time, to the effect that they reaffirm the statements made in the
letter furnished pursuant to subsection (f) of this Section, except that the
specified date referred to shall be a date not more than three business days
prior to the Closing Time.
(i) CONSUMMATION OF TRANSFER. Prior to delivering the Final Offering
Memorandum to each Initial Purchaser, CharterMac will have consummated the
Transfer.
(j) ADDITIONAL DOCUMENTS. At the Closing Time, counsel for the
Initial Purchasers shall have been furnished with such documents and opinions as
such counsel may reasonably require for the purpose of enabling such counsel to
pass upon the issuance and sale of the Securities as herein contemplated, or in
order to evidence the accuracy of any of the representations or warranties, or
the fulfillment of any of the conditions, herein contained; and all
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proceedings taken by the Company in connection with the issuance and sale of the
Securities as herein contemplated shall be reasonably satisfactory in form and
substance to the Initial Purchasers and counsel for the Initial Purchasers.
(k) TERMINATION OF AGREEMENT. If any condition specified in this
Section shall not have been fulfilled when and as required to be fulfilled, this
Agreement may be terminated by the Initial Purchasers by notice to the Company
at any time at or prior to the Closing Time, and such termination shall be
without liability of any party to any other party except as provided in Section
4 and except that Sections 1, 6, 7, 8 and 9 shall survive any such termination
and remain in full force and effect.
SECTION 6. SUBSEQUENT OFFERS AND RESALES OF THE SECURITIES.
(a) OFFER AND SALE PROCEDURES. Each of the Initial Purchasers and the
Company hereby establish and agree to observe the following procedures in
connection with the offer and sale of the Securities:
(i) INITIAL OFFERS AND SALES ONLY TO QUALIFIED INSTITUTIONAL
BUYERS. Offers and sales of the Securities purchased by the Initial
Purchasers from the Company in respect of a Security shall only be made
to persons whom the Initial Purchasers reasonably believe to be
qualified institutional buyers, as defined in Rule 144A under the 1933
Act ("Qualified Institutional Buyers").
(ii) NO GENERAL SOLICITATION. No general solicitation or
general advertising (within the meaning of Rule 502(c) under the 1933
Act) will be used in the United States in connection with the offering
or sale of the Securities.
(iii) PURCHASES BY NON-BANK FIDUCIARIES. In the case of a
Subsequent Purchaser acting as a fiduciary for one or more third
parties in respect of a Security, each third party shall, in the
judgment of the Initial Purchasers, be a Qualified Institutional Buyer.
(iv) SUBSEQUENT PURCHASER NOTIFICATION. Prior to or
contemporaneously with the sale of Securities purchased by it from the
Company, each Initial Purchaser will take reasonable steps to inform,
and cause each of its U.S. Affiliates to take reasonable steps to
inform, Subsequent Purchasers in the United States that the Securities
(A) have not been and will not be registered under the 1933 Act, (B)
are being sold to them without registration under the 1933 Act in
reliance on Rule 144A, and (C) may not be offered, sold or otherwise
transferred except (1) to the Company or the Initial Purchasers, or,
through, or in a transaction approved by, the Initial Purchasers, (2)
outside the United States in accordance with Regulation S, or (3)
inside the United States in accordance with (x) Rule 144A to a person
whom the seller reasonably believes is a Qualified Institutional Buyer
that is purchasing such Securities for its own account or for the
account of a Qualified Institutional Buyer to whom notice is given that
the offer, sale or transfer is being made in reliance on Rule 144A or
(y) pursuant to another available exemption from registration under the
1933 Act.
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<PAGE>
(v) MINIMUM NUMBER OF SHARES. No sale of the Securities to
any one subsequent purchaser will be for less than one share
(Liquidation Amount $2,000,000 per share) and no fractional shares will
be issued.
(vi) RESTRICTIONS ON TRANSFER. The transfer restrictions and
the other provisions set forth in the Offering Memorandum under the
heading "Notice to Investors," including the legend required thereby,
shall apply to the Securities, except as otherwise agreed in writing by
the Company and the Initial Purchasers.
(vii) DELIVERY OF OFFERING MEMORANDUM. Each Initial Purchaser
will deliver to each purchaser of the Securities from such Initial
Purchaser, in connection with its original placement of the Securities,
a copy of the Offering Memorandum, as amended and supplemented at the
date of such delivery.
(b) COVENANTS OF THE COMPANY. The Company covenants with each Initial
Purchaser as follows:
(i) INTEGRATION. The Company agrees that it will not, and
will cause its Affiliates not to, directly or indirectly, solicit any
offer to buy, sell or make any offer or sale of, or otherwise negotiate
in respect of, securities of the Company of any class if, as a result
of the doctrine of "integration" referred to in Rule 502 under the 1933
Act, such offer or sale would render invalid (for the purpose of (i)
the sale of the Securities by the Company to the Initial Purchasers,
(ii) the resale of the Securities by the Initial Purchasers to
Subsequent Purchasers or (iii) the resale of the Securities by such
Subsequent Purchasers to others) the exemption from the registration
requirements of the 1933 Act provided by Section 4(2) thereof or by
Rule 144A thereunder or otherwise.
(ii) RULE 144A INFORMATION. The Company agrees that, in order
to render the Securities eligible for resale pursuant to Rule 144A
under the 1933 Act, while any of the Securities remain outstanding, it
will make available, upon request, to any holder of Securities or
prospective purchasers of Securities the information specified in Rule
144A(d)(4), unless the Company furnishes information to the Commission
pursuant to Section 13 or 15(d) of the 1934 Act.
(iii) RESTRICTION ON REPURCHASES. Until the expiration of two
years after the original issuance of the Securities, the Company will
not, and will cause its Affiliates not to, purchase, acquire or agree
to purchase or acquire any Securities which are "restricted securities"
(as such term is defined under Rule 144(a)(3) under the 1933 Act),
whether as beneficial owner or otherwise, unless, immediately
thereupon, such securities are cancelled.
(c) QUALIFIED INSTITUTIONAL BUYER. Each Initial Purchaser severally
and not jointly represents and warrants to, and agrees with, the Company that it
is a Qualified Institutional Buyer.
(d) RESALE PURSUANT TO RULE 144A. Each Initial Purchaser understands
that the Securities have not been and will not be registered under the 1933 Act
and may not be offered or sold within the United States except pursuant to an
exemption from, or in a transaction not
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<PAGE>
subject to, the registration requirements of the 1933 Act. Each Initial
Purchaser severally represents and agrees that it has not offered or sold, and
will not offer or sell, any Securities constituting part of its allotment within
the United States except in accordance with Rule 144A under the Securities Act
another applicable exemption from the registration requirements of the 1933 Act
and applicable state securities laws.
SECTION 7. INDEMNIFICATION.
(a) INDEMNIFICATION OF INITIAL PURCHASERS. CharterMac and the Company
agree, jointly and severally, to indemnify and hold harmless each Initial
Purchaser and each person, if any, who controls any Initial Purchaser within the
meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act as follows:
(i) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, arising out of any untrue statement or
alleged untrue statement of a material fact included in any Preliminary
Offering Memorandum or the Final Offering Memorandum (or any amendment
or supplement thereto), or the omission or alleged omission therefrom
of a material fact necessary in order to make the statements therein,
in the light of the circumstances under which they were made, not
misleading;
(ii) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, to the extent of the aggregate amount
paid in settlement of any litigation, or any investigation or
proceeding by any governmental agency or body, commenced or threatened,
or of any claim whatsoever based upon any such untrue statement or
omission, or any such alleged untrue statement or omission; provided
that (subject to Section 7(d) below) any such settlement is effected
with the written consent of the Company; and
(iii) against any and all expense whatsoever, as incurred
(including the reasonable fees and disbursements of counsel chosen by
Merrill Lynch), reasonably incurred in investigating, preparing or
defending against any litigation, or any investigation or proceeding by
any governmental agency or body, commenced or threatened, or any claim
whatsoever based upon any such untrue statement or omission, or any
such alleged untrue statement or omission, to the extent that any such
expense is not paid under (i) or (ii) above;
PROVIDED, HOWEVER, that this indemnity agreement shall not apply to any loss,
liability, claim, damage or expense to the extent arising out of any untrue
statement or omission or alleged untrue statement or omission made in reliance
upon and in conformity with written information furnished to the Company by any
Initial Purchaser through Merrill Lynch expressly for use in the Offering
Memorandum (or any amendment or supplement thereto).
(b) INDEMNIFICATION OF COMPANY. Each Initial Purchaser severally
agrees to indemnify and hold harmless CharterMac and/or the Company and each
person, if any, who controls CharterMac and/or the Company within the meaning of
Section 15 of the 1933 Act or Section 20 of the 1934 Act against any and all
loss, liability, claim, damage and expense described in the indemnity contained
in subsection (a) of this Section, as incurred, but only with
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<PAGE>
respect to untrue statements or omissions, or alleged untrue statements or
omissions, made in the Offering Memorandum in reliance upon and in conformity
with written information furnished to the Company by such Initial Purchaser
through Merrill Lynch expressly for use in the Offering Memorandum.
(c) ACTIONS AGAINST PARTIES; NOTIFICATION. Each indemnified party
shall give notice as promptly as reasonably practicable to each indemnifying
party of any action commenced against it in respect of which indemnity may be
sought hereunder, but failure to so notify an indemnifying party shall not
relieve such indemnifying party from any liability hereunder to the extent it is
not materially prejudiced as a result thereof and in any event shall not relieve
it from any liability which it may have otherwise than on account of this
indemnity agreement. In the case of parties indemnified pursuant to Section 7(a)
above, counsel to the indemnified parties shall be selected by Merrill Lynch,
and, in the case of parties indemnified pursuant to Section 7(b) above, counsel
to the indemnified parties shall be selected by CharterMac and the Company, as
the case may be. An indemnifying party may participate at its own expense in the
defense of any such action; provided, however, that counsel to the indemnifying
party shall not (except with the consent of the indemnified party) also be
counsel to the indemnified party. In no event shall the indemnifying parties be
liable for fees and expenses of more than one counsel (in addition to any local
counsel) separate from their own counsel for all indemnified parties in
connection with any one action or separate but similar or related actions in the
same jurisdiction arising out of the same general allegations or circumstances.
Subject to Section 7(d) no indemnifying party shall, without the prior written
consent of the indemnified parties (which consent shall not be unreasonably
withheld, conditioned or delayed), settle or compromise or consent to the entry
of any judgment with respect to any litigation, or any investigation or
proceeding by any governmental agency or body, commenced or threatened, or any
claim whatsoever in respect of which indemnification or contribution could be
sought under this Section or Section 8 hereof (whether or not the indemnified
parties are actual or potential parties thereto), unless such settlement,
compromise or consent (i) includes an unconditional release of each indemnified
party from all liability arising out of such litigation, investigation,
proceeding or claim and (ii) does not include a statement as to or an admission
of fault, culpability or a failure to act by or on behalf of any indemnified
party.
(d) SETTLEMENT WITHOUT CONSENT IF FAILURE TO REIMBURSE. If at any
time an indemnified party shall have requested an indemnifying party to
reimburse the indemnified party for fees and expenses of counsel, such
indemnifying party agrees that it shall be liable for any settlement of the
nature contemplated by Section 7(a)(ii) effected without its written consent if
(i) such settlement is entered into more than 45 days after receipt by such
indemnifying party of the aforesaid request, (ii) such indemnifying party shall
have received notice of the terms of such settlement at least 30 days prior to
such settlement being entered into and (iii) such indemnifying party shall not
have reimbursed such indemnified party in accordance with such request prior to
the date of such settlement.
SECTION 8. CONTRIBUTION. If the indemnification provided for in Section
7 hereof is for any reason unavailable to or insufficient to hold harmless an
indemnified party in respect of any losses, liabilities, claims, damages or
expenses referred to therein, then each indemnifying party shall contribute to
the aggregate amount of such losses, liabilities, claims, damages and expenses
incurred by such indemnified party, as incurred, (i) in such proportion as is
appropriate to reflect
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<PAGE>
the relative benefits received by CharterMac and the Company, on the one hand,
and the Initial Purchasers, on the other hand, from the offering of the
Securities pursuant to this Agreement or (ii) if the allocation provided by
clause (i) is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause (i)
above but also the relative fault of CharterMac and the Company, on the one
hand, and the Initial Purchasers, on the other hand, in connection with the
statements or omissions which resulted in such losses, liabilities, claims,
damages or expenses, as well as any other relevant equitable considerations.
The relative benefits received by CharterMac and the Company, on the
one hand, and the Initial Purchasers, on the other hand, in connection with the
offering of the Securities pursuant to this Agreement shall be deemed to be in
the same respective proportions as the total net proceeds from the offering of
the Securities pursuant to this Agreement (before deducting expenses) received
by the Company and the total discount received by the Initial Purchasers bear to
the aggregate initial offering price of the Securities.
The relative fault of CharterMac and the Company, on the one hand, and
the Initial Purchasers, on the other hand, shall be determined by reference to,
among other things, whether any such untrue or alleged untrue statement of a
material fact or omission or alleged omission to state a material fact relates
to information supplied by CharterMac and the Company or by the Initial
Purchasers and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or omission.
CharterMac, the Company and the Initial Purchasers agree that it would
not be just and equitable if contribution pursuant to this Section were
determined by pro rata allocation (even if the Initial Purchasers were treated
as one entity for such purpose) or by any other method of allocation which does
not take account of the equitable considerations referred to above in this
Section. The aggregate amount of losses, liabilities, claims, damages and
expenses incurred by an indemnified party and referred to above in this Section
shall be deemed to include any legal or other expenses reasonably incurred by
such indemnified party in investigating, preparing or defending against any
litigation, or any investigation or proceeding by any governmental agency or
body, commenced or threatened, or any claim whatsoever based upon any such
untrue or alleged untrue statement or omission or alleged omission.
Notwithstanding the provisions of this Section, no Initial Purchaser
shall be required to contribute any amount in excess of the amount by which the
total price at which the Securities purchased and sold by it hereunder exceeds
the amount of any damages which such Initial Purchaser has otherwise been
required to pay by reason of such untrue or alleged untrue statement or omission
or alleged omission.
No person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the 1933 Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation.
For purposes of this Section, each person, if any, who controls an
Initial Purchaser within the meaning of Section 15 of the 1933 Act or Section 20
of the 1934 Act shall have the same rights to contribution as such Initial
Purchaser, and each person, if any, who controls CharterMac and/or the Company
within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934
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<PAGE>
Act shall have the same rights to contribution as CharterMac or the Company, as
applicable. The Initial Purchasers' respective obligations to contribute
pursuant to this Section are several in proportion to the principal amount of
Securities set forth opposite their respective names in Schedule A hereto and
not joint.
SECTION 9. REPRESENTATIONS, WARRANTIES AND AGREEMENTS TO SURVIVE
DELIVERY. All representations, warranties and agreements contained in this
Agreement or in certificates of officers of CharterMac or the Company or any of
its subsidiaries submitted pursuant hereto shall remain operative and in full
force and effect, regardless of any investigation made by or on behalf of any
Initial Purchaser or controlling person, or by or on behalf of CharterMac or the
Company, and shall survive delivery of the Securities to the Initial Purchasers.
SECTION 10. TERMINATION OF AGREEMENT.
(a) TERMINATION; GENERAL. The Initial Purchasers may terminate this
Agreement, by notice to the Company, at any time at or prior to the Closing Time
(i) if there has been, since the time of execution of this Agreement or since
the respective dates as of which information is given in the Offering
Memorandum, any Material Adverse Effect, or (ii) if there has occurred any
material adverse change in the financial markets in the United States, any
outbreak of hostilities or escalation thereof or other calamity or crisis or any
change or development involving a prospective change in national or
international political, financial or economic conditions, in each case the
effect of which is such as to make it, in the judgment of the Initial
Purchasers, impracticable to market the Securities or to enforce contracts for
the sale of the Securities, or (iii) if trading in any securities of the Company
or CharterMac has been suspended or materially limited by the Commission or, or
if trading generally on the American Stock Exchange, the New York Stock Exchange
or the Nasdaq National Market has been suspended or materially limited, or
minimum or maximum prices for trading have been fixed, or maximum ranges for
prices have been required, by any of said exchanges or by such system or by
order of the Commission, the National Association of Securities Dealers, Inc. or
any other governmental authority, or (iv) if a banking moratorium has been
declared by either Federal or New York authorities.
(b) LIABILITIES. If this Agreement is terminated pursuant to this
Section, such termination shall be without liability of any party to any other
party except as provided in Section 4 hereof, and provided further that Sections
1, 7, 8 and 9 shall survive such termination and remain in full force and
effect.
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<PAGE>
SECTION 11. DEFAULT BY ONE OR MORE OF THE INITIAL PURCHASERS. If one or
more of the Initial Purchasers shall fail at the Closing Time to purchase the
Securities which it or they are obligated to purchase under this Agreement (the
"Defaulted Securities"), the Initial Purchasers shall have the right, within 24
hours thereafter, to make arrangements for one or more of the non-defaulting
Initial Purchasers, or any other initial purchasers, to purchase all, but not
less than all, of the Defaulted Securities in such amounts as may be agreed upon
and upon the terms herein set forth; if, however, the Initial Purchasers shall
not have completed such arrangements within such 24-hour period, then:
if the number of Defaulted Securities does not exceed 10% of the total
number of the Securities to be purchased hereunder, each of the non-defaulting
Initial Purchasers shall be obligated, severally and not jointly, to purchase
the full amount thereof in the proportions that their respective underwriting
obligations hereunder bear to the underwriting obligations of all non-defaulting
Initial Purchasers, or
if the number of Defaulted Securities exceeds 10% of the total number
of the Securities to be purchased hereunder, this Agreement shall terminate
without liability on the part of any non-defaulting Initial Purchaser, unless
such non-defaulting Initial Purchasers acquire 100% of the Defaulted Securities.
If this Agreement is terminated in accordance with the prior sentence, the
Company shall have no obligation to pay or reimburse the Initial Purchasers as
set forth in Section 4.
