Agenda Item 6A4816-6105-6018.3
RESOLUTION NO. 13~02
A RESOLUTION PROVIDING FOR THE ISSUANCE BY THE CITY
OF ATLANTIC BEACH, FLORIDA OF ITS HEALTH CARE
FACILITIES REVENUE AND REFUNDING BONDS (FLEET
LANDING PROJECT), SERIES 2013A, IN AN AGGREGATE
PRINCIPAL AMOUNT NOT TO EXCEED $46,000,000, AND FOR A
LOAN BY THE CITY TO NAVAL CONTINUING CARE
RETIREMENT FOUNDATION, INC., A FLORIDA NOT-FOR-
PROFIT CORPORATION, IN A PRINCIPAL AMOUNT EQUAL TO
THE AGGREGATE PRINCIPAL AMOUNT OF SAID SERIES 2013A
BONDS, FOR THE PURPOSES OF (A) FINANCING OR
REFINANCING ALL OR ANY PART OF THE COST OF A CAPITAL
PROJECT (INCLUDING LAND) FOR THE CONTINUING CARE
RETIREMENT FACILITY KNOWN AS "FLEET LANDING" AS
DESCRIBED IN THIS RESOLUTION, (B) REFUNDING THE
OUTSTANDING CITY OF ATLANTIC BEACH, FLORIDA HEALTH
CARE FACILITIES REVENUE REFUNDING BONDS (FLEET
LANDING PROJECT), SERIES 1999, (C) REFUNDING THE
OUTSTANDING CITY OF ATLANTIC BEACH, FLORIDA
VARIABLE RATE DEMAND HEALTH CARE FACILITIES
REVENUE BONDS (FLEET LANDING PROJECT), SERIES 2006,
(D) FUNDING A DEBT SERVICE RESERVE FUND FOR THE
SERIES 2013A BONDS AND (E) PAYING A PORTION OF THE
COSTS OF ISSUING THE SERIES 2013A BONDS; PROVIDING FOR
THE RIGHTS OF THE HOLDERS OF THE SERIES 2013A BONDS
AND FOR THE PAYMENT THEREOF; AUTHORIZING THE
EXECUTION AND DELIVERY OF A TRUST INDENTURE AND
LOAN AGREEMENT; AUTHORIZING A NEGOTIATED SALE OF
THE SERIES 2013A BONDS, AND APPROVING THE CONDITIONS
AND CRITERIA FOR SUCH SALE; AUTHORIZING THE
EXECUTION AND DELIVERY OF A BOND PURCHASE
AGREEMENT WITH RESPECT TO THE SERIES 2013A BONDS;
AUTHORIZING A PRELIMINARY OFFICIAL STATEMENT AND A
FINAL OFFICIAL STATEMENT WITH RESPECT TO THE SERIES
20 13A BONDS; AUTHORIZING THE EXECUTION AND
DELIVERY OF THE SERIES 2013A BONDS AND OTHER
RELATED INSTRUMENTS AND CERTIFICATES; MAKING
CERTAIN OTHER COVENANTS AND AGREEMENTS IN
CONNECTION WITH THE ISSUANCE OF THE SERIES 2013A
BONDS; AND PROVIDING FOR AN EFFECTIVE DATE.
AGENDA ITEM# 6A
FEBRUARY 11, 2013
AGENDA ITEM# 6A
FEBRUARY II, 2013
BE IT RESOLVED BY THE CITY COMMISSION OF THE CITY OF
ATLANTIC BEACH, FLORIDA:
SECTION 1. AUTHORITY FOR THIS RESOLUTION. This Resolution is
adopted pursuant to the Constitution of the State of Florida, Chapter 159, Pmi II, Florida
Statutes, as amended and supplemented, and other applicable provisions of law.
SECTION 2. DEFINITIONS. Unless the context otherwise reqmres, the
terms defined in this section shall have the meanings specified in this section. Words impmiing
the singular shall include the plural, words importing the plural shall include the singular, and
words impmiing persons shall include corporations and other entities or associations.
"Act" means the Constitution of the State of Florida, Chapter 159, Pmi II, Florida
Statutes, as amended from time to time, and other applicable provisions of law.
"Bond Purchase Agreement" means the Bond Purchase Agreement among the
Issuer, the Borrower and the Underwriter, substantially in the form attached hereto as Exhibit E,
as amended or supplemented from time to time.
"Borrower" means Naval Continuing Care Retirement Foundation, Inc., a Florida
not-for-profit corporation and an organization described in Section 501(c)(3) of the Code, and its
lawful successors and assigns, to the extent permitted by the Loan Agreement.
"City" means the City of Atlantic Beach, Florida, an incorporated municipality of
the State.
"City Commission" means the City Commission of the City.
"Code" means the Intemal Revenue Code of 1986, as amended.
"Facilities" means the continuing care retirement facilities known as "Fleet
Landing" which are located at One Fleet Landing Boulevard in Atlantic Beach, Florida and all
land, buildings, structures, improvements, equipment, fixtures, machinery, fumiture, fumishings
and other real and personal property now or hereafter attached to, or located in, or used in
connection with, any such land, buildings, structures or improvements and all additions thereto,
substitutions therefor and replacements thereof, whether now owned or hereafter acquired by the
Bonower.
"Indenture" means the Indenture of Trust between the Issuer and the Trustee,
substantially in the form attached hereto as Exhibit A, as amended or supplemented from time to
time.
"Issuer" means the City.
"Loan Agreement" means the Loan Agreement between the Issuer and the
Bonower, substantially in the form attached hereto as Exhibit B, as amended or supplemented
from time to time.
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"Mayor" means the Mayor or, in the Mayor's absence, such other officer of the
Issuer as may be duly authorized by the Issuer to act on his behalf.
"Preliminary Official Statement" means the Preliminary Official Statement
relating to the Series 2013A Bonds, substantially in the form attached hereto as Exhibit D.
"Project" means the acquisition of approximately two acres of land to be used as
the future site of a facility operations center, located immediately south/southwest of and
adjacent to the existing Facilities.
"Refunded Bonds" means, collectively, the Series 1999 Bonds and the Series
2006 Bonds.
"Series 1999 Bonds" means the Issuer's outstanding Health Care Facilities
Revenue Refunding Bonds (Fleet Landing Project), Series 1999.
"Series 2006 Bonds" means the Issuer's outstanding Variable Rate Demand
Health Care Facilities Revenue Bonds (Fleet Landing Project), Series 2006.
"State" means the State of Florida.
"Trustee" means U.S. Banl( National Association, Jacksonville, Florida, or a
national banking association or trust company at the time serving as corporate trustee under the
provisions of the Indenture.
"Underwriter" means B.C. Ziegler and Company, as the underwriter of the Series
2013A Bonds.
SECTION 3. FINDINGS. It is hereby ascertained, determined and declared as
follows:
A. The Issuer is an incorporated municipality of the State and is a "local agency"
duly authorized and empowered by the Act to finance the acquisition, construction,
reconstruction, improvement, rehabilitation, renovation, expansion and enlargement, or additions
to, furnishing and equipping of any capital project, including any "project" (as defined or
described in the Act), including land, rights in land, buildings and other structures, machinery,
equipment, appurtenances and facilities incidental thereto, and other improvements necessary or
convenient therefor, and to obtain funds to finance or refinance the cost thereof by the issuance
of its revenue bonds, as the case may be, for the purposes, among others, of enhancing and
expanding the health care and senior living industry, improving the prosperity and welfare of the
State and its inhabitants, improving living conditions and health care in the State, increasing
purchasing power and opportunities for gainful employment, and otherwise providing for and
contributing to the health, safety and welfare of the people of the State.
B. On December 16, 1999, pursuant to the provisions of the Act, the
Authority issued the Series 1999 Bonds for the purpose of refunding ce1iain indebtedness which
was originally issued for the purpose of financing the costs of certain capital improvements to
the Facilities. On January 30, 2007, pursuant to the provisions of the Act, the Issuer issued the
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Series 2006 Bonds for the purpose of financing the costs of certain capital improvements to the
Facilities.
C. The Bonower has requested that the Issuer issue the Series 2013A Bonds for
the purposes of (i) paying or reimbursing the Borrower for all or a part of the cost of the Project,
(ii) refunding the Refunded Bonds, (iii) funding a debt service reserve fund and (iv) paying costs
of issuing the Series 2013A Bonds.
D. To reduce the transaction and financing costs relating to the issuance of
separate bond issues in separate cities, the Borrower has requested the Issuer to finance the
Project through the issuance of the Series 20 13A Bonds, with the proceeds of the Series 20 13A
Bonds to be loaned by the Issuer to the Bonower to finance the costs of the pmiions of the
Project located in the City and in the City of Jacksonville, Florida (both of which are located in
Duval County, Florida (the "County")). The Bonower has represented to the Issuer that
financing the Project pursuant to a single financing plan will result in substantial cost savings for
the Bonower in connection with the Project.
E. The Series 2013A Bonds will be secured by an obligation of the Borrower in
the Loan Agreement to make payments sufficient to pay, among other things, the principal of
and premium, if any, and interest on such Bonds when and as the same become due.
F. In compliance with Section 147(f) of the Code and the Treasury Regulations
thereunder, notice of a public hearing pertaining to the issuance of the Series 2013A Bonds, the
refunding of the Refunded Bonds, the financing of the Project and the location and nature of the
Project has been duly given in the same manner as required by the Issuer for the adoption of
resolutions generally, including publication of notice not less than foutieen (14) days prior to
such public hearing in a newspaper of general circulation in the City. Such public hearing was
held by the Issuer on February 11, 2013, and interested individuals were provided a reasonable
oppmiunity to express their views, both orally and in writing, on the proposed issuance of the
Series 2013A Bonds, the refunding of the Refunded Bonds, the financing of the Project and the
location and nature of the Project.
G. The Issuer has been advised that the refunding of the Refunded Bonds and the
financing of all or a pmi of the cost of the Project by the Issuer will be in furtherance of the
purposes of the Act in that it will enhance and expand the health care and senior housing
industries, promote and foster the economic growth and development of the Issuer and the State,
advance the public purposes providing modem and efficient continuing care facilities in the City
and the County, improve living conditions and health care and will serve other predominantly
public purposes as set fmih in the Act. The Project is appropriate to the needs and circumstances
of and shall make a significant contribution to the economic growth and development ofthe City,
the County and the State, shall preserve and provide gainful employment and shall serve a public
purpose by advancing the economic prosperity and the general welfare of the City, the County,
the State and its people as stated in Section 159.26, Florida Statutes, as amended.
H. Based on representations made by the Bonower, the City and other local
agencies have been and will continue to be able to cope satisfactorily with the impact of the
Facilities and have been and will be able to provide, or cause to be provided when needed, the
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public facilities, including utilities and public services, that have been or will be necessary for
the construction, operation, repair and maintenance of the Facilities and on account of any
increases in population or other circumstances resulting therefrom.
I. Adequate provision has been made in the documents attached hereto for a loan
by the Issuer to the Borrower to finance all or a portion of the cost of the Project and to refund
the Refunded Bonds, for the operation, repair and maintenance of the Facilities at the expense of
the Borrower and for the repayment by the Bmrower of the loan in installments sufficient to pay
the principal of, premium, if any, and the interest on the Series 2013A Bonds and all costs and
expenses relating thereto in the amounts and at the times required, and for the payment by the
BoiTower of all costs incutTed by the Issuer in connection with the financing of all or a pmiion of
the cost of the Project, the refunding of the Refunded Bonds and the administration of the
Facilities.
J. Based upon the financial information heretofore furnished to the Issuer by the
Bonower, the Borrower is financially responsible and fully capable and willing to serve the
purposes of the Act and fulfill its obligations under the proposed financing agreements for the
Project and under any other agreements to be made in connection with the issuance of the Series
2013A Bonds and the use of the Bond proceeds for financing all or a part of the cost of the
Project and the refunding of the Refunded Bonds, including the obligation to pay loan payments
or other payments in an amount sufficient in the aggregate to pay all of the interest, principal and
redemption premiums, if any, on the Series 20 13A Bonds, in the amounts and at the times
required, the obligation to operate, repair and maintain the Project at the Borrower's own
expense, and such other responsibilities as may be imposed under such agreements, due
consideration having been given to the financial condition of the Bonower, its ratio of current
assets to cunent liabilities, net wmih, earnings trends and coverage of all fixed charges, the
nature of the industry or business and of the activity involved, the inherent stability thereof and
other factors determinative of the capabilities of the Borrower financially and otherwise, to fulfill
its obligations consistently with the purposes of the Act.
K. Based on representations made by the Borrower, the cost of the Project and
the cost of the Projects paid from the proceeds of the Refunded Bonds are "costs" of a "project"
within the meaning ofthe Act. All ofthe proceeds of the Series 2013A Bonds will be applied to
the financing of a portion of the cost of the Project, refunding the Refunded Bonds, financing a
debt service reserve fund and paying costs of issuance of the Series 20 13A Bonds, as provided
herein.
L. Based on information supplied by the Borrower, the best interests of the
inhabitants of the City will be served, and the public purposes of the Act will be advanced, by the
financing all or all or a pmiion of the cost of the Project and the refunding of the Refunded
Bonds in the manner described in the Loan Agreement and the Indenture.
M. The principal of, premium, if any, and interest on the Series 2013A Bonds,
and all sinking fund and other payments required to be made by the Issuer under the provisions
of the Indenture and the Loan Agreement, shall be payable solely from ce1iain moneys pledged
under the Indenture, including but not limited to certain payments of the BoiTower under the
Loan Agreement. The Series 2013A Bonds shall not be deemed to constitute a debt, liability or
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FEBRUARY II, 2013
obligation of the Issuer, of the County or of the State or any political subdivision thereof, or a
pledge of the faith and credit or the taxing power of the Issuer, of the County or of the State or
any political subdivision thereof, but shall be payable solely from the revenues and proceeds
pledged thereto under the Indenture. The issuance of the Series 20 13A Bonds shall not directly
or indirectly, or contingently, obligate the Issuer, the County or the State or any political
subdivision thereof, to levy or pledge any form of taxation whatever therefor or to make any
appropriation for the payment thereof. No holder or owner of any of the Series 2013A Bonds
shall ever have any right to compel the exercise of the ad valorem taxing power or the levy or
collection of any ad valorem taxes, directly or indirectly, for the payment of any of the principal
of, premium, if any, or interest on the Series 2013A Bonds.
N. The payments to be made by the Borrower under the Loan Agreement will be
sufficient to pay all principal of, premium, if any, and interest on the Series 20 13A Bonds, as the
same shall become due, and to make all other payments required by the Loan Agreement and the
Indenture.
0. A negotiated sale of the Series 2013A Bonds is required and necessary and is
in the best interest of the Issuer for the following reasons: the Series 20 13A Bonds will be
special and limited obligations of the Issuer payable out of moneys derived by the Issuer from
the Bonower or as otherwise provided herein and will be secured by funds and collateral of the
Borrower; the Bonower will be required to pay all costs of the Issuer in connection with the
financing; the cost of issuance of the Series 2013A Bonds, which must be borne directly or
indirectly by the Borrower would most likely be greater if the Series 2013A Bonds are sold at
public sale by competitive bids than if the Series 2013A Bonds are sold at negotiated sale, and
there is no basis, considering prevailing market conditions, for any expectation that the terms and
conditions of a sale of the Series 20 13A Bonds at public sale by competitive bids would be any
more favorable than at negotiated sale; because prevailing market conditions are uncetiain, it is
desirable to sell the Series 2013A Bonds at a predetermined price; and revenue bonds having the
characteristics of the Series 2013A Bonds are typically sold at negotiated sale under prevailing
market conditions.
P. The Underwriter has orally agreed with the Borrower to use its best effmis to
submit to the Issuer and the Bon·ower an offer to purchase the Series 2013A Bonds in
substantially the fmm of the Bond Purchase Agreement upon terms acceptable to the Issuer and
the Bonower as hereinafter authorized, and it is necessary and appropriate to authorize a
negotiated sale of the Series 2013A Bonds to the Underwriter and to authorize the execution and
delivery of the Bond Purchase Agreement upon the terms hereinafter provided.
Q. It is appropriate that the Issuer approve the use and distribution by the
Undetwriter of the Preliminary Official Statement, and that the Issuer authorize the distribution
of a final official statement prior to the issuance and delivery of the Series 2012 Bonds. For this
purpose, it is appropriate that the Preliminary Official Statement be approved and that
preparation and distribution of a final official statement in the manner hereinafter provided be
authorized.
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R. All conditions precedent to the financing of the Project have been satisfied, or
will be satisfied prior to the delivery of the Series 2013A Bonds, and the issuance of the Series
2013A Bonds will otherwise comply with all of the provisions of the Act.
SECTION 4. FINANCING OF PROJECT AND REFUNDING OF
REFUNDED BONDS AUTHORIZED. The financing by the Issuer of the Project and the
refunding of the Refunding Bonds in the manner provided herein is hereby authorized.
SECTION 5. AUTHORIZATION OF THE SERIES 2013A BONDS. For
the purpose of providing funds to (i) pay or reimburse the cost of the Project, (ii) refund the
Refunded Bonds, (ii) fund a debt service reserve fund and (iv) pay certain costs of issuance of
the Series 2013A Bonds, and subject and pursuant to the provisions hereof, the issuance of the
Series 2013A Bonds in an aggregate principal amount of not to exceed $46,000,000 is hereby
authorized; provided, however, that no series of Bonds shall be issued unless and until (i) the
City Attorney has rendered his legal opinion relating to the issuance of the of Series 2013A
Bonds and (ii) Foley & Lardner LLP, or other nationally recognized bond counsel, has rendered
an opinion to the effect (among other things) that the interest on the Series 20 13A Bonds will be
excluded from gross income for federal income tax purposes under existing laws of the United
States of America at the time of the delivery of the Series 2013A Bonds.
The Series 2013A Bonds shall be in the aggregate principal amounts, dated such
dates, shall bear interest at such rates, shall be payable or shall mature on such dates and in such
amounts, shall be issued in such denominations, shall be subject to optional and mandatory
redemption and tender at such time or times, and upon such tetms and conditions, shall be
payable at the place or places and in the manner, shall be executed, authenticated and delivered,
shall otherwise be in such forms, and subject to such terms and conditions, all as provided in the
Indenture and Bond Purchase Agreement.
The Series 2013A Bonds and the premium, if any, and the interest thereon shall
not be deemed to constitute a general debt, liability or obligation of the Issuer, the County or the
State, or of any political subdivision thereof, or a pledge of the faith and credit of the Issuer, the
County or the State or of any political subdivision thereof, but shall be payable solely from the
Trust Estate (as defined in the Indenture) provided therefor under the Indenture, and the Issuer is
not obligated to pay the Series 2013A Bonds or the interest thereon except from such Trust
Estate pledged therefor and neither the faith and credit of the Issuer nor the faith and credit or
taxing power of the Issuer, the State, the County or any political subdivision thereof is pledged to
the payment of the principal of, premium, if any, or interest on the Series 2013A Bonds.
SECTION 6. AUTHORIZATION OF EXECUTION AND DELIVERY OF
THE INDENTURE. The Indenture, substantially in the form attached hereto as Exhibit A with
such insubstantial changes, corrections, insertions and deletions as may be approved by the
Mayor, such approval to be evidenced conclusively by their execution thereof, is hereby
approved and authorized; the Issuer hereby authorizes and directs the Mayor to date and execute
and the City Clerk to attest, under the official seal of the Issuer, the Indenture, and to deliver the
Indenture to the Trustee; and all of the provisions of the Indenture, when executed and delivered
by the Issuer, as authorized herein, and by the Trustee, shall be deemed to be a part of this
Resolution as fully and to the same extent as if incorporated verbatim herein.
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SECTION 7. AUTHORIZATION OF EXECUTION AND DELIVERY OF
THE LOAN AGREEMENT. The Loan Agreement, substantially in the form attached hereto as
Exhibit B with such insubstantial changes, corrections, insetiions and deletions as may be
approved by the Mayor, such approval to be evidenced conclusively by their execution thereof, is
hereby approved and authorized; the Issuer hereby authorizes and directs the Mayor to date and
execute and the City Clerk to attest, under the official seal of the Issuer, the Loan Agreement,
and to deliver the Loan Agreement to the Borrower; and all of the provisions of the Loan
Agreement, when executed and delivered by the Issuer, as authorized herein, and by the
Borrower, shall be deemed to be a pati of this Resolution as fully and to the same extent as if
incorporated verbatim herein.
SECTION 8. NEGOTIATED SALE OF SERIES 2013A BONDS;
AUTHORIZATION OF EXECUTION AND DELIVERY OF THE BOND PURCHASE
AGREEMENT. Subject to the satisfaction of the conditions set fmih in this Section, a
negotiated sale of the Series 2013A Bonds is hereby authorized. The Mayor is hereby authorized
and directed to award the sale of the Series 2013A Bonds to the Underwriter pursuant to the
provisions of the Bond Purchase Agreement, subject to all the following conditions:
A. Receipt by the Mayor of the Bond Purchase Agreement providing for, among
other things, (i) the issuance of the Series 2013A Bonds in an aggregate principal amount which,
together with the cumulative aggregate principal amount of any Bonds previously issued by the
Issuer, shall not to exceed $46,000,000, (ii) an underwriter's discount not in excess of 2.20% of
the par amount of such Series 2013A Bonds, (iii) a true interest cost not to exceed 6.50% per
annum, and (iv) the final maturity date of such Bonds to be no later than thirty-one (31) years
from the dated date of such Series 2013A Bonds.
B. Receipt by the Mayor from the Underwriter of a disclosure statement and
truth-in-bonding information complying with Section 218.385, Florida Statutes.
