SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
AMENDMENT NO. 1 TO FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES AND EXCHANGE ACT OF 1934
Date of Report (Date of Earliest Event Reported): May 21, 1997
American Tax-Exempt Bond Trust
------------------------------
(Exact Name of Registrant as Specified in Charter)
Delaware (Business Trust)
-------------------------
(State or other Jurisdiction of Incorporation)
0-28340 13-7033312
------- ----------
(Commission File Number) (IRS Employer Identification Number)
625 Madison Avenue, New York, NY 10022
--------------------------------------
(Address of Principal Executive Offices)
Registrant's telephone number, including area code: (212) 421-5333
Not Applicable
------------------------------------------------------------------------------
(Former Name or Former Address, if Changed Since Last Report
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Item 2. Acquisition or Disposition of Assets
LEXINGTON TRAILS APARTMENTS
General
- - -------
On May 7, 1997, the American Tax Exempt Bond Trust (the "Trust") purchased
tax-exempt First Mortgage Bonds (as herein referred to as the "Lexington Trails
Bonds") in an aggregate principal amount of $4,900,000 to fund the purchase of
Lexington Trails Apartments. The Lexington Trails Bonds were issued by the
Harris County Housing Finance Corporation (the "Issuer") and secured by a first
deed of trust and mortgage loan on Lexington Trails Apartments (the "Project" or
"Lexington Trails"), a development consisting of 200 apartment units in Houston,
Texas. Lexington Trails is owned and operated by Lexington Trails-American
Housing Foundation, Inc. (the "Borrower"), which is not affiliated with the
Trust or its manager (the "Manager").
In making this acquisition, the Trust utilized $5,568,182 of its gross proceeds
("Gross Proceeds") from its public offering (including fees and expenses) which
represents 19% of the Gross Proceeds raised.
As required by the Trust Agreement, the Trust has received an MAI appraisal
which indicates that the principal amount of the Lexington Trails Bonds is less
than 85% of the appraised value of the Project. It should be recognized that
appraised values are opinions and, as such, may not represent the true worth or
realizable value of the property being appraised.
Payment Terms
- - -------------
The Lexington Trails Bonds bear a fixed rate of 9.0%, payable monthly in
arrears.
The term of the Lexington Trails Bonds is twenty-five years. The Trust has the
right to put the Lexington Trails Bonds upon six months notice after the tenth
year. The principal of the Lexington Trails Bonds will be payable upon sale or
refinancing of the Project. Prepayment, in whole or in part, will be prohibited
during the first five years following the acquisition of the Lexington Trails
Bonds. Prepayment in whole will be permitted thereafter subject to the payment
of a premium. If prepaid during the sixth year, the premium is equal to 4% of
the principal amount of the Lexington Trails Bonds outstanding at the time of
prepayment. Thereafter, the premium will be reduced by 1% per year until the
tenth year, when there will be no prepayment premium payable.
Management Agent
- - ----------------
Asset Plus Management ("Asset Plus") is and is expected to continue to be the
property manager for an annual fee of 3.5% of gross rental revenues. Asset Plus
is not affiliated with the Manager.
Description of the Property
- - ---------------------------
Lexington Trails Apartments is a 200 unit garden community consisting of 28
two-story brick and wood-sided pitched-roofed buildings on ten acres. The
property was constructed in 1973 and substantially rehabilitated in 1995-1996.
Property amenities include: outdoor swimming pools (2), playground, central
laundry (2 buildings), perimeter fence and access gates, jacuzzi, picnic area,
and management office. Individual units feature: central air, walk-in closets,
full kitchen appliance package, fireplaces, private balcony/patio, w/d
connections, and ceiling fans.
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As part of the Trust's purchase of the Lexington Trails Bonds, $509,921 has been
deposited into separate accounts under the control of the bond trustee to fund
certain capital improvements and reserves. Release of funds in those accounts
requires the approval of the Trust.
Lease terms on the apartment units of Lexington Trails range from six to twelve
months. The type and number of apartments together with their projected monthly
rents are as follows:
Approximate Projected
Type Units Square Feet Monthly Rent
---- ----- ----------- ------------
1BR/1BA 16 717 $375
2BR/1BA 16 829 $430
2BR/2BA 8 995 $475
2BR/1.5BA 80 1,133 $500
3BR/2BA 48 1,274 $560
3BR/2BA 32 1,373 $620
The occupancy rate of Lexington Trails was 94% as of March 1997.
Rent Regulations
- - ----------------
The Project is subject to the Issuer's rent regulations which require that 20%
of unit be set aside for tenants at 50% of the area median income (adjusted for
family size), 75% of the units be set aside for tenants at 80% of the area
median income (without adjustment for family size), and 90% of the units be set
aside for tenants with incomes not greater than $56,465 (adjusted annually by
CPI).
Location and Market
- - -------------------
Lexington Trails is located at 6200 West Tidwell Road in the northwestern
portion of the City of Houston, Texas along the Northwest Freeway (U.S. 290)
corridor. The Houston Central Business District is located about ten miles
southeast of the site. The neighborhood is considered 65% to 70% developed at
present and represents one of the more rapidly growing areas of Houston.