No action taken pursuant to this Section shall relieve any defaulting
Initial Purchaser from liability in respect of its default.
In the event of any such default which does not result in a termination
of this Agreement, either the Initial Purchasers or the Company shall have the
right to postpone the Closing Time for a period not exceeding seven days in
order to effect any required changes in the Offering Memorandum or in any other
documents or arrangements. As used herein, the term "Initial Purchaser" includes
any person substituted for an Initial Purchaser under this Section.
SECTION 12. NOTICES. All notices and other communications hereunder
shall be in writing and shall be deemed to have been duly given if mailed or
transmitted by any standard form of telecommunication. Notices to the Initial
Purchasers shall be directed to Merrill Lynch at World Financial Center, North
Tower, New York, New York 10281, attention Alex Rubin; and notices to CharterMac
and the Company shall be directed to it at 625 Madison Avenue, New York, New
York 10022, attention of John B. Roche.
SECTION 13. PARTIES. This Agreement shall inure to the benefit of and
be binding upon the Initial Purchasers, the Company and CharterMac and their
respective successors. Nothing expressed or mentioned in this Agreement is
intended or shall be construed to give any person, firm or corporation, other
than the Initial Purchasers, the Company and CharterMac and their respective
successors and the controlling persons and officers and directors referred to in
Sections 7 and 8 and their heirs and legal representatives, any legal or
equitable right, remedy or claim under or in respect of this Agreement or any
provision herein contained. This Agreement and all conditions and provisions
hereof are intended to be for the sole and exclusive benefit of the Initial
Purchasers, the Company and CharterMac and their respective successors, and said
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<PAGE>
controlling persons and officers and directors and their heirs and legal
representatives, and for the benefit of no other person, firm or corporation. No
purchaser of Securities from any Initial Purchaser shall be deemed to be a
successor by reason merely of such purchase.
SECTION 14. GOVERNING LAW AND TIME. THIS AGREEMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. SPECIFIED
TIMES OF DAY REFER TO NEW YORK CITY TIME.
SECTION 15. EFFECT OF HEADINGS. The Article and Section headings herein
and the Table of Contents are for convenience only and shall not affect the
construction hereof.
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<PAGE>
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to the Company a counterpart hereof, whereupon
this instrument, along with all counterparts, will become a binding agreement
between the Initial Purchasers, the Company and CharterMac in accordance with
its terms.
Very truly yours,
CHARTERMAC EQUITY ISSUER TRUST
By: Wilmington Trust Company, not in its
individual capacity, but solely as
trustee of CharterMac Equity Issuer
Trust
By: /s/ Joseph B. Feil
-------------------------------------
Name: Joseph B. Feil
Title: Financial Services Officer
CHARTER MUNICIPAL MORTGAGE ACCEPTANCE COMPANY
By: Related Charter, LP, a Delaware
limited partnership, its Manager
By: Related Charter, LLC, a Delaware
limited liability Company, its General
Partner
By: /s/ John B. Roche
-------------------------------------
Name: John B. Roche
Title: SVP & CFO
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<PAGE>
CONFIRMED AND ACCEPTED,
as of the date first above written:
MERRILL LYNCH & CO.
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
LEGG MASON WOOD WALKER, INCORPORATED
MCDONALD INVESTMENTS INC.
By: Merrill Lynch & Co.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
By: /s/ Edward Curiand
-----------------------------------------------------
Authorized Signatory
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<PAGE>
SCHEDULE A
<TABLE>
<CAPTION>
Number of
Name or Initial Purchaser Securities
----------
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated..................................... 40
Legg Mason Wood Walker, Incorporated............................. 3
McDonald Investments Inc......................................... 2
----------
Total............................................................ 45
----------
----------
</TABLE>
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<PAGE>
SCHEDULE B
CharterMac Equity Issuer Trust
$90,000,000
6 5/8% Series A Cumulative Preferred Shares
1. The initial public offering price of the Securities shall be
$2,000,000 per share.
2. The purchase price to be paid by the Initial Purchasers for the
Securities shall be $86,850,000.
3. The distribution rate on the Securities shall be 6 5/8% per
annum, subject to remarketing on June 30, 2009 and thereafter.
4. The Securities shall be redeemable on or after June 30, 2009 at
$2,000,000 per share plus, to the extent of Quarterly Net Income, all accrued
but unpaid distributions and are subject to mandatory repurchase on June 30,
2049.
5. The Securities shall be remarketed on June 30, 2009 for one or
more periods to be determined by the Company.
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<PAGE>
Exhibit A
FORM OF OPINION OF COMPANY'S COUNSEL
TO BE DELIVERED PURSUANT TO
SECTION 5(a)
(i) The Company has been duly created and is validly existing
as a business trust in good standing under the laws of the State of
Delaware and, under its Trust Agreement and the Delaware Business Trust
Act (the "Trust Act") has full trust power and authority to own, lease
and operate its properties and to conduct its business as described in
the Offering Memorandum and to enter into and perform its obligations
under the Purchase Agreement. The Company is duly qualified as a
business trust to transact business and is in good standing in each
other jurisdiction in which such qualification is required, whether by
reason of the ownership or leasing of property or the conduct of
business, except where the failure so to qualify or to be in good
standing would not result in a Material Adverse Effect.
(ii) The authorized, issued and outstanding shares of the
Company are as set forth in the Offering Memorandum. The beneficial
interests in the Company (the "Shares") have been duly authorized for
issuance by the Trust Agreement, and when issued, executed and
authenticated in accordance with the Trust Agreement and when delivered
against payment therefor in accordance with the Purchase Agreement will
be fully paid and, subject to the qualifications set forth in this
paragraph (ii), non-assessable undivided beneficial interests in the
assets of the Company. Each holder of shares, in its capacity as a
beneficial owner of the Company, will be entitled to the same
limitation of personal liability as that extended to stockholders of
private corporations for profit organized under the General Corporation
Law of the State of Delaware. We note that a holder of shares may be
obligated to make certain payments provided for in the Trust Agreement.
Under the Trust Agreement and the Trust Act, the issuance of the Shares
is not subject to preemptive or other similar rights.
(iii) Each of the Designated Subsidiaries has been duly
created and is validly existing as a business trust in good standing
under the laws of the State of Delaware and, under their respective
Trust Agreements and the Trust Act, has full trust power and authority
to own, lease and operate its properties and to conduct its business as
described in the Offering Memorandum and to consummate the Transfer.
Each of the Designated Subsidiaries is duly qualified as a business
trust to transact business and is in good standing in each other
jurisdiction in which such qualification is required, whether by reason
of the ownership or leasing of property or the conduct of business,
except where the failure so to qualify or to be in good standing would
not result in a Material Adverse Effect.
(iv) CharterMac has been duly created and is validly existing
as a business trust in good standing under the laws of the State of
Delaware and, under its Trust Agreement and the Trust Act, has full
trust power and authority to own, lease and operate its properties and
to conduct its business as described in the Offering Memorandum, to
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<PAGE>
enter into and perform its obligations under the Purchase Agreement and
to consummate the Transfer.
(v) Under its respective Trust Agreement and the Trust Act,
the Purchase Agreement has been duly authorized, executed and delivered
by each of the Company and CharterMac.
(vi) The Trust Agreement has been duly authorized by CM
Holding Trust and constitutes a valid and legally binding agreement of
CM Holding Trust, and is enforceable against CM Holding Trust in
accordance with its terms, except to the extent that enforceability may
be limited by (i) bankruptcy, insolvency, moratorium, receivership,
reorganization, liquidation, fraudulent conveyance or transfer and
other similar laws relating to or affecting the rights and remedies of
creditors generally, (ii) principles of equity, including applicable
law relating to fiduciary duties (regardless of whether considered and
applied in a proceeding in equity or at law), and (iii) the effect of
applicable public policy on the enforceability of provisions relating
to indemnification or contribution.
(vii) The Securities and the Trust Agreement conform in all
material respects to the statements relating thereto contained in the
Offering Memorandum.
(viii) To the best of our knowledge, there is no action, suit,
proceeding, inquiry or investigation before or brought by any court or
governmental agency or body, domestic or foreign, now pending or
threatened against or affecting the Company or any of its subsidiaries
which would result in a Material Adverse Effect, or which might
reasonably be expected to materially and adversely affect the property
or assets of the Company or any of its subsidiaries or the consummation
of the transactions contemplated by the Purchase Agreement or the
performance by the Company of its obligations under the Purchase
Agreement.
(ix) The information in the Offering Memorandum under "Risk
Factors - If CharterMac declares bankruptcy, the Series A preferred
shareholders could be adversely affected," "Risk Factors The Value of
the Series A Preferred Shares and the Issuer's ability to make
distributions depends on the application of tax laws," "Risk Factors -
the Issuer is not registered under the Investment Company Act,"
"Description of Series A Preferred Shares," "The Issuer" and "Certain
Federal Income Tax Considerations" and "ERISA Considerations," to the
extent that it constitutes matters of law, summaries of legal matters,
the Trust Agreement or legal proceedings, or legal conclusions, has
been reviewed by us and is correct in all material respects; and the
opinions of such firm set forth under "Certain Federal Income Tax
Considerations" and "Risk Factors - The value of the Series A preferred
shares and the Issuer's ability to make distributions depends on the
application of tax laws" are confirmed subject to the assumptions,
qualifications, limitations, representations and covenants described in
those sections.
(x) All descriptions in the Offering Memorandum of contracts
and other documents to which the Company or any of its subsidiaries are
a party are accurate in all material respects. To the best of our
knowledge, there are no franchises, contracts,
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<PAGE>
indentures, mortgages, loan agreements, notes, leases or other
instruments that if the Company were conducting a registered offering
under the 1933 Act would be required to be described or referred to in
the Offering Memorandum that are not so described or referred to.
(xi) To the best of our knowledge, (i) neither the Company nor
any of its subsidiaries is in violation of its trust agreement and (ii)
no default by the Company or any of its subsidiaries exists in the due
performance or observance of any material obligation, agreement,
covenant or condition contained in any contract, indenture, mortgage,
loan agreement, note, lease or other agreement or instrument that is
described or referred to in the Offering Memorandum.
(xii) The issuance, sale and delivery by the Company of the
Securities, the execution, delivery and performance of the Purchase
Agreement by CharterMac and the Company and the consummation of the
transactions contemplated in the Purchase Agreement and in the Offering
Memorandum (including the use of the proceeds from the sale of the
Securities as described in the Offering Memorandum under the caption
"Use of Proceeds") and the compliance by CharterMac and the Company
with their respective obligations under the Purchase Agreement and the
Securities do not and will not, whether with or without the giving of
notice or lapse of time or both, (a) violate their trust agreement; (b)
constitute a default under any contract or agreement to which
CharterMac or the Company is a party of which we are aware or (c)
violate any applicable statute or regulation, or, to our knowledge, any
judgment, order or decree, of any court or governmental agency or body.
(xiii) No filing with, or authorization, approval, consent,
license, order, registration, qualification or decree of, any court or
governmental authority or agency is necessary or required for the
performance by CharterMac or the Company of their obligations under the
Purchase Agreement, in connection with the offering, issuance or sale
of the Securities or the consummation of the transactions contemplated
by this Agreement, except such as have been already obtained.
(xiv) It is not necessary in connection with the offer, sale
and delivery of the Securities to the Initial Purchasers and to each
Subsequent Purchaser in the manner contemplated by the Purchase
Agreement and the Offering Memorandum to register the Securities under
the 1933 Act.
(xv) The Company is not, or as a result of the consummation of
the transactions contemplated by the Offering Memorandum and the
Purchase Agreement will not become an "investment company" or an entity
"controlled" by an "investment company," as such terms are defined in
the 1940 Act.
(xvi) If CharterMac were to become a debtor in a case under
title 11 of the United States Code (the "Bankruptcy Code"), a federal
court exercising bankruptcy jurisdiction would not hold, if the matter
were properly presented and argued and if the court properly applied
existing case law that the transfer of investments to the Company
referred to in the Offering Memorandum, is a loan secured by the
Investments rather than
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<PAGE>
an absolute transfer of all of CharterMac's legal and equitable
interest in the related Investments.
(xvii) If CharterMac or the Company were to become a debtor in
a case under title 11 of the Bankruptcy Code, a federal court
exercising bankruptcy jurisdiction, if the matter were properly
presented and argued and if the court properly applied existing case
law would recognize the separate existence of the Company and,
accordingly, would not order the substantive consolidation of the
assets and liabilities of the Company and those of CharterMac or any
other affiliates of CharterMac.
(xviii) Nothing has come to our attention that would lead us
to believe that the Offering Memorandum or any amendment or supplement
thereto (except for the financial data included therein or omitted
therefrom, as to which we need make no statement), at the time the
Offering Memorandum was issued, at the time any such amended or
supplemented Offering Memorandum was issued or at the Closing Time,
included or includes an untrue statement of a material fact or omitted
or omits to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they
were made, not misleading.
(xix) In rendering such opinion, such counsel may rely as to
matters of fact (but not as to legal conclusions), to the extent they
deem proper, on certificates of responsible officers of the Company,
CharterMac and public officials.
-4-
EX-99.other
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- --------------------------------------------------------------------------------
AMENDED AND RESTATED
TRUST AGREEMENT
by and among
J. MICHAEL FRIED, STUART J. BOESKY,
ALAN P. HIRMES, ROBERT W. GRIER,
and
ANDREW T. PANACCIONE
as Managing Trustees,
CHARTER MUNICIPAL MORTGAGE ACCEPTANCE COMPANY
and
WILMINGTON TRUST COMPANY,
as Registered Trustee
Dated June 22, 1999
Relating to:
CHARTER MAC EQUITY ISSUER TRUST
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<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
1. ORGANIZATION.............................................................1
2. DEFINITIONS AND GLOSSARY OF TERMS........................................2
3. TRUSTEES; LEGAL TITLE....................................................10
4. PURPOSES; CONDUCT OF BUSINESS............................................11
5. SHARES GENERALLY.........................................................14
6. SERIES A PREFERRED SHARES................................................15
7. LIABILITY OF THE SHAREHOLDERS; REGISTERED TRUSTEE; MANAGING
TRUSTEES; EMPLOYEES; MANAGER..........................................19
8. COVENANTS................................................................20
9. ALLOCATION, CAPITAL ACCOUNTS AND OTHER TAX MATTERS.......................25
10. BOARD OF TRUSTEES; POWERS AND LIMITATIONS................................28
11. RIGHTS AND POWERS OF SHAREHOLDERS........................................32
12. DISSOLUTION OF THE TRUST.................................................33
13. SPECIAL POWER OF ATTORNEY................................................33
14. INDEMNIFICATION..........................................................34
15. CONCERNING THE REGISTERED TRUSTEE........................................35
16. CERTAIN TRANSACTIONS.....................................................37
17. MISCELLANEOUS............................................................37
ACCEPTANCE OF MANAGER........................................................43
EXHIBIT A.FORM OF PREFERRED SHARE CERTIFICATE................................44
</TABLE>
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TRUST AGREEMENT
This AMENDED AND RESTATED TRUST AGREEMENT is entered into on June 22,
1999 by and among Charter Municipal Mortgage Acceptance Company ("CHARTER") and
the undersigned Trustees, and consented and agreed to by CM Holding Trust
("HOLDING")), for the benefit of those persons who become Shareholders pursuant
to the terms hereof. Capitalized terms used but not defined shall have the
meanings assigned to such terms in Article 2.
R E C I T A L S
WHEREAS, Charter is the sole shareholder of Charter MAC Origination
Trust I (the "ORIGINATION TRUST");
WHEREAS, Charter has determined to raise additional capital through the
sale of preferred equity ownership interests;
WHEREAS, to facilitate such transaction Charter has heretofore caused
to be established this Trust;
WHEREAS, a trust agreement of the Trust, dated May 6, 1999 and amended
June 9, 1999 and June 10, 1999 (the "ORIGINAL TRUST AGREEMENT")) was previously
executed; and
WHEREAS, in connection with its contribution of property to the Trust,
Charter desires that the Original Trust Agreement be amended and restated in its
entirety;
NOW, THEREFORE, all money and property contributed to or otherwise
owned or held by or on behalf of the Trust, together with the proceeds thereof,
shall be held and managed in trust for the benefit of the Shareholders, subject
to the provisions hereof. The Original Trust Agreement is hereby amended and
restated in its entirety to read as follows:
1. ORGANIZATION
1.1. NAME. The trust continued hereby shall be known as CHARTER MAC
EQUITY ISSUER TRUST, in which name the Board of Trustees, the Manager and the
Trust shall conduct business.
1.2. BUSINESS OFFICES. The principal office of the Trust, and such
additional offices as the Board of Trustees may determine to establish, shall be
located at such place or places inside or outside the State of Delaware as the
Board of Trustees may designate from time to time.
1.3. CONTRIBUTION OF TRUST PROPERTY. The Trust acknowledges receipt
of the property now or hereafter transferred to the Trust pursuant to the
Charter Preferred Trust Contribution Agreement, including all the beneficial
interests represented by shares in the Origination Trust now owned by Charter,
which shall constitute the Trust Property. Charter shall pay or cause to be paid
organizational expenses of the Trust as they may arise or shall, upon the
request of the Registered Trustee, promptly reimburse the Registered Trustee for
any such expenses paid by the Registered Trustee.
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1.4. DECLARATION OF TRUST. The Board of Trustees hereby declares that
they will hold the Trust Property in trust upon and subject to the conditions
set forth herein for the use and benefit of the Shareholders. It is the
intention of the parties hereto that this Trust Agreement and the By-laws shall
constitute the governing instruments of the Trust. It is the intention of the
parties hereto that the Trust constitute a business trust under the Trust Act.
It is the intention of the parties hereto that, for income tax purposes, the
Trust shall be treated as a partnership. The parties agree that, unless
otherwise required by appropriate tax authorities, the Trust will file or cause
to be filed annual or other necessary returns, reports and other forms
consistent with such characterization of the Trust.