Upon satisfaction of the foregoing conditions, the Bond Purchase Agreement,
with such other insubstantial changes, corrections, insetiions and deletions as may be approved
by the Mayor, such approval to be evidenced conclusively by the Mayor's execution thereof, is
approved and authorized; the Issuer hereby authorizes and directs the Mayor to date and execute
the Bond Purchase Agreement and to deliver the Bond Purchase Agreement to the Underwriter;
and all of the provisions of the Bond Purchase Agreement, when executed and delivered by the
Issuer as authorized herein and by the Borrower and the Underwriter, shall be deemed to be a
pati of this Resolution as fully and to the same extent as if incorporated verbatim herein.
SECTION 9. APPROVAL OF PRELIMINARY OFFICIAL STATEMENT
AND AUTHORIZATION OF FINAL OFFICIAL STATEMENT. The form ofthe Preliminary
Official Statement, with such omissions, insertions and variations as may be necessary to
complete the Preliminary Official Statement and allow the Mayor to deem the Preliminary
Official Statement final as hereinafter described, is authorized to be used in connection with the
sale of the Series 2013A Bonds. Although the Issuer hereby consents to and approves the use
and distribution by the Underwriter of the Preliminary Official Statement, the Issuer has not
patiicipated in the preparation of the Preliminary Official Statement and makes no
representations as to its accuracy or completeness other than in respect to any information
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contained therein under the caption "THE ISSUER" and under the caption "LITIGATION-The
Issuer." The Mayor is hereby authorized to deem the Preliminary Official Statement final as of
its date on behalf of the Issuer for purposes of Rule 15c2-12 of the Securities and Exchange
Commission (except for such omissions permitted by such Rule), and to execute a certificate to
that effect to be delivered to the Underwriter. A final official statement in substantially the form
of the Preliminary Official Statement, with such omissions, insetiions and variations as may be
necessary and/or desirable and approved by the Mayor prior to the release thereof, is hereby
authorized for use and distribution by the Underwriter prior to the issuance and delivery of the
Series 2013A Bonds.
SECTION 10. AUTHORIZATION OF EXECUTION OF OTHER
CERTIFICATES AND INSTRUMENTS. The Mayor and the City Clerk are hereby authorized
and directed, either alone or jointly, under the official seal of the Issuer, to execute and deliver
certificates of the Issuer cetiifying such facts as counsel for the Issuer, counsel to the
Underwriter or Bond Counsel shall require in connection with the issuance, sale and delivery of
the Series 2013A Bonds, and to execute and deliver such other instruments, including but not
limited to, tax cetiificates and agreements, deeds, assignments, bills of sale and financing
statements, as shall be necessary or desirable to perfmm the Issuer's obligations under the Loan
Agreement, the Indenture and the Bond Purchase Agreement, and to consummate the
transactions hereby authorized.
SECTION 11. NO PERSONAL LIABILITY. No representation, statement,
covenant, warranty, stipulation, obligation or agreement herein contained, or contained in the
Series 2013A Bonds, the Loan Agreement, the Indenture, the Bond Purchase Agreement, or in
any certificate or other instrument to be executed on behalf of the Issuer in connection with the
issuance ofthe Series 2013A Bonds, shall be deemed to be a representation, statement, covenant,
waiTanty, stipulation, obligation or agreement of any member, officer, employee or agent of the
Issuer in his or her individual capacity, and none of the foregoing persons nor any officer of the
Issuer executing the Series 2013A Bonds, the Loan Agreement, the Indenture, the Bond Purchase
Agreement, or any cetiificate or other instrument to be executed in connection with the issuance
of the Series 2013A Bonds shall be liable personally thereon or be subject to any personal
liability or accountability by reason of the execution or delivery thereof.
SECTION 12. APPOINTMENT OF BOND TRUSTEE. U.S. Bank National
Association, a national banking association, with a designated corporate trust office located in
Jacksonville, Florida, is hereby appointed as the Bond Trustee (the "Bond Trustee") under the
Indenture relating to the Series 2013A Bonds and as registrar and paying agent with respect to
the Series 2013A Bonds.
SECTION 13. VALIDATION. The Series 2013A Bonds shall not be required
to be validated pursuant to Chapter 75, Florida Statutes, as amended; provided, however, that if
required by counsel to the Issuer, counsel to the Borrower or Bond Counsel, the Series 2013A
Bonds may be validated and in such event Issuer's counsel is hereby authorized, at the expense
of the Borrower, to prepare validation pleadings on behalf of the Issuer and to take any and all
action as Issuer's counsel may deem necessary or desirable for the validation of such Series
2013A Bonds.
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SECTION 14. NO THIRD PARTY BENEFICIARIES. Except as provided
herein or in the Series 2013A Bonds, the Loan Agreement, the Indenture, the Bond Purchase
Agreement, and any assignment thereof, nothing in this Resolution or in such documents,
expressed or implied, is intended or shall be construed to confer upon any person, firm,
corporation or other organization, other than the Issuer, the Bon-ower, the Bond Trustee, the
Underwriter and the owners from time to time of the Series 2013A Bonds any right, remedy or
claim, legal or equitable, under and by reason of this Resolution or any provision hereof or of
such documents; this instrument, such documents and all provisions hereof and thereof being
intended to be and being for the sole and exclusive benefit of the Issuer, the Bon-ower, the Bond
Trustee and the owners from time to time of the Series 2013A Bonds.
SECTION 15. PREREQUISITES PERFORMED. All acts, conditions and
things relating to the passage of this Resolution, to the issuance, sale and delivery of the Series
2013A Bonds, to the execution and delivery of the Loan Agreement, the Indenture and the Bond
Purchase Agreement, required by the Constitution or other laws of the State, to happen, exist and
be performed precedent to the passage hereof, and precedent to the issuance, sale and delivery of
the Series 2013A Bonds, to the execution and delivery of the Loan Agreement, the Indenture and
the Bond Purchase Agreement, have either happened, exist and have been performed as so
required or will have happened, will exist and will have been performed prior to such execution
and delivery.
SECTION 16. COMPLIANCE WITH CHAPTER 218, PART III, FLORIDA
STATUTES. The Issuer hereby approves and authorizes the completion and filing with the
Division of Bond Finance, Department of General Services of the State of Florida, at the expense
of the Bon-ower, of Bond Information Form BF 2003, and any other acts as may be necessary to
comply with Chapter 218, Part III, Florida Statutes, as amended.
SECTION 17. GENERAL AUTHORITY. The comm1sswners, officials,
attorneys, engineers or other agents or employees of the Issuer are hereby authorized to do all
acts and things required of them by this Resolution, the Series 2013A Bonds, the Loan
Agreement, the Indenture, and the Bond Purchase Agreement, and to do all acts and things which
are desirable and consistent with the requirements hereof or ofthe Series 2013A Bonds, the Loan
Agreement, and the Indenture, for the full, punctual and complete performance of all the terms,
covenants and agreements contained herein or in the Series 2013A Bonds, the Loan Agreement
and the Indenture.
SECTION 18. SEVERABILITY OF INVALID PROVISIONS. If any one or
more of the covenants, agreements or provisions herein contained shall be held contrary to any
express provisions of law, though not expressly prohibited, or shall for any reason whatsoever be
held invalid, then such covenants, agreements or provisions shall be null and void and shall be
deemed separable from the remaining covenants, agreements or provisions, and shall in no way
affect the validity of any of the other provisions hereof or of the Series 2013A Bonds issued
under the Indenture.
SECTION 19. REPEALING CLAUSE. All resolutions or pmis thereof in
conflict herewith, to the extent of such conflict, are hereby superseded and repealed.
10
4816-6105-6018.3
[Remainder of this page intentionally left blank.]
11
4816-6105-6018.3
AGENDA ITEM# 6A
FEBRUARY II, 2013
SECTION 20.
immediately upon its adoption.
AGENDA ITEM# 6A
FEBRUARY 11,2013
EFFECTIVE DATE. This Resolution shall take effect
PASSED AND ADOPTED this 11th day of February, 2013.
(OFFICIAL SEAL)
ATTEST:
Donna L. Bartle, CMC
City Clerk
CITY OF ATLANTIC BEACH, FLORIDA
By: _____________ _
Mike Borno
Mayor
APPROVED AS TO FORM AND CORRECTNESS:
Alan C. Jensen, Esquire
City Attorney
4816-6105-6018.3
12
Exhibit A -Indenture of Trust
Exhibit B -Loan Agreement
Exhibit C -Bond Purchase Agreement
Exhibit D -Official Statement
4816-6105-6018.3
EXHIBIT LIST
AGENDA ITEM# 6A
FEBRUARY II, 2013
4816-6105-6018.3
EXHIBIT A
INDENTURE OF TRUST
4812-3022-2866.4
INDENTURE OF TRUST
by and among
CITY OF ATLANTIC BEACH, FLORIDA
and
U.S. BANK NATIONAL ASSOCIATION,
AS BOND TRUSTEE
Dated as of Aprill, 2013
RELATING TO
CITY OF ATLANTIC BEACH, FLORIDA
F&L Draft of2/5/2013
HEALTH CARE FACILITIES REVENUE AND REFUNDING BONDS
(FLEET LANDING PROJECT),
SERIES 2013A
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS
Page
SECTION 1.01. DEFINITIONS .................................................................................. 15
SECTION 1.02. RECITAL INCORPORATION ......................................................... 15
ARTICLE II
AUTHORIZATION, TERMS, EXECUTION AND ISSUANCE OF BONDS
SECTION 2.0 1.
SECTION 2.02.
SECTION 2.03.
SECTION 2.04.
SECTION 2.05.
SECTION 2.06.
SECTION 2.07.
SECTION 2.08.
SECTION 2.09.
SECTION 2.10.
SECTION 2.11.
SECTION 2.12.
SECTION 2.13.
SECTION 3.01.
SECTION 3.02.
SECTION 3.03.
SECTION 3.04.
SECTION 3.05.
SECTION 3.06.
SECTION 3.07.
SECTION 3.08.
4812-3022-2866.4
AUTHORIZED AMOUNT OF BONDS .......................................... 16
ALL BONDS EQUALLY AND RATABLY SECURED,
BONDS NOT AN OBLIGATION OF ISSUER ......................... 16
AUTHORIZATION OF BONDS ...................................................... 16
EXECUTION OF BONDS, SIGNATURES ..................................... 17
REGISTRATION AND EXCHANGE OF BONDS;
PERSONS TREATED AS OWNERS ........................................ 18
LOST, STOLEN, DESTROYED, AND MUTILATED
BONDS ....................................................................................... 18
DELIVERY OF BONDS .................................................................. 19
BOND TRUSTEE'S AUTHENTICATION CERTIFICATE ........... 20
NO ISSUANCE OF ADDITIONAL BONDS .................................. 20
CANCELLATION AND DESTRUCTION OF BONDS BY
THE BOND TRUSTEE .............................................................. 20
BOOK ENTRY ONLY SYSTEM ..................................................... 20
SUCCESSOR SECURITIES DEPOSITORY; TRANSFERS
OUTSIDE BOOK ENTRY ONLY SYSTEM ............................ 21
PAYMENTS TO CEDE & CO ......................................................... 22
ARTICLE III
REVENUES AND FUNDS
APPLICATION OF PROCEEDS OF BONDS ................................. 23
CREATION OF THE BOND FUND ................................................ 23
PAYMENTS INTO THE BOND FUND .......................................... 23
USE OF MONEYS IN THE PRINCIPAL ACCOUNT AND
THE INTEREST ACCOUNT ..................................................... 24
CUSTODY OF THE BOND FUND ................................................. 24
PROJECT FUND .............................................................................. 24
COMPLETION CERTIFICATE ....................................................... 25
CREATION OF THE RESERVE FUND ......................................... 25
SECTION 3.09.
SECTION 3.10.
SECTION 3.11.
SECTION 3.12.
SECTION 3.13.
SECTION 3.14.
SECTION 3.15.
SECTION 3.16.
SECTION 3.17.
SECTION 4.01.
SECTION 4.02.
SECTION 4.03.
SECTION 4.04.
SECTION 4.05.
SECTION 4.05.
SECTION 4.07.
SECTION 4.08.
SECTION 5.01.
SECTION 5.02.
SECTION 5.03.
SECTION 5.04.
SECTION 5.05.
SECTION 5.06
SECTION 5.07.
SECTION 5.08.
4812-3022-2866.4
PAYMENTS INTO THE RESERVE FUND ................................... 25
USE OF MONEYS IN THE RESERVE FUND ............................... 25
CUSTODY OF THE RESERVE FUND ........................................... 26
NONPRESENTMENT OF BONDS ................................................. 26
BOND TRUSTEE'S AND PAYING AGENTS' FEES,
CHARGES, AND EXPENSES ................................................... 27
MONEYS TO BE HELD IN TRUST ............................................... 27
REPAYMENT TO THE OBLIGOR FROM THE FUNDS ............. 27
REBATE FUND ................................................................................ 28
COST OF ISSUANCE FUND .......................................................... 30
ARTICLE IV
COVENANTS OF THE ISSUER
PERFORMANCE OF COVENANTS; AUTHORITY ..................... 31
PAYMENTS OF PRINCIPAL, PREMIUM, IF ANY, AND
INTEREST .................................................................................. 3 1
SUPPLEMENTAL INDENTURES; RECORDATION OF
BOND INDENTURE AND SUPPLEMENTAL
INDENTURES ............................................................................ 31
LIEN OF BOND INDENTURE ........................................................ 32
RIGHTS UNDER THE LOAN AGREEMENT ............................... 32
TAX COVENANTS .......................................................................... 32
CHANGE IN LAW ........................................................................... 33
PROGRAM INVESTMENT ............................................................. 33
ARTICLE V
REDEMPTION OF BONDS
OPTIONAL REDEMPTION OF BONDS ........................................ 35
SINKING FUND REDEMPTION .................................................... 3 5
METHOD OF SELECTION OF BONDS IN CASE OF
PARTIAL REDEMPTION; REDEMPTION PRIORITY .......... 36
NOTICE OF REDEMPTION ............................................................ 36
BONDS DUE AND PAY ABLE ON REDEMPTION DATE;
INTEREST CEASES TO ACCRUE ........................................... 38
CANCELLATION ............................................................................ 3 8
PARTIAL REDEMPTION OF FULLY REGISTERED
BONDS ....................................................................................... 3 8
EXTRAORDINARY OPTIONAL REDEMPTION ......................... 38
11
ARTICLE VI
INVESTMENTS
SECTION 6.01. INVESTMENT OF BOND FUND, PROJECT FUND AND
RESERVE FUND MONEYS ..................................................... 40
SECTION 6.02. ALLOCATION AND TRANSFERS OF INVESTMENT
INCOME ..................................................................................... 40
SECTION 6.03. VALUATION OF PERMITTED INVESTMENTS ........................ .41
ARTICLE VII
DISCHARGE OF BOND INDENTURE
SECTION 7.01. DISCHARGE OF THE BOND INDENTURE ................................ .43
SECTION 8.0 1.
SECTION 8.02.
SECTION 8.03.
SECTION 8.04.
SECTION 8.05.
SECTION 8.06.
SECTION 8.07.
SECTION 8.08.
SECTION 8.09.
SECTION 8.10.
SECTION 8.11.
SECTION 8.12.
ARTICLE VIII
DEFAULTS AND REMEDIES
EVENTS OF DEFAULT .................................................................. 45
REMEDIES ON EVENTS OF DEFAULT ...................................... .45
MAJORITY OF BONDHOLDERS MAY CONTROL
PROCEEDINGS ......................................................................... 46
RIGHTS AND REMEDIES OF BONDHOLDERS ........................ .47
APPLICATION OF MONEYS ......................................................... 48
BOND TRUSTEE MAY ENFORCE RIGHTS WITHOUT
BONDS ....................................................................................... 49
BOND TRUSTEE TO FILE PROOFS OF CLAIM IN
RECEIVERSHIP, ETC ............................................................... 49
DELAY OR OMISSION NO WAIVER ........................................... 50
DISCONTINUANCE OF PROCEEDINGS ON DEFAULT,
POSITION OF PARTIES RESTORED ...................................... 50
ENFORCEMENT OF RIGHTS ........................................................ 50
UNDERTAKING FOR COSTS ........................................................ 51
WAIVER OF EVENTS OF DEFAULT ........................................... 51
ARTICLE IX
CONCERNING THE BOND TRUSTEE AND PAYING AGENTS
SECTION 9.0 1. DUTIES OF THE BOND TRUSTEE ............................................... 52
SECTION 9.02. FEES AND EXPENSES OF BOND TRUSTEE AND
PAYING AGENT ....................................................................... 56
SECTION 9.03. RESIGNATION OR REPLACEMENT OF BOND TRUSTEE ...... 56
SECTION 9.04. CONVERSION, CONSOLIDATION OR MERGER OF
BOND TRUSTEE ....................................................................... 57
SECTION 9.05. DESIGNATION AND SUCCESSION OF PAYING AGENT ........ 58
111
4812-3022-2866.4
ARTICLE X
SUPPLEMENTAL INDENTURES AND AMENDMENTS TO THE LOAN
AGREEMENT
SECTION 10.01. SUPPLEMENTAL INDENTURES NOT REQUIRING
CONSENT OF BONDHOLDERS .............................................. 59
SECTION 10.02. SUPPLEMENTAL INDENTURES REQUIRING CONSENT
OF BONDHOLDERS ................................................................. 59
SECTION 10.03. EXECUTION OF SUPPLEMENTAL INDENTURE ...................... 60
SECTION 1 0.04. CONSENT OF OBLIGOR ................................................................ 61
SECTION 10.05. AMENDMENTS, ETC., OF THE LOAN AGREEMENT
NOT REQUIRING CONSENT OF BONDHOLDERS ............. 61
SECTION 1 0.06. AMENDMENTS, ETC., OF THE LOAN AGREEMENT
REQUIRING CONSENT OF BONDHOLDERS ...................... 61
ARTICLE XI
MISCELLANEOUS
SECTION 11.01. EVIDENCE OF SIGNATURE OF BONDHOLDERS AND
OWNERSHIP OF BONDS ......................................................... 63
SECTION 11.02. NO PERSONAL LIABILITY ........................................................... 63
SECTION 11.03. LIMITED OBLIGATION ................................................................. 64
SECTION 11.04. PAR TIES INTERESTED HEREIN .................................................. 64
SECTION 11.05. TITLES, HEADINGS, ETC .............................................................. 64
SECTION 11.06. SEVERABILITY ............................................................................... 64
SECTION 11.07. GOVERNING LAW ......................................................................... 64
SECTION 11.08. EXECUTION OF COUNTERPARTS .............................................. 64
SECTION 11.09. CONSEQUENTIAL/PUNITIVE DAMAGES ................................. 64
SECTION 11.1 0. WAIVER OF JURY TRIAL ............................................................. 64
SECTION 11.11. NO LIABILITY OF BOND TRUSTEE'S OFFICERS ..................... 65
SECTION 11.12. NOTICES .......................................................................................... 65
SECTION 11.13. PAYMENTS DUE ON HOLIDAYS ................................................ 66
lV
4812-3022-2866.4
INDENTURE OF TRUST
THIS INDENTURE OF TRUST dated as of April 1, 2013, between CITY OF
ATLANTIC BEACH, a municipality duly organized and existing under the laws of the
State of Florida (the "Issuer"), and U.S. BANK NATIONAL ASSOCIATION, a national
banking association with trust powers in the State of Florida having an office in
Jacksonville, Florida, as bond trustee (the "Bond Trustee"), being authorized to accept
and execute trusts of the character herein set out,
WITNESSETH
WHEREAS, the Issuer is an incorporated municipality organized and existing
under the laws of the State of Florida, and a "local agency" under and pursuant to
Chapter 159, Pali II, Florida Statutes, as amended and supplemented (the "Act"); and
WHEREAS, the Issuer has determined to issue a series of Bonds hereunder,
designated "City of Atlantic Beach, Florida Health Care Facilities Revenue and
Refunding Bonds (Fleet Landing Project), Series 2013A" (hereinafter called the "Bonds")
in the Aggregate Principal Amount of $ for the purpose of loaning the
proceeds and providing funds to (i) refund the outstanding City of Atlantic Beach, Florida
Health Care Facilities Revenue Refunding Bonds (Fleet Landing Project), Series 1999
(the "Series 1999 Bonds"), the proceeds of which were used to refund celiain outstanding
indebtedness, the proceeds of which were used to finance and refinance a poliion of the
costs of the acquisition, construction, and equipping of a continuing care retirement
community owned and operated by the Obligor and known as "Fleet Landing", initially
consisting of 320 independent living units, a community center containing kitchen,
dining, recreational and administration facilities, an 80-bed skilled nursing facility and a
60-unit assisted living facility, located on a site containing approximately 86.5 acres at
One Fleet Landing Boulevard, in the City of Atlantic Beach, Florida (the "Series 1999
Bonds"), (ii) refund the outstanding City of Atlantic Beach, Florida Variable Rate
Demand Health Care Facilities Revenue Bonds (Fleet Landing Project), Series 2006 (the
"Series 2006 Bonds" and, together with the Series 1999 Bonds, the "Refunded Bonds"),
the proceeds of which were used to finance the acquisition, construction and installation
of certain capital improvements at Fleet Landing, including 34 additional independent
living units, a community center and related facilities and equipment, (iii) pay or
reimburse the cost of the acquisition of approximately 2 acres to be used as the future site
of a facility operations center, located immediately south/southwest of and adjacent to
Fleet Landing and (iv) pay costs and fund necessary reserves associated with the issuance
of the Bonds; and
WHEREAS, the Issuer has found and detennined, and does hereby find and
determine, that in order to increase the commerce, welfare and prosperity of the
inhabitants of the Issuer and the citizens of Duval County and the State of Florida, and to
1
4812-3022-2866.4
improve their health and living conditions by providing access to adequate medical care
and health care facilities, it has become necessary for the Issuer to issue the Bonds
pursuant to the Act and this Bond Indenture for the purposes set forth in the preceding
paragraph;
WHEREAS, the proceeds of the Bonds shall be loaned to the Naval Continuing
Care Retirement Foundation, Inc. (the "Obligor") pursuant to a Loan Agreement dated as
of Aprill, 2013 (the "Loan Agreement") between the Issuer and the Obligor; and
WHEREAS, to secure the payment of the principal of the Bonds, premium, if
any, and the interest thereon and the performance and observance of the covenants and
conditions herein contained the Issuer has authorized the execution and delivery of this
Bond Indenture; and
WHEREAS, the execution and delivery of this Indenture of Trust (hereinafter
sometimes referred to as the "Bond Indenture"), and the issuance of the Bonds hereinafter
authorized under this Bond Indenture, pursuant to the provisions of the Act, have been in
all respects duly and validly authorized by a resolution duly adopted and approved by the
Issuer; and
WHEREAS, the Bonds, the Bond Trustee's authentication certificate and the
assignment are to be substantially in the following forms, with such necessary or
appropriate variations, omissions, and insertions as permitted or required by this Bond
Indenture:
2
4812-3022-2866.4
* * * [BEGIN FORM OF BOND FORM] * * *
CITY OF ATLANTIC BEACH, FLORIDA
HEALTH CARE FACILITIES REVENUE AND REFUNDING BONDS
(FLEET LANDING PROJECT),
SERIES 2013A
No.R-
Interest Rate
%
Maturity Date Delivery Date
REGISTERED OWNER:
PRINCIPAL AMOUNT: DOLLARS -------
$ _____ _
Dated CUSIPNo.