Competition
- - -----------
There are seven apartment complexes in the area that compete directly with
Lexington Trails. They are comparable in unit mix, rental rates, property
amenities, and age. These buildings vary in size from 200 units to 492 units and
the average occupancy as of February 1997 was 93.7%.
Real Estate Taxes
- - -----------------
It is estimated that annual real estate taxes with respect to Lexington Trails
will be $72,104.
Fees
- - ----
In connection with the selection and acquisition of the Lexington Trails Bonds,
the Manager did not receive any Mortgage Placement Fees from the Borrower.
However, the Manager is entitled to receive from the Trust a Bond Selection Fee
equal to (i) $111,363, or 2% of the Gross Proceeds and (ii) an Acquisition
Expense Allowance equal to $55,682, or 1% of the Gross Proceeds.
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Item 7. Financial Statements, Pro Forma Financial Information
and Exhibits.
(a) Financial Statements
--------------------
The following financial statements are included in compliance with
Staff Accounting Bulletin Number 71/71a.
[WELENKEN, HIMMELFARB & CO. LETTERHEAD]
LEXINGTON TRAILS APARTMENTS
HISTORICAL SUMMARY OF GROSS INCOME AND
DIRECT OPERATING EXPENSES
YEAR ENDED DECEMBER 31, 1996
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[WELENKEN, HIMMELFARB & CO. LETTERHEAD]
LEXINGTON TRAILS APARTMENTS
TABLE OF CONTENTS
Page
INDEPENDENT AUDITORS' REPORT 1
HISTORICAL SUMMARY OF GROSS INCOME AND
DIRECT OPERATING EXPENSES 2
Notes to Historical Summary of Gross Income and
Direct Operating Expenses 3
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[WELENKEN, HIMMELFARB & CO. LETTERHEAD]
INDEPENDENT AUDITORS' REPORT
----------------------------
Board of Directors
West Tidwell Realty Trust
Springfield, Massachusetts
We have audited the accompanying Historical Summary of Gross Income and Direct
Operating Expenses of Lexington Trails Apartments for the year ended December
31, 1996. This historical summary is the responsibility of the Apartment's
management. Our responsibility is to express an opinion on the historical
summary based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the historical summary is free of material misstatement.
An audit includes examining, on a test basis, evidence supporting the amounts
and disclosures in the historical summary. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall presentation of the historical summary. We believe
that our audit provides a reasonable basis for our opinion.
The accompanying historical summary was prepared for the purpose of complying
with the rules and regulations of the Securities and Exchange Commission as
described in Note B and is not intended to be a complete presentation of the
Apartments' income and expenses.
In our opinion, the historical summary referred to above presents fairly, in all
material respects, the gross income and direct operating expenses described in
Note B for the year ended December 31, 1996, in conformity with generally
accepted accounting principles.
/s/ Welenken Himmelfarb & Co.
WELENKEN HIMMELFARB & CO.
Certified Public Accountants
Louisville, Kentucky
April 22, 1997
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[WELENKEN, HIMMELFARB & CO. LETTERHEAD]
LEXINGTON TRAILS APARTMENTS
HISTORICAL SUMMARY OF GROSS INCOME AND
DIRECT OPERATING EXPENSES
YEAR ENDED DECEMBER 31, 1996
GROSS INCOME:
Rental income $708,770
Other income 57,636
--------
766,406
--------
DIRECT OPERATING EXPENSES
Administrative 176,407
Operating and maintenance 180,523
Utilities 169,458
Real estate taxes and insurance 126,868
--------
653,256
--------
EXCESS OF GROSS INCOME OVER DIRECT
OPERATING EXPENSES $113,150
========
See Notes to Historical Summary of Gross Income and Direct Operating Expenses.
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[WELENKEN, HIMMELFARB & CO. LETTERHEAD]
LEXINGTON TRAILS APARTMENTS
NOTES TO HISTORICAL SUMMARY OF GROSS INCOME AND
DIRECT OPERATING EXPENSES
YEAR ENDED DECEMBER 31, 1996
A. ORGANIZATION
West Tidwell Realty Trust was created on October 20, 1995. The trust owns
and operates Lexington Trails Apartments, a 200 unit apartment complex in
Houston, Texas.
B. BASIS OF PRESENTATION
The accompanying Historical Summary was prepared for the purpose of
complying with Rule 3-14 of Regulation S-X of the Securities and Exchange
Commission and is not intended to be a complete presentation of the
Apartment's income and expenses. Accordingly, the Historical Summary
includes the income and direct operating expenses of Lexington Trails
Apartments, and excludes depreciation, amortization, interest and other
financing charges.