2. DEFINITIONS AND GLOSSARY OF TERMS
2.1. DEFINITIONS. For all purposes of this Trust Agreement, except
as otherwise expressly provided herein or unless the context clearly indicates
otherwise, the following terms shall have the following meanings:
"AFFILIATE" of a Person shall mean (i) any officer, director, trustee,
partner, employee or controlling shareholder of such Person; (ii) any Person
controlling, controlled by or under common control with any Person or any
individual described in (i) above; (iii) any officer, director, trustee, general
partner or employee of any Person described in (ii) above; and (iv) any Person
who is a member, other than as limited partner, with any individual described in
(i) and (ii) above in relationship of joint venture, general partnership, or
similar form of unincorporated business association; provided however, that a
partner in a partnership or joint venture with (a) Charter or (b) an Affiliate
of a Related Manager, shall not by virtue of such relationship be deemed an
Affiliate of a Related Manager. For purposes of this definition, the term
"control" shall mean the control or ownership of 10% or more of the outstanding
voting securities of the Person referred to.
"AFFILIATE TRANSACTION" shall mean the Trust or any of its
Subsidiaries, directly or indirectly, conducting any business or entering into
or permitting to exist any transaction or series of related transactions
(including, without limitation, the purchase, sale, lease or exchange of any
property or investment or the rendering of any service) with or for the benefit
of any Affiliate of the Trust or any Subsidiary of the Trust.
"AMT" shall mean the federal alternative minimum tax.
"ANNUAL ORDINARY INCOME" shall mean the sum of the Trust's Quarterly
Net Income for each of the fiscal quarters of a particular fiscal year.
"BOARD OF TRUSTEES" shall mean, collectively, the Managing Trustees
named in Section 3.1(b) so long as they continue in office, and all other
individuals who have been duly elected and qualify as Managing Trustees.
"BOOK AMORTIZATION" shall have the meaning ascribed thereto in Section
9.5.
"BOOK DEPRECIATION" shall have the meaning ascribed thereto in Section
9.5.
"BOOK DISPARITY" shall have the meaning ascribed thereto in Section
9.5.
"BOOK GAIN" shall have the meaning ascribed thereto in Section 9.5.
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<PAGE>
"BOOK LOSS" shall have the meaning ascribed thereto in Section 9.5.
"BY-LAWS" shall mean the By-laws of the Trust as adopted, and as
amended or restated from time to time, by the Board of Trustees pursuant to
Section 10.2(b), which By-laws are incorporated herein by reference and shall
form a part of the governing instrument of the Trust.
"CAPITAL ACCOUNT" shall have the meaning ascribed thereto in Section
9.4(a).
"CAPITAL GAIN DISTRIBUTION" shall mean the distribution of any net
capital gain reported for tax purposes by the Trust for any fiscal year.
"CEDE" shall mean Cede & Co.
"CHARTER" shall have the meaning ascribed thereto in the Recitals.
"CHARTER PREFERRED TRUST CONTRIBUTION AGREEMENT" shall mean that
certain Contribution Agreement dated as of June 22, 1999 by and between Charter
and the Trust, as the same may be amended or supplemented from time to time.
"CODE" shall mean the Internal Revenue Code of 1986, as amended, or any
successor statute.
"COMMON DISTRIBUTION" shall mean a distribution of cash to Common
Shareholders, other than a Capital Gain Distribution.
"COMMON SHARES" shall mean those beneficial interests issued by the
Trust authorized by and described in Article 5.
"COMMON SHAREHOLDER" shall mean any Person who owns Common Shares.
"CONSOLIDATED NET INCOME" shall mean, with respect to any period, the
net income of the Trust and its Subsidiaries for such period determined on a
consolidated basis in accordance with GAAP, adjusted, to the extent included in
calculating such net income, by excluding the net income of any Subsidiary to
the extent that the declaration of distributions by that Subsidiary of that
income is not at the time (regardless of any waiver) permitted, directly or
indirectly, by operation of the terms of its charter or any agreement,
instrument, judgment, decree, order, statute, rule or governmental regulations
applicable to that Subsidiary or the holders of its Equity Interests.
"COVERED BONDS" shall mean the following bonds transferred by
Charter to the Trust or its Subsidiaries: East Ridge, Martin's Creek, Bay Club,
Players Club and Suntree.
"COVERED PERSON" shall have the meaning ascribed thereto in Section
10.8.
"DTC" means The Depository Trust Company.
"DISTRIBUTABLE CASH FLOW" shall mean, with respect to any period,
Consolidated Net Income for such period, PLUS depreciation, amortization and any
other non-cash items for such period (including amortization of goodwill and
other intangibles but excluding amortization of prepaid cash expenses that were
paid in a prior period) and other non-cash items or charges (excluding any such
non-cash charge to the extent that it represents an accrual of, or a reserve
for, cash charges for any future period or amortization of cash income received
in a period) of the Trust and its Subsidiaries for such period to the extent
that such depreciation, amortization and other non-cash items or charges were
deducted in computing such Consolidated Net Income and
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<PAGE>
LESS all non-cash income for such period (excluding any such non-cash income to
the extent it represents an accrual of cash income in any future period or
amortization of cash income received in a period). Notwithstanding the
foregoing, the depreciation and amortization and other non-cash items and
charges of a Subsidiary of the Trust shall be added to Consolidated Net Income
to compute Distributable Cash Flow only to the same extent that such Subsidiary
could have paid such amount at the date of determination as a distribution to
the Trust by such Subsidiary without prior governmental approval (that has not
been obtained), pursuant to the terms of its charter and all agreements,
instruments, judgments, decrees, orders, statutes, rules and governmental
regulations applicable to that subsidiary or the holders of its Equity
Interests.
"DISTRIBUTIONS" shall mean Common Distributions, Preferred
Distributions and Capital Gain Distributions.
"EQUITY INTERESTS" in any Person shall mean any and all shares,
interests, rights to purchase, warrants, options, participation or other
equivalents of or interests in (however designated) corporate stock or other
equity participation, including partnership interests, whether general or
limited, in such Person, including any Preferred Equity Interests.
"FAILED REMARKETING" shall mean any remarketing date on which the
remarketing agent is not able to sell all of the tendered Series A Preferred
Shares.
"GAAP" means, at any date of determination, generally accepted
accounting principles in effect in the United States which are applicable at the
date of this Trust Agreement.
"HOLDING" shall have the meaning ascribed thereto in the Recitals.
"INDEMNIFIED PARTY(IES)" shall have the meaning ascribed thereto in
Section 14.1.
"INDEPENDENT TRUSTEES" shall mean those Managing Trustees who are not,
and have not been at any time during the preceding five (5) years, an employee,
Affiliate, or family member of an employee or Affiliate of the Trust, Charter,
the Manager, Related or their respective Affiliates.
"INVESTMENT" means, with respect to any Person, (i) all investments by
such Person in any other Person in the form of any direct or indirect loan,
advance, guarantee or other extension of credit or capital contribution (by
means of transfers of cash or other property or investments to others, payments
for property or services for the account or use of others, the execution of an
interest rate swap, put agreement or other similar notional principal contract
or otherwise); (ii) any purchase or other acquisition of capital stock, bonds,
notes, debentures, residual investments, subordinate investments or other
securities or evidences of indebtedness issued by any other Person; and (iii)
all other items that would be classified as an asset on a balance sheet of such
Person prepared in accordance with GAAP. For purposes of the foregoing, the
substitution of an Investment for another Investment shall be deemed an
Investment as of such date.
"INVESTMENT VALUE" means (without duplication) the aggregate value in
U.S. dollars of the cash and investments of the Trust and its Subsidiaries. For
purposes of determining the Investment Value, the following principles shall be
applied: (i) unless otherwise indicated, all amounts and values shall be
determined in accordance with GAAP and will be based upon the amount thereof
reflected on the financial statements of the Trust and its Subsidiaries for the
quarter end immediately preceding the determination date (except that, if the
latest quarterly financial statements are not available, the financial
statements for the prior quarter end shall be
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<PAGE>
used); (ii) all investments acquired since the date of such quarterly financial
statements shall be valued at the purchase price therefor; (iii) the amount of
all Senior Investment Interests owned by the Trust or one of its Subsidiaries
purchased since the date of such quarterly financial statements shall be the
face or par value thereof; and (iv) the value of each Investment shall be
further adjusted by (A) adding the cost of all additions thereto and (B)
subtracting the amount of any portion of such Investment repaid to the Trust or
a Subsidiary of the Trust in cash as repayment of principal or a return of
capital, as the case may be, from the end of the previous quarter or date of
acquisition, as appropriate, through the determination date.
"IRS" shall mean the Internal Revenue Service.
"JUNIOR EQUITY INTERESTS" shall mean the Common Shares and each other
class of Equity Interests or series of Preferred Shares established hereafter by
the Board of Trustees the terms of which provide that it ranks junior to the
Series A Preferred Shares in the right to the payment of Distributions or
amounts payable in liquidation, dissolution or winding up of the Trust.
"LEVERAGE RATIO" means, as of any determination date, the ratio of (A)
the then-outstanding Obligations of the Trust and its Subsidiaries to (B)
(without duplication) the sum of (i) the Proportionate Amount of the outstanding
par amount of any Unsecured Senior Investment Interests not otherwise included
in the Investment Value, directly or indirectly PLUS (ii) the outstanding par
amount of any Secured Senior Investment Interests not otherwise included in the
Investment Value, directly or indirectly, on account of the inclusion in the
Investment Value of the underlying bonds, PROVIDED that the Trust or one of its
Subsidiaries owns all of the related Subordinated Investment Interests PLUS
(iii) the Investment Value. The Leverage Ratio shall be calculated taking into
account any Obligations and Senior Investment Interests created, purchased or
generated by the transactions giving rise to the need to calculate the Leverage
Ratio.
"LIQUIDATION AMOUNT" shall mean, with respect to the Series A
Preferred Shares, an amount equal to $2,000,000 per Series A Preferred Share.
"Liquidation Amount" with respect to any other class of Preferred Shares shall
have the meaning provided in the resolution authorizing such Preferred Shares.
"LIQUIDATION PREFERENCE" shall mean, with respect to the Series A
Preferred Shares, an amount equal to the Liquidation Amount, plus, to the extent
of the Trust's Quarterly Net Income, an amount equal to all Preferred
Distributions accrued but unpaid on the Series A Preferred Shares. "Liquidation
Preference" with respect to any other class of Preferred Shares shall have the
meaning provided in the resolution authorizing such Preferred Shares.
"MANAGEMENT AGREEMENT" shall mean the Management Agreement dated as of
June 22, 1999 between the Trust and the Manager as amended or superseded from
time to time, pursuant to which the Manager will be engaged by the Trust to
conduct the business and affairs of the Trust upon the terms and conditions
therein.
"MANAGER" shall mean Related Charter LP, or any other entity retained
by the Trust to conduct the day-to-day business and affairs of the Trust.
"MANAGING TRUSTEES" shall mean the individuals named in Section 3.1(b)
so long as they continue in office, and all other individuals who have been duly
elected and qualify as
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trustees of the Trust hereunder, including the Independent Trustees but not
including the Registered Trustee.
"OBLIGATION" shall mean (without duplication), whether recourse is to
all or a portion of the assets of a Person and whether or not contingent: (i)
every obligation of a Person for money borrowed; (ii) every obligation of a
Person evidenced by bonds, debentures, notes or other similar instruments,
including obligations incurred in connection with the acquisition of property,
assets or businesses; (iii) every Reimbursement Obligation of a Person; (iv)
every obligation of a Person issued or assumed as the deferred purchase price of
property or services (excluding accrued payables and liabilities arising in the
ordinary course of business which are not overdue or which are being contested
in good faith); (v) the obligations of a Person under any lease that is required
to be classified and accounted for as capital lease obligation under GAAP; (vi)
the Proportionate Amount of any Unsecured Senior Investment Interests not owned
by the Trust or one of its Subsidiaries; (vii) any Secured Senior Investment
Interests not owned by the Trust or one of its Subsidiaries that are
attributable to the Subordinated Investment Interests owned by the Trust or one
of its Subsidiaries; (viii) every Obligation of the type referred to in clauses
(i) through (vii) above of another Person, and all distributions of another
Person, the payment of which the Trust or one of its Subsidiaries has guaranteed
or is responsible or liable for, directly or indirectly, as obligor, guarantor
or otherwise; (ix) the outstanding amount of any Preferred Equity Interests
issued by a Subsidiary of the Trust (other than the face or par amount of such
interests owned by the Trust or its other Subsidiaries); and (x) any and all
deferrals, renewals, extensions and refundings of, or amendments, modifications
or supplements to, any liability of the kind described in the preceding clauses
(i) through (ix) above. At such time as the value of any Reimbursement
Obligation or portion thereof related to any Secured Senior Investment Interests
no longer is reflected in the Investment Value of the related Subordinated
Investment Interests, whether because the Trust and its Subsidiaries have
disposed of such Subordinated Investment Interests or otherwise, such
Reimbursement Obligation or portion thereof not theretofore treated as an
Obligation shall be treated as an Obligation incurred on such date. The amount
of all outstanding Obligations shall be the face or par amount thereof;
PROVIDED, HOWEVER, (i) in the case of a Reimbursement Obligation incurred in
connection with the issuance of Senior Investment Interests with respect to
which the Trust or its Subsidiaries owns 100% of the related Subordinated
Investment Interests, the amount of outstanding Obligations related thereto
(including any Reimbursement Obligations) shall be the excess, if any, of the
face or par amount of the Senior Investment Interests in such securitization
over the value, as of the determination date, of the underlying assets in the
securitization vehicle, and (ii) the value of any Preferred Equity Interests
issued by a Subsidiary of the Trust shall be the liquidation preference thereof.
"ORIGINAL TRUST AGREEMENT" shall have the meaning ascribed thereto in
the Recitals.
"ORIGINATION TRUST" shall have the meaning ascribed thereto in the
Recitals.
"PERMITTED AFFILIATE TRANSACTIONS" shall mean: (i) the payment of
reasonable fees and compensation to, and indemnity provided on behalf of,
officers, trustees, employees or consultants of the Trust or any Subsidiary of
the Trust as determined in good faith by the Board of Trustees or the governing
body of such Subsidiary, as the case may be; and (ii) transactions exclusively
between or
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among the Trust and any of its Subsidiaries or exclusively between or among its
Subsidiaries, provided such transactions are not otherwise prohibited by this
Trust Agreement.
"PERMITTED INVESTMENT" shall mean: (i) any Obligation issued by or on
behalf of any state of the United States of America or any political subdivision
or agency thereof (whether or not backed by the full faith and credit of the
government issuer); (ii) any publicly offered investment vehicle holding
tax-exempt investments, the tax-exempt character of which is passed through to
the beneficial holders thereof; (iii) any Senior Investment Interest in an
Investment described in clauses (i) and (ii) above; (iv) shares in regulated
investment companies (as such term is used in the Code) whose stated objective
is to produce only income that is tax-exempt income; provided, that any such
Investment must pass-through the tax-exempt character of the income on its
assets to the beneficial holders thereof: (v) any Subordinated Investment
Interest in an Investment described in clause (i) and (ii) above; and (vi) any
Investment by the Trust or a wholly-owned Subsidiary of the Trust in a Person
that is or will become immediately after such investment a wholly-owned
Subsidiary of the Trust or such wholly-owned Subsidiary or that will merge or
consolidate into the Trust or a wholly-owned Subsidiary of the Trust provided
that such Person invests only in Permitted Investments described in clauses (i)
through (v) above; PROVIDED, HOWEVER, that the Trust or one of its Subsidiaries
shall be provided an opinion or opinions of nationally recognized bond counsel
to the effect that, as of the date of original issuance of the Investment, with
respect to each Permitted Investment described in clauses (i) through (iv)
above, that the interest or distributions on such Investment is excludable from
gross income for federal income tax purposes and, with respect to each
Investment described in clauses (iii) and (iv), that the tax-exempt nature of
the income on the underlying tax-exempt bonds will be passed through to the
Trust; PROVIDED FURTHER, that in the case of an opinion rendered to the original
purchaser of the Investment, the seller is not aware of any IRS audit or other
change that could adversely affect the conclusions of such opinion; and,
PROVIDED FURTHER, that none of these opinions may be qualified with respect to
whether the Investment (or the underlying investment in the case of a
pass-through vehicle) represents indebtedness for federal income tax purposes.
"PERSON" shall mean any individual, corporation, partnership, joint
venture, association, joint-stock trust, limited liability company, limited
liability partnership, limited partnership, trust, unincorporated organization
or government or any agency or political subdivision thereof.
"PREFERRED DISTRIBUTION" shall mean a distribution of cash to Preferred
Shareholders other than a Capital Gain Distribution.
"PREFERRED EQUITY INTERESTS" in any Person shall mean an equity
interest (including redeemable preferred securities) of any class or classes
which is preferred as to the payment of distributions, or as to the distribution
of assets upon any voluntary or involuntary liquidation or dissolution or
winding up of such Person, over equity interests of any other class in such
Person.
"PREFERRED SHARES" shall mean the Series A Preferred Shares and any
other beneficial interests issued by the Trust in accordance with this Trust
Agreement and designated as "preferred shares."
"PREFERRED SHAREHOLDER" shall mean any holder of Preferred Shares.
"PROPORTIONATE AMOUNT" shall mean that portion of the aggregate
principal amount of the Unsecured Senior Investment Interests issued in a
securitization transaction obtained by
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multiplying such aggregate par amount of Unsecured Senior Investment Interests
by a fraction the numerator of which is the par amount of Subordinated
Investment Interests issued in such securitization transaction that are owned by
the Trust or a Subsidiary of the Trust and the denominator of which is the
aggregate par amount of such Subordinated Investment Interests issued in that
securitization transaction.
"QUARTERLY NET INCOME" means the Trust's tax-exempt income (net of
expenses) for the particular calendar quarter.
"REGISTERED TRUSTEE" shall mean Wilmington Trust Company, a Delaware
banking corporation, not in its individual capacity but solely as a trustee
hereunder, or any other Person which succeeds it in such capacity pursuant to
Section 15.2 and in compliance with Section 3807 of the Trust Act.
"REGISTERED TRUSTEE PERSONS" shall have the meaning ascribed thereto in
Section 14.2.