The CITY OF ATLANTIC BEACH, a municipality duly organized and existing
under the laws of the State of Florida (the "Issuer"), for value received, promises to pay,
from the sources described herein, to the Registered Owner specified above, or registered
assigns, the principal amount specified above, on the maturity date specified above
(unless this Bond shall have been called for prior redemption) and to pay, from such
sources, interest on said sum on and _ of each year,
commencing _, 2013, at the interest rate specified above, until payment of the
principal hereof has been made or provided for. This Bond will bear interest from the
most recent interest payment date to which interest has been paid or provided for, or, if
no interest has been paid, from the Delivery Date of this Bond.
THE STATE OF FLORIDA AND ANY POLITICAL SUBDIVISION OR
AGENCY OF THE STATE OF FLORIDA, INCLUDING DUVAL COUNTY,
FLORIDA ("DUVAL COUNTY") SHALL NOT BE LIABLE OR OBLIGATED
(GENERALLY, SPECIALLY, MORALLY OR OTHERWISE) TO PAY THE
PRINCIPAL OF THIS BOND OR THE PREMIUM, IF ANY, OR INTEREST
HEREON, EXCEPT WITH RESPECT TO THE ISSUER AND SOLELY FROM THE
SOURCES IDENTIFIED IN THE BOND INDENTURE AND LOAN AGREEMENT
HEREINAFTER IDENTIFIED AND NEITHER THE FAITH AND CREDIT NOR THE
TAXING POWER OF THE ISSUER, DUVAL COUNTY, THE STATE OF FLORIDA,
OR ANY OTHER POLITICAL SUBDIVISION OR AGENCY THEREOF IS
PLEDGED TO THE PAYMENT OF THE PRINCIPAL OF, PREMIUM, IF ANY, OR
INTEREST ON THE BONDS.
This Bond and the series of Bonds of which it is a part have been issued under and
pursuant to the Chapter 159, Part II, Florida Statutes, and other applicable provisions of
3
4812-3022-2866.4
law (the "Act"). This Bond is a limited obligation of the Issuer payable solely from the
revenues, receipts and resources of the Issuer pledged to its payment and not from any
other revenues, funds or assets of the Issuer. No owner of any Bonds has the right to
compel the Issuer to pay the principal of, interest or redemption premium, if any, on the
Bonds, except from such sources.
The principal of and premium, if any, on this Bond are payable upon the
presentation and surrender hereof at the Jacksonville, Florida, trust office of U.S. Bank
National Association, as bond trustee, or at the designated corporate trust office of its
successor in trust (the "Bond Trustee") under an Indenture of Trust dated as of April 1,
2013 (the "Bond Indenture") by and between the Issuer and the Bond Trustee. Interest on
this Bond will be paid on each interest payment date (or, if such interest payment date is
not a business day, on the next succeeding business day), by check or draft mailed to the
person in whose name this Bond is registered (the "Registered Owner") in the registration
records of the Issuer maintained by the Bond Trustee at the address appearing thereon at
the close of business on the last day of the calendar month next preceding such interest
payment date (the "Regular Record Date") or by wire transfer of same day funds upon
receipt by the Bond Trustee prior to the Regular Record Date of a written request by a
Registered Owner of $1,000,000 or more in aggregate principal amount of Bonds. The
CUSIP number and appropriate dollar amounts for each CUSIP number shall accompany
all payments of principal of, redemption premium, if any, and interest on the Bonds. Any
such interest not so timely paid or duly provided for shall cease to be payable to the
person who is the Registered Owner hereof at the close of business on the Regular
Record Date and shall be payable to the person who is the Registered Owner hereof at the
close of business on a Special Record Date (as defined in the hereinafter defined Loan
Agreement), for the payment of any defaulted interest. Such Special Record Date shall
be fixed by the Bond Trustee whenever moneys become available for payment of the
defaulted interest, and notice of the Special Record Date shall be given to the Registered
Owners of such Bonds not less than ten days prior to such Special Record Date.
Alternative means of payment of interest may be used if mutually agreed upon between
the owner of this Bond and the Bond Trustee, as provided in the Bond Indenture. All
such payments shall be made in lawful money of the United States of America without
deduction for the services of the Bond Trustee.
This Bond shall be issued pursuant to a book entry system administered by The
Depository Trust Company (together with any successor thereto, "Securities
Depository"). The book entry system will evidence beneficial ownership of the Bonds
with transfers of ownership effected on the register held by the Securities Depository
pursuant to rules and procedures established by the Securities Depository. So long as the
book entry system is in effect, transfer of principal, interest and premium payments, and
provisions of notices or other communications, to beneficial owners of the Bonds will be
the responsibility of the Securities Depository as set forth in the Bond Indenture.
4
4812-3022-2866.4
This Bond is one of a duly authorized series of bonds of the Issuer dated
____ , 2013, known as "City of Atlantic Beach, Florida Health Care Facilities
Revenue and Refunding Bonds (Fleet Landing Project), Series 20 13A" (the "Bonds") and
issued in an Aggregate Principal Amount (as defined in the hereinafter defined Loan
Agreement) of$ for the purpose of providing funds to be loaned to the
Naval Continuing Care Retirement Foundation, Inc., a Florida nonprofit corporation (the
"Obligor"), to be used to finance and refinance the cost of a continuing care retirement
community located in the City of Atlantic Beach, Florida (the "Project"), to fund a debt
service reserve fund and to pay a portion of the cost of issuance.
To provide for its loan repayment obligations, the Obligor has issued its Note (the
"Note") under a Loan Agreement dated as of April 1, 2013, between the Issuer and the
Obligor (the "Loan Agreement"). The Note is issued pursuant to a Master Trust
Indenture dated as of April 1, 2013, as supplemented (the "Master Indenture"), between
the Obligor and U.S. Bank National Association, as master trustee (the "Master Trustee").
Pursuant to the Master Indenture, and a Mortgage and Security Agreement dated as of
April 1, 2013, from the Obligor to the Master Trustee (the "Mortgage"), the Obligor has
pledged and granted a security interest in, among other things, the Gross Revenues (as
defined in the Master Indenture) and the Mortgaged Property (as defined in the
Mortgage) to the Master Trustee to secure the Note. Additional obligations on a parity
with the Note may be issued pursuant to the Master Indenture subject to the conditions
and terms contained therein, and the payments on such additional obligations will also be
secured by a pledge of the Gross Revenues, the Motigaged Property and certain other
property.
This Bond and the claims for interest hereon are payable only out of the revenues
derived by the Issuer pursuant to the Loan Agreement. The Bonds are issued under and
are equally and ratably secured and are entitled to the protection given by the Bond
Indenture.
No recourse under or upon any obligation, covenant, or agreement contained in the
Bond Indenture, or in any Bond, or under any judgment obtained against the Issuer or by
the enforcement of any assessment or by any legal or equitable proceeding by virtue of
any constitution or statute or otherwise or under any circumstances, under or independent
of the Bond Indenture, shall be had against any director, incorporator, officer, agent,
employee, or representative as such, past, present or future, of the Issuer, either directly
or through the Issuer or otherwise, for the payment for or to the Issuer or for or to the
Registered Owner of any Bond issued thereunder or otherwise, of any sum that may be
due and unpaid by the Issuer upon any such Bond.
Neither the elected officials, officers, agents, employees or representatives of the
Issuer past, present or future, nor any person executing this Bond or the Bond Indenture,
shall be personally liable hereon or thereon or be subject to any personal liability by
reason of the issuance hereof and thereof, whether by virtue of any constitution, statute or
5
4812-3022-2866.4
rule of law or by the enforcement of any assessment or penalty, or otherwise, all such
liability being expressly released and waived as a condition of and in consideration for
the execution of the Bond Indenture and the issuance of this Bond.
Reference is hereby made to the Bond Indenture and all indentures supplemental
thereto and the Master Indenture for a description of the revenues pledged, the nature and
extent of the security, the rights, duties, and obligations of the Issuer, the Bond Trustee
and the owners of the Bonds, and the terms and conditions upon which the Bonds are,
and are to be, secured.
The Bonds maturing on and after _, __ , are subject to optional
redemption prior to maturity by the Issuer at the direction of the Obligor in whole or in
part on _, __ or on any date thereafter, at the redemption price equal to the
principal amount of such Bonds to be redeemed, together with accrued interest to the
redemption date.
The Bonds maturing on _, __ are subject to mandatory sinking fund
redemption at a redemption price equal to the principal amount thereof plus accrued
interest to the redemption date. As and for a sinking fund for the redemption of Bonds
maturing on _, __ , the Issuer shall cause to be deposited into the Principal
Account of the Bond Fund a sum which is sufficient to redeem on of each
of the following years (after credit as provided below) the following principal amounts of
Bonds maturing on _, __ ,plus accrued interest to the redemption date:
Year Amount Year Amount
*maturity
6
4812-3022-2866.4
The Bonds maturing on _, __ are subject to mandatory sinking fund
redemption at a redemption price equal to the principal amount thereof plus accrued
interest to the redemption date. As and for a sinking fund for the redemption of Bonds
maturing on _, __ , the Issuer shall cause to be deposited into the Principal
Account of the Bond Fund a sum which is sufficient to redeem on of each
of the following years (after credit as provided below) the following principal amounts of
Bonds maturing on _, __ , plus accrued interest to the redemption date:
Year Amount Year Amount
*maturity
At the option of the Obligor to be exercised by delivery of a written certificate to
the Bond Trustee on or before the forty-fifth day next preceding any sinking fund
redemption date, it may (i) deliver to the Bond Trustee for cancellation Bonds or portions
thereof of the same maturity, in an Aggregate Principal Amount desired by the Obligor,
or (ii) specifY a principal amount of Bonds or portions thereof of the same maturity,
which prior to said date have been redeemed (otherwise than through the operation of the
sinking fund) and canceled by the Bond Trustee at the request of the Obligor and not
theretofore applied as a credit against any sinking fund redemption obligation.
The Bonds shall be subject to optional redemption by the Issuer at the direction of
the Obligor prior to their scheduled maturities, in whole or in part at a redemption price
equal to the principal amount thereof plus accrued interest from the most recent interest
payment date to the redemption date on any date following the occurrence of any of the
following events:
4812-3022-2866.4
(1) in case of damage or destruction to, or condemnation of, any
property, plant, and equipment of any Obligated Group Member, to the extent that
the net proceeds of insurance or condemnation award exceed the Threshold
Amount (as defined in the Master Indenture) and the Obligor has determined not
to use such net proceeds or award to repair, rebuild or replace such property, plant,
and equipment; or
(2) as a result of any changes in the Constitution or laws of the State of
Florida or of the United States of America or of any legislative, executive, or
administrative action (whether state or federal) or of any final decree, judgment, or
order of any court or administrative body (whether state or federal), the
obligations of the Obligor under the Loan Agreement have become, as established
by an Opinion of Counsel, void or unenforceable in each case in any material
7
respect in accordance with the intent and purpose of the parties as expressed in the
Loan Agreement.
If less than all Bonds are to be optionally redeemed, the Obligor may select the
maturities eligible for redemption which are to be redeemed. If less than all Bonds of a
single maturity are to be redeemed, the selection shall be made by the Securities
Depository or by lot by the Bond Trustee. Notice of the call for any redemption shall be
given by the Bond Trustee by sending a copy of the redemption notice by mail not more
than 60 nor less than 30 days prior to the redemption date to the Registered Owner of
each Bond to be redeemed as shown on the registration records kept by the Bond Trustee,
as provided in the Bond Indenture. All Bonds or portions thereof called for redemption
will cease to bear interest after the specified redemption date, provided funds for their
payment are on deposit at the place of payment at that time.
The Bonds are issuable as fully registered Bonds in denominations of $5,000 and
any integral multiple thereof and are exchangeable for an equal Aggregate Principal
Amount of fully registered Bonds of the same maturity of other authorized denominations
at the aforesaid office of the Bond Trustee but only in the manner and subject to the
limitations and on payment of the charges provided in the Bond Indenture.
This Bond is fully transferable by the Registered Owner hereof in person or by his
or her or its duly authorized attorney on the registration books kept at the principal office
of the Bond Trustee upon surrender of this Bond together with a duly executed written
instrument of transfer satisfactory to the Bond Trustee. Upon such transfer a new fully
registered Bond of authorized denomination or denominations for the same Aggregate
Principal Amount and maturity will be issued to the transferee in exchange herefor, all
upon payment of the charges and subject to the terms and conditions set forth in the Bond
Indenture.
The Bond Trustee will not be required to transfer or exchange any Bond after the
mailing of notice calling such Bond or any portion thereof for redemption has been given
as herein provided, nor during the period beginning at the opening of business 15 days
before the day of mailing by the Bond Trustee of a notice of prior redemption and ending
at the close of business on the day of such mailing.
The Issuer and the Bond Trustee may deem and treat the person in whose name
this Bond is registered as the absolute owner hereof for the purpose of making payment
(except to the extent otherwise provided hereinabove and in the Bond Indenture with
respect to Regular and Special Record Dates for the payment of interest) and for all other
purposes, and neither the Issuer nor the Bond Trustee shall be affected by any notice to
the contrary. The principal of, premium, if any, and interest on this Bond shall be paid
free from and without regard to any equities between the Obligor and the original or any
intermediate owner hereof, or any setoffs or counterclaims.
8
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The owner of this Bond shall have no right to enforce the provisions of the Bond
Indenture or to institute action to enforce the covenants therein, or to take any action with
respect to any event of default under the Bond Indenture, or to institute, appear in or
defend any suit or other proceedings with respect thereto, except as provided in the Bond
Indenture. In case an event of default under the Bond Indenture shall occur, the principal
of all of the Bonds at any such time Outstanding under the Bond Indenture may be
declared or may become due and payable, upon the conditions and in the manner and
with the effect provided in the Bond Indenture. The Bond Indenture provides that such
declaration may in certain events be waived by the Bond Trustee or the owners of a
requisite principal amount of the Bonds Outstanding under the Bond Indenture.
To the extent permitted by, and as provided in, the Bond Indenture, modifications
or amendments of the Bond Indenture, or of any indenture supplemental thereto, and of
the rights and obligations of the Issuer and of the owners of the Bonds may be made with
the consent of the Issuer and the Bond Trustee and, in certain instances, of not less than a
majority in Aggregate Principal Amount of the Bonds then Outstanding; provided,
however, that no such modification or amendment shall be made which will affect the
terms of payment of the principal of, premium, if any, or interest on any of the Bonds,
which are unconditional. Any such consent by the owner of this Bond shall be
conclusive and binding upon such owner and upon all future owners of this Bond and of
any Bond issued upon the transfer or exchange of this Bond whether or not notation of
such consent is made upon this Bond.
IT IS HEREBY CERTIFIED, RECITED AND DECLARED that all acts,
conditions and things required to exist, happen and be performed precedent to and in the
execution and delivery of the Bond Indenture and issuance of this Bond do exist, have
happened and have been performed in due time, form and manner as required by law.
THIS BOND shall not be entitled to any benefit under the Bond Indenture, or any
indenture supplemental thereto, or become valid or obligatory for any purpose until the
Bond Trustee shall have manually signed the cetiificate of authentication hereon.
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4812-3022-2866.4
IN WITNESS WHEREOF, the City of Atlantic Beach, Florida has caused this
Bond to be executed with the manual or facsimile signatures of its Chairman and
Secretary, and a facsimile of its corporate seal to be hereto affixed or printed, all as of the
date set forth above.
CITY OF ATLANTIC BEACH, FLORIDA
By:
Chairman
(SEAL)
Attest:
Secretary
10
4812-3022-2866.4
(FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION)
This is one of the Bonds referred to in the within mentioned Bond Indenture.
Date of Authentication: U.S. BANK NATIONAL ASSOCIATION,
as Bond Trustee
By:
Authorized Signatory
(END OF FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION)
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4812-3022-2866.4
(FORM OF ASSIGNMENT)
ASSIGNMENT
For value received, the undersigned hereby sells, assigns and transfers unto
______________ the within Bond, and does hereby irrevocably
constitute and appoint attorney to transfer such Bond
on the books kept for registration and transfer of the within Bond, with full power of
substitution in the premises.
Date: ------------
Signature Guaranteed By:
Authorized Signatory
NOTICE: The signature to this
Assignment must correspond with the
name as it appears upon the face of the
within Bond in every particular, without
enlargement or alteration or any change
whatsoever.
NOTE: The signature to this Assignment must be guaranteed by a financial
institution that is a member of the Securities Transfer Agents Medallion Program
("STAMP"), the Stock Exchange Medallion Program ("SEMP") or the New York Stock
Exchange, Inc. Medallion Signature Program ("MSP").
* * * [END OF BOND FORM] * * *
12
4812-3022-2866.4
WHEREAS, all things necessary to make the Bonds, when authenticated by the
Bond Trustee and issued as in this Bond Indenture provided, the valid, binding, and legal
limited and special obligations of the Issuer and to constitute this Bond Indenture a valid,
binding, and legal instrument for the security of the Bonds in accordance with its terms,
have been done and perfonned.
NOW, THEREFORE, THIS INDENTURE OF TRUST WITNESSETH:
That the Issuer, in consideration of the premises and of the mutual covenants
herein contained and of the purchase and acceptance of the Bonds by the owners thereof
and of the sum of One Dollar to it duly paid by the Bond Trustee at or before the
execution and delivery of these presents, and for other good and valuable consideration,
the receipt of which is hereby acknowledged, in order to secure the payment of the
principal of, premium, if any, and interest on all Bonds at any time Outstanding under
this Bond Indenture, according to their tenor and effect, and to secure the performance
and observance of all the covenants and conditions in the Bonds and herein contained,
and to declare the terms and conditions upon and subject to which the Bonds are issued
and secured, has executed and delivered this Bond Indenture and has granted, bargained,
sold, warranted, alienated, remised, released, conveyed, assigned, pledged, set over, and
confirmed, and by these presents does grant, bargain, sell, warrant, alien, remise, release,
convey, assign, pledge, set over, and confirm unto the Bond Trustee, and to its successors
and assigns forever, all and singular the following described propeliy, franchises, and
mcome:
A. All of the Issuer's right, title and interest in and to the Note delivered by the
Obligor to the Issuer pursuant to the Loan Agreement; and
B. All of the Issuer's right, title and interest in and to the Loan Agreement
(except for the rights of the Issuer to receive payments, if any, under Sections 5.7, 7.5,
and 9.5 of the Loan Agreement), together with all powers, privileges, options and other
benefits of the Issuer contained in the Loan Agreement; provided, however, that nothing
in this clause shall impair, diminish or otherwise affect the Issuer's obligations under the
Loan Agreement or, except as otherwise provided in this Bond Indenture, impose any
such obligations on the Bond Trustee; and
C. Amounts on deposit from time to time in the Bond Fund, Cost of Issuance
Fund, Reserve Fund and Project Fund, but excluding the Rebate Fund (all as defined in
the Loan Agreement), subject to the provisions of this Bond Indenture permitting the
application thereof for the purposes and on the terms and conditions set folih herein; and
D. Any and all property of every kind or description which may from time to
time hereafter be sold, transferred, conveyed, assigned, hypothecated, endorsed,
deposited, pledged, moligaged, granted or delivered to, or deposited with the Bond
Trustee as additional security by the Issuer or anyone on its part or with its written
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4812-3022-2866.4
consent, or which pursuant to any of the provisions hereof or of the Loan Agreement or
any Note may come into the possession of or control of the Bond Trustee or a receiver
appointed pursuant to Article VIII hereof, as such additional security (except amounts
held in the Rebate Fund); and the Bond Trustee is hereby authorized to receive any and
all such property as and for additional security for the payment of the Bonds, and to hold
and apply all such property subject to the terms hereof.