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(b) Pro Forma Financial Information
-------------------------------
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL DATA
The following tables of unaudited pro forma consolidated data of the Trust have
been prepared from the historical consolidated financial statements of the
Trust, as adjusted to give effect to a significant acquisition (the purchase of
tax-exempt First Mortgage Bonds, hereinafter referred to as the "Lexington
Trails Bonds"). The accompanying pro forma balance sheet of the Trust has been
prepared as if this investment had been consummated on March 31, 1997. The
accompanying pro forma statements of income and other financial data for the
year ended December 31, 1996 and the three months ended March 31, 1997 have been
prepared as if the investment had been consummated as of January 1, 1996 and
January 1, 1997, respectively. The unaudited pro forma financial data does not
purport to be indicative of what the results of the Trust would have been had
the transactions been completed on the dates assumed, nor is such financial data
necessarily indicative of the results of operations of the Trust that may exist
in the future. The unaudited pro forma financial data must be read in
conjunction with the Notes therein and with the historical Consolidated
Financial Statements and the related Notes of the Registrant.
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UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1996
Pro Forma Pro Forma
Historical Adjustments Total
---------- ----------- ----------
Revenues:
Interest Income:
First Mortgage Bonds $1,127,980 $ 441,000 (a) $1,556,289
(12,691) (b)
Tax-Exempt Securities 2,054 -- 2,054
Marketable Securities 262,381 (171,500) (d) 90,881
---------- --------- ----------
Total revenues 1,392,415 256,809 1,649,224
---------- --------- ----------
Expenses:
General and administrative 68,013 -- 68,013
General and administrative-
related parties 139,007 -- 139,007
Loan serving fees 37,946 12,250 (c) 50,196
Amortization of organization costs 10,000 -- 10,000
---------- --------- ----------
Total expenses 254,966 12,250 267,216
---------- --------- ----------
Net income $1,137,449 $ 244,559 $1,382,008
========== ========= ==========
Allocation of Net Income:
Shareholders $1,067,015 $ 217,858 $1,284,873
Manager 10,778 2,201 12,979
Special distributions to Manager 59,656 24,500 (e) 84,156
---------- --------- ----------
Net income $1,137,449 $ 244,559 $1,382,008
========== ========= ==========
Net income per weighted
average share-shareholders $ 0.89 $ 0.18 $ 1.07
========== ========= ==========
NOTES TO THE UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF
INCOME FOR THE YEAR ENDED DECEMBER 31, 1996
(a) Represents interest income on the Lexington Trails Bonds for the period
1/1/96 - 12/31/96.
(b) Represents amortization of loan origination costs associated with the
Lexington Trails Bonds for the period 1/1/96 - 12/31/96.
(c) Represents loan servicing fees for the Lexington Trails Bonds for the
period 1/1/96 -12/31/96.
(d) Represents reduction in interest income resulting from the use of proceeds
to purchase the Lexington Trails Bonds on 1/1/96.
(e) Represents the accrued special distribution to Manager associated with the
Lexington Trails Bonds for the period 1/1/96 -12/31/96.
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UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 1997
Pro Forma Pro Forma
Historical Adjustments Total
---------- ----------- ---------
Revenues:
Interest Income:
First Mortgage Bonds $338,002 $ 110,250 (e) $445,079
-- (3,173)(c) --
Tax-Exempt Securities 1,274 -- 1,274
Marketable Securities 72,742 (42,875)(d) 29,867
-------- --------- --------
Total revenues 412,018 64,202 476,220
-------- --------- --------
Expenses:
General and administrative 29,744 -- 29,744
General and administrative-
related parties 24,060 -- 24,060
Loan serving fees 9,632 3,021 (f) 12,653
Amortization of organization costs 2,500 -- 2,500
-------- --------- --------
Total expenses 65,936 3,021 68,957
-------- --------- --------
Net income $346,082 $ 61,181 $407,263
======== ========= ========
Allocation of Net Income:
Shareholders $322,790 $ 54,505 $377,295
Manager 3,261 551 3,812
Special distributions to Manager 20,031 6,125 (f) 26,156
-------- --------- --------
Net income $346,082 $ 61,181 $407,263
======== ========= ========
Net income per weighted
average share-shareholders $ 0.22 $ 0.04 $ 0.26
======== ========= ========
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UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF MARCH 31, 1997
Pro Forma Pro Forma
Historical Adjustments Total
----------- ----------- -----------
ASSETS:
Investment in First Mortgage Bonds-
at fair value $16,168,786 $ 4,900,000 (a) $21,195,702
126,916 (b)
Cash and cash equivalents 842,388 -- 842,388
Marketable securities 8,950,000 (4,900,000)(a) 4,130,100
80,100 (g)
Deferred costs 320,963 (126,916)(b) 194,047
Organization costs (net of accumulated
amortization of $20,000) 30,000 -- 30,000
Accrued interest receivable 121,395 -- 121,395
Other assets 80,100 (80,100)(g) 0
----------- ----------- -----------
Total assets $26,513,632 $ 0 $26,513,632
=========== =========== ===========
LIABILITES AND SHAREHOLDERS' EQUITY
Liabilities:
Due to affiliates $ 330,313 $ -- $ 330,313
Accounts payable 25,901 -- 25,901
----------- ----------- -----------
Total Liabilities 356,214 0 356,214
----------- ----------- -----------
Shareholders' equity:
Beneficial owner's equity-manager (8,998) -- (8,998)
Beneficial owner's
equity-shareholders
(1,464,222 shares issued and
outstanding) 26,056,217 -- 26,056,217
Net unrealized gain on First
Mortgage Bonds 110,199 -- 110,199
----------- ----------- -----------
Total shareholders' equity 26,157,418 0 26,157,418
----------- ----------- -----------
Total liabilities and
shareholders' equity $26,513,632 $ 0 $26,513,632
=========== =========== ===========
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NOTES TO THE UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED AND AS OF MARCH 31, 1997
(a) Represents the purchase of the Lexington Trails Bonds on 3/31/97.