"REIMBURSEMENT OBLIGATION" shall mean the obligation of a Person for
the reimbursement of or a provision of collateral or security for any obligor on
any letter of credit, liquidity facility, standby purchase agreement, bankers'
acceptance or other similar facilities.
"RELATED" shall mean Related Capital Company.
"RELATED MANAGER" shall mean any Manager which is an Affiliate of
Related.
"RESTRICTED PAYMENT" shall mean any direct or indirect (i) declaration
or payment of any Distribution in respect of any Junior Equity Interest (other
than, in the case of a Subsidiary, to the Trust) or (ii) redemption of any
Junior Equity Interest; PROVIDED, HOWEVER, that Distributions of Distributable
Cash Flow shall not be Restricted Payments.
"SECURED SENIOR INVESTMENT INTERESTS" shall mean any Senior Investment
Interests that are not Unsecured Senior Investment Interests and with respect to
which the Trust or one of its Subsidiaries has a Reimbursement Obligation.
"SENIOR INVESTMENT INTERESTS" shall mean: (i) the senior certificates
of participation, custodial receipts, partnership interests, or other similar
interests, whether floating or fixed rate, that were or are issued as part of a
securitization transaction in which (x) an underlying asset is deposited into a
custodial arrangement, trust, partnership or other pass-through vehicle
(including, without limitation, a "tax-exempt municipal investment conduit" if
and when such a conduit is permitted), and (y) payments on Subordinated
Investment Interests issued as part of the securitization transaction will only
be made to the extent of cash flow available after the payment of amounts owing
to the Senior Investment Interests; and (ii) any other Investment, whether or
not held by the Trust or a Subsidiary of the Trust, which is senior in right of
payment to an Investment held by the Trust or one of its Subsidiaries.
"SERIES A PREFERRED SHAREHOLDER" shall mean any Person who owns Series
A Preferred Shares.
"SERIES A PREFERRED SHARES" shall mean those beneficial interests
issued by the Trust authorized by and described in Article 6.
"SHAREHOLDER" shall mean any Common Shareholder or any Preferred
Shareholder, including the Manager to the extent it holds Shares.
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"SHARES" shall mean Common Shares and Preferred Shares.
"SUBORDINATED INVESTMENT INTEREST" shall mean any Investment held,
directly or indirectly, by the Trust or one of its Subsidiaries, that is
subordinated in right of payment to the prior payment in full of a Senior
Investment Interest, whether or not such Senior Investment Interest is held by
the Trust or any of its Subsidiaries.
"SUBSIDIARY" shall mean, with respect to any Person: (i) any other
Person of which outstanding Equity Interests having at least a majority of the
votes entitled to be cast in the election of directors under ordinary
circumstances shall at the time be owned, directly or indirectly, by such
Person; or (ii) any other Person of which at least a majority of the voting
interest under ordinary circumstances is at the time, directly or indirectly,
owned by such Person.
"SURVIVING PERSON" shall have the meaning ascribed thereto in Section
8.5.
"TAX MATTERS PARTNER" shall have the meaning ascribed thereto in
Section 9.7.
"TRUST" shall mean Charter Mac Equity Issuer Trust, a Delaware business
trust.
"TRUST ACT" shall mean Chapter 38 of Title 12 of the Delaware Code,
as amended from time to time, or any successor statute.
"TRUST AGREEMENT" shall mean this Amended and Restated Trust Agreement,
as amended or restated from time to time, and shall include the By-laws, as
amended or restated from time to time by the Board of Trustees.
"TRUST PROPERTY" shall mean all right, title and interest of the Trust
in and to any property contributed to the Trust by the Shareholders or otherwise
acquired by the Trust, including, without limitation, all distributions or
payments thereon or proceeds therefrom.
"TRUSTEES" shall mean, collectively, the Managing Trustees and the
Registered Trustee.
"UNSECURED SENIOR INVESTMENT INTERESTS" shall mean any Senior
Investment Interests with respect to which (i) neither the Trust nor any of its
Subsidiaries has a Reimbursement Obligation with respect to the securitization
transaction creating such Senior Investment Interests and (ii) the Trust or a
Subsidiary of the Trust acquires and holds, directly or indirectly, all or a
portion of the related Subordinated Investment Interests.
2.2. RULES OF CONSTRUCTION.
(a) All defined terms in this Trust Agreement shall have
the defined meanings when used in any certificate or other document made or
delivered pursuant hereto unless otherwise defined therein.
(b) As used in this Trust Agreement and in any
certificate or other document made or delivered pursuant hereto or thereto,
accounting terms not defined in this Trust Agreement or in such certificate or
other document, and accounting terms partly defined in this Trust Agreement or
in any such certificate or other document to the extent not defined, shall have
the respective meanings given to them under generally accepted accounting
principles. To the extent that the definitions of accounting terms in this Trust
Agreement or in any such certificate or other document are inconsistent with the
meanings of such terms under generally accepted accounting principles, the
definitions contained in this Trust Agreement or in any such certificate or
other document shall control.
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(c) The words "hereof," "herein," "hereunder"
and words of similar import when used in this Trust Agreement shall refer to
this Trust Agreement as a whole and not to any particular provision of this
Trust Agreement; Section and Exhibit references contained in this Trust
Agreement are referenced to Sections and Exhibits in or to this Trust Agreement
unless otherwise specified; and the term "including" shall mean "including
without limitation."
(d) The definitions contained in this Trust Agreement
are applicable to the singular as well as the plural forms of such terms and to
the masculine as well as to the feminine and neuter genders of such terms.
(e) Any agreement, instrument or statute defined or
referred to herein or in any instrument or certificate delivered in connection
herewith means such agreement, instrument or statute as from time to time
amended, modified, consolidated, continued, extended or supplemented and
includes (in the case of agreements or instruments) references to all
attachments thereto and instruments incorporated therein; references to a Person
are also to its permitted successors and assigns.
3. TRUSTEES; LEGAL TITLE
3.1. MANAGING TRUSTEES.
(a) NUMBER. There shall be not less than three nor
more than nine Managing Trustees, at least one of whom must be an Independent
Trustee. Initially, the Trust shall have five Managing Trustees, which number
may be increased or decreased pursuant to the By-laws but shall never be less
than the minimum number, if any, required by the Trust Act nor more than nine.
(b) INITIAL BOARD OF TRUSTEES. The names of the initial
Managing Trustees are:
J. Michael Fried
Stuart J. Boesky
Alan P. Hirmes
Robert W. Grier (Independent Trustee)
Andrew T. Panaccione (Independent Trustee)
(c) ELECTION AND TERM. The initial Board of Trustees
shall be as specified in Section 3.1(b). The Board of Trustees shall be elected
by the Common Shareholders pursuant to the voting procedures set forth in the
By-laws. The Managing Trustees hold their offices until their resignation or
removal. The Managing Trustees may increase the number of Managing Trustees and
may fill any vacancy, whether resulting from an increase in the number of
Managing Trustees or otherwise, on the Board of Trustees in the manner provided
in the By-laws. Written evidence of the qualification and acceptance of election
or appointment of successor and additional Managing Trustees may be filed with
the records of the Trust and in such other offices, agencies or places as the
Board of Trustees may deem necessary or desirable.
(d) REMOVAL OF MANAGING TRUSTEES. Subject to the rights
of holders of one or more classes or series of Shares to elect one or more
Managing Trustees, any Managing
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Trustee, or the entire Board of Trustees, may be removed from office at any
time, with or without cause, but only by majority vote of the Common
Shareholders.
(e) RESIGNATION OF MANAGING TRUSTEES. Any Managing
Trustee may resign at any time by delivering his resignation in writing to the
Board of Trustees, to take effect at the time specified in the resignation; the
acceptance of a resignation, unless required by its terms, shall not be
necessary to make it effective. No resignation of a Managing Trustee shall
become effective until such Managing Trustee's successor shall have been
elected.
3.2. REGISTERED TRUSTEE.
(a) APPOINTMENT OF REGISTERED TRUSTEE. The Registered
Trustee has been appointed as trustee and joined as a party hereunder for the
sole and limited purpose of fulfilling the requirements of Section 3807 of the
Trust Act. In the event of the resignation or removal of the Registered Trustee,
the Board of Trustees shall appoint a successor Registered Trustee in accordance
with Section 15.2.
(b) POWERS OF REGISTERED TRUSTEE. The Registered Trustee
shall be responsible for performing only the following duties with respect to
the Trust: (i) to execute, deliver, acknowledge and file any certificates of
trust and any amendments thereto required to be filed pursuant to applicable
law, (ii) to execute any duly adopted amendments to this Trust Agreement and
(iii) to execute, deliver, acknowledge and file any certificates of cancellation
required to be filed pursuant to applicable law. The Registered Trustee shall
have no other authority, duties or liabilities. The Board of Trustees or the
Manager shall keep the Registered Trustee reasonably informed of any actions of
the Board of Trustees or the Manager or other circumstances that could affect
the rights, duties or liabilities of the Registered Trustee. The Registered
Trustee has no responsibility for monitoring the conduct of the Board of
Trustees or the Manager or causing the Board of Trustees or the Manager, or any
other Person to discharge their respective duties under this Trust Agreement,
the By-laws or the Management Agreement, and the Registered Trustee shall have
no liability for the acts and omissions of the Trust, the Board of Trustees or
the Manager.
(c) COMPENSATION AND EXPENSES OF REGISTERED TRUSTEE. The
Registered Trustee shall be entitled to receive from the Trust reasonable
compensation for its services hereunder, as shall be agreed to from time to time
by the Board of Trustees and the Registered Trustee, and the Registered Trustee
shall be entitled to be reimbursed by the Trust for reasonable out-of-pocket
expenses incurred by the Registered Trustee in the performance of its duties
hereunder. The parties hereto hereby approve and ratify the Trust's execution,
delivery and performance of the Fee Agreement, dated May __, 1999, by and among
the Registered Trustee, the Trust and the other parties thereto.
3.3. LEGAL TITLE. Legal title to all Trust Property shall be vested
in the Trust. To the fullest extent permitted by law, no Shareholder shall be
deemed to have a severable ownership interest in any individual asset of the
Trust or any right of partition or possession thereof.
4. PURPOSES; CONDUCT OF BUSINESS
4.1. PURPOSES. The sole purposes of the Trust shall be, to the
extent permitted under the Trust Act: (i) to accept capital contributions from
Charter pursuant to the Charter Preferred
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Trust Contribution Agreement; (ii) to accept capital contributions in the form
of cash from Series A Preferred Shareholders; (iii) to acquire Permitted
Investments; (iv) to enter into such agreements, documents, instruments,
certificates and other writings as may be necessary or appropriate in
furtherance of the foregoing purposes and business activities; (v) to make
Distributions to the Shareholders as permitted by this Trust Agreement; and (vi)
take such other actions as may be necessary or appropriate in furtherance of the
foregoing purposes and the business activities set forth in this Trust
Agreement. The Trust shall not engage in any activity other than in connection
with the foregoing or other than as required or authorized by the terms of this
Trust Agreement. Upon the transfer of any asset from Charter to the Trust, the
Trust shall receive an opinion of counsel to the effect that such transfer will
be respected as a valid and effectual transfer of ownership for federal
bankruptcy purposes.
4.2. CONDUCT OF BUSINESS. The Trust shall agree to conduct its
business in accordance with the following covenants:
(a) To conduct its own business in its own name;
(b) To hold itself out as a separate entity;
(c) To correct any known misunderstanding regarding its
separate identity;
(d) To use separate stationery, business forms, invoices,
checks and to allocate fairly and reasonably any office space within any shared
office building;
(e) To maintain books and records (including tax,
accounting, financial reporting, payroll, employee benefits administration, and
legal) separate from any other Person.
(f) To maintain its accounts separate from any other
Person;
(g) To maintain careful records of all transactions
(including all transactions with Affiliates);
(h) Not to commingle assets with those of any other
Person;
(i) To identify itself and its assets and liabilities
separately in any combined or consolidated financial statements;
(j) To identify itself as a separate entity in each
report, tax return and business transaction;
(k) To maintain adequate capital in light of its
contemplated business operations;
(l) To pay its own liabilities (including overhead and
employee salary and benefits) out of its own funds;
(m) To have separate employees and to pay the salaries of
its own employees and maintain a sufficient number of employees in light of its
contemplated business operations;
(n) Not to guarantee or become obligated for the debts of
any other Person or hold out its credit as being available to satisfy the
obligations of others;
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(o) Except for the obligation of Charter to indemnify the
Registered Trustee, not to permit Charter or any Affiliate of Charter (other
than the Trust itself) to guarantee or become obligated for the debts of the
Trust or hold out its credit as being available to satisfy the obligations of
the Trust; and not to accept any financing or credit from or incur any other
obligation to any Person who is looking to the assets of Charter or any
Affiliate of Charter (other than the Trust itself) to satisfy such obligations;
(p) Not to pledge its assets for the benefit of any other
Person or make any loans or advances to any Person;
(q) Not to permit Charter or any Affiliate of Charter
(other than the Trust itself) to pledge its assets for the benefit of the Trust
or make any loans or advances to the Trust;
(r) To observe all applicable trust formalities
(including separate and regular meetings and preparation of minutes of such
meetings);
(s) To maintain an arm's length relationship with its
Affiliates and other Persons (including not entering into any transaction which
is on terms which are not believed by both parties to be fair and reasonable and
comparable to those available from third parties);
(t) Not to acquire obligations or securities of the
Shareholders, its beneficiaries or its Affiliates (other than shares of
beneficial interest in the Origination Trust);
(u) To act in a limited capacity to effectuate the intent
of its limited business purpose;
(v) Not to enter into any agreement or transaction,
unless (i) it does so without any intent to defraud creditors, (ii) at the time
it does so, it is solvent, and (iii) such agreement or transactions and the
performance of its obligations thereunder or in connection therewith will not
render it insolvent;
(w) To perform its duties and obligations under, and
comply with its covenants contained in, each document or instrument to which it
is permitted by this Trust Agreement to be a party and to which it is a party;
and
(x) Not manage, control, use, sell, reinvest, dispose of
or otherwise deal with the Trust Property except as expressly permitted by this
Trust Agreement.
4.3. COVENANT NOT TO FILE A BANKRUPTCY PETITION. Each of the
Registered Trustee, the Managing Trustees and the Manager hereby agrees that
until one year and one day after the date on which the Series A Preferred Shares
are redeemed in full, it shall not (i) institute the filing of a bankruptcy
petition against the Trust based upon any claim in its favor; (ii) file a
petition or consent to a petition seeking relief on behalf of the Trust under
any bankruptcy law; (iii) consent to the appointment of a receiver, liquidator,
assignee, trustee, sequestrator or similar official of the Trust or a
substantial portion of the property of the Trust; (iv) make any assignment for
the benefit of the Trust's creditors; or (v) cause the Trust to admit its
inability to pay its debts generally as they become due.
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5. SHARES GENERALLY
5.1. COMMON SHARES. The Trust is authorized to issue one hundred
Common Shares. The rights and powers of the Common Shares shall be as provided
in this Trust Agreement. The Common Shares may be, but need not be, evidenced by
certificates in such form as the Board of Trustees may by resolution approve.
The Trust is authorized to issue the one hundred authorized Common Shares to
Holding without further approval.
5.2. PREFERRED SHARES. The terms of the Series A Preferred Shares
are set forth in this Agreement. Authority is hereby vested in the Board of
Trustees, subject to the express provisions of this Trust Agreement, to provide
for the issuance of Preferred Shares in addition to the Series A Preferred
Shares. Such issuances may include series or classes of Shares in addition to
the Series A Preferred Shares. In connection therewith, the Board of Trustees
may fix by resolution providing for the issue of such Preferred Shares, the
authorized number of Preferred Shares to be issued and the powers, designations,
preferences and relative participating, optional or other special rights and
limitations or restrictions of such Preferred Shares, including, without
limitation, rights of redemption or conversion, to the fullest extent now or
hereafter permitted by law.
5.3. SIGNATURES AND DATES. Share certificates bearing the manual
signature of an individual who was, at the time when such signature was affixed,
authorized to sign on behalf of a Managing Trustee or the Manager shall bind the
Trust, notwithstanding that such individual has ceased to be so authorized prior
to the delivery of such Shares or does not hold such office at the date of
delivery of such Shares. Each Share certificate shall be dated the date of its
issuance and shall bear such legends as are deemed appropriate by the person
executing such Share certificate.
5.4. VOTING. Each Share shall entitle the holder thereof to one
vote, in respect of matters to which such class of Shareholder is entitled to
vote.
5.5. TRANSFER RESTRICTIONS. No transfer of a Share or any interest
in the Trust shall be made to any Person unless such transfer is exempt from the
registration requirements of the Securities Act of 1933, as amended, and any
applicable state securities laws or is made in accordance with said Act and
state laws. No Shares may be transferred if as a result of a proposed transfer
the aggregate number of Shareholders would exceed 100 (as determined in
accordance with the Investment Company Act of 1940, as amended) or the Trust
would otherwise become subject to regulation under the Investment Company Act of
1940, as amended, or be treated as a publicly traded partnership taxable as a
corporation. Other than as set forth in this Section 5.5 and Section 6.5, Shares
are freely transferable.
5.6. DISTRIBUTIONS. The Shareholders shall be entitled to receive
such Distributions as the Board of Trustees may from time to declare; PROVIDED,
that no Common Distributions may be declared or paid unless all accrued and
unpaid Preferred Distributions have been paid. Notwithstanding the foregoing
proviso, to the extent that the Trust reports a net capital gain with respect to
any taxable year, the Trust shall make a Capital Gain Distribution to each
Shareholder within 90 days after the end of such year in amount equal to the net
capital gain allocated to such Shareholder pursuant to Article 9 hereof.
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5.7. PRE-EMPTIVE RIGHTS. The Shares shall have no pre-emptive or
similar rights and when issued and delivered to the Shareholders against payment
of the purchase price therefor will be fully paid and non-assessable by the
Trust.