TO HAVE AND TO HOLD the same with all privileges and appurtenances
hereby conveyed and assigned, or agreed or intended to be, to the Bond Trustee and its
successors in said trust and assigns forever;
IN TRUST, NEVERTHELESS, upon the terms herein set forth for the equal and
proportionate benefit, security, and protection of all owners of the Bonds issued under
and secured by this Bond Indenture without privilege, priority, or distinction as to the lien
or otherwise of any of the Bonds over any other of the Bonds;
PROVIDED, HOWEVER, that if the Issuer, its successors or assigns, shall pay,
or cause to be paid, the principal of the Bonds and the premium, if any, and the interest
due or to become due thereon, at the times and in the manner mentioned in the Bonds
according to the true intent and meaning thereof, and shall cause the payments to be made
into the Bond Fund as hereinafter required or shall provide, as permitted hereby, for the
payment thereof by depositing with the Bond Trustee the entire amount due or to become
due hereon, or certain securities as herein permitted and shall keep, perform, and observe
all the covenants and conditions pursuant to the terms of this Bond Indenture to be kept,
performed, and observed by it, and shall pay or cause to be paid to the Bond Trustee all
sums of money due or to become due to it in accordance with the terms and provisions
hereof, then upon such final payments this Bond Indenture and the rights hereby granted
shall cease, determine, and be void; otherwise this Bond Indenture to be and remain in
full force and effect.
THIS BOND INDENTURE FURTHER WITNESSETH and it is expressly
declared that all Bonds issued and secured hereunder are to be issued, authenticated, and
delivered and all said rights hereby pledged and assigned are to be dealt with and
disposed of under, upon, and subject to the terms, conditions, stipulations, covenants,
agreements, trusts, uses, and purposes as hereinafter expressed, and the Issuer has agreed
and covenanted, and does hereby agree and covenant, with the Bond Trustee and with the
respective owners from time to time of the Bonds as follows:
[END OF PREAMBLE]
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4812-3022-2866.4
ARTICLE I
DEFINITIONS
SECTION 1.01. DEFINITIONS. All defined words and phrases used in this
Bond Indenture shall have the meaning given and ascribed to such words and phrases in
Article I of the Loan Agreement or Article I of the Master Indenture.
SECTION 1.02. RECITAL INCORPORATION. The recitals set forth in
the beginning of this Bond Indenture are hereby incorporated herein.
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4812-3022-2866.4
ARTICLE II
AUTHORIZATION, TERMS, EXECUTION AND ISSUANCE OF BONDS
SECTION 2.01. AUTHORIZED AMOUNT OF BONDS. No Bonds may be
issued under this Bond Indenture except in accordance with this Article. The total
principal amount of Bonds that may be issued hereunder is hereby expressly limited to
$ , except as provided in Section 2.06 hereof.
SECTION 2.02. ALL BONDS EQUALLY AND RATABLY SECURED,
BONDS NOT AN OBLIGATION OF ISSUER. All Bonds issued under this Bond
Indenture and at any time Outstanding shall in all respects be equally and ratably secured
hereby, without preference, priority, or distinction on account of the date or dates or the
actual time or times of the issuance or maturity of the Bonds, so that all Bonds at any
time issued and Outstanding hereunder shall have the same right, lien, and preference
under and by virtue of this Bond Indenture, and shall all be equally and ratably secured
hereby. The Bonds shall be payable solely out of the revenues and other security pledged
hereby and shall not constitute an indebtedness of the Issuer within the meaning of any
state constitutional provision or statutory limitation and shall never constitute nor give
rise to a pecuniary liability of the Issuer.
SECTION 2.03. AUTHORIZATION OF BONDS. (a) There is hereby
authorized to be issued hereunder and secured hereby a series of bonds designated as the
"City of Atlantic Beach, Florida Health Care Facilities Revenue and Refunding Bonds
(Fleet Landing Project), Series 2013A." The Bonds shall be numbered consecutively
upward from R-1.
(b) The Bonds shall bear interest from the most recent interest payment date to
which interest has been paid or provided for, or, if no interest has been paid, from the
Delivery Date of the Bonds. The Bonds shall bear interest on the basis of a 360 day year
composed of twelve 30 day months payable each and each _,
commencing _, 2013, at the rates per annum and shall mature on ___ _
_ in the years and principal amounts as follows:
Year
Principal
Amount
Interest
Rate(%) Year
Principal
Amount
Interest
Rate(%)
(c) The Bonds shall be issued in Authorized Denominations and shall be dated
____ , 2013. The Bonds are subject to prior redemption as herein set forth and shall
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4812-3022-2866.4
be substantially in the form and tenor hereinabove recited with appropriate variations,
omissions, and insertions as are permitted or required by this Bond Indenture.
(d) The principal of and premium, if any, on the Bonds shall be payable in
lawful money of the United States of America at the Payment Office of the Bond Trustee,
or at the designated corporate trust office of its successor, upon presentation and
surrender of the Bonds. Payment of interest on any Bond shall be made to the person
who is the Registered Owner thereof at the close of business on the Regular Record Date
for such Interest Payment Date by check mailed by the Bond Trustee on such Interest
Payment Date to such Registered Owner at his or her address as it appears on the
registration records kept by the Bond Trustee or by wire transfer of same day funds upon
receipt by the Bond Trustee prior to the Regular Record Date of a written request by a
Registered Owner of $1,000,000 or more in aggregate principal amount of Bonds. The
CUSIP number and appropriate dollar amounts for each CUSIP number shall accompany
all payments of principal, premium, if any, and interest on the Bonds. Any such interest
not so timely paid or duly provided for shall cease to be payable to the person who is the
Registered Owner of such Bond at the close of business on the Regular Record Date and
shall be payable to the person who is the Registered Owner thereof at the close of
business on a Special Record Date for the payment of any such defaulted interest. Such
Special Record Date shall be fixed by the Bond Trustee whenever moneys become
available for payment of the defaulted interest, and notice of the Special Record Date
shall be given to the Registered Owners of the Bonds not less than ten days prior thereto
by first class postage prepaid mail to each such Registered Owner as shown on the
registration records, stating the date of the Special Record Date and the date fixed for the
payment of such defaulted interest. Alternative means of payment of interest may be
used if mutually agreed upon between the owners of any Bonds and the Bond Trustee.
All such payments shall be made in lawful money of the United States of America.
Notwithstanding the foregoing, payments of the principal of and interest on any
Bonds that are subject to the book entry system as provided in Article II of this Bond
Indenture shall be made in accordance with the rules, regulations and procedures
established by the securities depository in connection with the book entry system.
SECTION 2.04. EXECUTION OF BONDS, SIGNATURES. The Bonds
shall be executed on behalf of the Issuer by its Chairman and its seal shall be thereunto
affixed and attested by the Secretary. The signatures of such officers and the seal of the
Issuer may be in facsimile. In case any officer who shall have signed any of the Bonds
shall cease to hold such office and any of such Bonds shall have been authenticated by
the Bond Trustee or delivered or sold, such Bonds with the signatures thereto affixed
may, nevertheless, be authenticated by the Bond Trustee, and delivered, and may be sold
by the Issuer, as though the person or persons who signed such Bonds had remained in
office.
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4812-3022-2866.4
SECTION 2.05. REGISTRATION AND EXCHANGE OF BONDS;
PERSONS TREATED AS OWNERS. The Issuer shall cause books for the registration
and for the transfer of the Bonds as provided in this Bond Indenture to be kept by the
Bond Trustee which is hereby appointed the bond registrar of the Issuer for the Bonds.
Upon surrender for transfer of any fully registered Bond at the Payment Office of the
Bond Trustee, duly endorsed for transfer or accomplished by an assignment duly
executed by the Registered Owner or his attorney duly authorized in writing, the Issuer
shall execute and the Bond Trustee shall authenticate and deliver in the name of the
transferee or transferees a new fully registered Bond or Bonds of a like Aggregate
Principal Amount for a like principal amount and maturity.
The Issuer shall execute and the Bond Trustee shall authenticate and deliver Bonds
which the Bondholder making the exchange is entitled to receive, bearing numbers not
contemporaneously Outstanding. The execution by the Issuer of any fully registered
Bond of any denomination shall constitute full and due authorization of such
denomination and the Bond Trustee shall thereby be authorized to authenticate and
deliver such Bond.
The Bond Trustee shall not be required to transfer or exchange any Bond after the
mailing of notice calling such Bond or any portion thereof for redemption has been given
as herein provided, nor during the period beginning at the opening of business fifteen
days before the day of mailing by the Bond Trustee of a notice of prior redemption and
ending at the close of business on the day of such mailing except for Bondholders of
$1,000,000 or more in aggregate principal amount of the Bonds.
As to any Bond, the Person in whose name the same shall be registered shall be
deemed and regarded as the absolute owner thereof for all purposes, and payment of
principal of or interest on any Bond shall be made only to or upon the written order of the
Registered Owner thereof or his legal representative, but such registration may be
changed as hereinabove provided. All such payments shall be valid and effectual to
satisfY and discharge the liability upon such Bond to the extent of the sum or sums paid.
The Bond Trustee shall require the payment by any Bondholder requesting
exchange or transfer of any tax or other governmental charge required to be paid with
respect to such exchange or transfer.
SECTION 2.06. LOST, STOLEN, DESTROYED, AND MUTILATED
BONDS. Upon receipt by the Bond Trustee of evidence satisfactory to it of the
ownership of and the loss, theft, destruction, or mutilation of any Bond and, in the case of
a lost, stolen, or destroyed Bond, of indemnity satisfactory to it, and upon surrender and
cancellation of the Bond if mutilated, (i) the Issuer shall execute, and the Bond Trustee
shall authenticate and deliver, a new Bond of the same series, date and maturity as the
lost, stolen, destroyed or mutilated Bond in lieu of such lost, stolen, destroyed, or
mutilated Bond, or (ii) if such lost, stolen, destroyed, or mutilated Bond shall have
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4812-3022-2866.4
matured or have been called for redemption, in lieu of executing and delivering a new
Bond as aforesaid, the Issuer may pay such Bond. Any such new Bond shall bear a
number not contemporaneously Outstanding. The applicant for any such new Bond may
be required to pay all expenses and charges of the Issuer and of the Bond Trustee in
connection with the issue of such new Bond. All Bonds shall be held and owned upon
the express condition that, to the extent permitted by law, the foregoing conditions are
exclusive with respect to the replacement and payment of mutilated, destroyed, lost, or
stolen Bonds, negotiable instruments, or other securities. If, after the delivery of such
new Bond, a bona fide purchaser of the original Bond in lieu of which such duplicate
Bond was issued presents for payment such original Bond, the Obligor or the Bond
Trustee shall be entitled to recover upon such new Bond from the person to whom it was
delivered or any person taking therefrom, except a bona fide purchaser, and shall be
entitled to recover upon the security or indemnity provided therefor to the extent of any
loss, damage, cost or expense incurred by the Obligor or the Bond Trustee in connection
therewith.
SECTION 2.07. DELIVERY OF BONDS. Upon the execution and delivery
of this Bond Indenture, the Issuer shall execute and deliver to the Bond Trustee and the
Bond Trustee shall authenticate the Bonds and deliver them to the initial purchasers
thereof as directed by the Issuer and as hereinafter in this Section provided.
Prior to the delivery by the Bond Trustee of any of the Bonds there shall be filed
with and delivered to the Bond Trustee at least:
(a) A certified resolution of the Issuer authorizing the execution and delivery
of the Loan Agreement, this Bond Indenture and the issuance of the Bonds.
(b) Original executed counterparts of the Loan Agreement, this Bond
Indenture, the Collateral Assignment, the Mortgage, the Tax Compliance Agreement, the
Continuing Disclosure Agreement, the Supplemental Indenture and the Master Indenture.
(c) The Note, duly executed and authenticated and duly assigned and payable
to the Bond Trustee.
(d) A request and authorization to the Bond Trustee on behalf of the Issuer and
signed by its Chairman to authenticate and deliver the Bonds to the purchasers therein
identified upon payment to the Bond Trustee but for the account of the Issuer of a sum
specified in such request and authorization plus accrued interest thereon to the date of
delivery, together with instructions (which may be in the form of a separate certificate) as
to the disposition of the proceeds of the Bonds.
(e) An Opinion of Bond Counsel addressed to the Bond Trustee (or a reliance
letter therefor) to the effect that the Bonds have been duly and validly authorized, issued
and delivered and constitute valid and binding obligations of the Issuer, enforceable
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4812-3022-2866.4
against the Issuer in accordance with their terms, that the interest payable on the Bonds is
excludable from gross income for federal income tax purposes and that each of the
instruments to which the Issuer is a party has been duly and validly authorized, executed
and delivered by the Issuer and constitutes the legal, valid and binding obligation of the
Issuer, enforceable against the Issuer in accordance with its terms, subject to customary
qualifications on enforceability.
SECTION 2.08. BOND TRUSTEE'S AUTHENTICATION
CERTIFICATE. The Bond Trustee's authentication certificate upon the Bonds shall be
substantially in the form and tenor hereinbefore provided. No Bond shall be secured
hereby or entitled to the benefit hereof, or shall be valid or obligatory for any purpose,
unless the certificate of authentication, substantially in such form, has been duly executed
by the Bond Trustee and such certificate of the Bond Trustee upon any Bond shall be
conclusive evidence and the only competent evidence that such Bond has been
authenticated and delivered hereunder. The Bond Trustee's certificate of authentication
shall be deemed to have been duly executed by it if manually signed by an authorized
signatory of the Bond Trustee, but it shall not be necessary that the same person sign the
certificate of authentication on all of the Bonds issued hereunder.
SECTION 2.09. NO ISSUANCE OF ADDITIONAL BONDS. The Issuer
agrees that it will not issue any additional bonds under this Bond Indenture. Only the
Bonds shall be Outstanding under this Bond Indenture and entitled to the security of the
Trust Estate.
SECTION 2.10. CANCELLATION AND DESTRUCTION OF BONDS
BY THE BOND TRUSTEE. Whenever any Outstanding Bonds shall be delivered to
the Bond Trustee for the cancellation thereof pursuant to this Bond Indenture, upon
payment of the principal amount or interest represented thereby or for replacement
pursuant to Section 2.06 hereof, such Bonds shall be promptly cancelled and treated in
accordance with the Bond Trustee's standard retention policies. In the event of
destruction of the Bonds by the Bond Trustee, a certificate of destruction evidencing such
destruction shall be furnished by the Bond Trustee to the Issuer and the Obligor upon
written request.
SECTION 2.11. BOOK ENTRY ONLY SYSTEM. The Bonds shall be
initially issued in the form of a single fully registered Bond for each maturity of the
Bonds registered in the name of Cede & Co., as nominee of DTC, and except as provided
in Section 2.12 hereof, all of the outstanding Bonds shall be registered in the name of
Cede & Co., as nominee ofDTC.
With respect to Bonds registered in the name of Cede & Co., as nominee of DTC,
the Issuer and the Bond Trustee shall have no responsibility or obligation to any
participant in DTC (a "DTC Participant") or to any person on behalf of whom such a
DTC Participant holds an interest in the Bonds, except as provided in this Bond
20
4812-3022-2866.4
Indenture. Without limiting the immediately preceding sentence, the Issuer and the Bond
Trustee shall have no responsibility or obligation with respect to (a) the accuracy of the
records of DTC, Cede & Co. or any DTC Participant with respect to any ownership
interest in the Bonds, (b) the delivery to any DTC Participant or any other person, other
than a Bondholder, as shown on the registration books, of any notice with respect to the
Bonds, including any notice of redemption, (c) any consent given or other action taken by
DTC or Cede & Co. as the Registered Owner, or (d) the payment to any DTC Participant
or any other person, other than a Bondholder as shown in the registration books, of any
amount with respect to principal of, premium, if any, or interest on, the Bonds.
Notwithstanding any other provision of this Bond Indenture to the contrary, the Issuer
and the Bond Trustee shall be entitled to treat and consider the person in whose name
each Bond is registered in the registration books as the absolute owner of such Bond for
the purpose of payment of principal, premium, if any, and interest with respect to such
Bond, for the purpose of giving notices of redemption and other matters with respect to
such Bond, for the purpose of registering transfers with respect to such Bond, and for all
other purposes whatsoever. The Bond Trustee shall pay all principal of, premium, if any,
and interest on the Bonds only to or upon the order of the respective owners, as shown in
the registration books as provided in this Bond Indenture, or their respective attomeys
duly authorized in writing, and all such payments shall be valid and effective to fully
satisfY and discharge the Issuer's obligations with respect to payment of principal of,
premium, if any, and interest on, the Bonds to the extent of the sum or sums so paid. No
person other than an owner, as shown in the registration books, shall receive a Bond
certificate evidencing the obligation of the Issuer to make payments of principal,
premium, if any, and interest, pursuant to this Bond Indenture. Upon delivery by DTC to
the Bond Trustee of written notice to the effect that DTC has determined to substitute a
new nominee in place of Cede & Co., and subject to the provisions in this Bond Indenture
with respect to payment of interest to the Registered Owner at the close of business on
the Record Date, the word "Cede & Co." in this Bond Indenture shall refer to such new
nominee of DTC.
SECTION 2.12. SUCCESSOR SECURITIES DEPOSITORY;
TRANSFERS OUTSIDE BOOK ENTRY ONLY SYSTEM. (a) In the event that the
Obligor determines that DTC is incapable of discharging its responsibilities described
herein and in the representation letter of the Issuer to DTC (the "DTC Letter") and that it
is in the best interest of the beneficial owners of the Bonds that they be able to obtain
certificated Bonds, the Issuer, at the direction of the Obligor, shall (i) appoint a successor
securities depository, qualified to act as such under Section 17(a) of the Securities
Exchange Act of 1934, as amended, notifY DTC and DTC Participants, identified by
DTC, of the appointment of such successor securities depository and transfer one or more
separate Bonds to such successor securities depository, or (ii) notifY DTC and DTC
Participants, identified by DTC, of the availability through DTC of Bonds and transfer
one or more separate Bonds to DTC Participants, identified by DTC, having Bonds
credited to their DTC accounts. In such event, the Bonds shall no longer be restricted to
21
4812-3022-2866.4
being registered in the registration books in the name of Cede & Co., as nominee ofDTC,
but may be registered in the name of the successor securities depository, or its nominee,
or in whatever name or names Bondholders transfening or exchanging Bonds shall
designate, in accordance with the provisions of this Bond Indenture.
(b) Upon the written consent of 100% of the beneficial owners of the Bonds,
the Bond Trustee, in accordance with the DTC Letter, shall withdraw the Bonds from
DTC, and authenticate and deliver Bonds fully registered to the assignees of DTC or its
nominee. If the request for such withdrawal is not the result of any Issuer action or
inaction, such withdrawal, authentication and delivery shall be at the cost and expense
(including costs of printing, preparing and delivering such Bonds) of the Persons
requesting such withdrawal, authentication and delivery.
SECTION 2.13. PAYMENTS TO CEDE & CO. Notwithstanding any other
provision of this Bond Indenture to the contrary, so long as any Bond is registered in the
name of Cede & Co., as nominee of DTC, all payments with respect to principal of,
premium, if any, and interest on, such Bond and all notices, transfers and deliveries with
respect to such Bond shall be made and given, respectively, in the manner provided in the
DTC Letter.
22
4812-3022-2866.4
ARTICLE III
REVENUES AND FUNDS
SECTION 3.01. APPLICATION OF PROCEEDS OF BONDS. The Issuer
will sell and cause to be delivered to the initial purchasers thereto the Bonds and will
deliver the proceeds thereof to the Bond Trustee for disposal as follows:
(a) Payment of the redemption price and discharge of the Series 1999 Bonds on
the date of issuance ofthe Bonds;
(b) Reimbursement to Wells Fargo Bank, N.A., successor to Wachovia Bank,
N.A., as provider of the letter of credit securing the Series 2006 Bonds, for the payment
of the redemption price and discharge of the Series 2006 Bonds on the date of issuance of
the Bonds;
(c) Deposit, into the Reserve Fund, the amount specified in the request and
authorization to the Bond Trustee described in Section 2.07(d) hereof.
(d) Deposit, into the Cost of Issuance Fund, the amount specified in the request
and authorization to the Bond Trustee described in Section 2.07( d) hereof.
(e) Deposit, into the Project Fund, the balance of the proceeds of the Bonds.
SECTION 3.02. CREATION OF THE BOND FUND. There is hereby
created by the Issuer and ordered established with the Bond Trustee a trust fund to be
designated as the "City of Atlantic Beach, Florida Health Care Facilities Revenue and
Refunding Bonds (Fleet Landing Project) Bond Fund" (the "Bond Fund"). There are
hereby created by the Issuer and ordered established with the Bond Trustee two separate
accounts within the Bond Fund to be designated as the Principal Account and the Interest
Account, respectively. Moneys on deposit in the Principal Account shall be used to pay
the principal of and premium, if any, on the Bonds, when due and payable. Moneys on
deposit in the Interest Account shall be used to pay the interest on the Bonds.
SECTION 3.03. PAYMENTS INTO THE BOND FUND. There shall be
deposited into the Interest Account all accrued interest received from the sale of the
Bonds to the initial purchasers thereof. In addition, there shall also be deposited into the
Principal Account or the Interest Account, as and when received, (i) all payments on the
Note, (ii) all moneys transferred to the Bond Fund from the Reserve Fund pursuant to
Section 3.10 hereof, (iii) all other moneys required to be deposited therein pursuant to the
Loan Agreement, and (iv) all other moneys received by the Bond Trustee when
accompanied by directions that such moneys are to be paid into the Principal Account or
the Interest Account. There also shall be retained or deposited in the Principal Account
or the Interest Account all interest and other income received on investments or moneys
required to be transferred thereto, in accordance with Section 6.02 hereof. The Issuer
23
4812-3022-2866.4
hereby covenants and agrees that so long as any of the Bonds are Outstanding it will
deposit, or cause to be deposited, into the Principal Account or the Interest Account for
its account sufficient sums from revenues and receipts derived from the Loan Agreement
promptly to meet and pay the principal of, premium, if any, and interest on the Bonds as
the same become due and payable.
SECTION 3.04. USE OF MONEYS IN THE PRINCIPAL ACCOUNT
AND THE INTEREST ACCOUNT. Except as provided in Sections 3.15 and 8.05
hereof, moneys in the Principal Account or the Interest Account shall be used solely for
the payment of the principal of, premium, if any, and interest on the Bonds on a pro rata
basis.