(b) Represents the reclass of loan origination costs associated with the
Lexington Trails Bonds.
(c) Represents amortization of loan origination costs associated with the
Lexington Trails Bonds for the period 1/1/97 - 3/31/97.
(d) Represents reduction of interest income resulting from the use of
proceeds to purchase the Lexington Trails Bonds on 1/1/97.
(e) Represents interest income on the Lexington Trails Bonds for the
period 1/1/97 - 3/31/97.
(f) Represents accrued loan servicing fees and accrued special
distribution to Manager associated with the Lexington Trails Bonds for
the period 1/1/97 - 3/31/97.
(g) Represents the repayment of a short term loan to the purchaser.
(c) Exhibits
--------
10.1 Harris County Housing Finance Corporation Multifamily Revenue Bonds
1997 Series (Lexington Trails Apartments) in the principal amount of
$4,900,000 dated May 1, 1997.
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SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
AMERICAN TAX-EXEMPT BOND TRUST
(Registrant)
By: RELATED AMI ASSOCIATES, INC., as Manager
July 18, 1997 By: /s/ Stuart J. Boesky
--------------------
Stuart J. Boesky
Director and Senior Vice President
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THIS BOND IS SUBJECT TO TRANSFER RESTRICTIONS. EXCEPT AS OTHERWISE PROVIDED IN
THE INDENTURE, NO TRANSFER WILL BE MADE UNLESS THE ISSUER AND THE TRUSTEE
RECEIVE FROM THE TRANSFEREE AN INVESTMENT LETTER IN THE FORM REQUIRED BY THE
INDENTURE, SETTING FORTH THE REPRESENTATIONS AND CERTAIN FINANCIAL
QUALIFICATIONS OF THE TRANSFEREE.
THIS BOND IS UNRATED AND NOT SECURED BY A CREDIT FACILITY (AS DEFINED IN THE
INDENTURE). BY THE PURCHASE AND ACCEPTANCE OF THIS BOND, THE OWNER ACKNOWLEDGES
AND AGREES THAT THIS BOND CANNOT AND WILL NOT BE OFFERED, SOLD, ASSIGNED,
PLEDGED OR OTHERWISE TRANSFERRED, UNLESS ONE OF THE TWO FOLLOWING CONDITIONS
EXISTS: (1) THIS BOND IS RATED IN ONE OF THE THREE HIGHEST RATING CATEGORIES OF
MOODY'S AND/OR STANDARD AND POOR'S; OR (2) EACH OF THE FOLLOWING EXISTS OR HAS
OCCURRED: (A) SAID BOND IS OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED TO A
PERSON OR ENTITY WHO IS A "QUALIFIED INSTITUTIONAL BUYER," AS THAT TERM IS
DEFINED IN SECURITIES AND EXCHANGE COMMISSION RULE 144A, OR TO A FINANCIAL
INSTITUTION, AND (B) THE TRUSTEE RECEIVES FROM THE PURCHASER (WITH COPY TO THE
SELLER AND THE ISSUER) AN INVESTMENT LETTER IN THE FORM ATTACHED TO THE
INDENTURE. THIS BOND SHALL BE SOLD ONLY IN DENOMINATIONS OF AT LEAST $100,000.
UNITED STATES OF AMERICA
STATE OF TEXAS
$4,900,000
Harris County Housing Finance Corporation
Multifamily Mortgage Revenue Bonds
1997 Series
(Lexington Trails Apartments)
Number: R-2
Dated Date: May 7, 1997
Maturity Date: May 1, 2022
Registered Owner: American Tax Exempt Bond Trust
Principal Amount: $4,900,000
Harris County Housing Finance Corporation (the "Issuer"), a public
nonprofit corporation duly created, organized and existing under the laws of the
State of Texas (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
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hereinafter provided, upon presentation and surrender of this Bond at the
principal office of Texas Commerce Bank National Association in the City of
Dallas, Texas or its successor as Trustee, under the Indenture (described
below), the principal amount stated above, and to pay interest on said principal
amount, from and including the dated date hereof until the principal amount
shall have been paid in accordance with the terms of this Bond and the
Indenture, as and when set forth below, but only from the sources and as
hereinafter provided, by wire transfer if there be one Owner of all of the Bonds
or otherwise by check or draft mailed to the record Owners of Bonds as the same
appear upon the books of registry to be maintained by the Trustee, as Registrar.