6. SERIES A PREFERRED SHARES
6.1. AUTHORIZATION. The Trust is authorized to issue forty-five
(45) Series A Preferred Shares. The Series A Preferred Shares shall be evidenced
by certificates substantially in the form annexed hereto as Exhibit A, as the
same may be amended from time to time by resolution of the Board of Trustees.
6.2. DISTRIBUTIONS.
(a) Series A Preferred Shareholders shall be entitled to
receive quarterly Preferred Distributions, but only to the extent declared by
the Board of Trustees. No Preferred Distributions shall be declared by the Board
of Trustees with respect to any quarter of the Trust in excess of the Quarterly
Net Income for such quarter.
(b) Preferred Distributions shall accrue with respect to
the Series A Preferred Shares at the distribution rate of 6 5/8% per annum on
the Liquidation Amount of such Shares. Preferred Distributions with respect to
any period of less than a full quarter will be calculated on the basis of a
360-day year consisting of twelve 30-day months. Preferred Distributions with
respect to the Series A Preferred Shares shall be cumulative. No interest shall
be owed or paid by the Trust on accrued but unpaid Preferred Distributions on
the Series A Preferred Shares.
(c) No Distributions shall be paid on any Junior Equity
Interests until all accrued but unpaid Distributions on the Series A Preferred
Shares are paid or are declared and set aside for payment on the Series A
Preferred Shares.
(d) Subject to Section 6.6 hereof, Preferred
Distributions, to the extent declared by the Board of Trustees, shall be payable
to Series A Preferred Shareholders of record at the close of business on the
last day of the calendar quarter prior to the date of payment of such Preferred
Distribution (whether or not a business day). Preferred Distributions on the
Series A Preferred Shares will be payable quarterly on each January 31, April
30, July 31 and October 31, in respect of the immediately preceding quarter
ending December 31, March 31, June 30 and September 30, respectively; provided,
that if any such Distribution payment date is not a business day, the applicable
Distribution will be made on the next business day.
6.3. REDEMPTION AND MANDATORY REPURCHASE.
(a) The Series A Preferred Shares will not be redeemable
by the Trust prior to June 30, 2009. On or after June 30, 2009, the Trust may
redeem all of the Series A Preferred Shares. The redemption price per Share will
be an amount equal to the Liquidation Preference. Each Series A Preferred
Shareholder must tender its Series A Preferred Shares to the Trust on June 30,
2049 at a price per Share equal to the Liquidation Preference, unless the Trust
decides to remarket the Series A Preferred Shares on such date, in which event
the Series A Preferred Shareholders may elect to retain their Series A Preferred
Shares in the manner hereinafter set forth.
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(b) Redemptions prior to June 30, 2049 may only be
financed with funds derived as set forth in the following two sentences except
that redemptions during the one year following a Failed Remarketing may be
financed using funds from any source. The Trust may make partial redemptions, at
any time and from time to time, so long as it finances such redemptions with the
proceeds of (i) an offering of Junior Equity Interests, (ii) a liquidation of
assets, or (iii) payments received from bonds or other Investments, and the
Trust selects the Shares to be redeemed by lot. The Trust may finance
redemptions of all outstanding Series A Preferred Shares, at any time, from the
sources listed in the preceding sentence as well as from the proceeds of an
offering of Equity Interests ranking senior to or equal to with the Series A
Preferred Shares.
(c) The Trust will give notice of redemption by mail to
the holders of record of the Series A Preferred Shares which notice will state a
redemption date not less than 30 nor more than 60 days after the date on which
the Trust gives the notice of redemption announcing its intention to redeem the
Series A Preferred Shares.
(d) On the redemption date or mandatory repurchase date,
to the extent of its Quarterly Net Income, the Trust will pay in cash all
accrued but unpaid Preferred Distributions on each Series A Preferred Share the
Trust redeems or repurchases. In the case of a redemption date or mandatory
repurchase date falling after a Preferred Distribution record date and prior to
or on the related Preferred Distribution payment date, the holders of the Series
A Preferred Shares at the close of business on the related record date will be
entitled to receive the Preferred Distribution payable on such Shares on the
corresponding Preferred Distribution payment date, notwithstanding such
redemption or repurchase. Except as provided for in the preceding sentences, no
payment or allowance will be made for accrued and unpaid Preferred Distributions
on any Series A Preferred Shares called for redemption or which are subject to
mandatory repurchase.
(e) On and after the date fixed for redemption or
repurchase, provided that the Trust has made available at the office of the
transfer agent an amount of cash to effect the redemption or repurchase, (i)
Preferred Distributions will cease to accrue on the Series A Preferred Shares
called for redemption or repurchase, (ii) such Shares shall no longer be deemed
to be outstanding and (iii) all rights of the holders of such Series A Preferred
Shares shall cease except the right to receive cash payable upon such redemption
or repurchase, without interest from the date of such redemption or repurchase.
6.4. REMARKETING.
(a) On June 30, 2009, and on each remarketing date
thereafter, the remarketing agent shall seek to remarket the Series A Preferred
Shares at the lowest distribution rate that would result in a resale of the
Series A Preferred Shares at a price equal to the Liquidation Amount thereof,
for an additional remarketing period to be determined by the Board of Trustees
except in the event of a Failed Remarketing, in which case the Series A
Preferred Shares will be remarketed one year after such Failed Remarketing using
the same procedures. The remarketing agent will notify the holders of the new
minimum distribution rate and remarketing period no later than ten (10) business
days prior to each remarketing date.
(b) On each remarketing date, all Series A Preferred
Shares are required to be tendered to the remarketing agent for remarketing and
purchase at a price equal to the
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Liquidation Preference unless the holder has elected to retain the Shares. If on
the remarketing date, the amount of the Liquidation Preference exceeds the
Liquidation Amount, the Trust will pay to the holder of each Series A Preferred
Share such excess, but only to the extent of the Trust's Quarterly Net Income.
Any election to retain the Series A Preferred Shares must be exercised not later
than nine (9) business days prior to the remarketing date by delivery to the
Trust and the remarketing agent of a notice of non-tender in the following form:
SERIES A PREFERRED SHAREHOLDER'S NOTICE OF NON-TENDER
Charter Mac Equity Issuer Trust
Series A Preferred Shares
The undersigned owner of the shares described below does hereby
irrevocably elect not to tender the shares for purchase in connection with the
remarketing of the shares to occur on ______________ (the "Remarketing Date").
The undersigned understands that from and after the Remarketing Date, the
distribution rate with respect to the shares will be predetermined as provided
in the Trust Agreement governing Charter Mac Equity Issuer Trust.
NON-TENDERED SHARES
LIQUIDATION AMOUNT CUSIP NUMBER(S)
Dated: Signature(s) of the Registered Owner(s)
Of the Non-Tendered Shares
-----------------------------------
Name:
-----------------------------------
Name:
Address:
Telephone:
Federal Taxpayer Identification Number:
Signature Guaranteed
- ---------------------------------------
(c) From and after any remarketing date (other than a
Failed Remarketing), the distribution rate on the Series A Preferred Shares and
the related remarketing period will be
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as determined immediately prior to such remarketing date by the remarketing
agent in accordance with Section 6.4(a) hereof.
(d) If the remarketing agent shall have successfully
remarketed all of the Series A Preferred Shares (other than those for which an
election to retain the Shares has been properly made), the transfer agent shall
register the transfer of each Series A Preferred Share to the Person to whom it
has been remarketed.
(e) In the event of a Failed Remarketing, the
distribution rate on all the Series A Preferred Shares shall be set for one year
at two times the yield published on the applicable remarketing date by Municipal
Market Data for non-callable tax-exempt municipal bonds maturing 15 years after
such remarketing date (as set forth by Municipal Market Data or a successor or
similar publication if Municipal Market Data ceases to publish such information)
on the page entitled "MMD Yields 1-15 Yr." under the heading "BAA" and in the
row corresponding to the year 15 years after such remarketing date.
6.5. TRANSFER RESTRICTIONS. In addition to the other restrictions
contained in this Trust Agreement, unless the Trust causes the Series A
Preferred Shares to be registered under the Securities Act of 1933, as amended,
no fractional interest in a Series A Preferred Share may be transferred.
6.6. BOOK ENTRY SYSTEM.
(a) Except as provided in Section 6.6(c) hereof, the
registered owner of all of the Series A Preferred Shares shall be and the Series
A Preferred Shares shall be registered in the name of Cede as nominee of DTC.
(b) The Series A Preferred Shares shall be initially
issued in the form of a separate single fully registered certificate in the
amount of the aggregate Liquidation Amount of the Series A Preferred Shares. The
Trust shall make all payments with respect to the Series A Preferred Shares only
to or upon the order of DTC, and all such payments shall be valid and effective
to fully satisfy and discharge the Trust's obligations with respect to the
Series A Preferred Shares to the extent of the sum or sums so paid. Upon
delivery by DTC to the Trust of written notice to the effect that DTC has
determined to substitute a new nominee in place of Cede, and subject to the
transfer provisions hereof, the word "Cede" in this Trust Agreement shall refer
to such new nominee of DTC.
(c) DTC may determine to discontinue providing its
services with respect to the Series A Preferred Shares at any time by giving
written notice to the Trust and discharging its responsibilities with respect
thereto under applicable law. Under such circumstances (if there is not a
successor securities depository), certificates representing the Series A
Preferred Shares will be printed and delivered in such form and manner as the
Board of Trustees may by resolution provide. The Board of Trustees, in its
discretion and without the consent of any other Person, may terminate the
services of DTC with respect to the Series A Preferred Shares if the Board of
Trustees determines that: (i) DTC is unable to discharge its responsibilities
with respect to the Series A Preferred Shares, or (ii) a continuation of the
requirement that all of the Series A Preferred Shares be registered in the
registration books kept by the Trust in the name of Cede, as nominee of DTC, is
not in the best interest of the Series A Preferred Shareholders. In the event
that no successor securities depository is found by the Board of Trustees,
certificates representing
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the Series A Preferred Shares will be printed, executed and delivered in such
form and manner as the Board of Trustees may by resolution provide.
7. LIABILITY OF THE SHAREHOLDERS; REGISTERED TRUSTEE; MANAGING
TRUSTEES; EMPLOYEES; MANAGER
7.1. SHAREHOLDERS. The Shareholders shall be entitled to the same
limitation of personal liability extended to stockholders of private for profit
corporations organized under the General Corporation Law of the State of
Delaware.
7.2. REGISTERED TRUSTEE. The Registered Trustee shall not be liable
to the Trust, Shareholders, the Trustees or any other Person or third parties
for any act, omission or obligation of the Trust, the Board of Trustees, any
Managing Trustee, any Shareholder, any employee of the Trust or the Manager,
under any circumstance, except for any loss directly attributable to the
Registered Trustee's own gross negligence or willful misconduct. In particular,
but not by way of limitation:
(a) The Registered Trustee shall not be liable for any
error of judgment made by it which did not constitute gross negligence or
willful misconduct by it;
(b) No provision of this Trust Agreement shall require
the Registered Trustee to take any action to expend or risk its personal funds
or otherwise incur any financial liability in the performance of its rights,
powers or obligations hereunder if it shall have reasonable grounds for
believing that repayment of such funds or adequate indemnity against such
action, risk or liability is not reasonably assured or provided to it;
(c) Under no circumstance shall the Registered Trustee be
personally liable for any representation, warranty, covenant or other obligation
or indebtedness of the Trust;
(d) The Registered Trustee shall not be personally
responsible for or in respect of the validity or sufficiency of this Trust
Agreement, or the form, validity, value or sufficiency of the Trust Property;
(e) The Registered Trustee shall not be personally liable
for its good faith reliance on the provisions of this Trust Agreement;
(f) Under no circumstances shall the Registered Trustee
be personally liable for (i) any action it takes or omits to take in good faith
in accordance with the instruction of the Board of Trustees or the Manager (to
the extent such Persons are entitled hereunder to deliver such instructions),
(ii) the acts or omissions of the Board of Trustees or the Manager or (iii) the
supervision of or the failure of the Board of Trustees or the Manager to
discharge their respective duties hereunder or pursuant to the Management
Agreement; and
(g) The Registered Trustee shall not incur any liability
to anyone in acting upon any document believed in good faith by it to be genuine
and believed in good faith by it to be signed by the proper party or parties and
need not investigate any fact or matter pertaining to or in any such document.
The Registered Trustee may accept a certified copy of a resolution of the board
of directors or other governing body of any Person as conclusive evidence that
such resolution has been duly adopted by such Person and that the same is in
full force and effect. As to any fact or matter, the method of the determination
of which is not specifically
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prescribed herein, the Registered Trustee may for all purposes hereof rely on a
certificate, signed by any officer of the relevant Person, as to such fact or
matter, and such certificate shall constitute full protection to the Registered
Trustee for any action taken or omitted to be taken by it in good faith in
reliance thereon.
7.3. MANAGING TRUSTEES; EMPLOYEE. A Managing Trustee or employee of
the Trust, when acting in such respective capacities, shall not be personally
liable to any Person other than the Trust or a Shareholder for any act, omission
or obligation of the Trust, the Registered Trustee, the Manager or any Managing
Trustee. To the maximum extent that Delaware law in effect from time to time
permits limitation of the liability of trustees of a business trust, no Managing
Trustee shall be liable to the Trust or to any Shareholder for monetary damages
for breach of any duty (including, without limitation, fiduciary duty) as a
Managing Trustee, except (i) for acts or omissions of such Managing Trustee that
involve actual fraud or willful misconduct, or (ii) for any transaction from
which such Managing Trustee derived improper personal benefit. Neither the
amendment nor repeal of this Section 7.3 nor the adoption or amendment of any
other provision of this Trust Agreement inconsistent with this Section 7.3 shall
apply to or affect in any respect the applicability of the immediately preceding
sentence with respect to any act or failure to act that occurred prior to such
amendment, repeal or adoption.
7.4. RELIANCE ON AGENTS, ATTORNEYS, ETC. In the exercise of their
rights and obligations hereunder, the Registered Trustee and the Managing
Trustees (i) may act directly, or at the expense of the Trust, through agents or
attorneys pursuant to agreements entered into with any of them, and they shall
not be liable for the default or misconduct of such agents or attorneys if such
agent or attorney shall have been selected in good faith and (ii) may, at the
expense of the Trust, consult with counsel to be selected in good faith, and
employed by them, and shall not be liable for anything done, suffered or omitted
in good faith in accordance with the advice or opinion of any such counsel.
8. COVENANTS
8.1. TAX-EXEMPT INTEREST. The Trust will only acquire or hold
Investments, other than Investments acquired pursuant to the Charter Preferred
Trust Contribution Agreement, that the Trust reasonably believes, based upon the
unqualified opinion of nationally recognized bond counsel delivered on the
original issuance (or reissuance) date of such Investment, will generate
interest and distributions excludable from the gross income of the holders
thereof for federal income tax purposes and, in the case of short-term floating
rate interests or similar equity interests in pass-through vehicles owning
tax-exempt bonds, that the tax-exempt nature of the income on the underlying
tax-exempt bonds will be passed through to the Trust. The Trust will dispose of
any Investment the interest on which becomes includable in gross income for
federal income tax purposes, for any reason, as soon commercially practicable.
8.2. LEVERAGE. The Trust will not, and will not permit any of its
Subsidiaries to, directly or indirectly, incur any Obligation except if (i) the
Trust is not in default under this Trust Agreement, (ii) the Trust has paid or
declared and set aside for payment all accrued and unpaid Distributions on the
Series A Preferred Shares, and (iii) after giving effect to the incurrence of
the Obligation, the Leverage Ratio is less than .6 to 1.0.
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For purposes of determining whether a Senior Investment Interest is an
Obligation and the date of incurrence, any Senior Investment Interest treated as
an Obligation that is purchased by the Trust or one of its Subsidiaries shall
cease to be treated as an Obligation as of the date of its acquisition. At such
time as all or any part of any Senior Investment Interest is sold or otherwise
transferred for value to any Person other than the Trust or one of its
Subsidiaries, such Senior Investment Interest sold or transferred shall be
treated as an Obligation incurred on the date of such sale or transfer, PROVIDED
that if such Senior Investment Interest sold or transferred is an Unsecured
Senior Investment Interest, only the Proportionate Amount of the par amount of
such Unsecured Senior Investment Interests shall be treated as an Obligation
incurred on the date of such sale or transfer.
8.3. LIMITATION ON ISSUANCE OF PREFERRED EQUITY INTERESTS. The
Trust will not issue any Preferred Equity Interests that are senior to the
Series A Preferred Shares in the right to the payment of Distributions or
amounts payable in liquidation, dissolution or winding up of the Trust without
the consent of the holders of a majority of the Series A Preferred Shares. The
Trust will not issue any Preferred Equity Interests that are equal in rank to
the Series A Preferred Shares in the right to the payment of Distributions or
amounts payable in liquidation, dissolution or winding up of the Trust unless:
(i) after giving effect to such new issuance, the aggregate Liquidation
Preference of the Trust's Preferred Equity Interests that are equal or senior in
rank to the Series A Preferred Shares (including the Preferred Equity Interests
to be issued if they are equal or senior in rank to the Series A Preferred
Shares) shall not be in excess of 25% of the sum of (without duplication) (A)
the Investment Value (including in such assets the net proceeds the Trust
expects to receive from any proposed issuance of preferred equity interests),
(B) the par amount of any Secured Senior Investment Interests not included in
the Investment Value with respect to which the Trust or its Subsidiaries own all
of the Subordinated Investment Interests, and (C) the Proportionate Amount of
any Unsecured Senior Investment Interests not included in the Investment Value,
LESS the Trust's Obligations; (ii) the Trust has paid or declared and set aside
for payment all accrued and unpaid Distributions on the Series A Preferred
Shares; and (iii) the Trust is not in default under this Trust Agreement. This
covenant shall not prohibit, however, the issuance by the Trust of Preferred
Equity Interests that rank equal with or senior to the Series A Preferred Shares
to the extent that all of the proceeds thereof are used to redeem or repurchase
Preferred Equity Interests that rank equal with or senior to the Series A
Preferred Shares at a price not in excess of the Liquidation Preference thereof.