SECTION 3.05. CUSTODY OF THE BOND FUND. The Bond Fund shall
be in the custody of the Bond Trustee but in the name of the Issuer, and the Issuer hereby
authorizes and directs the Bond Trustee to withdraw sufficient funds from the Principal
Account or the Interest Account of the Bond Fund to pay the principal of, premium, if
any, and interest on the Bonds as the same come due and payable, which authorization
and direction the Bond Trustee hereby accepts.
SECTION 3.06. PROJECT FUND. (a) There is hereby created and
established with the Bond Trustee a trust fund designated as the "City of Atlantic Beach,
Florida Health Care Facilities Revenue and Refunding Bonds (Fleet Landing Project)
Project Fund" (the "Project Fund"). Moneys in the Project Fund shall be used to pay
Costs of the Project or as hereinafter provided. Under no circumstances shall moneys in
the Project Fund be used to pay Cost of Issuance.
(b) Payments from the Project Fund shall be made in accordance with this
Article III and Article IV of the Loan Agreement. Upon receipt of the required
certificates, the Bond Trustee shall pay the amount requested to the extent that the
Obligor is entitled to payment pursuant to the Loan Agreement.
(c) If an Event of Default occurs under this Bond Indenture, and the Bond
Trustee declares the principal of all Bonds and the interest accrued thereon to be due and
payable, no moneys may be paid out of the Project Fund by the Bond Trustee during the
continuance of such an Event of Default; provided, however, that if such an Event of
Default shall be waived and such declaration shall be rescinded by the Bond Trustee or
the holders and owners of the Bonds pursuant to the terms of this Bond Indenture, the full
amount of any such remaining moneys in the Project Fund may again be disbursed by the
Bond Trustee in accordance with the provisions of the Loan Agreement and this Bond
Indenture.
(d) The Bond Trustee shall not be accountable for the use or application of the
proceeds from the Project Fund disbursed in accordance with the provisions of the Loan
Agreement and this Bond Indenture.
24
4812-3022-2866.4
SECTION 3.07. COMPLETION CERTIFICATE. At such time as the
Obligor determines that construction of the Project has been completed in substantial
compliance with the final plans and specifications for the Project or has determined to
terminate any further construction of the Project, it shall deliver the Completion
Certificate to the Bond Trustee in accordance with and to the extent required by the Loan
Agreement.
SECTION 3.08. CREATION OF THE RESERVE FUND. (a) There is
hereby created and established with the Bond Trustee a trust fund designated as the "City
of Atlantic Beach, Florida Health Care Facilities Revenue and Refunding Bonds (Fleet
Landing Project) Debt Service Reserve Fund" (the "Reserve Fund").
(b) Moneys on deposit in the Reserve Fund shall be used to provide a reserve
for the payment of the principal of and interest on the Bonds.
SECTION 3.09. PAYMENTS INTO THE RESERVE FUND. In addition to
the deposits required by Section 3.01 hereof, there shall be deposited into the Reserve
Fund any Reserve Fund Obligations delivered by the Obligor to the Bond Trustee
pursuant to Section 5.6 of the Loan Agreement. In addition, there shall be deposited into
the Reserve Fund all moneys required to be transferred thereto pursuant to Section 6.02
hereof, and all other moneys received by the Bond Trustee when accompanied by
directions that such moneys are to be paid into the Reserve Fund. There shall also be
retained in the Reserve Fund all interest and other income received on investments of
Reserve Fund moneys in the Reserve Fund to the extent provided in Section 6.02 hereof.
SECTION 3.10. USE OF MONEYS IN THE RESERVE FUND. (a)
Except as provided in this Section 3 .1 0 and in Section 3.15 hereof, moneys in the Reserve
Fund shall be used solely for the payment of the principal of and interest on the Bonds in
the event moneys in the Bond Fund and the Funded Interest Account are insufficient to
make such payments when due, whether on an interest payment date, redemption date,
maturity date, acceleration date or otherwise.
(b) Upon the occurrence of an Event of Default of which the Bond Trustee is
deemed to have notice hereunder and the election by the Bond Trustee of the remedy
specified in Section 8.02(a) hereof, any Reserve Fund Obligations in the Reserve Fund
shall, subject to the provisions of Section 3.16 hereof, be transfe1Ted by the Bond Trustee
to the Principal Account and applied in accordance with Section 8.05 hereof. In the event
of the redemption of a portion of the Bonds, any Reserve Fund Obligations on deposit in
the Reserve Fund in excess of the Reserve Fund Requirement on the Bonds to be
Outstanding immediately after such redemption may, subject to the provisions of Section
3.16 hereof, be transferred to the Principal Account and applied to the payment of the
principal of the Bonds to be redeemed. On and _ in each year,
any earnings on the Reserve Fund Obligations on deposit in the Reserve Fund that are in
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4812-3022-2866.4
excess of the Reserve Fund Requirement shall be transferred into the Interest Account of
the Bond Fund.
(c) On the final maturity date of the Bonds, any Reserve Fund Obligations in
the Reserve Fund in excess of the Reserve Fund Requirement after giving effect to such
maturity may, upon the direction of the Obligor, be used to pay the principal of and
interest on the Bonds on such final maturity date.
(d) If at any time moneys in the Reserve Fund are sufficient to pay the
principal or redemption price of all Bonds, the Bond Trustee may use the moneys on
deposit in the Reserve Fund to pay such principal or redemption price of the Bonds.
(e) In accordance with Section 651.035, Florida Statutes, not less than ten (10)
days prior to any withdrawal of monies from the Reserve Fund, notice of the withdrawal
from the Reserve Fund shall be given by the Bond Trustee or the Obligor by telephone
(850/413-3140) (promptly confirmed in writing) or facsimile (850/488-0313) to the
Florida Office of Insurance Regulation, Specialty Product Administration, The Larson
Building 200 East Gaines Street, Tallahassee, Florida 32399-0327 (the "Office of
Insurance"), provided that such notice by telephone, by facsimile or in writing may be
given to the Office of Insurance at other telephone numbers or other addresses if required
by the Office of Insurance to be used in lieu of the foregoing. The Bond Trustee shall
provide the Office of Insurance with any information concerning the Reserve Fund upon
request of the Office of Insurance or the Borrower.
SECTION 3.11. CUSTODY OF THE RESERVE FUND. The Reserve
Fund shall be in the custody of the Bond Trustee but in the name of the Issuer, and the
Issuer hereby authorizes and directs the Bond Trustee to transfer sufficient moneys from
the Reserve Fund to the Bond Trustee for deposit to the Bond Fund to pay the principal
of and interest on the Bonds for the purposes herein described, which authorization and
direction the Bond Trustee hereby accepts. In the event there shall be a deficiency in the
Principal Account or the Interest Account on any payment date for the Bonds, the Bond
Trustee shall promptly make up such deficiency from the Reserve Fund.
SECTION 3.12. NONPRESENTMENT OF BONDS. In the event that any
Bonds shall not be presented for payment when the principal thereof or interest thereon
becomes due, either at maturity, the date fixed for redemption thereof, or otherwise, if
funds sufficient for the payment thereof shall have been deposited into the Bond Fund or
otherwise made available to the Bond Trustee for deposit therein as provided in Section
3.03 hereof, all liability of the Issuer to the owner or owners thereof for the payment of
such Bonds shall forthwith cease, determine and be completely discharged, and
thereupon it shall be the duty of the Bond Trustee to hold such fund or funds, without
liability for interest thereon, for the benefit of the owner or owners of such Bonds, who
shall thereafter be restricted exclusively to such fund or funds for any claim of whatever
nature on his or their part under this Bond Indenture or on, or with respect to, said Bond,
26
4812-3022-2866.4
and all such funds shall remain uninvested. If any Bond shall not be presented for
payment within the period of two years following the date of final maturity of such Bond,
the Bond Trustee shall, to the extent required by law, transfer such funds to the state
treasury of the state in which the principal office of the Bond Trustee is located, in which
case the owner of such Bonds shall look only to such state for payment, or, in the
alternative, to the extent permitted by law, the Bond Trustee shall, upon request in
writing by the Obligor, return such funds to the Obligor free of any trust or lien and such
Bond shall, subject to the defense of any applicable statute of limitation, thereafter be an
unsecured obligation of the Obligor. In either event, the Bond Trustee shall have no
further responsibility with respect to such moneys or payment of such Bonds. Thereafter,
the Bondholders shall be entitled to look only to the Obligor for payment, and then only
to the extent of the amount so repaid by the Bond Trustee. The Obligor shall not be
liable for any interest on any sums paid to it.
SECTION 3.13. BOND TRUSTEE'S AND PAYING AGENTS' FEES,
CHARGES, AND EXPENSES. Pursuant to the provisions of the Loan Agreement, the
Obligor has agreed to pay to the Bond Trustee and to each Paying Agent, commencing
with the effective date of the Loan Agreement and continuing until the principal of,
premium, if any, and interest on the Bonds shall have been fully paid or provision for the
payment thereof shall have been made in accordance with the provisions of this Bond
Indenture, the reasonable and necessary fees and expenses (including reasonable
attorneys fees) of the Bond Trustee and each Paying Agent, as and when the same
become due, upon the submission by the Bond Trustee and each Paying Agent of a
statement therefor.
SECTION 3.14. MONEYS TO BE HELD IN TRUST. All moneys required
to be deposited with or paid to the Bond Trustee under any provision of this Bond
Indenture (except moneys in the Rebate Fund) shall be held by the Bond Trustee in trust
for the purposes specified in this Bond Indenture, and except for moneys deposited with
or paid to the Bond Trustee for the redemption of Bonds for which the notice of
redemption has been duly given, shall, while held by the Bond Trustee, constitute part of
the Trust Estate and be subject to the lien hereof.
SECTION 3.15. REPAYMENT TO THE OBLIGOR FROM THE
FUNDS. Any amounts remaining in the Cost of Issuance Fund, Bond Fund, Reserve
Fund or Project Fund after payment in full of the Bonds (or after making provision for
such payment), the fees and expenses of the Bond Trustee and the Paying Agents
(including attorneys fees, if any), the Administration Expenses, and all other amounts
required to be paid hereunder and under the Loan Agreement shall be paid to the Obligor
upon the termination of the Loan Agreement.
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4812-3022-2866.4
SECTION 3.16. REBATE FUND.
(a) A special Rebate Fund is hereby established by the Issuer. The Rebate
Fund shall be for the sole benefit of the United States of America and shall not be subject
to the claim of any other Person, including without limitation the Bondholders. The
Rebate Fund is established for the purpose of complying with Section 148 of the Code.
The money deposited in the Rebate Fund, together with all investments thereof and
investment income therefrom, shall be held in trust and applied solely as provided in this
Section. The Rebate Fund is not a portion of the Trust Estate and is not subject to the lien
of this Bond Indenture. Notwithstanding the foregoing, the Bond Trustee with respect to
the Rebate Fund is afforded all the rights, protections and immunities otherwise accorded
to it hereunder.
(b) Within 60 days after the close of each fifth "Bond Year," the Obligor shall
provide the Bond Trustee a computation in the form of a certificate of an officer of the
Obligor of the amount of "Excess Earnings," if any, for the period beginning on the date
of delivery of the Bonds and ending at the close of such "Bond Year" and the Obligor
shall pay to the Bond Trustee for deposit into the Rebate Fund an amount equal to the
difference, if any, between the amount then in the Rebate Fund and the Excess Earnings
so computed. The term "Bond Year" means with respect to the Bonds each one-year
period ending on the anniversary of the date of delivery of the Bonds or such other period
as may be elected by the Issuer in accordance with the Code and notice of which election
has been given to the Bond Trustee. If, at the close of any Bond Year, the amount in the
Rebate Fund exceeds the amount that would be required to be paid to the United States of
America under paragraph (d) below if the Bonds had been paid in full, such excess may,
at the request of the Obligor, be transferred from the Rebate Fund and paid to the
Obligor.
4812-3022-2866.4
(c) In general, "Excess Earnings" for any period of time means the sum of
(i) the excess of--
(A) the aggregate amount earned during such period of time on all
"Nonpurpose Investments" (including gains on the disposition of such
Obligations) in which "Gross Proceeds" of the issue are invested (other than
amounts attributable to an excess described in this subparagraph (c)(i)),
over
(B) the amount that would have been earned during such period of time
if the "Yield" on such Nonpurpose Investments (other than amounts attributable
to an excess described in this subparagraph (c)(i)) had been equal to the yield on
the issue, plus
28
(ii) any income during such period of time attributable to the
excess described in subparagraph ( c )(i) above.
The term Nonpurpose Investments, Gross Proceeds, Issue Date and Yield shall
have the meanings given to such terms in Section 148 of the Code.
(d) The Bond Trustee shall, as directed in writing by the Obligor, pay to the
United States of America at least once every five years, to the extent that funds are
available in the Rebate Fund or otherwise provided by the Obligor, an amount that
ensures that at least 90 percent of the Excess Earnings from the date of delivery of the
Bonds to the close of the period for which the payment is being made will have been
paid. The Bond Trustee shall pay to the United States of America not later than 60 days
after the Bonds have been paid in full as directed by the Obligor in writing, to the extent
that funds are available in the Rebate Fund or otherwise provided by the Obligor, 100
percent of the amount then required to be paid under Section 148(f) of the Code as a
result of Excess Earnings.
(e) The amounts to be computed, paid, deposited or disbursed under this
section shall be determined by the Obligor acting on behalf of the Issuer within thirty
days after each Bond Year. By such date, the Obligor shall also notify, in writing, the
Bond Trustee and the Issuer of the determinations the Obligor has made and the payment
to be made pursuant to the provisions of this section. Upon written request of any
Registered Owner ofBonds, the Obligor shall furnish to such Registered Owner of Bonds
a certificate (supported by reasonable documentation, which may include calculation by
Bond Counsel or by some other service organization) showing compliance with this
section and other applicable provisions of Section 148 of the Code.
(f) The Bond Trustee shall maintain a record of the periodic determinations by
the Obligor of the Excess Earnings for a period beginning on the first anniversary date of
the issuance of the Bonds and ending on the date six years after the final retirement of the
Bonds. Such records shall state each such anniversary date and summarize the manner in
which the Excess Earnings, if any, was determined.
(g) If the Bond Trustee shall declare the principal of the Bonds and the interest
accrued thereon immediately due and payable as the result of an Event of Default
specified in this Bond Indenture, or if the Bonds are optionally or mandatorily prepaid or
redeemed prior to maturity as a whole in accordance with their terms, any amount
remaining in any of the funds shall be transferred to the Rebate Fund to the extent that the
amount therein is less than the Excess Earnings computed by the Obligor as of the date of
such acceleration or redemption, and the balance of such amount shall be used
immediately by the Bond Trustee for the purpose of paying principal of, redemption
premium, if any, and interest on the Bonds when due. In furtherance of such intention,
the Issuer hereby authorizes and directs its Chairman to execute any documents,
certificates or reports required by the Code and to make such elections, on behalf of the
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4812-3022-2866.4
Issuer, which may be permitted by the Code as are consistent with the purpose for the
issuance of the Bonds.
(h) The requirements contained in this Section relating to the computation and
payment of Excess Earnings shall not be applicable if all Gross Proceeds of the Bonds are
expended in compliance with Section 1.148-7 of the Code.
(i) Notwithstanding any of the provisions of this Section, the Bond Trustee
shall have no duty or responsibility with respect to the Rebate Fund except to follow the
specific written instructions of the Obligor.
SECTION 3.17. COST OF ISSUANCE FUND. There is hereby created and
established with the Bond Trustee a trust fund designated as the "City of Atlantic Beach,
Florida Health Care Facilities Revenue and Refunding Bonds (Fleet Landing Project)
Cost of Issuance Fund" (the "Cost of Issuance Fund"). The Bond Trustee shall disburse
moneys in the Cost of Issuance Fund as provided in Article IV of the Loan Agreement.
Moneys in the Cost of Issuance Fund may be used only for payment of the Cost of
Issuance. On the earlier of (a) the day the Bond Trustee receives a certificate of the
Obligor to the effect that all Cost of Issuance relating to the Bonds has been paid, and (b)
the 180th day following the Delivery Date, any moneys remaining in the Cost of Issuance
Fund shall be transferred to the Interest Account of the Bond Fund. The Cost of Issuance
Fund shall then be closed.
30
4812-3022-2866.4
ARTICLE IV
COVENANTS OF THE ISSUER
SECTION 4.01. PERFORMANCE OF COVENANTS; AUTHORITY.
The Issuer covenants that it will faithfully perform at all times any and all covenants,
undertakings, stipulations, and provisions contained in this Bond Indenture, in any and
every Bond and in all proceedings of the Issuer pertaining hereto; provided, however, that
except for the covenant of the Issuer set forth in Section 4.02 hereof relating to payment
of the Bonds, the Issuer shall not be obligated to take any action or execute any
instrument pursuant to any provision hereof until it shall have been requested to do so by
the Obligor or by the Bond Trustee, or shall have received the instrument to be executed
and at the option of the Issuer shall have received from the party requesting such
execution assurance satisfactory to the Issuer that the Issuer shall be reimbursed for its
reasonable expenses incurred or to be incurred in connection with taking such action or
executing such instrument. The Issuer covenants that it is duly authorized under the laws
of the State of Florida, including particularly and without limitation the Act, to issue the
Bonds and to execute this Bond Indenture, and to pledge the revenues and receipts hereby
pledged, and to assign its rights under and pursuant to the Loan Agreement and the Note
in the manner and to the extent herein set forth, that all action on its part and to the extent
herein set forth, that all action on its part for the issuance of the Bonds and the execution
and delivery of this Bond Indenture has been duly and effectively taken and will be duly
taken as provided herein, and that the Bonds in the hands of the owners thereof are and
will be valid and enforceable limited obligations of the Issuer according to the import
hereof, except as enforcement thereof and hereof may be limited by bankruptcy,
insolvency, moratorium, reorganization and other similar laws affecting the rights of
creditors and by the application of general principles of equity, if such remedies are
pursued.
SECTION 4.02. PAYMENTS OF PRINCIPAL, PREMIUM, IF ANY,
AND INTEREST. The Issuer will promptly pay or cause to be paid the principal of,
premium, if any, and interest on all Bonds issued hereunder according to the terms
hereof. The principal, premium, if any, and interest payments are payable solely from
revenues and other amounts derived from the Note, and from the other security pledged
hereby, which revenues and security are hereby specifically pledged to the payment
thereof in the manner and to the extent herein specified. Nothing in the Bonds or in this
Bond Indenture shall be considered or construed as pledging any funds or assets of the
Issuer other than those pledged hereby.
SECTION 4.03. SUPPLEMENTAL INDENTURES; RECORDATION OF
BOND INDENTURE AND SUPPLEMENTAL INDENTURES. The Issuer will
execute and deliver all indentures supplemental hereto, and will cause this Bond
Indenture, the Loan Agreement, and all supplements hereto and thereto, as well as all
security instruments and financing statements relating thereto, to be filed in each office
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4812-3022-2866.4
required by law in order to publish notice of the liens created by this Bond Indenture and
the Loan Agreement. The Bond Trustee, at the Obligor's expense will cause all
continuation statements and all supplements to any financing statement or continuation
statement and other instruments as may be required, at all times to be recorded, registered
and filed in such manner and in such places as may be required by law in order fully to
preserve and protect the security of the Bondholders and all rights of the Bond Trustee
hereunder. Notwithstanding the preceding sentence, the Bond Trustee shall not be liable
for failure to effect any such filings.
SECTION 4.04. LIEN OF BOND INDENTURE. The Issuer hereby agrees
not to create any lien having priority or preference over the lien of this Bond Indenture
upon the Trust Estate or any part thereof, other than the security interest granted by it to
the Bond Trustee, except as otherwise specifically provided in Article VIII hereof. The
Issuer agrees that no obligations the payment of which is secured by payments or other
moneys or amounts derived from the Loan Agreement and the other sources provided
herein will be issued by it except in accordance with Sections 2.09 and 2.10 of this Bond
Indenture.
SECTION 4.05. RIGHTS UNDER THE LOAN AGREEMENT. The
Issuer will observe all of the obligations, terms and conditions required on its part to be
observed or performed under the Loan Agreement. The Issuer agrees that wherever in
the Loan Agreement it is stated that the Issuer will notify the Bond Trustee, give the
Bond Trustee some right or privilege, or in any way attempts to confer upon the Bond
Trustee the ability for the Bond Trustee to protect the security for payment of the Bonds,
that such part of the Loan Agreement shall be as though it were set out in this Bond
Indenture in full.
The Issuer agrees that the Bond Trustee as assignee of the Loan Agreement may
enforce, in its name or in the name of the Issuer, all rights of the Issuer (except those
rights of the Issuer to indemnification and payment under Sections 5.7, 7.5 and 9.5
thereof) and all obligations of the Obligor under and pursuant to the Loan Agreement for
and on behalf of the Bondholders, whether or not the Issuer is in default hereunder.
SECTION 4.05. TAX COVENANTS. (a) The Issuer covenants and agrees
that until the final maturity of the Bonds, based upon the Obligor's covenants in Section
4.9 of the Loan Agreement, it will not knowingly take any action, use any money on
deposit in any fund or account maintained in connection with the Bonds, whether or not
such money was derived from the proceeds of the sale of the Bonds or from any other
source, in a manner that would cause the Bonds to be arbitrage bonds, within the meaning
of Section 148 of the Code. In the event the Obligor notifies the Issuer that it is
necessary to restrict or limit the yield on the investment of moneys held by the Bond
Trustee pursuant to this Bond Indenture, or to use such moneys in any certain manner to
avoid the Bonds being considered arbitrage bonds, the Issuer at the written direction and
expense of the Obligor shall deliver to the Bond Trustee appropriate written instructions
32
4812-3022-2866.4
of the Issuer, in which event the Bond Trustee shall take such action as instructed to
restrict or limit the yield on such investment or to use such moneys in accordance with
such instructions.