This Bond is one of a series of bonds (the "Bonds") issued pursuant to,
and is subject to, Harris County Housing Finance Corporations Act, constituting
Chapter 394, Texas Local Governmental Code Annotated, as amended (the "Act"),
and pursuant to a Trust Indenture, dated as of May 1, 1997 (the "Indenture"), by
and between the Issuer and the Trustee and resolutions duly adopted by the
governing body of the Issuer. 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 $4,900,000 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 funding a Loan for the
acquisition and renovation of a multifamily residential development.
THE BONDS SHALL BE LIMITED OBLIGATIONS OF THE ISSUER PAYABLE SOLELY
FROM THE TRUST ESTATE. THE BONDS SHALL CONSTITUTE A VALID CLAIM OF THE
RESPECTIVE HOLDERS THEREOF AGAINST THE TRUST ESTATE, WHICH IS PLEDGED TO SECURE
THE PAYMENT OF THE PRINCIPAL OF, PREMIUM, IF ANY, AND INTEREST ON THE BONDS, AND
WHICH SHALL BE UTILIZED FOR NO OTHER PURPOSE, EXCEPT AS EXPRESSLY AUTHORIZED IN
THIS INDENTURE. THE BONDS DO NOT CONSTITUTE, WITHIN THE MEANING OF ANY STATUTORY
OR CONSTITUTIONAL PROVISION, AN INDEBTEDNESS, AN OBLIGATION OR A LOAN OF CREDIT
OF THE STATE, THE COUNTY, OR ANY OTHER MUNICIPALITY, COUNTY OR OTHER MUNICIPAL
OR POLITICAL CORPORATION OR SUBDIVISION OF THE STATE. THE BONDS DO NOT CREATE A
MORAL OBLIGATION ON THE PART OF THE STATE, THE COUNTY OR ANY OTHER MUNICIPALITY,
COUNTY OR OTHER MUNICIPAL OR POLITICAL CORPORATION OR SUBDIVISION OF THE STATE
AND EACH OF SUCH ENTITIES IS PROHIBITED BY THE ACT FROM MAKING ANY PAYMENTS WITH
RESPECT TO THE BONDS. THE ISSUER HAS NO TAXING POWER.
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Interest on the Bonds.
(a) General. The Bonds (including this Bond) shall bear interest as
provided below.
(b) Interest during Initial Rate Period. Until and through the
initial Conversion Date, the Bonds shall bear interest during each Interest
Accrual Period calculated and payable at a rate equal to 9% per annum payable on
each payment date specified in paragraph (d)(1) below. Such interest shall be
calculated on the basis of a year of 360 days and twelve 30-day months.
(c) Interest During Reset Rate Period. From and after the Initial
Remarketing Date, if all of the Bonds have been remarketed in accordance with
the Indenture, the Bonds shall bear interest at a rate determined as provided in
the Indenture.
(d) Interest Payment Date. (1) prior to the Initial Remarketing Date,
interest shall be payable on the tenth day of each month, commencing on June 10,
1997, and in addition to those dates the last day of the Initial Rate Period;
and (2) after the Initial Remarketing Date, (a) with respect to the payment of
interest during a Reset Rate Period, interest shall be payable on each May 1 and
November 1, or (b) with respect to the payment of interest during an Adjustable
Rate Period, interest shall be payable on the first Business day of each month,
commencing on the first such date which is at least thirty (30) days after the
commencement of such Adjustable Rate Period.
Notwithstanding anything elsewhere contained in this Bond but subject
to Section 7.11 of the Indenture, (a) total interest on this Bond, cumulative
from the original date of issuance of the Bond, shall not exceed the sum of 12%
per annum, simple and noncompounded for each year from such date of issuance to
the date of calculation (calculated on the basis of a year of 365 days, actual
number of days elapsed); and (b) if the rate at which this Bond bears interest
shall at any time be deemed to be in excess of the maximum rate permitted by
law, then the Bond shall instead bear interest at the maximum rate permitted by
such law. Any excess payment of interest shall be deemed to be a credit against
the unpaid principal amount of this Bond.
The foregoing interest provisions are a summary of those contained in
the Indenture, and reference is hereby made to the Indenture for a full
statement of their terms.
Page 3 of 13
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Demand Purchase Option. (a) During any Adjustable Rate Period, each
Owner shall have the option to require the purchase of the Bonds such Owner
holds in the manner set forth in this Section. To exercise such option the Owner
shall:
(i) deliver to the Tender Agent a purchase notice (a "Purchase
Notice") in written form stating (A) the principal amount of Bonds to be
purchased, and (B) the date on which such Owner desires such Bonds to be
purchased, which shall be a Business Day not prior to the seventh day next
succeeding the date of delivery of such notice to the Tender Agent; and
(ii) deliver to the Tender Agent, not later than 10:00 a.m., New York,
New York time on the Purchase Date, the Bonds to be purchased pursuant to such
Purchase Notice, with an appropriate endorsement for transfer or a blank bond
power, and, in the case of any Bonds to be purchased prior to an Interest
Payment Date and after the Regular Record Date with respect to such Interest
Payment Date, a nonrecourse due-bill check for all unpaid interest to accrue on
such Bond to such Interest Payment Date, payable to bearer, in form satisfactory
to the Tender Agent, for interest due on such Interest Payment Date.