8.4. LIMITATION ON RESTRICTED PAYMENTS. The Trust will not make any
Restricted Payment unless immediately after such Restricted Payment the Trust
would be permitted to otherwise incur $1.00 of additional Obligations and issue
$1.00 of additional Preferred Equity Interests ranking equal with or senior to
the Series A Preferred Shares under Sections 8.2 and 8.3 hereof.
8.5. MERGER, CONSOLIDATION AND SALE. The Trust will not, in a
single transaction or series of related transactions, consolidate or merge with
or into any Person, or sell, assign, transfer, lease, convey or otherwise
dispose of (or cause or permit any Subsidiary of the Trust to sell, assign,
transfer, lease, convey or otherwise dispose of) all or substantially all of the
property and assets of the Trust and its Subsidiaries, taken as a whole, to any
Person or Persons, unless:
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(a) either (i) the Trust shall be the surviving or
continuing Person or (ii) the Person (if other than the Trust) formed by such
consolidation or into which the Trust is merged or consolidated or the Person
which acquires by sale, assignment, transfer, lease, conveyance or other
disposition the properties and assets of the Trust and of the Trust's
subsidiaries as an entirety or substantially as an entirety (the "SURVIVING
PERSON") shall be a Person organized and validly existing under the laws of the
United States or any State thereof or the District of Columbia and shall
expressly assume the performance and observance of every obligation and covenant
of the Trust under this Trust Agreement to be performed or observed on the part
of the Trust;
(b) immediately after giving effect to such transaction,
the Trust or the Surviving Person, as the case may be, could incur at least
$1.00 of additional Obligations (PROVIDED, HOWEVER, that if the Trust is not the
Surviving Person, all references to the Trust and its Subsidiaries in the
definitions used to determine the Leverage Ratio shall be to the Surviving
Person and its Subsidiaries after giving effect to such transaction);
(c) immediately before and immediately after giving
effect to such transaction, no default or event of default under this Trust
Agreement shall have occurred or be continuing; and
(d) the Trust receives an opinion from tax counsel to the
effect that, after giving effect to such transaction, the Trust or the Surviving
Person, as the case may be, will be classified as a partnership other than a
publicly traded partnership within the meaning of Section 7704 of the Code, and
not as an association taxable as a corporation, for federal income tax purposes.
For purposes of the foregoing, the transfer (by lease,
assignment, sale or otherwise, in a single transaction or series of
transactions) of all or substantially all of the properties or assets of one or
more Subsidiaries of the Trust the equity interests of which constitute all or
substantially all of the properties and assets of the Trust shall be deemed to
be the transfer of all or substantially all of the properties and assets of the
Trust. Any consolidation, merger or disposition of assets of the Trust permitted
by this Section 8.5 shall not require the approval of any class of Preferred
Shareholders.
8.6. LIMITATION ON TRANSACTIONS WITH AFFILIATES. The Trust will
not, and will not permit any of its Subsidiaries to engage in any Affiliate
Transactions, other than (i) Permitted Affiliate Transactions, (ii) pursuant to
the Charter Preferred Trust Contribution Agreement and (iii) Affiliate
Transactions on terms that are no less favorable to the Trust or such
Subsidiary, as the case may be, than could reasonably be obtained at such time
in a comparable transaction on an arm's-length basis from an unaffiliated third
party. Any Affiliate Transaction, whether direct or indirect, involving
aggregate payments or other property with a fair market value in excess of $10
million shall be approved by the Independent Trustees of the Trust, such
approval to be evidenced by a resolution stating that such transaction complies
with the foregoing provisions.
8.7. LIMITATIONS ON DISTRIBUTIONS FROM SUBSIDIARIES. The Trust will
not, and will not cause or permit any of its Subsidiaries to, directly or
indirectly, create or otherwise cause or permit to exist or become effective any
encumbrance or restriction on the ability of any Subsidiary of the Trust to: (a)
pay or make Distributions on or in respect of its Equity Interests; (b) make
loans or advances or pay any Obligation owed to the Trust or any other
Subsidiary of
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the Trust; or (c) transfer any of its property or assets to the Trust or any
other Subsidiary of the Trust, except for such encumbrances or restrictions
existing under or by reason of: (i) applicable law; (ii) this Trust Agreement
as it exists on the date hereof; or (iii) the Private Label Tender Option
Program, and any similar programs permitted under this Trust Agreement.
8.8. LIMITATION ON INVESTMENTS. The Trust will not, and will not
permit any of its Subsidiaries to, directly or indirectly, acquire any
Investment other than the Investments it or they now own, the Investments to be
contributed pursuant to the Charter Preferred Trust Contribution Agreement and
Permitted Investments.
8.9. FAILURE TO PAY DISTRIBUTIONS. If the Trust has not paid in
full six consecutive quarterly Preferred Distributions on the Series A Preferred
Shares, the Trust shall be required to reconstitute the Board of Trustees so
that a majority of the Board of Trustees consists of Independent Trustees. The
Trust's Board of Trustees shall be reconstituted within 45 days of the date on
which the sixth consecutive quarterly unpaid Preferred Distribution would be
payable.
8.10. BOND DEFAULTS. In the event of a default on any bond owned
directly or indirectly by the Trust or its Subsidiaries, the Trust and its
Subsidiaries will not modify any such bond without an opinion of counsel to the
effect that such modification will not adversely affect the excludability from
gross income of interest on such defaulted bond. Any failure to enforce any
remedies for payment defaults under the documents underlying the bonds for more
than two years shall be considered a modification of a bond for purposes of this
Section 8.10.
8.11. INTEREST SUBJECT TO THE AMT. Prior to the end of each fiscal
quarter the Trust will provide a good faith estimate of the maximum percentage
of income expected to be subject to the AMT during the next calendar quarter.
8.12. REASONABLE BEST EFFORTS TO SETTLE CLAIMS ON COVERED BONDS WITH
THE IRS. In the event the IRS investigates the tax-exempt status of a Covered
Bond owned directly or indirectly by the Trust, the Trust will use its
reasonable best efforts to settle any claims with the IRS to avoid recognition
by Series A Preferred Shareholders of taxable income on such bond retroactive to
the date they acquitted such Series A Preferred Shares.
8.13. INFORMATION AND REPORTING.
(a) The Trust will notify the holders of Series A
Preferred Shares of the occurrence of any default or event of default under this
Trust Agreement within five business days after becoming aware of it and will
from time to time on reasonable request deliver to the holders of Series A
Preferred Shares a certificate confirming that no such default or event of
default has occurred or setting out details of any such default or event of
default and the action taken or proposed to be taken to remedy it.
(b) The Trust will keep, and ensure that each of its
Subsidiaries will keep, proper books of account relating to its business.
(c) The Trust will deliver to holders of Series A Preferred
Shares the following:
(i) within 100 days after the end of each calendar
year, its consolidated balance sheet and related statements of
operations, shareholder's
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equity and cash flows showing the financial condition of the
Trust and its consolidated Subsidiaries as of the close of
such calendar year and the results of its operations and the
operations of the Trust and its consolidated Subsidiaries
during such year, all audited by auditors or other independent
public accountants of recognized national standing and
accompanied by an opinion of such accountants (which shall not
be qualified in any material respect) to the effect that such
consolidated financial statements fairly present the financial
condition, results of operations and cash flows of the Trust
and its consolidated Subsidiaries on a consolidated basis in
accordance with GAAP;
(ii) within 55 days after the end of each of the
first three calendar quarters of each calendar year, its
consolidated balance sheet and related statements of
operations, shareholders' equity and cash flows showing the
financial condition of the Trust and its consolidated
Subsidiaries as of the close of such calendar quarter and the
results of its operations and cash flows of the Trust and its
consolidated Subsidiaries during such calendar quarter and the
then elapsed portion of the calendar year, all certified by
one of its financial officers as fairly presenting the
financial condition and results of operations of the Trust and
its consolidated Subsidiaries on a consolidated basis in
accordance with GAAP, subject to normal year-end audit
adjustments;
(iii) concurrently with any delivery of financial
statements under subparagraph (i) or (ii) above, a certificate
of the accounting firm or financial officer of the Trust
opining on or certifying such statements (which certificate,
when furnished by an accounting firm, may be limited to
accounting matters and disclaim responsibility for legal
interpretations) certifying that no event of default or
default under this Trust Agreement has occurred or, if such an
event of default or default has occurred, specifying the
nature and extent thereof and any corrective action taken or
proposed to be taken with respect thereto;
(iv) to the extent information is available to the
Trust from the underlying property owners, within 55 days
after the end of each calendar quarter, a report identifying
each of the Trust's bonds and bond related Investments, the
value of each such Investment (and the method of valuation),
any Investment that was more than 30 days in default at the
end of such calendar quarter, the allocations by state of
interest from each Investment, the average rent per unit for
property underlying each Investment and the percentage of the
Trust's income for the preceding quarter that was subject to
the AMT;
(v) within 55 days of the end of the Trust's
calendar year, a report detailing by state the tax-exempt
income earned during such calendar year; and within 55 days of
the end of the calendar year, to the extent information is
available to the Trust from the underlying property owners, a
summary of the net operating income for such calendar year for
those properties which collateralize the Trust's direct and
indirect Investments in fixed rate bonds; and
(vi) within 60 days of the end Trust's calendar
year, a Form K-1 that shall, among other things, indicate the
holder's amount of net capital gains.
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8.14. WAIVER OF CERTAIN COVENANTS. The Trust will not be required to
comply with any term, provision or condition of the covenants, and with any
other term, provision or condition with respect to the Series A Preferred
Shares, if before or after the time for such compliance, the holders of a
majority of the Series A Preferred Shares waive compliance with the covenant or
condition in that instance or generally. Except to the extent waived, and until
the waiver is effective, the obligations of the Trust in respect of such term,
provision or condition, shall remain in full force and effect.
8.15. TIME PERIOD TO CURE BREACHES OF COVENANTS. The Trust will have
60 days to correct any breach of the covenants described in this Article 8
before any holder of Series A Preferred Shares will have any claim against the
Trust. Upon any uncured breach, the Series A Series A Preferred Shareholders
will have a claim against the Trust for violating this Trust Agreement.
8.16. REMEDIES FOR BREACHES OF COVENANTS. In addition to any
remedies available at law, the distribution rate for any quarter in which the
Trust has breached a covenant and has not timely cured such breach shall
increase .5% from the previous quarter; PROVIDED, HOWEVER, the distribution rate
for the Series A Preferred Shares shall never exceed the initial distribution
rate at issuance (or the distribution rate then in effect as a result of any
remarketing) by more than 2%.
9. ALLOCATION, CAPITAL ACCOUNTS AND OTHER TAX MATTERS
9.1. PARTNERSHIP STATUS. It is the intent of the Trustees and all
other parties hereto that the Trust be treated as a partnership for purposes of
federal income taxation. None of the Trustees, Shareholders, the Tax Matters
Partner, or any other Person shall file an election pursuant to Treasury
Regulation ss.301.7701-3(c) to have the Trust treated as other than a
partnership for purposes of federal income taxation. By purchasing Shares each
Shareholder agrees not to file an election as provided in the preceding sentence
or to take any other action or position inconsistent with the Trust's being
treated as a partnership for federal income tax purposes.
9.2. ALLOCATIONS.
(a) With respect to each taxable year of the Trust, to
the extent of the Trust's Annual Ordinary Income, each Series A Preferred
Shareholder shall be allocated an amount of Annual Ordinary Income equal to the
Preferred Distributions declared and paid to such Series A Preferred
Shareholder. Each such allocation shall comprise a ratable allocation of each
item entering into the calculation of Annual Ordinary Income.
(b) With respect to each taxable year of the Trust, ten
percent of the Trust's net capital gain shall be allocated to the Series A
Preferred Shareholders in proportion to each such Shareholder's ownership of
Series A Preferred Shares.
(c) All items of income, gain, loss, deduction or credit
of the Trust, as computed for federal income tax purposes, not allocated to the
Series A Preferred Shareholders in accordance with Sections 9.2(a) and 9.2(b)
hereof, including any taxable income other than net
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capital gain of the Trust, shall be allocated to the Common Shareholders in
proportion to each such Shareholder's ownership of Common Shares.
9.3. CONSENT TO METHODS. The methods set forth in this Article 9 by
which allocations of income, gain, loss, deduction or credit are made and
apportioned are hereby expressly consented to by each Shareholder as an express
condition to becoming a Shareholder.
9.4. CAPITAL ACCOUNTS.
(a) GENERAL. A separate capital account ("CAPITAL
ACCOUNT") shall be maintained by the Trust for each Shareholder in accordance
with this Section 9.4. Neither the Board of Trustees nor the Registered Trustee
shall have any responsibility for the establishment, maintenance or adjustment
of Capital Accounts. Each Shareholder's Capital Account shall be increased by
(i) the amount of money contributed, or deemed contributed, by such Shareholder
to the capital of the Trust and (ii) the amount of income or gain allocated to
such Shareholder for federal income tax purposes. Each Shareholder's Capital
Account shall be decreased by (i) the amount of Distributions to such
Shareholder and (ii) the amount of loss or deduction allocated to such
Shareholder for federal income tax purposes.
(b) MULTIPLE CLASS OR SERIES OF INTERESTS. If a
Shareholder owns Shares which represent more than one class or series of
interests in the Trust, the Shareholder shall have a single Capital Account that
reflects all such interests, regardless of the class of interests owned by the
Shareholder and regardless of the time or manner in which such interests were
acquired.
(c) CONTRIBUTIONS OF PROPERTY. In the event that property
(other than cash) is contributed by a Shareholder to the Trust, the computation
of Capital Accounts, as set forth in this Section 9.4, shall be adjusted as
follows:
(i) the contributing Shareholder's Capital Account
shall be increased by the fair market value of the property
contributed to the Trust by the Shareholder (net of
liabilities securing such contributed property that the Trust
is considered to assume or take subject to under Section 752
of the Code); and
(ii) as and if required by Treas. Reg. ss.ss.
1.704-l(b)(2)(iv)(g) and 1.704-l(b)(4)(i), if a Shareholder's
Capital Account reflects a fair market value for property
which differs from such property's adjusted basis, such
Shareholder's Capital Account thereafter shall be adjusted to
take account of the amount of Book Gain and Book Loss
allocated to such Shareholder pursuant to Section 9.5 hereof
and shall not thereafter take into account the net income, net
gain and net loss for tax purposes allocated to such
Shareholder pursuant to this Article 9.
(d) DISTRIBUTIONS OF PROPERTY. In the event that property
is distributed by the Trust to a Shareholder, the following special rules shall
apply:
(i) the Capital Account of the Shareholder
receiving the distribution first shall be adjusted to the
extent required (as provided in Treas. Reg. ss.
1.704-l(b)(2)(iv)(e)) to reflect the manner in which the
unrealized income, gain, loss and deduction inherent in such
property (that has not already been reflected in such
Shareholder's Capital Account) would be allocated to such
Shareholder if
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there were a taxable disposition of such property for its fair
market value on the date of distribution; and
(ii) the Capital Account of the Shareholder who is
receiving the distribution of property from the Trust shall be
charged with the fair market value of the property at the time
of distribution (net of liabilities secured by such property
that such Shareholder is considered to assume or take subject
to under Section 752 of the Code).
(e) INTENTION. The foregoing provisions are intended to
satisfy the capital account maintenance requirements of Treas. Reg. ss.ss.
1.704-l(b) and 1.704-2 and such provisions shall be modified to the extent
required by such section or any successor provision thereto.
9.5. ALLOCATION OF BOOK ITEMS. In cases where property of the Trust
is, under Treas. Reg. ss. 1.704-1(b)(2)(iv)(g), properly reflected in the
Capital Accounts of a Shareholder at a fair market value that differs from the
adjusted tax basis of such property (such difference is hereinafter referred to
as the "BOOK DISPARITY"), then depreciation, amortization and gain or loss as
computed for book purposes with respect to such property ("BOOK DEPRECIATION,"
"BOOK AMORTIZATION," "BOOK GAIN," and "BOOK LOSS," respectively) will be greater
or less than the depreciation, amortization or gain or loss as computed for tax
purposes. The Manager shall adopt, pursuant to Treas. Reg. ss.
1.704-l(b)(2)(iv)(g), a reasonable method of computing Book Depreciation and
Book Amortization. Such Book Depreciation and Book Amortization shall be
allocated to such Shareholder and reflected in such Shareholder's Capital
Account under Section 9.4 hereof in a manner so as to eliminate, to the extent
possible, the Book Disparity.
9.6. MANDATORY ALLOCATIONS. Notwithstanding the provision of
Section 9.2 hereof, any allocation of net income, net gain or net loss for tax
purposes which is required to be allocated to a Shareholder to take into account
the disparity between the fair market value of a Trust asset and its adjusted
basis (e.g., allocations under Section 704(c) of the Code for contributed
property) shall be allocated to such Shareholder in accordance with the
requirements of the Code and the regulations promulgated thereunder.
9.7. TAX-MATTERS PARTNER.
(a) The Manager is hereby designated as the "Tax Matters
Partner" in accordance with Section 6231(a)(7) of the Code and, in connection
therewith and in addition to all other powers given thereunder, shall have all
other powers needed fully to perform hereunder including, without limitation,
the power to retain all attorneys and accountants of its choice and the right to
settle any audits without the consent of the Series A Preferred Shareholders.
The designation made in this Section 9.7 is hereby expressly consented to by the
Series A Preferred Shareholders as an express condition to acquiring Series A
Preferred Shares. The Tax Matters Partner shall be responsible for the
establishment, maintenance and adjustments to Capital Accounts pursuant to
Section 9.4.
(b) The Tax Matters Partner shall prepare and timely file
and the Tax Matters Partner shall execute the partnership tax returns for the
Trust and any required annual partnership income information returns for the
Trust and any other required federal, state or local tax returns or reports. To
the extent required by applicable law or regulations, the Tax Matters
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Partner shall promptly provide each Series A Preferred Shareholder with copies
of any such tax returns or reports.
(c) The Tax Matters Partner may, in its sole and absolute
discretion, make or refrain from making any election which the Trust may be
permitted to make for any federal, state or local tax purpose, including without
limitation an election under Section 754 of the Code to adjust the income tax
basis of the Trust Property upon the occurrence of certain events.