(b) The Issuer shall not knowingly use any proceeds of Bonds or any other
funds of the Issuer, directly or indirectly, in any manner, and shall not knowingly take
any other action or actions, that would result in any of the Bonds being treated other than
as an obligation described in Section 103(a) ofthe Code.
(c) The Issuer will not knowingly use any portion of the proceeds of the Bonds,
including any investment income earned on such proceeds, directly or indirectly, to make
or finance loans to Persons who are not "Exempt Persons." For purposes of the preceding
sentence, a loan to an organization described in Section 50l(c)(3) of the Code for use
with respect to an unrelated trade or business, determined according to Section 513 (a) of
the Code, constitutes a loan to a Person who is not an "Exempt Person."
(d) The Issuer will not knowingly take any action that would result in all or any
portion of the Bonds being treated as federally guaranteed within the meaning of Section
149(b )(2) of the Code.
(e) For purposes of this Section, the Issuer's compliance shall be based solely
on acts or omissions by the Issuer, and no acts, omissions or directions of the Obligor, the
Bond Trustee or any other Persons shall be attributable to the Issuer.
SECTION 4.07. CHANGE IN LAW. To the extent that published rulings of
the Internal Revenue Service, or amendments to the Code modify the covenants of the
Issuer that are set forth in this Bond Indenture or that are necessary for interest on the
Bonds to be excludable from gross income for federal income tax purposes, the Issuer,
upon receiving the written Opinion of Bond Counsel to such effect, will comply, at the
expense of the Obligor, with such modifications and direct the Bond Trustee to take such
action as may be required to comply with such modifications.
SECTION 4.08. PROGRAM INVESTMENT. The proceeds of the Bonds
are to be used to finance the Project. With respect to the Bonds, the Issuer asserts:
(a) At least 95 percent of all obligations acquired with the proceeds of the
Bonds, by amount of cost outstanding, will be evidences of loans to a substantial number
of persons representing the general public, loans to exempt persons, or loans to provide
housing and related facilities, or any combination of the foregoing.
(b) At least 95 percent of all amounts received by the Issuer with respect to the
Bonds will be used for one or more of the following purposes: to make loans to exempt
organizations, to pay the principal or interest or otherwise to service the debt on the
Bonds; to reimburse the Issuer or to pay for administrative costs of issuing such
33
4812-3022-2866.4
obligations; or to redeem or retire such Bonds of the Issuer at the next earliest possible
date of redemption.
(c) Any person or any related party, as defined in Section 1.150-1 of the Code,
as amended, from whom the Issuer may acquire obligations, shall not, pursuant to an
arrangement, formal or informal, purchase the Issuer's bonds in an amount related to the
amount of the obligations to be acquired from such person by the Issuer.
(d) The Issuer does not waive the right to treat the Loan Agreement as a
program investment.
34
4812-3022-2866.4
SECTION 5.01.
ARTICLE V
REDEMPTION OF BONDS
OPTIONAL REDEMPTION OF BONDS. The Bonds
maturing on and after _, __ , are subject to optional redemption prior to
maturity by the Issuer at the written direction of the Obligor in whole or in part on
_____ , __ or on any date thereafter, at the redemption price equal to the
principal amount of such Bonds to be redeemed, together with accrued interest to the
redemption date.
SECTION 5.02. SINKING FUND REDEMPTION.
(a) The Bonds maturing on _, __ are subject to mandatory sinking
fund redemption at a redemption price equal to the principal amount thereof plus accrued
interest to the redemption date. As and for a sinking fund for the redemption of Bonds
maturing on _, __ , the Issuer shall cause to be deposited into the Principal
Account of the Bond Fund a sum which is sufficient to redeem on of each
of the following years (after credit as provided below) the following principal amounts of
Bonds maturing on _, __ , plus accrued interest to the redemption date:
Year Amount Year Amount
*maturity
(b) The Bonds maturing on _, __ are subject to mandatory
sinking fund redemption at a redemption price equal to the principal amount thereof plus
accrued interest to the redemption date. As and for a sinking fund for the redemption of
Bonds maturing on _, __ , the Issuer shall cause to be deposited into the
Principal Account of the Bond Fund a sum which is sufficient to redeem on ___ _
of each of the following years (after credit as provided below) the following principal
amounts of Bonds maturing on _, __ , plus accrued interest to the
redemption date:
Year Amount Year Amount
*maturity
35
4812-3022-2866.4
(c) On or before the thirtieth day prior to each sinking fund payment date, the
Bond Trustee shall proceed to select for redemption (by lot in such manner as the Bond
Trustee may determine) from all Bonds Outstanding maturing on _, __ or
_____ , __ , as the case may be, a principal amount of such Bonds equal to the
Aggregate Principal Amount of such Bonds redeemable with the required sinking fund
payment, and shall call such Bonds or portions thereof ($5,000 or any integral multiple
thereof) for redemption from the sinking fund on the next _, and give notice
of such call. At the option of the Obligor to be exercised by delivery of a written
certificate to the Bond Trustee on or before the forty-fifth day next preceding any sinking
fund redemption date, it may (i) deliver to the Bond Trustee for cancellation Bonds or
portions thereof maturing on _, __ or _, __ , as the case may
be, in an Aggregate Principal Amount desired by the Obligor, or (ii) specify a principal
amount of Bonds or portions thereof maturing on _, __ or _,
__ , as the case may be, which prior to said date have been redeemed (otherwise than
through the operation of the sinking fund) and canceled by the Bond Trustee at the
request of the Issuer and not theretofore applied as a credit against any sinking fund
redemption obligation. Each such Bond or portion thereof so delivered or previously
redeemed shall be credited by the Bond Trustee at 100% of the principal amount thereof
against the obligation of the Issuer to redeem Bonds on such sinking fund redemption
date. Any excess shall be credited against the next sinking fund redemption obligation to
redeem Bonds. In the event that the Obligor shall avail itself of the provisions of clause
(i) of the second sentence of this paragraph, the certificate required by the second
sentence of this paragraph shall be accompanied by the Bonds or portions thereof to be
canceled.
SECTION 5.03. METHOD OF SELECTION OF BONDS IN CASE OF
PARTIAL REDEMPTION; REDEMPTION PRIORITY.
(a) In the event that less than all of the Outstanding Bonds are to be redeemed
as provided in Sections 5.01 or 5.08 hereof, the Obligor may select the particular
maturities to be redeemed. If less than all of the Outstanding Bonds of a single maturity
are to be redeemed, they shall be selected by the Securities Depository or by lot in such
manner as the Bond Trustee may determine.
(b) If a Bond is of a denomination larger than the mmtmum Authorized
Denomination, a portion of such Bond may be redeemed, but Bonds shall be redeemed
only in the principal amount of an Authorized Denomination and no Bond may be
redeemed in part if the principal amount to be Outstanding following such partial
redemption is not an Authorized Denomination.
SECTION 5.04. NOTICE OF REDEMPTION. Bonds shall be called for
redemption by the Bond Trustee as herein provided upon receipt by the Bond Trustee at
least 45 days prior to the redemption date of a certificate of the Obligor specifying the
principal amount of Bonds to be called for redemption, the applicable redemption price or
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4812-3022-2866.4
prices and the provision or provisions of this Bond Indenture pursuant to which such
Bonds are to be called for redemption. The provisions of the preceding sentence shall not
apply to the redemption of Bonds pursuant to the sinking fund provided in Section 5.02
hereof, and such Bonds shall be called for redemption by the Bond Trustee without the
necessity of any action by the Obligor or the Issuer. In case of every redemption, the
Bond Trustee shall cause notice of such redemption to be given by mailing by first class
mail, postage prepaid, a copy of the redemption notice to the owners of the Bonds
designated for redemption in whole or in part, at their addresses as the same shall last
appear upon the registration books, in each case not more than 60 nor less than 30 days
prior to the redemption date. In addition, notice of redemption shall be sent by first class
or registered mail, return receipt requested, or by over night delivery service ( 1)
contemporaneously with such mailing: (A) to any owner of $1,000,000 or more in
principal amount of Bonds, and (B) to at least two or more information services of
national recognition that disseminate redemption information with respect to municipal
bonds; and (2) to any securities depository registered as such pursuant to the Securities
Exchange Act of 1934, as amended, that is an owner of Bonds to be redeemed so that
such notice is received at least two days prior to such mailing date. An additional notice
of redemption shall be given by certified mail, postage prepaid, mailed not less than 60
nor more than 90 days after the redemption date to any owner of Bonds selected for
redemption that has not surrendered the Bonds called for redemption, at the address as
the same shall last appear upon the registration books.
4812-3022-2866.4
All notices of redemption shall state:
(1) the redemption date,
(2) the redemption price,
(3) the identification, including complete designation (including series)
and issue date of the Bonds and the CUSIP number (and in the case of partial
redemption, certificate number and the respective principal amounts, interest rates
and maturity dates) of the Bonds to be redeemed,
( 4) the condition for redemption, if any,
(5) that on the redemption date the redemption price will become due
and payable upon each such Bonds, and that interest thereon shall cease to accrue
from and after said date, and
(6) the name and address of the Bond Trustee and any paying agent for
such Bonds, including the place where such Bonds are to be surrendered for
payment of the redemption price and the name and phone number of a contact
person at such address.
37
Provided, however, that failure to give any such notice, or any defect therein, shall
not affect the validity of any proceedings for the redemption of such Bonds.
SECTION 5.05. BONDS DUE AND PAYABLE ON REDEMPTION
DATE; INTEREST CEASES TO ACCRUE. On or before the Business Day prior to
the redemption date specified in the notice of redemption, an amount of money sufficient
to redeem all Bonds called for redemption at the appropriate redemption price, including
accrued interest to the date fixed for redemption, shall be deposited with the Bond
Trustee. If at the time of mailing of notice of any optional redemption the Obligor shall
not have deposited with the Bond Trustee moneys sufficient to redeem all of the Bonds
called for redemption, such notice may state that it is conditional in that it is subject to the
deposit of moneys with the Bond Trustee not later than the redemption date, and such
notice shall be of no effect unless such moneys are so deposited. On the redemption date
the principal amount of each Bond to be redeemed, together with the accrued interest
thereon to such date and redemption premium, if any, shall become due and payable; and
from and after such date, notice having been given and deposit having been made in
accordance with the provisions of this Article V, then, notwithstanding that any Bonds
called for redemption shall not have been surrendered, no further interest shall accrue on
any such Bonds. From and after such date of redemption (such notice having been given
and such deposit having been made), the Bonds to be redeemed shall not be deemed to be
Outstanding hereunder, and the Issuer shall be under no further liability in respect
thereof.
SECTION 5.06 CANCELLATION. All Bonds which have been redeemed
shall be cancelled by the Bond Trustee and treated as provided in Section 2.10 hereof.
SECTION 5.07. PARTIAL REDEMPTION OF FULLY REGISTERED
BONDS. Upon surrender of any fully registered Bond for redemption in part only, the
Issuer shall execute and the Bond Trustee shall authenticate and deliver to the owner
thereof, at the expense of the Obligor, a new Bond or Bonds of the same maturity of
Authorized Denominations in an Aggregate Principal Amount equal to the unredeemed
portion of the Bond surrendered.
SECTION 5.08. EXTRAORDINARY OPTIONAL REDEMPTION. The
Bonds shall be subject to optional redemption by the Issuer at the written direction of the
Obligor prior to their scheduled maturities, in whole or in part at a redemption price equal
to the principal amount thereof plus accrued interest from the most recent interest
payment date to the redemption date on any date following the occurrence of any of the
following events:
(1) in case of damage or destruction to, or condemnation of, any property,
plant, and equipment of any Obligated Group Member, to the extent that the net proceeds
of insurance or condemnation award exceed the Threshold Amount and the Obligor has
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determined not to use such net proceeds or award to repair, rebuild or replace such
property, plant, and equipment; or
(2) as a result of any changes in the Constitution or laws of the State of Florida
or of the United States of America or of any legislative, executive, or administrative
action (whether state or federal) or of any final decree, judgment, or order of any court or
administrative body (whether state or federal), the obligations of the Obligor under the
Loan Agreement have become, as established by an Opinion of Counsel, void or
unenforceable in each case in any material respect in accordance with the intent and
purpose of the parties as expressed in the Loan Agreement.
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4812-3022-2866.4
ARTICLE VI
INVESTMENTS
SECTION 6.01. INVESTMENT OF BOND FUND, PROJECT FUND
AND RESERVE FUND MONEYS. Any moneys held as part of the Bond Fund,
Project Fund or Reserve Fund shall be invested or reinvested by the Bond Trustee at the
written request and direction of the Obligor (upon which the Bond Trustee is entitled to
rely) in Permitted Investments, subject to the provisions of this Bond Indenture. All
Permitted Investments shall be either subject to redemption at any time at a fixed value at
the option of the owner thereof or shall mature or be marketable not later than the
Business Day prior to the date on which the proceeds are expected to be expended. For
the purpose of any investment or replacement under this Section, the Permitted
Investments shall be deemed to mature at the earliest date on which the Obligor is, on
demand, obligated to pay a fixed sum in discharge of the whole of such obligation. The
Bond Trustee may make any and all investments permitted by the provisions of this
Section through its trust department and may charge its ordinary and customary fees for
such trades, including cash sweep account fees. In order to comply with the directions of
the Obligor, the Bond Trustee may sell, at the market price, or present for redemption, or
may otherwise cause liquidation prior to their maturities, any of the obligations in which
funds have been invested, and the Bond Trustee shall not be liable for any loss or penalty
of any nature resulting therefrom. In order to avoid loss in the event of any need for
funds, the Obligor may instruct the Bond Trustee, in lieu of a liquidation or redemption
of investments in the fund or account needing funds, to exchange such investment for
investments in another fund or account that may be liquidated at no, or at reduced, loss.
The Bond Trustee shall be under no liability for interest on any moneys received
hereunder unless specifically agreed to in writing. Notwithstanding anything to the
contrary in this Section 6.01, (i) the Obligor shall not direct the Bond Trustee to purchase
any Premium Security unless the written instructions of the Obligor to make such
purchase set forth the amount of premium on such Premium Security, and (ii) the Obligor
shall not direct the Bond Trustee to sell any Premium Security, unless prior to such sale,
the Obligor has directed the Bond Trustee as to the amount of realized premium on such
Premium Security to be transferred from the Funded Interest Account to the account in
which such Premium Security was held.
Ratings of Investment Securities shall be determined at the time of purchase of
such Investment Securities and without regard to ratings subcategories. The Bond
Trustee shall have no responsibility to monitor the ratings of Investment Securities after
the initial purchase of such Investment Securities.
SECTION 6.02. ALLOCATION AND TRANSFERS OF INVESTMENT
INCOME. Any investments in any Fund shall be held by or under the control of the
Bond Trustee and shall be deemed at all times a part of the Fund from which the
investment was made. Any loss resulting from such investments shall be charged to such
40
4812-3022-2866.4
Fund. The Bond Trustee shall not be liable for any loss or penalty resulting from any
such investment made in accordance with any permitted direction by an Obligor or for
the Bonds becoming "arbitrage bonds" by reason of any such investment. Any interest or
other gain from any fund from any investment or reinvestment pursuant to Section 6.01
hereof shall be allocated and transferred as follows:
(a) On a monthly basis the Bond Trustee shall furnish to the Obligor a full and
complete statement of all receipts and disbursements of Permitted Investments in any
Fund and Account covering such period.
(b) Any interest or other gain realized as a result of any investments or
reinvestments of moneys in the Principal Account and the Interest Account of the Bond
Fund shall be credited at least semiannually to the Interest Account unless a deficiency
exists in the Reserve Fund, in which case such interest or other gain shall be paid into the
Reserve Fund forthwith.
(c) Any interest or other gain realized as a result of any investments or
reinvestments of moneys in the Reserve Fund shall be credited to the Reserve Fund if a
deficiency exists therein at that time. If a deficiency does not exist in the Reserve Fund at
that time, such interest or other gain on other amounts paid into the Reserve Fund shall be
paid during the construction period for the Project for deposit into the Funded Interest
Account of the Project Fund created in connection with the issuance of Bonds for the
Project or if after the completion of such construction period, for deposit into the Interest
Account of the Bond Fund, in each case at least semiannually.
The Bond Trustee shall sell and reduce to cash a sufficient portion of such
investments whenever the cash balance in any fund is insufficient for the purposes of
such fund.
SECTION 6.03. VALUATION OF PERMITTED INVESTMENTS.
Accounting and valuation of Permitted Investments in any Fund or Account will be
performed as follows:
(a) On a monthly basis the Bond Trustee shall furnish to the Obligor a full and
complete statement of all receipts and disbursements of Permitted Investments in any
Fund and Account covering such period.
(b) The Bond Trustee shall also furnish on or before _ of each year
a statement of the assets contained in each Fund and Account. Assets will be valued at
market value as by the Bond Trustee in such statement in accordance with
the normal valuation procedures of the Bond Trustee; provided, however, in the event
monies are withdrawn from the Reserve Fund for a deficiency in the Principal Account or
Interest Account pursuant to Section 3 .1 O(b) hereof, assets in the Reserve Fund shall also
41
4812-3022-2866.4
be valued as of the first Business Day after such transfer is made (such date and each
______ referred to as a "Valuation Date").
(c) If on any Valuation Date, the amount on deposit in the Reserve Fund is less
than 90% of the Reserve Fund Requirement as a result of a decline in the market value of
investments on deposit in the Reserve Fund, the Obligor shall deposit with the Bond
Trustee an amount necessary to restore the Reserve Fund to the Reserve Fund
Requirement within 120 days following the date on which the Obligor receives notice of
such deficiency.
(d) If at any time, the amount on deposit in the Reserve Fund is less than 100%
of the Reserve Fund Requirement as a result of a draw on such Reserve Fund, the Obligor
shall deposit with the Bond Trustee an amount necessary to restore the Reserve Fund to
the Reserve Fund Requirement in not more than 12 substantially equal monthly
installments beginning on the first day of the seventh month after the month in which
such draw occurred.
42
4812-3022-2866.4
ARTICLE VII
DISCHARGE OF BOND INDENTURE
SECTION 7.01. DISCHARGE OF THE BOND INDENTURE. If, when
the Bonds secured hereby shall become due and payable in accordance with their terms or
otherwise as provided in this Bond Indenture and the whole amount of the principal of,
premium, if any, and interest due and payable upon all of the Bonds shall be paid, or
provision shall have been made for the payment of the same, together with all other sums
payable hereunder (including but not limited to the fees and expenses of the Bond Trustee
and any Paying Agent, in accordance with Section 3.13 hereof), then the right, title and
interest of the Bond Trustee in and to the Trust Estate and all covenants, agreements and
other obligations of the Issuer to the Bondholders shall thereupon cease, terminate and
become void and be discharged and satisfied. In such event, upon the written request of
the Issuer or of the Obligor, and upon receipt of an Opinion of Counsel to the effect that
all conditions precedent herein provided relating to the satisfaction and discharge of this
Bond Indenture have been complied with, the Bond Trustee shall execute such
documents as may be reasonably required by the Issuer and shall turn over to the Obligor
any surplus in the Cost of Issuance Fund, Bond Fund, Reserve Fund and Project Fund.
All Outstanding Bonds of any one or more series shall prior to the maturity or
redemption date thereof be deemed to have been paid within the meaning and with the
effect expressed in this Section if (i) in case said Bonds are to be redeemed on any date
prior to their maturity, the Obligor shall have given to the Bond Trustee in form
satisfactory to it irrevocable written instructions to give on a date in accordance with the
provisions of Section 5.04 hereof notice of redemption of such Bonds on said redemption
date, such notice to be given in accordance with the provisions of Section 5.04 hereof, (ii)
there shall have been deposited with the Bond Trustee (or another Paying Agent) either
moneys in an amount which shall be sufficient, or Government Obligations which shall
not contain provisions permitting the redemption thereof at the option of the issuer, or
any other Person other than the holder thereof, the principal of and the interest on which
when due, and without any reinvestment thereof, will provide moneys which, together
with the moneys, if any, deposited with or held by the Bond Trustee or any Paying Agent
at the same time (including the Bond Fund and the Reserve Fund), shall be sufficient, in
the opinion of an independent certified public accountant, to pay when due the principal
of, premium, if any, and interest due and to become due on said Bonds on or prior to the
redemption date or maturity date thereof, as the case may be, and (iii) in the event that
said Bonds are not by their terms subject to redemption within the next 45 days, the
Obligor shall have given the Bond Trustee in form satisfactory to it irrevocable written
instructions to give, as soon as practicable in the same manner as the notice of
redemption is given pursuant to Section 5.04 hereof, a notice to the owners of such Bonds
that the deposit required by subclause (ii) above has been made with the Bond Trustee (or
43
4812-3022-2866.4
another depository) and that said Bonds are deemed to have been paid in accordance with
this Section and stating such maturity or redemption date upon which moneys are to be
available for the payment of the principal of, premium, if any, and interest on said Bonds.
Neither the Government Obligations nor moneys deposited with the Bond Trustee
pursuant to this Section nor principal or interest payments on any such Government
Obligations shall be withdrawn or used for any purpose other than, and shall be held in
trust for, the payment of the principal of, premium, if any, and interest on said Bonds;
provided any such cash received from such principal or interest payments on such
Government Obligations deposited with the Bond Trustee, if not then needed for such
purpose, shall, at the written direction of the Obligor, either (1) be reinvested, to the
extent practicable, in Government Obligations of the type described in clause (ii) of this
paragraph maturing at the times and in amounts sufficient to pay when due the principal
of, premium, if any, and interest to become due on said Bonds on or prior to such
redemption date or maturity date thereof, as the case may be, or (2) be used to pay
principal and/or interest on the Bonds. At such time as any Bond shall be deemed paid as
aforesaid, it shall no longer be secured by or entitled to the benefits of this Bond
Indenture, except for the purpose of any payment from such moneys or Government
Obligations deposited with the Bond Trustee and the purpose of transfer and exchange
pursuant to Section 2.05 hereof.