Deliveries of Purchase Notices.
(a) Bonds and due-bill checks to the Tender Agent shall be made to
the Tender Agent at the office of the Tender Agent in New York, New York, or to
such other address in New York, New York as the Tender Agent may designate.
Immediately upon receipt of a Purchase Notice, the Tender Agent shall give
notice to the Borrower, the Remarketing Agent and the Credit Facility Provider,
if any, which notice shall be given by telephone, telecopy, telegraph or other
electronic means, promptly confirmed in writing, of the principal amount of
Bonds to be purchased pursuant to such Purchase Notice and the date of purchase
specified therein. In no event shall the Tender Agent be required to purchase a
portion of any Bond.
(b) In the event that the Tender Agent receives a Purchase Notice
following the issuance by the Trustee of notice given under the Indenture of the
establishment of a Reset Rate Conversion Date, the Tender Agent shall provide
copies of such notice from the Trustee to the Remarketing Agent, who shall
furnish a copy of such notice to each Person to whom the Remarketing Agent
attempts to sell such Bonds pursuant to the Remarketing Agreement.
(c) A Purchase Notice shall be irrevocable and effective upon receipt
by the Tender Agent. Any Bond as to which a Purchase Notice has been delivered
pursuant to Section 5.10(a) of the Indenture must be delivered to the Tender
Agent as provided in Section 5.10(a) of the Indenture, and any Bonds not so
delivered for which there has been deposited irrevocably in trust with the
Tender Agent an amount of money sufficient to pay the purchase
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price thereof on the date of purchase shall be deemed to be Undelivered Bonds
hereunder and shall be deemed to have been purchased on the Purchase Date at the
Purchase Price. IN THE EVENT AN OWNER OF BONDS FAILS TO DELIVER ITS BONDS AS
REQUIRED FOLLOWING SUBMISSION OF A PURCHASE NOTICE, SAID OWNER SHALL NOT BE
ENTITLED TO PAYMENT (INCLUDING ANY INTEREST TO ACCRUE ON OR SUBSEQUENT TO THE
DATE DESIGNATED FOR PURCHASE IN THE APPLICABLE NOTICE) OTHER THAN THE PURCHASE
PRICE FOR SUCH UNDELIVERED BONDS, AND ANY UNDELIVERED BONDS SHALL NO LONGER BE
ENTITLED TO THE BENEFITS OF THIS INDENTURE, EXCEPT FOR THE PAYMENT OF THE
PURCHASE PRICE THEREFOR UPON PRESENTATION OF SUCH BONDS.
(d) Notwithstanding the foregoing provisions, in the event that any
Bond as to which the Owner thereof has submitted a Purchase Notice is remarketed
to such Owner pursuant to the Remarketing Agreement, the Remarketing Agent shall
so notify the Trustee and the Tender Agent, and such Owner need not deliver such
Bond to the Tender Agent as required under Section 5.10(a)(ii) of the Indenture,
although the purchase price with respect to such Bond shall be deemed to have
been paid, and such Bond shall be deemed to have been delivered to the Tender
Agent, redelivered to such Owner and remarketed for purposes of the Indenture.
Limited Recourse. Pursuant to a Loan Agreement dated as of May 1,
1997, and a Promissory Note dated May 7, 1997 (the "Note"), Lexington
Trails-American Housing Foundation, Inc., a Texas nonprofit corporation (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 AND THE PREMIUM, IF ANY, AND THE INTEREST THEREON ARE LIMITED OBLIGATIONS
OF THE ISSUER. THE PRINCIPAL OF, PREMIUM, IF ANY, AND INTEREST ON THE BONDS ARE
PAYABLE SOLELY FROM THE PAYMENTS ON THE LOAN AND FROM ANY OTHER MONEYS
CONSTITUTING A PART OF THE TRUST ESTATE UNDER THE INDENTURE.
Transfer. This Bond is transferable by the registered Owner hereof in
person or by such Owner's 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.
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<PAGE>
During such time as a Bond is not rated by a Rating Agency in one of
the three highest rating categories (without regard to numerical or other
modifiers), (x) such Bond may only be transferred (i) by an assignment to a bank
or other financial institution issuing a letter of credit or like instrument in
connection with the Bonds; or (ii) to one or more Institutional Investors if, in
each instance, the Issuer and the Trustee receive from the transferee its
agreement to the transfer restrictions set forth in this paragraph in connection
with subsequent transfers of the Bond and (y) any legal or beneficial interest
in such Bond may only be transferred upon prior written notice to the Borrower.
The Bonds are issuable as fully registered Bonds in Authorized
Denominations as provided in the Indenture.