10. BOARD OF TRUSTEES; POWERS AND LIMITATIONS
10.1. GENERAL. Subject to the express limitations herein or in the
By-laws, (a) the business and affairs of the Trust shall be managed by or under
the direction of the Board of Trustees, and (b) the Board of Trustees shall have
full, exclusive and absolute power, control and authority over the Trust
Property and over the business of the Trust. The Board of Trustees may take any
actions consistent with the Trust's powers and in compliance with the covenants
of this Trust contained herein as in its sole judgment and discretion are
necessary or desirable to conduct the business of the Trust. Any Managing
Trustee, upon direction of the Board of Trustees, shall be authorized to execute
a Management Agreement. The Manager, as authorized herein or otherwise upon the
direction of the Board of Trustees, shall be authorized to execute documents on
behalf of the Trust.
10.2. POWERS OF THE BOARD OF TRUSTEES. The conduct of the Trust's
business shall be controlled solely by the Board of Trustees in accordance with
this Trust Agreement and the By-laws. The Board of Trustees shall have all
authority, rights and powers conferred by law and those required or appropriate
to the management of the Trust's business which, by way of illustration but not
by way of limitation, shall, subject only to the provisions of Sections 4.1,
4.2, 4.3, 10.3 and 10.4, include the right, authority and power, without the
vote of Shareholders, or any other Person to:
(a) make all filings as may be necessary or proper in
order to create the Trust and to maintain its valid existence under the Trust
Act or to provide that this Trust Agreement shall constitute, for all purposes,
an agreement of trust under the laws of the State of Delaware as in effect from
time to time;
(b) adopt and implement the By-laws;
(c) cause the Trust to accept contributions of Permitted
Investments, or pursuant to the Charter Preferred Trust Contribution Agreement,
from Charter, contribute assets to Subsidiaries, accept capital contributions
from Preferred Shareholders and acquire Permitted Investments;
(d) cause the Trust to enter into and perform the
Management Agreement and the agreement or undertaking to which it is a party;
(e) open accounts and deposit and maintain funds in the
name of the Trust in banks or savings and loan associations, provided, however,
that the Trust's funds shall not be commingled with the funds of any other
Person;
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(f) change the Trust's accounting year from a calendar
year to such fiscal year as approved by the Internal Revenue Service;
(g) require in all Trust obligations that the Board of
Trustees, the Manager or any Shareholder shall not have any personal liability
thereon and that the Person contracting with the Trust is to look solely to the
Trust and its assets for satisfaction; provided, however, that the Board of
Trustees' failure to so require such limitation on personal liability of the
Manager or any Shareholder shall not be construed to imply that the Manager or
any Shareholder has personal liability for any such Trust obligations;
(h) prepare or cause to be prepared reports, statements
and other relevant information for distribution to Shareholders including annual
and quarterly reports;
(i) cause the Trust to make or revoke any of the
elections permitted by the Code;
(j) determine the appropriate accounting method or
methods to be used by the Trust in maintaining its books and records;
(k) assure any Person dealing with the Trust or the
Manager that he may rely upon a certificate signed by the Manager as authority
with respect to: (i) the identity of the Registered Trustee, the Managing
Trustees, the Manager or any Shareholder; (ii) the existence or nonexistence of
any fact or facts which constitute a condition precedent to acts by the Manager
or in any other manner germane to the affairs of the Trust, (iii) the Persons
who are authorized to execute and deliver any instrument or document of the
Trust; or (iv) any act or failure to act by the Trust or as to any other matter
whatsoever involving the Trust, the Managing Trustees, the Manager, or any
Shareholder,
(l) remove the Registered Trustee at any time for any
reason or no reason in its sole discretion and in the event of such removal or
the resignation of the Registered Trustee, to appoint a successor Registered
Trustee in accordance with Section 15.2;
(m) establish reserves or increase or decrease reserves
as it deems necessary, appropriate, convenient or advisable for the proper
operation of the business of the Trust;
(n) declare and pay Distributions;
(o) pay, collect, compromise, litigate, arbitrate, or
otherwise adjust or settle any and all other claims or demands of or against the
Trust or to hold such proceeds against the payment of contingent liabilities; or
(p) qualify the Trust to do business in any state, territory,
dependency or foreign country.
10.3. LIMITATIONS.
(a) Except as provided in Section 10.5, the Board of
Trustees shall amend this Trust Agreement only upon a majority vote of the
Common Shareholders. Notwithstanding the foregoing, the Board of Trustees must
also obtain a majority vote of the Series A Preferred Shareholders to amend,
alter or repeal the terms of the Series A Preferred Shares or of any provision
of this Trust Agreement that would adversely affect the powers, preferences,
privileges
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or rights of the Series A Preferred Shareholders. The consent of each
Independent Trustees is required to adopt any change to this Trust Agreement
relating to the Independent Trustees.
(b) The Board of Trustees shall not issue, authorize or
increase the amount of, or issue or authorize any obligation or security
convertible into or evidencing a right to purchase, any additional class or
series of Shares ranking senior to the Series A Preferred Shares as to
distributions or upon liquidation, or to reclassify any outstanding Shares of
the Trust into such senior Shares except upon the majority vote of the Series A
Preferred Shareholders. No such majority vote will be required for the Board of
Trustees to take any such actions with respect to any Shares ranking on a parity
with or junior to the Series A Preferred Shares.
(c) The Board of Trustees shall not have the authority to:
(i) do any act in contravention of this Trust
Agreement or which would make it impossible to carry on the
ordinary business of the Trust;
(ii) confess a judgment against the Trust in
connection with any threatened or pending legal action;
(iii) possess any Trust asset or assign the rights of
the Trust in specific Trust assets for other than a Trust
purpose;
(iv) perform any act (other than an act required by
this Trust Agreement or any act taken in good faith reliance
upon counsel's opinion) which would, at the time such act
occurred, subject any Shareholders to liability in any
jurisdiction;
(v) commingle the Trust funds with those of any
other Person; or
(vi) operate the Trust in such a manner as to have
the Trust classified as (1) an "investment company" or under
the "control" of an "investment company" for purposes of the
Investment Company Act of 1940, or (2) other than as an entity
not regarded as separate from its owner for purposes of the
Code.
10.4. UNANIMOUS CONSENT OF BOARD OF TRUSTEES. The unanimous consent
of the Board of Trustees, including the affirmative vote of each Independent
Trustee, shall be required for any of the following actions:
(a) subject to the limitations contained in Section 4.3,
filing or consenting to the filing of a bankruptcy petition or otherwise
instituting an insolvency proceeding;
(b) dissolving, liquidating, converting, consolidating,
merging or selling assets (except as permitted in Article 12);
(c) acquiring any assets or engaging in any business
other than as described in Article 4 hereof or amending, modifying or
supplementing Article 4 hereof; or
(d) failing to engage in activities in furtherance of the
stated purpose of the Trust.
10.5. AMENDMENTS WITHOUT CONSENT. In addition to any amendments
otherwise authorized herein (but subject to the limitations contained in
Sections 10.3 and 10.4), this Trust Agreement and the By-Laws may be amended
from time to time by the Board of Trustees, but
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<PAGE>
without the consent of the Shareholders or the Registered Trustee (subject to
the provisions in this Section 10.5):
(a) to add to the representations, duties or obligations
of the Board of Trustees or the Registered Trustee or their respective
Affiliates or surrender any right or power granted to the Board of Trustees or
the Registered Trustee or their respective Affiliates herein, for the benefit of
the Shareholders; provided, that no representations, duties or obligations of
the Registered Trustee shall be added or right or power granted to the
Registered Trustee or its Affiliates surrendered without the Registered
Trustee's consent;
(b) to cure any ambiguity, to correct or supplement any
provision herein which may be inconsistent with law applicable to the Trust as
in effect at the time the amendment is adopted, or judicial or administrative
interpretations thereof, or with any other provision herein, as long as any such
change will not adversely affect the rights of the Shareholders, the Manager or
the Registered Trustee;
(c) to delete or add any provision of this Trust
Agreement required to be so deleted or added by the staff of the Securities and
Exchange Commission or by a State "Blue Sky" Commissioner or similar such
official, which addition or deletion is deemed by such Commission or state
official to be for the benefit or protection of the Shareholders;
(d) to reflect the substitution of Shareholders;
(e) to change the name of the Trust to any lawful name
which it may select (in which case the Trust shall notify the Registered Trustee
of such change in name);
(f) to take such steps as the Board of Trustees or the
Manager determines are advisable or necessary in order to preserve the tax
status of the Trust as an entity taxable as a partnership and not as an
association for federal income tax purposes, in each case to the minimum extent
necessary or desirable in accordance with the advice of the accountants and/or
counsel to comply with any applicable federal or state legislation, rules or
regulations enacted or promulgated administrative pronouncements or
interpretations and/or judicial interpretations thereof after the date of this
Trust Agreement.
Notwithstanding the foregoing, no amendment of this Trust
Agreement or the By-laws which adversely affects the Registered Trustee may be
made without the prior written consent of the Registered Trustee. Written notice
of any amendments to the Trust Agreement shall be provided to the Registered
Trustee within ten days of their adoption.
10.6. NOTICE OF LIMITATION OF LIABILITY. The Board of Trustees or
the Manager shall use its best efforts, in the conduct of the Trust's business,
to put all Persons with whom the Trust does business on notice that the
Shareholders, the Trustees, and the Manager are not liable for the Trust's
obligations and that such Persons shall look solely to the assets of the Trust
for payment, and all agreements to which the Trust is a party shall include a
statement to the effect that the Trust is a business trust created under the
Trust Act; but the Board of Trustees or the Manager shall not be liable for any
failure to give such notice to such Persons and any failure in giving such
notice shall not imply that the Shareholders, the Managing Trustees, the Manager
and the Registered Trustee are liable for the Trust's obligations.
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<PAGE>
10.7. ACCOUNTING MATTERS. The Board of Trustees or the Manager shall
make all decisions as to accounting matters in accordance with the accounting
methods adopted by the Trust in accordance with generally accepted accounting
principles and procedures applied on a consistent basis. Such party may rely on
the Trust's independent certified public accountants to determine whether such
decisions are in accordance with generally accepted accounting principles.
10.8. DUTIES OF BOARD OF TRUSTEES AND MANAGER AND REGISTERED
TRUSTEE. The Board of Trustees and the Manager shall have a fiduciary
responsibility for the safekeeping and use of all funds and assets of the Trust,
whether or not in their immediate possession or control and shall not employ, or
permit another to employ, such funds or assets in any manner except for the
exclusive benefit of the Trust. In addition and subject to the limitations
contained in Section 4.3, the Managing Trustees shall have a fiduciary duty to
creditors and will be required to consider the interests of creditors in
connection with any decision or action with respect to the filing of a petition
in bankruptcy for the Trust or any other action described in Section 10.4. To
the extent that, at law or in equity, the Board of Trustees or the Manager or
the Registered Trustee or any Affiliate thereof (each, a "COVERED PERSON") has
duties (including fiduciary duties) and liabilities relating thereto to the
Trust or to the Shareholders, the Covered Person acting in connection with the
Trust's business or affairs shall not be liable to the Trust or to any
Shareholder for its good faith reliance on the provisions of this Trust
Agreement. The provisions of this Trust Agreement, to the extent that they
restrict the duties and liabilities of a Covered Person otherwise existing at
law or in equity, are agreed by the Trust and the Shareholders to replace such
other duties and liabilities of such Covered Person.
11. RIGHTS AND POWERS OF SHAREHOLDERS
11.1. CONTROL. Other than as expressly set forth in this Trust
Agreement, Shareholders shall have no voting rights and Shareholders shall take
no part in any manner in the control, conduct or operation of the Trust and
shall have no right or authority to act for or bind the Trust.
11.2. VOTING RIGHTS. The Series A Preferred Shareholders shall have
no voting rights except as provided in Sections 10.3 and 12.2(a) or expressly
required by law. The Common Shareholders have the right by majority vote (voting
in the manner set forth in the By-laws) and, to vote upon:
(a) without the consent and recommendation of the Board
of Trustees:
(i) subject to the provisions of Section 3.1(d),
the removal of Managing Trustees;
(ii) the election of Managing Trustees;
(b) with the prior consent and recommendation of the Board of
Trustees:
(i) the merger, consolidation or conversion of the
Trust with or into another entity;
(ii) the determination to dissolve the Trust,
subject to the provisions of Article 12; and
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<PAGE>
(c) amendment of the Trust Agreement, provided such
amendment is not otherwise permissible without Shareholder vote under Section
10.5.
12. TERM AND DISSOLUTION OF THE TRUST
12.1. DURATION. The Trust shall continue perpetually unless
dissolved pursuant to Section 12.2 or pursuant to any applicable provision of
the Trust Act.
12.2. DISSOLUTION. The Trust may be dissolved as follows:
(a) The Trust may be dissolved upon the recommendation of
the Board of Trustees and the approval of Common Shareholders by majority vote;
provided, however, that the Trust may not be dissolved prior to June 1, 2009,
without also obtaining the majority vote of the Series A Preferred Shareholders;
or
(b) The Trust may be dissolved by order of a court of
competent jurisdiction to judicially dissolve the Trust if it is no longer
reasonably practicable to continue the business and affairs of the Trust as
contemplated by this Trust Agreement.
12.3. LIQUIDATION AND DISTRIBUTION OF ASSETS. Upon a dissolution of
the Trust for any reason, the Board of Trustees or the Manager shall take full
account of the Trust's assets and liabilities, shall liquidate the assets as
promptly as is consistent with obtaining the Trust fair value thereof, and shall
apply and distribute the proceeds therefrom in the following order:
(a) first, to the satisfaction to the extent permitted by
law (whether by payment or reasonable provision for payment thereof) of
obligations of the Trust to creditors of the Trust (other than as set forth in
paragraphs (b) and (c) below);
(b) second, to the repayment of any outstanding loans
made by the Manager or its Affiliates to the Trust;
(c) third, to the Series A Preferred Shareholders in an
amount equal to each Series A Preferred Shareholder's Liquidation Preference and
in accordance with, and to the extent of, the positive balances in their Capital
Accounts after net income or net loss (or each item thereof) has been allocated
pursuant to the provisions of Article 9; and
(d) fourth, to the Common Shareholders in proportion to
their ownership of Common Shares and in accordance with, and to the extent of,
the positive balances in their Capital Accounts after net income or net loss (or
items thereof) has been allocated pursuant to the provisions of Article 9.
12.4. TERMINATION OF THE TRUST. Upon dissolution and the completion
of the winding up of the affairs of the Trust, the Trust shall be terminated by
the executing and filing with the Secretary of State of the State of Delaware by
one or more Managing Trustees of a certificate of cancellation of the
certificate of trust of the Trust.
13. SPECIAL POWER OF ATTORNEY
13.1. GRANT OF POWER OF ATTORNEY. By subscribing and paying for
Shares, each Shareholder is hereby granting to the Board of Trustees and the
Manager a special power of attorney irrevocably making, constituting and
appointing the Board of Trustees and the Manager,
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<PAGE>
acting singly or collectively, as the attorney-in-fact for such Shareholder,
with power and authority to act in his name and on his behalf to execute,
acknowledge and swear to the execution, acknowledgment and filing of documents,
which shall include, by way of illustration but not of limitation, the
following:
(a) this Trust Agreement, any separate certificates of
trust of the Trust, as well as any amendments to or restatements of the
foregoing which, under the laws of the State of Delaware or the laws of any
other state, are required to be filed or which the Board of Trustees or the
Manager deems to be advisable to file;
(b) any duly adopted amendments or restatements of this
Trust Agreement;
(c) any other instrument or document which may be
required to be filed by the Trust under the laws of any state or by any
governmental agency, or which the Board of Trustees or Manager deems advisable
to file; and
(d) any instrument or document which may be required to
effect the continuation of the Trust, the admission of an additional or
substituted Shareholder, or the dissolution and termination of the Trust
(provided such continuation, admission or dissolution and termination are in
accordance with the terms of this Trust Agreement), or to reflect any reductions
in amount of contributions of Shareholders.
13.2. CHARACTER OF POWER OF ATTORNEY. The special power of attorney
being hereby granted by each Shareholder:
(a) is a special power of attorney coupled with an
interest, is irrevocable, shall survive the death, legal incapacity, disability,
dissolution, bankruptcy or termination of the granting Shareholder, and is
limited to those matters herein set forth;
(b) may be exercised by the Board of Trustees or the
Manager acting for each Shareholder by a facsimile signature of a Managing
Trustee, or the Manager or one of its officers, or by listing all of the
Shareholders executing any instrument with a signature of a Managing Trustee,
the Manager or one of its officers acting as its attorney-in-fact; and
(c) shall survive a transfer by a Shareholder of all or
any portion of his Shares for the sole purpose of enabling the Board of Trustees
or the Manager to execute, acknowledge and file any instrument or document
necessary to effect such transfer.
13.3. RELIANCE. Each Shareholder has executed this special power of
attorney, and each Shareholder will rely on the effectiveness of such powers
with a view to the orderly administration of the Trust's affairs.
14. INDEMNIFICATION
14.1. MANAGING TRUSTEES; EMPLOYEES. To the fullest extent permitted
by law, the Trust shall indemnify its present and former Managing Trustees, the
Manager and its officers, directors, members, partners and employees and agents
(the "Indemnified Part(y)(ies)") against judgments, penalties, fines,
settlements and reasonable expenses actually incurred by them in connection with
any proceeding to which they may be made a party by reason of their service in
those or other capacities unless it is established that (a) the act or omission
of the Indemnified
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Party was material to the matter giving rise to the proceeding and (i) was
committed in bad faith or (ii) was the result of active and deliberate
dishonesty, (b) the Indemnified Party actually received an improper personal
benefit in money, property or services, or (c) in the case of any criminal
proceeding, the Indemnified Party had reasonable cause to believe that the act
or omission was unlawful. In addition, the Trust shall pay or reimburse
reasonable expenses in advance of final disposition of a proceeding to any
present or former Indemnified Party, provided that the Trust first obtains (i) a
written affirmation by the Indemnified Party of his or its good-faith belief
that he or it has met the standard of conduct necessary for indemnification by
the Trust as authorized by the Trust Agreement and (ii) a written statement by
him or it or on his or its behalf to repay the amount paid or reimbursed by the
Trust if it shall ultimately be determined that the standard of conduct was not
met. The Trust shall also provide indemnification and advance expenses to any
present or former Indemnified Party who served a predecessor of the Trust in
such capacity.