The release of the obligations of the Issuer under this Section shall be without
prejudice to the rights of the Bond Trustee to be paid reasonable compensation for all
services rendered by it hereunder and all its reasonable and necessary expenses, charges
and other disbursements incurred on or about the administration of the trust hereby
created and the perfonnance of its powers and duties hereunder.
44
4812-3022-2866.4
ARTICLE VIII
DEFAULTS AND REMEDIES
SECTION 8.01. EVENTS OF DEFAULT. If any of the following events
occur, it is hereby defined as and shall be deemed an "Event of Default":
(a) Default in the payment of the principal of or premium, if any, on any Bond
when the same shall become due and payable, whether at the stated maturity thereof, or
upon proceedings for redemption or as required by the sinking fund provisions hereof or
otherwise.
(b) Default in the payment of any installment of interest on any Bond when the
same shall become due and payable.
(c) Declaration under the Master Indenture that the principal of, and accrued
interest on, any Obligation issued thereunder is immediately due and payable.
(d) Failure by the Issuer in the performance or observance of any other of the
covenants, agreements or conditions on its part in this Bond Indenture or in the Bonds
contained, which failure shall continue for a period of 60 days after written notice
specifYing such failure and requesting that it be remedied, is given to the Issuer and the
Obligor by the Bond Trustee or to the Issuer, the Obligor and to the Bond Trustee by the
owners of not less than 25% in principal amount of the Bonds Outstanding; provided that
such failure is the result of the failure of the Obligor to perform its obligations under the
Loan Agreement.
SECTION 8.02. REMEDIES ON EVENTS OF DEFAULT. Upon the
occurrence of an Event of Default, the Bond Trustee shall have the following rights and
remedies:
(a) The Bond Trustee shall, in the event that the payment of the principal of
and accrued interest on any Note has been declared due and payable immediately by the
Master Trustee, by notice in writing given to the Issuer and the Obligor, declare the
principal amount of all Bonds then Outstanding and the interest accrued thereon to be
immediately due and payable and said principal and interest shall thereupon become
immediately due and payable. Upon any declaration of acceleration hereunder, the Bond
Trustee shall give notice to the Bondholders in the same manner as a notice of
redemption under Article V hereof, stating the date upon which the Note and the Bonds
shall be payable.
The provisions of the preceding paragraph, however, are subject to the condition
that if, after the payment of the principal of, and accrued interest on, the Note and the
Bonds has been declared due and payable immediately, the declaration of the acceleration
of the Note shall be annulled in accordance with the provisions of the Master Indenture,
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4812-3022-2866.4
the declaration of the acceleration of the Bonds shall be automatically annulled, and the
Bond Trustee shall promptly give written notice of such annulment to the Issuer and the
Obligor and notice to Bondholders in the same manner as a notice of redemption under
Article V hereof; but no such annulment shall extend to or affect any subsequent Event of
Default or impair any right or remedy consequent thereon;
(b) The Bond Trustee may, by mandamus, or other suit, action or proceeding at
law or in equity, enforce the rights of the Bondholders, and require the Issuer or the
Obligor or both of them to carry out the agreements with or for the benefit of the
Bondholders and to perfonn its or their duties under the Act, the Loan Agreement and
this Bond Indenture.
(c) The Bond Trustee may, by action or suit in equity, require the Issuer to
account as if it were the trustee of an express trust for the Bondholders but any such
judgment against the Issuer shall be enforceable only against the funds and accounts
hereunder in the hands of the Bond Trustee.
(d) The Bond Trustee may, by action or suit in equity, enjoin any acts or things
which may be unlawful or in violation of the rights of the Bondholders.
(e) The Bond Trustee may, upon the filing of a suit or other commencement of
judicial proceedings to enforce the rights of the Bond Trustee and the Bondholders, have
appointed a receiver or receivers of the Trust Estate upon a showing of good cause with
such powers as the court making such appointment may confer.
No right or remedy is intended to be exclusive of any other right or remedy, but
each and every such right or remedy shall be cumulative and in addition to any other
remedy given hereunder or now or hereafter existing at law or in equity or by statute.
If any Event of Default shall have occurred and if requested by the owners of at
least 25% in Aggregate Principal Amount of Bonds then Outstanding and indemnified as
provided in Section 9.01(m) hereof (except the remedy under Section 8.02(a) above, for
which no indemnity may be required), the Bond Trustee shall be obligated to exercise
such one or more of the rights and powers conferred by this Section as it, being advised
by counsel, shall deem most expedient in the interests of such Bondholders. In the event
the Bond Trustee shall receive inconsistent or conflicting requests and indemnity from
two or more groups of owners of Outstanding Bonds, each representing less than a
majority of the aggregate principal amount of the Outstanding Bonds, the Bond Trustee,
in its sole discretion, may determine what action, if any, shall be taken.
SECTION 8.03. MAJORITY OF BONDHOLDERS MAY CONTROL
PROCEEDINGS. Anything in this Bond Indenture to the contrary notwithstanding the
owners of at least a majority in Aggregate Principal Amount of the Bonds then
Outstanding shall have the right, at any time, to the extent permitted by law, by an
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4812-3022-2866.4
instrument or instruments in writing executed and delivered to the Bond Trustee, to direct
the time, method, and place of conducting all proceedings, to be taken in connection with
the enforcement of the terms and conditions of this Bond Indenture, or for the
appointment of a receiver, and any other proceedings hereunder; provided that such
direction shall not be otherwise than in accordance with the provisions hereof and
provided, further, that notwithstanding anything to the contrary in this Bond Indenture,
the Issuer shall have the sole ability to direct the method and place of conducting all
proceedings to be taken in connection with the enforcement of Section 4.10 of the Loan
Agreement. The Bond Trustee shall not be required to act on any direction given to it
pursuant to this Section until indemnity as set forth in Section 9.0l(m) hereof is provided
to it by such Bondholders.
SECTION 8.04. RIGHTS AND REMEDIES OF BONDHOLDERS. No
owner of any Bond shall have any right to institute any suit, action, or proceeding in
equity or at law for the enforcement of this Bond Indenture or for the execution of any
trust hereof or for the appointment of a receiver or any other applicable remedy
hereunder, unless a default has occurr-ed of which the Bond Trustee has been notified as
provided in Section 9.01 hereof, or of which by said Section it is deemed to have notice,
nor unless such default shall have become an Event of Default and the owners of at least
a majority in Aggregate Principal Amount of Bonds then Outstanding shall have made
written request to the Bond Trustee and shall have offered reasonable opportunity either
to proceed to exercise the powers hereinbefore granted or to institute such action, suit, or
proceeding in their own names, nor unless they have also offered to the Bond Trustee
indemnity as provided in Section 9.0l(m) hereof, nor unless the Bond Trustee shall
thereafter fail or refuse to exercise the powers hereinbefore granted, or to institute such
action, suit, or proceeding in its own name; and such notification, request, and offer of
indemnity are hereby declared in every case at the option of the Bond Trustee to be
conditions precedent to the execution of the powers and trusts of this Bond Indenture, and
to any action or cause of action for the enforcement of this Bond Indenture, or for the
appointment of a receiver or for any other remedy hereunder; it being understood and
intended that no one or more owners of the Bonds shall have the right in any manner
whatsoever to affect, disturb, or prejudice the lien of this Bond Indenture by his, her, its,
or their action or to enforce any right hereunder except in the manner herein provided and
that all proceedings at law or in equity shall be instituted, had, and maintained in the
manner herein provided and for the equal benefit of the owners of all Bonds then
Outstanding. Nothing in this Bond Indenture contained shall, however, affect or impair
the right of any owner of Bonds to enforce the payment of the principal of, premium, if
any, or interest on any Bond at and after the maturity thereof, or the obligation of the
Issuer to pay the principal of, premium, if any, and interest on each of the Bonds to the
respective owners of the Bonds at the time and place, from the source and in the manner
herein, and in the Bonds expressed.
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SECTION 8.05. APPLICATION OF MONEYS. (a) Subject to the
provisions of subparagraph (c) hereof, all moneys received by the Bond Trustee pursuant
to any right given or action taken under the provisions of this Article shall, after payment
of the costs and expenses (including reasonable attorney fees) of the proceedings
resulting in the collection of such moneys and the expenses, liabilities, and advances
incutTed or made by the Bond Trustee, be deposited into the Bond Fund, and all moneys
so deposited into the Bond Fund and all moneys held in or deposited into the Bond Fund
during the continuance of an Event of Default and available for payment of the Bonds
under the provisions of Section 3. 04 hereof shall (after payment of the fees and expenses
of the Bond Trustee and the Issuer) be applied as follows:
4812-3022-2866.4
(i) Unless the principal of all of the Bonds shall have become or shall
have been declared due and payable, all such moneys shall be applied:
First: To the payment to the Persons entitled thereto of all installments of
interest then due on the Bonds in the order of the maturity of the installments of
such interest and, if the amount available shall not be sufficient to pay in full any
particular installment, then to the payment ratably, according to the amounts due
on such installment, to the Persons entitled thereto, without any discrimination or
privilege; and
Second: To the payment to the Persons entitled thereto of the unpaid
principal of any of the Bonds which shall have become due (other than Bonds
called for redemption for the payment of which moneys are held pursuant to the
provisions of this Bond Indenture), in the order of their due dates, with interest on
such Bonds from the respective dates upon which they become due at the rate of
interest borne by such Bonds and, if the amount available shall not be sufficient to
pay in full Bonds due on any particular date, together with such interest, then to
the payment ratably, according to the amount of principal due on such date, to the
persons entitled thereto, without any discrimination or privilege.
(ii) If the principal of all the Bonds shall have become due or shall have
been declared due and payable, all such moneys shall be applied to the payment of
the principal and interest then due and unpaid upon all of the Bonds (together with
interest on overdue installments of principal at the rate of interest borne by each
Bond), without preference or priority of principal over interest, any other
installment of interest, or of any Bond over any other Bond, or of any series of
Bonds over any other series of Bonds ratably, according to the amounts due
respectively for principal and interest, to the Persons entitled thereto without any
discrimination or privilege.
(iii) If the principal of all the Bonds shall have been declared due and
payable, and if such declaration shall thereafter have been rescinded and annulled
under the provisions of this Article then, subject to the provisions of paragraph (ii)
48
of this Section in the event that the principal of all the Bonds shall later become
due or be declared due and payable, the moneys shall be applied in accordance
with the provisions of the foregoing paragraph (i) of this Section.
(b) Whenever moneys are to be applied pursuant to the provisions of this
Section, such moneys shall be applied at such times, and from time to time, as the Bond
Trustee shall determine, having due regard to the amount of such moneys available for
application and the likelihood of additional moneys becoming available for such
application in the future. Whenever the Bond Trustee shall apply such moneys, it shall
fix the date (which shall be an Interest Payment Date unless it shall deem another date
more suitable) upon which such application is to be made and upon such date interest on
the amounts of principal to be paid on such date shall cease to accrue. The Bond Trustee
shall give such notice as it may deem appropriate of the deposit of any such moneys and
of the fixing of any such date, and shall not be required to make payment to the owner of
any unpaid Bond until such unpaid Bond shall be presented to the Bond Trustee for
appropriate endorsement or for cancellation if fully paid.
(c) Notwithstanding the foregoing, any moneys transferred into any Account of
the Bond Fund from the Reserve Fund shall be held by the Bond Trustee separate and
apart from any other moneys in such Account of the Bond Fund.
(d) Whenever all of the Bonds and interest thereon have been paid under the
provisions of this Section and all expenses and fees of the Bond Trustee and the Paying
Agents and all Administration Expenses have been paid, any balance remaining in any
funds shall be paid to the Obligor as provided in Section 3.15 hereof.
SECTION 8.06. BOND TRUSTEE MAY ENFORCE RIGHTS
WITHOUT BONDS. All rights of action and claims under this Bond Indenture or any
of the Bonds Outstanding hereunder may be enforced by the Bond Trustee without the
possession of any of the Bonds or the production thereof in any trial or proceedings
relative thereto; and any suit or proceeding instituted by the Bond Trustee shall be
brought in its name as Bond Trustee, without the necessity of joining as plaintiffs or
defendants any owners of the Bonds and any recovery of judgment shall be for the ratable
benefit of the owners of the Bonds, subject to the provisions of this Bond Indenture.
SECTION 8.07. BOND TRUSTEE TO FILE PROOFS OF CLAIM IN
RECEIVERSHIP, ETC. In the case of any receivership, insolvency, bankruptcy,
reorganization, arrangement, adjustment, composition, or other judicial proceedings
affecting the Obligor, the Bond Trustee shall, to the extent permitted by law, be entitled
to file such proofs of claims and other documents as may be necessary or advisable in
order to have claims of the Bond Trustee and of the Bondholders allowed in such
proceedings for the entire amount due and payable by the Issuer under this Bond
Indenture or by the Obligor at the date of the institution of such proceedings and for any
additional amounts which may become due and payable by it after such date, without
49
4812-3022-2866.4
prejudice, however, to the right of any Bondholder to file a claim in his, her or its own
behalf.
No provision of this Bond Indenture empowers the Bond Trustee to authorize,
consent to, accept or adopt on behalf of any Bondholder any plan or reorganization,
aiTangement, adjustment or composition affecting any of the rights of any Bondholders,
or authorizes the Bond Trustee to vote in respect of the claim in any proceeding described
in this Section.
In the event the Bond Trustee incurs expenses or renders services in any
proceedings affecting the Obligor and described in this Section, the expenses so incuiTed
and compensation for services so rendered are intended to constitute expenses of
administration under the United States Bankruptcy Code or equivalent law.
SECTION 8.08. DELAY OR OMISSION NO WAIVER. No delay or
omission of the Bond Trustee or of any Bondholder to exercise any right or power
accruing upon any default or Event of Default shall exhaust or impair any such right or
power or shall be construed to be a waiver of any such default or Event of Default, or
acquiescence therein; and every power and remedy given by this Bond Indenture may be
exercised from time to time and as often as may be deemed expedient.
SECTION 8.09. DISCONTINUANCE OF PROCEEDINGS ON
DEFAULT, POSITION OF PARTIES RESTORED. In case the Bond Trustee shall
have proceeded to enforce any right under this Bond Indenture, and such proceedings
shall have been discontinued or abandoned for any reason or shall have been determined
adversely to the Bond Trustee, then and in every such case the Issuer and the Bond
Trustee shall be restored to their former positions and rights hereunder with respect to the
Trust Estate, and all rights, remedies, and powers of the Bond Trustee shall continue as if
no such proceedings had been taken.
SECTION 8.10. ENFORCEMENT OF RIGHTS. The Bond Trustee, as
pledgee and assignee for security purposes of all the right, title, and interest of the Issuer
in and to the Loan Agreement (except those rights of the Issuer under Section 5.7, 7.5,
and 9.5 thereof) and the Note shall, upon compliance with applicable requirements oflaw
and except as otherwise set forth in this Article VIII, be the sole real party in interest in
respect of, and shall have standing, exclusive of owners of Bonds to enforce each and
every right granted to the Issuer under the Loan Agreement and under the Note. The
Issuer and the Bond Trustee hereby agree, without in any way limiting the effect and
scope thereof, that the pledge and assignment hereunder to the Bond Trustee of any and
all rights of the Issuer in and to the Note and the Loan Agreement shall constitute an
agency appointment coupled with an interest on the part of the Bond Trustee which, for
all purposes of this Bond Indenture, shall be iiTevocable and shall survive and continue in
full force and effect notwithstanding the bankruptcy or insolvency of the Issuer or its
default hereunder or on the Bonds. Subject to Section 9.01 hereof, in exercising such
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4812-3022-2866.4
right and the rights given the Bond Trustee under this Article VIII, the Bond Trustee shall
take such action as, in the judgment of the Bond Trustee, would best serve the interests of
the Bondholders, taking into account the provisions of the Master Indenture, together
with the security and remedies afforded to owners of the Note.
SECTION 8.11. UNDERTAKING FOR COSTS. All parties to this Bond
Indenture agree, and each Bondholder by his acceptance thereof shall be deemed to have
agreed, that any court may in its discretion require, in any suit for the enforcement of any
right or remedy under this Bond Indenture, or in any suit against the Bond Trustee for
any action taken or omitted by it as Bond Trustee, the filing by any party litigant in such
suit of an undertaking to pay the costs of such suit, and that such court may in its
discretion assess reasonable costs, including reasonable attorneys' fees, against any party
litigant in such suit, having due regard to the merits and good faith of the claims or
defenses made by such party litigant; but the provisions of this Section shall not apply to
any suit instituted by the Bond Trustee, to any suit instituted by any Bondholder, or group
of Bondholders, holding in aggregate more than 10% in principal amount of the
Outstanding Bonds, or to any suit instituted by a Bondholder for the enforcement of the
payment of the principal of (or premium, if any) or interest on any Bond on or after the
respective maturities thereof expressed in such Bond (or, in the case of redemption, on or
after the redemption date).
SECTION 8.12. WAIVER OF EVENTS OF DEFAULT. The Bond Trustee
may in its discretion waive any Event of Default hereunder and its consequences, and
shall do so upon the written request of the Owners of a majority in aggregate principal
amount of the Bonds then Outstanding; provided, however, that the Bond Trustee may
not waive an Event of Default described in subparagraph (a) of Section 8.01 hereof
without the written consent of the Registered Owners of all Bonds then Outstanding; and
provided, further, that notwithstanding anything to the contrary in this Bond Indenture,
the Issuer shall have the sole ability to waive any Event of Default in connection with the
covenants and obligations of the Obligor under Section 4.10 of the Loan Agreement.
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ARTICLE IX
CONCERNING THE BOND TRUSTEE AND PAYING AGENTS
SECTION 9.01. DUTIES OF THE BOND TRUSTEE. The Bond Trustee
hereby accepts the trust imposed upon it by this Bond Indenture and agrees to perform
said trusts, but only upon and subject to the following express terms and conditions, and
no implied covenants or obligations shall be read into this Bond Indenture against the
Bond Trustee:
(a) The Bond Trustee, prior to the occurrence of an Event of Default and after
the curing of all Events of Default which may have occurred, undertakes to perform such
duties and only such duties as are specifically set forth in this Bond Indenture. In case an
Event of Default has occurred (which has not been cured) the Bond Trustee shall exercise
such of the rights and powers vested in it by this Bond Indenture and use the same degree
of care and skill in its exercise as a prudent person would exercise or use under the
circumstances in the conduct of his or her own affairs.
(b) The Bond Trustee may execute any of the trusts or powers hereof and
perform any of its duties hereunder, either directly or by or through attorneys, agents,
receivers, or employees, and the Bond Trustee shall not be responsible for any
misconduct or negligence on the part of any receiver, agent or attorney appointed with
due care by it hereunder, and shall be entitled to act upon an Opinion of Counsel
concerning all matters of trust hereof and the duties hereunder, and may in all cases pay
such reasonable compensation to all such attorneys, agents, receivers, and employees as
may reasonably be employed in connection with the trust hereof. The Bond Trustee may
act upon an Opinion of Counsel and shall not be responsible for any loss or damage
resulting from any action or nonaction taken by or omitted to be taken in good faith in
reliance upon such Opinion of Counsel.
(c) The Bond Trustee shall not be responsible for any recital herein or in the
Bonds (except in respect to the certificate of authentication by the Bond Trustee endorsed
on the Bonds and the acceptance of the trusts hereunder).
(d) The Bond Trustee shall not be accountable for the use of any Bonds
authenticated or delivered hereunder or the proceeds thereof, or for any moneys disbursed
by the Bond Trustee in accordance with this Bond Indenture. The Bond Trustee makes
no representations as to the validity or sufficiency of this Bond Indenture or the Bonds.
The Bond Trustee is not a party to, is not responsible for, and makes no representations
with respect to matters set forth in any preliminary or final official statement, or similar
document prepared and distributed in connection with the sale of the Bonds. The Bond
Trustee may become the owner of the Bonds with the same rights which it would have if
not Bond Trustee.
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(e) The Bond Trustee shall be protected in acting upon any notice, request,
consent, certificate, order, affidavit, letter, telegram, teletransmission or other paper or
document reasonably believed to be genuine and con·ect and to have been signed or sent
by the proper person or persons. Any request or direction of the Issuer or the Obligor
mentioned herein shall be sufficiently evidenced by a written request, order, or consent
signed in the name of the Issuer or Obligor, by the Issuer Representative, or Obligor, as
the case may be. Any action taken by the Bond Trustee pursuant to this Bond Indenture
upon the request or authority or consent of any person who at the time of making such
request or giving such authority or consent is the owner of any Bonds shall be conclusive
and binding upon all future owners of the same Bond and upon Bonds issued in place
thereof.
(f) As to the existence or nonexistence of any fact or matter or as to the
sufficiency or validity of any instrument, paper, or proceeding, the Bond Trustee shall be
entitled to rely and shall be protected in acting or refraining to act upon a certificate
signed on behalf of the Issuer or the Obligor by the Issuer Representative or Obligor or
such other person as may be designated for such purpose as sufficient evidence of the
facts therein contained, and prior to the occurrence of a default of which the Bond
Trustee has been notified as provided in subsection (h) of this Section, or of which by
said subsection it is deemed to have notice, shall also be at liberty to accept a similar
certificate to the effect that any particular dealing, transaction, or action is necessary or
expedient, but may at its discretion secure such further evidence deemed necessary or
advisable, but shall in no case be bound to secure the same.