Redemption of Bonds. The Bonds are subject to redemption by the Issuer
prior to maturity as follows:
Mandatory Redemption. The Bonds shall be subject to mandatory
redemption, at a price equal to the principal amount of the Bonds being
redeemed, together with accrued interest to the date of redemption and shall be
redeemed, prior to maturity as follows:
(a) in whole or in part on the first Interest Payment Date, or if
after the Conversion Date, on the next Business Day for which adequate notice
can be given in accordance with the Indenture, after and to the extent that
Insurance Proceeds or a Condemnation Award in connection with the Project are
deposited in the Revenue Fund (i) if the conditions of the Indenture have not
been met for a transfer of such funds to the Replacement and Capital Cost Fund,
upon a determination in accordance with the Indenture that such funds are not to
be used to repair or restore the Project, or (ii) upon transfer of such funds
immediately after the Project Completion Date in accordance with the Indenture;
or
(b) in whole upon any Remarketing Date if the conditions to
remarketing set forth in the Indenture hereof are not satisfied, or if the
Remarketing Agent does not successfully remarket all Bonds tendered or deemed
tendered on such Remarketing Date, or if the full purchase price thereof is not
paid or available for payment to the tendering Owners according to the Indenture
hereof, or if all interest and principal payable on the Bonds up to and
including the Remarketing Date has not been fully paid; or
(c) in whole on the next ensuing Interest Payment Date not less than
45 days after the date of any Sale of the Project but only if the Sale of the
Project occurs on or before the initial Conversion Date and if the Owners of all
of the Outstanding Bonds elect redemption
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<PAGE>
by giving not less than thirty (30) days prior notice to the Trustee, the Issuer
and the Borrower of their election of redemption; or
(d) during any period when the Bonds are not rated by a Rating Agency
in one of the three highest rating categories, in whole upon a Determination of
Taxability, on the date specified by any Owner electing redemption in a written
notice delivered to the Borrower, the Issuer and the Trustee at least five (5)
Business Days prior to such date; or
(e) if the Bonds are not purchased in accordance with the Indenture
from funds made available in accordance with the Indenture, in whole on any
specified Interest Payment Date on or after May 1, 2007 if the Owners of all of
the Bonds elect redemption by giving not less than six (6) months' prior written
notice to the Trustee and the Borrower, which notice shall specify the Interest
Payment Date on which the Bonds are to be redeemed; or
(f) in whole in the event a Credit Facility is then in effect, on the
date specified by the Credit Facility Provider which shall be within sixty (60)
days of receipt by the Trustee of written notice from the Credit Facility
Provider advising of the occurrence of an event of default under the
Reimbursement Agreement and directing the redemption of the Bonds.
Optional Redemption. On or after May 1, 2002, the Bonds shall be
subject to redemption prior to maturity in whole, at the direction of the
Borrower given not less than thirty five (35) days in advance, on any Bond
Payment Date, at the redemption prices set forth below, expressed as percentages
of the principal amount of the Bonds to be redeemed together with accrued
interest to the redemption date
Period in Which Redeemed
(from May 1 of first-listed year to day
preceding May 1 in second-listed year) Redemption Price
------------------------------------- ----------------
2002-2003 104%
2003-2004 103%
2004-2005 102%
2005-2006 101%
2006 and at all times thereafter 100%
Remarketing in Lieu of Redemption. Upon either (i) an election by the
Owners of a redemption in whole of the Bonds pursuant to a Mandatory Redemption
in accordance with (c), (d) or (e) above, or (ii) an election by the Borrower of
a redemption in whole of the Bonds pursuant to an Optional Redemption, the Bonds
shall be redeemed on the date specified in the
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<PAGE>
notice to the Borrower, the Issuer and the Trustee from the Owners described in
(c), (d) or (e) above, or the Interest Payment Date selected by the Borrower in
connection with an Optional Redemption, unless the Borrower elects to remarket
the Bonds in lieu of redemption, which election shall be evidenced by the
delivery of written notice thereof to the Issuer and the Trustee at least five
days prior to the date on which the Bonds would otherwise be redeemed. The
purchase price of Bonds so remarketed in lieu of redemption shall be the
principal amount thereof, premium, if any, and all accrued and unpaid interest
and shall be payable on the date on which the Bonds would otherwise have been
redeemed.
Notice of Redemption. (a) Notice of Redemption shall be given by the
Trustee (x) by telephone, telegram or other electronic means, promptly confirmed
in writing, not less than thirty Business Days prior to the date fixed for
redemption of the Bonds if the redemption is to occur on or before the initial
Conversion Date and (y) in writing by mail not less than thirty days prior to
the date fixed for redemption if the redemption is to occur after the initial
Conversion Date.
(b) Notice of Redemption shall be given to the Owners of all Bonds to
be redeemed at their addresses appearing on the books of registry (except that
(i) an Owner opting for redemption pursuant to (c), (d) or (e) above shall be
deemed to have received Notice of Redemption, and (ii) an Owner which shall not
have notified the Registrar of its telephone, telex, telecopier or other number
for electronic notice shall only be entitled to notice in writing). After the
initial Conversion Date, receipt of such Notice of Redemption shall not be a
condition precedent to such redemption, and failure so to notify any of such
registered Owners shall not affect the validity of the proceedings for the
redemption of the Bonds.