14.2. THE REGISTERED TRUSTEE. To the fullest extent permitted by
law, the Trust shall indemnify and hold harmless the Registered Trustee and its
Affiliates, and their respective officers, directors, employees, agents and
representatives (collectively, the "Registered Trustee Persons") from and
against any and all claims or liabilities (including any environmental
liabilities) for which any such Person may become liable by reason of the
Registered Trustee's acting in such capacity under this Trust Agreement or
arising out of or connected with (i) the Trust, (ii) this Trust Agreement or the
By-laws, (iii) any breach of duty owed to the Trust or the Shareholders by a
third party or (iv) any violation or alleged violation of federal or state
securities laws. The Trust shall not indemnify such Persons for liabilities
resulting from such Persons' own fraud, gross negligence or willful misconduct.
In addition, the Trust shall pay or reimburse reasonable expenses in advance of
final disposition of a proceeding to any present or former Registered Trustee
Person, provided that the Trust first obtains (i) a written affirmation by the
Registered Trustee Person of his or its good-faith belief that he or it has met
the standard of conduct necessary for indemnification by the Trust as authorized
by this Trust Agreement and (ii) a written statement by him or it or on his or
its behalf to repay the amount paid or reimbursed by the Trust if it shall
ultimately be determined that the standard of conduct was not met. The Trust
shall also provide indemnification and advance expenses to any present or former
Registered Trustee Person who served a predecessor of the Trust in such
capacity. The provisions of this Section 14.2 shall survive termination of this
Trust Agreement and the Trust.
15. CONCERNING THE REGISTERED TRUSTEE
15.1. AUTHORITY AND DUTIES OF THE REGISTERED TRUSTEE.
(a) GENERAL. The Registered Trustee shall have only those
rights, authority, powers, responsibilities and duties as set forth in Section
3.2.
(b) LIMITATIONS. Without limiting the generality of
Section 15.1, the Registered Trustee shall have no duty or liability (i) as to
any document contemplated by this Trust Agreement, (ii) to see to any recording
or filing of this Trust Agreement, the By-laws or any document contemplated
hereby or any security interest or lien or to see to the maintenance of any such
documentation, recording or filing, (iii) to see to any maintenance of or
insurance on the Trust Property, (iv) to see to the payment or discharge of any
tax assessment or other
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governmental charge or any lien assessed or levied against the Trust or any part
of the Trust Property or to make or prepare any reports or returns related
thereto, (v) to confirm, verify or inquire into the failure of the Board of
Trustees, any Managing Trustee or the Manager to exercise or perform any of
their respective rights or duties under this Trust Agreement, or (vi) to approve
as satisfactory to it or consent to any matter contemplated by this Trust
Agreement or any document contemplated hereby.
15.2. RESIGNATION AND REMOVAL OF THE REGISTERED TRUSTEE.
(a) GENERAL. The Registered Trustee may resign as of the
last business day of any month by giving 60 days' prior notice to the Board of
Trustees or the Manager, and the Board of Trustees or the Manager may remove the
Registered Trustee as of the last business day of any month on 60 days' prior
notice to the Registered Trustee. In the case of the resignation or removal of
the Registered Trustee, the Board of Trustees or the Manager shall, without the
consent of any Shareholder, appoint a successor Registered Trustee, provided
that such successor Registered Trustee shall in all respects satisfy the
requirements of Section 3807 of the Trust Act, or any successor provision. The
appointment of the successor Registered Trustee shall take effect concurrently
with the resignation or removal of the former Registered Trustee, and,
thereupon, the Registered Trustee so resigned or removed shall be fully
discharged of its duties and liabilities hereunder, if any. The Registered
Trustee shall not be liable for the acts or omissions to act of any successor
Registered Trustee.
(b) FAILURE TO APPOINT SUCCESSOR. If a successor
Registered Trustee shall not have been appointed within 60 days after such
notice of resignation or removal, the Registered Trustee, the Board of Trustees,
the Manager or any Shareholder may apply to any court of competent jurisdiction
to appoint a successor Registered Trustee to act until such time, if any, as a
successor shall have been appointed as above provided. Such court may thereupon,
after prescribing such notice, if any, as it may deem proper, appoint a
successor Registered Trustee.
(c) SUCCESSOR BY MERGER. Any Person into which the
Registered Trustee may be merged or converted or with which it may be
consolidated, or any Person resulting from any merger, conversion or
consolidation to which the Registered Trustee shall be a party, or any
corporation to which substantially all the corporate trust business of the
Registered Trustee may be transferred, shall, subject to such Person satisfying
in all respects the requirements of Section 3807 of the Trust Act, be the
Registered Trustee hereunder without further act.
(d) AMENDMENT OF CERTIFICATE OF TRUST. Upon the
substitution of the successor Registered Trustee, the Board of Trustees or the
Manager shall file an amendment along with the successor Registered Trustee to
the certificate of trust with the Secretary of State of the State of Delaware in
accordance with the provisions of the Trust Act, indicating the change in the
Registered Trustee.
(e) LIMITATION OF LIABILITY OF REGISTERED TRUSTEE. Except
as expressly provided above, all Persons having any claim against the Registered
Trustee by reason of the transactions contemplated by this Trust Agreement,
shall look only to the property and assets of the Trust for payment or
satisfaction thereof.
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16. CERTAIN TRANSACTIONS
The Trustees, any Shareholder, the Manager and any Affiliate thereof,
and any shareholder, officer, director, trustee, partner or employee thereof, or
any Person owning a legal or beneficial interest therein, may engage in or
possess an interest in any other business or venture of every nature and
description, independently or with or for the account of others including, but
not limited to, investments in revenue bonds or mortgages of any type or
instruments backed by or representing a participation interest in revenue bonds
or mortgages, and the ownership, financing, leasing, operation, management,
brokerage and development of real property. Neither the Trustees, any
Shareholder, the Manager nor their Affiliates shall be obligated to present to
the Trust any particular investment opportunity, regardless of whether such
opportunity might be suitable for investment by the Trust, and each Trustee, the
Shareholders, the Manager and each Affiliate shall have the right to take for
its own account (individually or otherwise) or to recommend to others any such
investment opportunity.
17. MISCELLANEOUS
17.1. COUNTERPARTS. This Trust Agreement may be executed in several
counterparts and all so executed shall constitute one Trust Agreement, binding
on all of the parties hereto, notwithstanding that all of the parties are not
signatory to the original or the same counterpart.
17.2. BINDING PROVISIONS. The terms and provisions of this Trust
Agreement shall be binding upon and shall inure to the benefit of the successors
and assigns of the respective parties.
17.3. SEVERABILITY. In the event any sentence or section of this
Trust Agreement is declared by a court of competent jurisdiction to be void,
such sentence or section shall be deemed severed from the remainder of the Trust
Agreement and the balance of the Trust Agreement shall remain in effect.
17.4. NOTICES. All notices under this Trust Agreement shall be in
writing and shall be given to the party entitled thereto, by personal service or
by mail, posted to the address maintained by the Trust for such Person or at
such other address as he may specify in writing.
17.5. HEADINGS. Paragraph titles or captions contained in this Trust
Agreement are inserted only as a matter of convenience and for reference. Such
titles and captions in no way define, limit, extend or describe the scope of
this Trust Agreement or the intent of any provision hereof.
17.6. GOVERNING LAW. This Trust Agreement shall be governed by and
construed and enforced in accordance with the laws of the State of Delaware
(including the Trust Act) applicable to agreements to be made and performed
entirely in said State, and the Shares shall be construed in accordance with the
laws of the State of Delaware, and the obligations, rights and remedies of the
parties hereunder shall be determined in accordance with such laws; provided,
however, that nothing herein shall affect the obligations of the Trust to comply
with federal or state securities laws, and provided further, however, that there
shall not be applicable to the Trust, the Board of Trustees, the Registered
Trustee or this Trust Agreement any provisions of the laws (statutory or common)
of the State of Delaware pertaining to trusts (other than the Trust Act) that
relate to or regulate, in a manner inconsistent with the terms hereof (i) the
filing with
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any court or governmental body or agency of trustee accounts or schedules of
trustee fees and charges, (ii) affirmative requirements to post bonds for
trustees, officers, agents or employees of a trust, (iii) the necessity for
obtaining court or other governmental approval concerning the acquisition,
holding or disposition of real or personal property, (iv) fees or other sums
payable to trustees, officers, agents or employees of a trust, (v) the
allocation of receipts and expenditures to income or principal, (vi)
restrictions or limitations on the permissible nature, amount or concentration
of trust investments or requirements relating to the titling, storage or other
manner of holding or investing trust assets, or (vii) the establishment of
fiduciary or other standards or responsibilities or limitations on the acts or
powers of trustees, which are inconsistent with the limitations or liabilities
or authorities and powers of trustees as set forth or referenced in this Trust
Agreement. Section 3540 of Title 12 of the Delaware Code shall not apply to the
Trust.
17.7. OTHER JURISDICTIONS. In the event the business of the Trust is
carried on or conducted in states in addition to the State of Delaware, then the
Board of Trustees and the Shareholders agree that this Trust shall be qualified
under the laws of each state in which business is actually conducted by the
Trust, and they severally agree to execute such other and further documents as
may be required or requested in order that the Board of Trustees or the Manager
legally may qualify this Trust to do business in such states. The power of
attorney granted to the Board of Trustees and the Manager by each Shareholder in
Article 13 shall constitute the authority of the Board of Trustees and the
Manager to perform the ministerial duty of qualifying this Trust under the laws
of any state in which it is necessary to file documents or instruments of
qualification. A Trust office or principal place of business in any jurisdiction
(within or without the State of Delaware) may be designated from time to time by
the Board of Trustees.
17.8. POWER TO RECONSTITUTE. In the event that the State of Delaware
amends the Trust Act in any manner which precludes the Trust, at any time, from
obtaining an opinion of tax counsel to the effect that the Trust will be treated
as a partnership for federal income tax purposes and not as an association
taxable as a corporation, then the Board of Trustee or the Manager may,
notwithstanding the provisions of Section 10.4(b) and Section 11.2(b) hereof, in
its sole discretion, reconstitute the Trust under the laws of another state.
17.9. AGREEMENT TO BE BOUND. EVERY PERSON, BY VIRTUE OF HAVING
BECOME A SHAREHOLDER IN ACCORDANCE WITH THE TERMS OF THIS TRUST AGREEMENT, SHALL
BE DEEMED TO HAVE EXPRESSLY ASSENTED AND AGREED TO THE TERMS OF, AND SHALL BE
BOUND BY, THIS TRUST AGREEMENT.
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<PAGE>
IN WITNESS WHEREOF, the undersigned have caused these presents to be
executed as of the day and year first above written.
<TABLE>
<CAPTION>
CHARTER: MANAGING TRUSTEES:
<S> <C>
CHARTER MUNICIPAL MORTGAGE
ACCEPTANCE COMPANY, a Delaware /s/ J. Michael Fried
business trust ----------------------------------
Name: J. Michael Fried
By: Related Charter, LP, a Delaware limited
partnership, its manager /s/ Stuart J. Boesky
----------------------------------
Name: Stuart J. Boesky
By: Related Charter, LLC, a Delaware limited
liability company, its general partner
/s/ Alan P. Hirmes
----------------------------------
Name: Alan P. Hirmes
By: /s/ J. Michael Fried
----------------------------------
Name: J. Michael Fried /s/ Robert W. Grier
Title: Chairman & CEO ----------------------------------
Name: Robert W. Grier
/s/ Andrew T. Panaccione
----------------------------------
Name: Andrew T. Panaccione
REGISTERED TRUSTEE:
WILMINGTON TRUST COMPANY
By: /s/ Joseph B. Feil
-------------------------------
Name: Joseph B. Feil
Title: Financial Services Officer
</TABLE>
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<PAGE>
CONSENT AND AGREEMENT
The undersigned, as owner of the beneficial interest in
Charter Mac Equity Issuer Trust (the "Trust"), consents and agrees to the
Amended and Restated Trust Agreement of the Trust, dated June 22, 1999, to which
this Consent and Agreement is annexed.
CM HOLDING TRUST
By: Wilmington Trust Company,
as Registered Trustee
By: /s/ Joseph B. Feil
-----------------------------
Name: Joseph B. Feil
Title: SVP & CFO
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<PAGE>
ACCEPTANCE OF MANAGER
Subject to the provisions of the Management Agreement, the Manager
hereby acknowledges the foregoing Trust Agreement, accepts and agrees to perform
the duties of the "Manager" thereunder and accepts the special power of attorney
granted under Article 13 thereof.
RELATED CHARTER, LP, a Delaware
limited partnership
By: Related Charter, LLC, a Delaware
limited liability company, its
general partner
By: /s/ John B. Roche
-------------------------------------
Name: John B. Roche
Title: Chief Financial Officer
43
<PAGE>
EXHIBIT A
THE SERIES A PREFERRED SHARES REPRESENTED HEREBY HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"),
OR ANY STATE SECURITIES LAWS OR ANY OTHER APPLICABLE SECURITIES LAWS AND THE
ISSUER HAS NOT BEEN REGISTERED UNDER THE INVESTMENT COMPANY ACT OF 1940, AS
AMENDED (THE "INVESTMENT COMPANY ACT"). NEITHER SUCH SERIES A PREFERRED SHARES
NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED,
TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH
REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM SUCH REGISTRATION,
INCLUDING THE EXEMPTION PROVIDED BY RULE 144A PROMULGATED UNDER THE SECURITIES
ACT ("RULE 144A"). UNTIL THE SERIES A PREFERRED SHARES REPRESENTED HEREBY HAVE
BEEN REGISTERED UNDER THE SECURITIES ACT, SUCH SERIES A PREFERRED SHARES WILL BE
ISSUED AND MAY BE TRANSFERRED ONLY IN WHOLE SHARES.
THE HOLDER BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR OTHERWISE
TRANSFER THE SERIES A PREFERRED SHARES REPRESENTED HEREBY, PRIOR TO THE DATE
WHICH IS TWO YEARS AFTER THE LATER OF THE ORIGINAL ISSUANCE DATE HEREOF AND THE
LAST DAT ON WHICH THE ISSUER OR ANY "AFFILIATE" OF THE ISSUER WAS THE OWNER OF
SUCH SERIES A PREFERRED SHARES (OR ANY PREDECESSOR HEREOF), ONLY IN A TRANSFER
(A) TO THE ISSUER OR AN INITIAL PURCHASER OR BY, THROUGH, OR IN A TRANSACTION
APPROVED BY AN INITIAL PURCHASER, (B) PURSUANT TO A REGISTRATION STATEMENT WHICH
HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) SO LONG AS THE SERIES
A PREFERRED SHARES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A, TO A PERSON IT
REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE
144A) THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED
INSTITUTIONAL BUYER AND TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE
IN RELIANCE ON RULE 144A, (D) TO AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS
DEFINED IN RULE 501 UNDER THE SECURITIES ACT) THAT IS ACQUIRING SUCH SERIES A
PREFERRED SHARES FOR THEIR OWN ACCOUNT OR AS FIDUCIARY OR AGENT FOR OTHERS (EACH
OF WHICH MUST BE SUCH AN INSTITUTIONAL ACCREDITED INVESTOR UNLESS THE PURCHASER
IS A BANK ACTING IN ITS FIDUCIARY CAPACITY) FOR INVESTMENT PURPOSES AND NOT WITH
A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN
VIOLATION OF THE SECURITIES ACT OR (E) PURSUANT TO ANY OTHER AVAILABLE EXEMPTION
FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. EACH PURCHASER OF A
SERIES A PREFERRED SHARE WILL BE DEEMED TO HAVE MADE THE REPRESENTATIONS AND
AGREEMENTS SET FORTH IN THE TRUST AGREEMENT.
<PAGE>
NO TRANSFER OF THE SERIES A PREFERRED SHARES WILL BE PERMITTED IF SUCH
TRANSFER WOULD RESULT IN THERE BEING IN EXCESS OF 100 HOLDERS OF THE ISSUER'S
SECURITIES OR OTHERWISE CAUSE THE ISSUER TO BE SUBJECT TO REGULATION UNDER THE
INVESTMENT COMPANY ACT. IN ANY EVENT, ONLY TRANSFERS WHICH MAY BE EFFECTED
WITHOUT LOSS OF ANY APPLICABLE INVESTMENT COMPANY ACT EXEMPTION TO A BUYER THAT
CONSTITUTES ONE "BENEFICIAL OWNER" WITHIN THE MEANING OF THE INVESTMENT COMPANY
ACT WILL BE PERMITTED.
ANY TRANSFER IN VIOLATION OF THE FOREGOING WILL BE OF NO FORCE AND
EFFECT, WILL BE VOID AB INITIO, AND WILL NOT OPERATE TO TRANSFER ANY RIGHTS TO
THE TRANSFEREE, NOTWITHSTANDING ANY INSTRUCTION TO THE CONTRARY TO THE ISSUER,
THE TRANSFER AGENT OR ANY INTERMEDIARY.
44
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This 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>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 63,198,186
<SECURITIES> 548,231,828
<RECEIVABLES> 9,775,221
<ALLOWANCES> 138,000
<INVENTORY> 0
<CURRENT-ASSETS> 598,593
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 635,978,015
<CURRENT-LIABILITIES> 60,462,247
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 328,515,768
<TOTAL-LIABILITY-AND-EQUITY> 635,978,015
<SALES> 0
<TOTAL-REVENUES> 17,198,860
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 4,867,623
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 373,478
<INCOME-PRETAX> 11,957,759
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 11,957,759
<EPS-BASIC> .53
<EPS-DILUTED> .53
</TABLE>