(c) Any notice of optional redemption of Bonds given pursuant to the
Indenture may state that it is conditional upon receipt by the Trustee of moneys
sufficient to pay the redemption price of such Bonds or upon the satisfaction of
any other condition, or that it may be rescinded upon the occurrence of any
other event, and any conditional notice so given may be rescinded at any time
before payment of such redemption price if any such condition so specified is
not satisfied or if any such other event occurs. Notice of such rescission shall
be given by the Trustee to affected Owners as promptly as practicable upon the
failure of such condition or the occurrence of such other event.
(d) Notice of Redemption having been given as provided above and all
conditions precedent, if any, specified in such notice having been satisfied,
the Bonds or portions thereof so to be redeemed shall become due and payable on
the date fixed for redemption at the redemption price specified therein plus any
accrued interest to, but not including, the redemption date, and upon
presentation and surrender thereof at the place specified in such
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<PAGE>
Notice, such Bonds or portions thereof shall be paid at the redemption price,
plus any accrued interest to, but not including, the redemption date. On and
after the redemption date (unless the Issuer shall default in the payment of the
redemption price and accrued interest), (i) such Bonds shall cease to bear
interest, and (ii) such Bonds shall no longer be considered as Outstanding under
the Indenture.
Selection of Bonds To Be Redeemed. (a) If less than all the Bonds are
to be redeemed, the particular Bonds or portions of Bonds to be redeemed shall
be selected by the Trustee, (i) if on or before the Conversion Date, in such
manner as the Trustee in its discretion may deem fair and appropriate so that
Bonds are redeemed, as nearly as practicable, from each Owner, if there is more
than one Owner, on a pro rata basis according to the principal amount of Bonds
represented by each Bond Outstanding, and (ii) if after the initial Conversion
Date, by lot in such manner as the Trustee in its discretion may deem fair and
appropriate.
Enforcement. Only the Acting Party shall have the right to enforce the
provisions of this Bond or the Indenture or to institute any action to enforce
the covenants herein or therein, or to take any action with respect to any Event
of Default under the Indenture, or to institute, appear in or defend any suit or
other proceedings with respect thereto, except as provided in the Indenture. If
an Event of Default occurs and is continuing, the principal of all Bonds then
outstanding may be declared due and payable by the Acting Party upon the
conditions and in the manner and with the effect provided in the Indenture. 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.
The Issuer, the Registrar, and any other person may treat the person
in whose name this Bond is registered on the books of registry as the Owner
hereof for the purpose of receiving payment as herein provided and for all other
purposes, whether or not this Bond be overdue, and no person shall be affected
by notice to the contrary.
Discharge. The Indenture prescribes the manner in which it may be
discharged and after which the Bonds shall be deemed to be paid and no longer be
secured by or entitled to the benefits of the Indenture, except for the purposes
of registration and exchange of Bonds and of such payment.
Modifications. Modifications or alterations of the Indenture, or of
any supplements thereto, may be made only to the extent and in the circumstances
permitted by the Indenture.
By its acceptance of this Bond, the Owner hereof agrees that it will
be bound by and accepts the provisions of the Indenture and the Loan Documents
as defined in the Loan
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<PAGE>
Agreement. This Bond shall not be valid or obligatory for any purpose until it
shall have been signed on behalf of the Issuer and such signature attested, by
the officer, and in the manner, provided in the Indenture, and authenticated by
a duly authorized officer of the Trustee, as Authenticating Agent.
It is hereby certified and recited that all conditions, acts and things
required by the Constitution or statutes of the State or by the Act or the
Indenture to exist, to have happened or to have been performed precedent to or
in the issuance of this Bond exist, have happened and have been performed and
that the issue of the Bonds, together with all other indebtedness of the Issuer,
is within every debt and other limit prescribed by said Constitution or
statutes.
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<PAGE>
IN WITNESS WHEREOF, the Harris County Housing Finance Corporation has
caused this Bond to be executed on its behalf by the facsimile signature of its
Authorized Representative, and attested to by the facsimile signature of its
Secretary, and its seal to be reproduced hereon, all as of the Effective Date.
HARRIS COUNTY HOUSING FINANCE HARRIS COUNTY
CORPORATION SEAL HOUSING FINANCE
CORPORATION
/s/ Gerald E. Redmon
President
Attest:
/s/ Travis R. Cooper
Secretary
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<PAGE>
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This Bond is one of the Bonds referred to in the within mentioned Indenture.
Date of Authentication:
TEXAS COMMERCE BANK NATIONAL
ASSOCIATION, as Trustee
By: /s/ Steven M. Horowitz
-----------------------------
Authorized Signatory
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<PAGE>
ASSIGNMENT
For value received, the undersigned do(es) hereby sell, assign and transfers
unto
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
(Name, Address and Tax Identification or Social
Security Number of Assignee)
the within-registered Bond and do(es) hereby irrevocably constitute and appoint,
attorney, to transfer the same on the registration books of the Trustee, with
full power of substitution in the premises.
Dated:
-------------------------------
Signature Guaranteed:
- - ---------------------------------------- --------------------------------------
NOTICE: Signature(s) must be guaranteed NOTICE: The signature on Assignment
by an eligible guarantor must correspond with the name(s) as
written on the face of the within
Bond in every particular without
alteration or enlargement or any
change whatsoever.
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