(g) The permissive right of the Bond Trustee to do things enumerated in this
Bond Indenture shall not be construed as a duty (except as otherwise herein provided)
and the Bond Trustee shall not be answerable for other than its own negligence or willful
misconduct, except that:
4812-3022-2866.4
(1) the Bond Trustee shall not be liable for any error of judgment made
in good faith by a Responsible Officer, unless it shall be proved that the Bond
Trustee was negligent in ascertaining the pertinent facts;
(2) the Bond Trustee shall not be liable with respect to any action taken
or omitted to be taken by it in good faith in accordance with the direction of the
Bondholders of at least a majority in Aggregate Principal Amount of the
Outstanding Bonds relating to the time, method, and place of conducting any
proceeding for any remedy available to the Bond Trustee, or exercising any trust
or power conferred upon the Bond Trustee, under this Bond Indenture; and
(3) the Bond Trustee shall not be liable if the Bond Trustee reasonably
relies in good faith upon an Officer's Cetiificate delivered pursuant to this Bond
Indenture or an Opinion of Counsel.
53
(h) The Bond Trustee shall not be required to take notice or be deemed to have
notice of any default hereunder except failure by the Issuer to cause to be made any of the
payments to the Bond Trustee required to be made by Article III hereof unless the Bond
Trustee shall be specifically notified in writing of such default by the Issuer or by the
owners of at least a majority in Aggregate Principal Amount of Bonds then Outstanding
and all notices or other instruments required by this Bond Indenture to be delivered to the
Bond Trustee, must, in order to be effective, be delivered to a Responsible Officer at the
designated corporate trust office of the Bond Trustee, and in the absence of such notice so
delivered, the Bond Trustee may conclusively assume there is no default except as
aforesaid.
(i) All moneys received by the Bond Trustee shall, until used or applied or
invested as herein provided, be held in trust in the manner and for the purposes for which
they were received, but need not be segregated from other funds except to the extent
required by this Bond Indenture or law.
U) At any and all reasonable times the Bond Trustee and its duly authorized
agents, attorneys, experts, engineers, accountants, and representatives shall have the right,
but shall not be required, to inspect the Project, including all books, papers, and records
of the Issuer and the Obligor pertaining to the Project and the Bonds.
(k) The Bond Trustee shall not be required to give any bond or surety in
respect of the execution of the said trusts and powers or otherwise in respect of the
premises, and no provision of this Bond Indenture shall require the Bond Trustee to
expend or risk its own funds or otherwise incur any financial liability in the performance
of any of its duties hereunder, or in the exercise of any of its rights or powers, without
regard to whether it shall have grounds for believing that repayment of such funds or
indemnity satisfactory against such risk or liability is not assured to it.
(1) Notwithstanding anything in this Bond Indenture contained, the Bond
Trustee shall have the right, but shall not be required, to demand in respect of the
authentication of any Bonds, the withdrawal of any cash, or any action whatsoever within
the purview of this Bond Indenture, any showings, certificates, opinion, appraisals, or
other information, or corporate action or evidence thereof, in addition to that by the terms
hereof required, as a condition of such action by the Bond Trustee deemed desirable for
the purpose of establishing the right of the Issuer to the authentication of any Bonds, the
withdrawal of any cash, or the taking of any other action by the Bond Trustee.
(m) Before taking any action under this Section or Article VIII hereof, the Bond
Trustee may require that indemnity reasonably satisfactory to it be furnished to it for the
reimbursement of its reasonable fees, costs, liabilities and all expenses (including
attorneys fees) which it may incur and to protect it against all liability, except liability
which may result from its negligence or willful misconduct, by reason of any action so
taken.
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(n) Except as provided in Section 9.0l(a) above, it shall not be the duty of the
Bond Trustee, except as expressly provided herein, to see that any duties or obligations
imposed herein or in the Loan Agreement upon the Issuer, the Obligor, or other Persons
are performed, and the Bond Trustee shall not be liable or responsible because of the
failure of the Issuer, the Obligor, or other Persons to perform any act required of them
pursuant to the terms of this Bond Indenture.
( o) In acting or omitting to act pursuant to the provisiOns of the Loan
Agreement, the Bond Trustee shall be entitled to and be protected by the rights and
immunities accorded to it by the terms of this Bond Indenture.
(p) In the event the Bond Trustee receives inconsistent or conflicting requests
and indemnity from two or more groups of holders of Bonds, each representing less than
a majority in aggregate principal amount of the Bonds Outstanding, the Bond Trustee, in
its sole discretion, may determine what action, if any, shall be taken.
(q) The Bond Trustee's immunities and protections from liability in connection
with the performance of its duties under this Bond Indenture shall extend to the Bond
Trustee's officers, directors, agents and employees. Such immunities and protections,
together with the Bond Trustee's right to compensation, shall survive the Bond Trustee's
resignation or removal and final payment of the Bonds.
(r) The Bond Trustee shall not be responsible or liable for any failure or delay
in the performance of its obligation under this Bond Indenture arising out of or caused,
directly or indirectly, by circumstances beyond its reasonable control, including, without
limitation, acts of God; earthquakes; fire; flood; wars; tenorism; similar military
disturbances; sabotage; epidemic; riots; interruptions; loss or malfunctions of utilities,
computer (hardware or software) or communications services; accidents; labor disputes;
acts of civil or military authority or governmental action; it being understood that the
Bond Trustee shall use commercially reasonable efforts which are consistent with
accepted practices in the banking industry to resume performance as soon as reasonably
practicable under the circumstances.
(s) Notwithstanding the effective date of this Bond Indenture or anything to the
contrary in this Bond Indenture, the Bond Trustee shall have no liability or responsibility
for any act or event relating to this Bond Indenture which occurs prior to the date the
Bond Trustee formally executes this Bond Indenture and commences acting as Bond
Trustee hereunder.
(t) The permissive right of the Bond Trustee to do things enumerated in this
Bond Indenture shall not be construed as a duty.
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4812-3022-2866.4
SECTION 9.02. FEES AND EXPENSES OF BOND TRUSTEE AND
PAYING AGENT. The Issuer agrees, but solely from any funds received from the
Obligor pursuant to the Loan Agreement,
(a) to pay to the Bond Trustee, each Paying Agent and all other agents their
reasonable and necessary fees for services rendered hereunder as and when the same
become due and all expenses (including attorneys fees) reasonably and necessarily made
or incurred by the Bond Trustee, such Paying Agent or such other agent in connection
with such services as and when the same become due as provided in Section 3.13 hereof;
and
(b) to reimburse the Bond Trustee upon its request for all reasonable expenses,
disbursements, and advances incurred or made by the Bond Trustee in accordance with
any provisions of this Bond Indenture (including the reasonable compensation, expenses,
and disbursements of its agents and counsel), except any such expense, disbursement, or
advance as may be attributable to the negligence or bad faith of the Bond Trustee.
As security for the performance of the obligations of the Issuer under this Section,
the Bond Trustee shall be secured under this Bond Indenture by a lien subject and
subordinate to the Bonds, in the case of money held for the credit of the Project Fund or
the Reserve Fund, and otherwise prior to the Bonds, and for the payment of the expenses
and reimbursements due hereunder, the Bond Trustee shall have the right to use and
apply any trust funds held by it hereunder, unless held or required to be held in the
Rebate Fund.
SECTION 9.03. RESIGNATION OR REPLACEMENT OF BOND
TRUSTEE. The present or any future Bond Trustee may resign by giving to the Issuer,
the Obligor and each Bondholder thirty days' notice of such resignation. Such
resignation shall not be effective until such time as a successor Bond Trustee shall have
accepted its appointment. The present or any future Bond Trustee may be removed (a) at
any time by an instrument in writing executed by the owners of at least a majority in
Aggregate Principal Amount of Bonds Outstanding, or (b) if an Event of Default
hereunder has not occurred and is continuing, by an instrument in writing executed by the
Obligor.
In case the present or any future Bond Trustee shall at any time resign or be
removed or otherwise become incapable of acting, a successor may be appointed by the
owners of at least a majority in Aggregate Principal Amount of the Bonds Outstanding by
an instrument or concurrent instruments signed by such Bondholders, or their attorneys in
fact duly appointed; provided that the Issuer may, by an instrument executed by order of
the Governing Body, appoint a successor until a new successor shall be appointed by the
Bondholders as herein authorized. The Issuer upon making such appointment shall
forthwith give notice thereof to each Bondholder and to the Obligor, which notice may be
given concurrently with the notice of resignation given by any resigning Bond Trustee.
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4812-3022-2866.4
Any successor so appointed by the Issuer shall immediately and without further act be
superseded by a successor appointed in the manner above provided by the owners of at
least a majority in Aggregate Principal Amount of the Bonds Outstanding. In the event
that the Issuer does not so act within thirty days after notice of resignation, the Bond
Trustee shall have the right to petition a court of competent jurisdiction to appoint a
successor Bond Trustee.
Every successor Bond Trustee shall always be a bank, banking corporation or trust
company duly organized under the laws of the United States of America or any state or
territory thereof, with trust powers in good standing, qualified to act hereunder, and
having a combined capital and surplus of not less than $50,000,000. Any successor
appointed hereunder shall execute, acknowledge, and deliver to the Issuer and the
predecessor Bond Trustee an instrument accepting such appointment hereunder and
thereupon such successor shall, without any further act, deed, or conveyance, become
vested with all the estates, properties, rights, powers, and trusts of its predecessor in the
trust hereunder with like effect as if originally named as Bond Trustee herein; but the
Bond Trustee retiring shall, nevertheless, on the written demand of its successor, execute
and deliver an instrument conveying and transferring to such successor, upon the trusts
herein expressed, all the estates, properties, rights, powers, and trusts of the predecessor,
who shall, upon payment of the expenses, charges and other disbursements which are due
and owing to it pursuant to Sections 3.13 and 9.02 hereof, duly assign, transfer and
deliver to the successor all propetiies and moneys held by it under this Bond Indenture.
Should any instrument in writing from the Issuer be required by any successor for more
fully and certainly vesting in and confirming to it all of such estates, properties, rights,
powers, and trusts, the Issuer shall, on request of such successor, make, execute,
acknowledge, and deliver the deeds, conveyances, and necessary instruments in writing.
The notices herein provided for shall be given by mailing a copy thereof to the
Obligor and the Registered Owners of the Bonds at their addresses as the same shall last
appear on the registration books. The instruments evidencing the resignation or removal
of the Bond Trustee and the appointment of a successor hereunder, together with all other
instruments provided for in this Section shall be filed and/or recorded by the successor
Bond Trustee in each recording office where this Bond Indenture shall have been filed
and/or recorded.
SECTION 9.04. CONVERSION, CONSOLIDATION OR MERGER OF
BOND TRUSTEE. Any bank, banking corporation or trust company into which the
Bond Trustee merges or is consolidated, or to which it (or a receiver on its behalf) may
sell or transfer its corporate trust business as a whole, or substantially as a whole, shall be
the successor of the Bond Trustee under this Bond Indenture with the same rights,
powers, duties, and obligations and subject to the same restrictions, limitations, and
liabilities as its predecessor, all without the execution or filing of any papers or any
further act on the part of any of the parties hereto, anything herein to the contrary
57
4812-3022-2866.4
notwithstanding. In case any of the Bonds to be issued hereunder shall have
authenticated, but not delivered, any successor Bond Trustee may adopt the certificate of
any predecessor Bond Trustee, and deliver the same as authenticated; and, in case any of
such Bonds shall not have been authenticated, any successor Bond Trustee may
authenticate such Bonds in the name of such successor Bond Trustee.
SECTION 9.05. DESIGNATION AND SUCCESSION OF PAYING
AGENT. The Bond Trustee and any other banks or trust companies, if any, designated
as Paying Agent or Paying Agents in any supplemental indenture shall be the Paying
Agent or Paying Agents for the Bonds.
Any bank or trust company with or into which any Paying Agent may be merged
or consolidated, or to which the assets and business of such Paying Agent may be sold,
shall be deemed the successor of such Paying Agent for the purposes of this Bond
Indenture. If the position of Paying Agent shall become vacant for any reason, the Issuer
shall, within thirty days thereafter, appoint such bank or trust company as shall be
specified by the Obligor and located in the same city as such Paying Agent to fill such
vacancy; provided, however, that if the Issuer shall fail to appoint such Paying Agent
within said period, the Bond Trustee shall make such appointment.
The Paying Agents, if any, shall enjoy the same protective provisions in the
performance of their duties hereunder as are specified in Section 9.01 hereof with respect
to the Bond Trustee insofar as such provisions may be applicable.
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4812-3022-2866.4
ARTICLE X
SUPPLEMENTAL INDENTURES AND AMENDMENTS TO THE LOAN
AGREEMENT
SECTION 10.01. SUPPLEMENTAL INDENTURES NOT REQUIRING
CONSENT OF BONDHOLDERS. The Issuer and the Bond Trustee may, without the
consent of, or notice to, the Bondholders, enter into such indentures or agreements
supplemental hereto (which supplemental indentures or agreements shall thereafter form
a part hereof) for any one or more or all of the following purposes:
(a) To add to the covenants and agreements in this Bond Indenture contained
other covenants and agreements thereafter to be observed for the protection or benefit of
the Bondholders.
(b) To cure any ambiguity, or to cure, correct, or supplement any defect or
inconsistent provision contained in this Bond Indenture, or to make any provisions with
respect to matters arising under this Bond Indenture or for any other purpose if such
provisions are necessary or desirable and do not, in the judgment of the Bond Trustee,
adversely affect the interests of the owners of Bonds.
(c)
collateral.
To subject to this Bond Indenture additional revenues, properties, or
(d) To qualify this Bond Indenture under the Trust Indenture Act of 1939, if
such be hereafter required in the Opinion of Counsel.
(e) To satisfy any requirements imposed by a Rating Agency if necessary to
maintain the then current rating on the Bonds.
(f) To maintain the extent to which the interest on the Bonds is not includable
in the gross income of the recipients thereof, if in the Opinion of Bond Counsel such
supplemental indenture or agreement is necessary.
SECTION 10.02. SUPPLEMENTAL INDENTURES REQUIRING
CONSENT OF BONDHOLDERS. Exclusive of supplemental indentures covered by
Section 10.01 hereof, the owners of not less than a majority in Aggregate Principal
Amount of the Bonds then Outstanding affected thereby shall have the right, from time to
time, to consent to and approve the execution by the Issuer and the Bond Trustee of such
indenture or indentures supplemental hereto as shall be deemed necessary or desirable by
the Issuer for the purpose of modifying, altering, amending, adding to, or rescinding, in
any particular, any of the terms or provisions contained in this Bond Indenture; provided,
however, that without the consent of the owners of all the Bonds at the time Outstanding
nothing herein contained shall permit, or be construed as permitting any of the following:
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4812-3022-2866.4
(a) An extension of the maturity of, or a reduction of the principal amount of,
or a reduction of the rate of, or extension of the time of payment of interest on, or a
reduction of a premium payable upon any redemption of, any Bond.
(b) The deprivation of the owner of any Bond then Outstanding of the lien
created by this Bond Indenture (other than as originally permitted hereby).
(c) A privilege or priority of any Bond or Bonds, over any other Bond.
(d) A reduction in the Aggregate Principal Amount of the Bonds required for
consent to any supplemental bond indenture.
Upon the execution of any supplemental bond indenture pursuant to the provisions
of this Section, this Bond Indenture shall be deemed to be modified and amended in
accordance therewith, and the respective rights, duties, and obligations under this Bond
Indenture of the Issuer, the Bond Trustee and all owners of Bonds then Outstanding shall
thereafter be determined, exercised, and enforced hereunder, subject in all respects to
such modifications and amendments.
If at any time the Issuer shall request the Bond Trustee to enter into such
supplemental bond indenture for any of the purposes of this Section, the Bond Trustee
shall, upon being satisfactorily indemnified with respect to costs, fees and expenses
(including attorneys fees), cause notice of the proposed execution of such supplemental
indenture to be mailed to the Registered Owners of the Bonds at their addresses as the
same last appear on the registration books. Such notice shall briefly set forth the nature
of the proposed supplemental bond indenture and shall state that copies thereof are on file
at the designated office of the Bond Trustee for inspection by all Bondholders. If, within
sixty days or such longer period as shall be prescribed by the Issuer following the giving
of such notice, the owners of not less than a majority in Aggregate Principal Amount of
the Bonds Outstanding at the time of the execution of any such supplemental bond
indenture shall have consented to and approved the execution thereof as herein provided,
no owner of any Bond shall have any right to object to any of the terms and provisions
contained therein, or the operation thereof, or in any manner to question the propriety of
the execution thereof, or to enjoin or restrain the Bond Trustee or the Issuer from
executing the same or from taking any action pursuant to the provisions thereof.
SECTION 10.03. EXECUTION OF SUPPLEMENTAL INDENTURE. The
Bond Trustee is authorized to join with the Issuer in the execution of any such
supplemental bond indenture and to make further agreements and stipulations which may
be contained therein, but the Bond Trustee shall not be obligated to enter into any such
supplemental bond indenture which affects its rights, duties, or immunities under this
Bond Indenture. The Bond Trustee shall be entitled to receive, and shall be fully
protected in relying upon, an Opinion of Counsel stating that the execution and delivery
of a supplemental bond indenture is authorized or permitted by this Bond Indenture and
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4812-3022-2866.4
has been effected in compliance with the prov1s10ns hereof. In connection with a
supplemental bond indenture entered into pursuant to Section IO.Ol(b) hereof, the Bond
Trustee may in its discretion determine whether or not in accordance with such provision
the Bondholders would be affected by modification or amendment of this Bond
Indenture, and any such determination shall be binding and conclusive upon the Issuer,
the Obligor, and Bondholders. The Bond Trustee may receive an Opinion of Counsel as
conclusive evidence as to whether the Bondholders would be so affected by any such
modification or amendment to this Bond Indenture.
Any supplemental bond indenture executed in accordance with the provisions of
this Article shall thereafter form a part of this Bond Indenture; and all the terms and
conditions contained in any such supplemental bond indenture as to any provision
authorized to be contained therein shall be deemed to be pmi of this Bond Indenture for
any and all purposes. In case of the execution and delivery of any supplemental bond
indenture, express reference may be made thereto in the text of the Bonds issued
thereafter, if any, if deemed necessary or desirable by the Bond Trustee.
SECTION 10.04. CONSENT OF OBLIGOR. Anything herein to the contrary
notwithstanding, a supplemental bond indenture under this Article shall not become
effective unless and until the Obligor shall have consented in writing to the execution and
delivery of such supplemental bond indenture unless the Obligor is in default under the
Loan Agreement or an Event of Default described under Section 8.01(a), (b) or (c)
hereunder has occurred and is continuing, in which case no consent of the Obligor shall
be required. The Bond Trustee shall cause notice of the proposed execution of any
supplemental indenture together with a copy of the proposed supplemental bond
indenture to be mailed to the Obligor at least fifteen days prior to the proposed date of
execution of such supplemental bond indenture.
SECTION 10.05. AMENDMENTS, ETC., OF THE LOAN AGREEMENT
NOT REQUIRING CONSENT OF BONDHOLDERS. The Issuer and the Bond
Trustee shall, without the consent of or notice to the Bondholders, consent to any
amendment, change, or modification of the Loan Agreement as may be required (a) by
the provisions of the Loan Agreement and this Bond Indenture, (b) for the purpose of
curing any ambiguity or formal defect or omission, (c) to satisfY any requirements
imposed by a Rating Agency if necessary to maintain the then current rating on the
Bonds, (d) to maintain the extent to which the interest on the Bonds is not includable in
the gross income of the recipients thereof, if in the Opinion of Bond Counsel such
amendment is necessary, and (e) in connection with any other change therein which does
not adversely affect the Bond Trustee or the owners of the Bonds.
SECTION 10.06. AMENDMENTS, ETC., OF THE LOAN AGREEMENT
REQUIRING CONSENT OF BONDHOLDERS. Except for the amendments,
changes, or modifications as provided in Section 10.05 hereof, neither the Issuer nor the
Bond Trustee shall consent to any other amendment, change, or modification of the Loan
61
4812-3022-2866.4
Agreement without the giving of notice to and the written approval or consent of the
owners of not less than a majority in Aggregate Principal Amount of the Bonds at the
time Outstanding given and procured as provided in Section 10.02 hereof. If at any time
the Issuer and the Obligor shall request the consent of the Bond Trustee to any such
proposed amendment, change, or modification of the Loan Agreement, the Bond Trustee
shall, upon being satisfactorily indemnified with respect to expenses, cause notice of such
proposed amendment, change, or modification to be given in the same manner as
provided in Section 10.02 hereof. Such notice shall briefly set forth the nature of such
proposed amendment, change, or modification and shall state that copies of the
instrument embodying the same are on file at the designated office of the Bond Trustee
for inspection by all Bondholders.
In executing any amendment, change or modification of the Loan Agreement, the
Bond Trustee shall be entitled to receive, and shall be fully protected in relying upon, an
Opinion of Counsel stating that the execution and delivery of such amendment, change,
modification of the Loan Agreement is authorized or permitted by this Bond Indenture
and the Loan Agreement and has been effected in compliance with the provisions of this
Bond Indenture and the Loan Agreement. The Bond Trustee may, but shall not be
obligated to, enter into any such amendment, change, or modification which affects the
Bond Trustee's own rights, duties or immunities. In connection with any amendment,
change or modification in connection with Section 10.05(e), the Bond Trustee may in its
discretion determine whether or not in accordance with such provision the Bond Trustee
or the Bondholders would be prejudiced by such amendment, change, modification. Any
such determination shall be binding and conclusive on the Issuer, the Obligor, and the
Bondholders. The Bond Trustee may receive an Opinion of Counsel as conclusive
evidence as to whether the Bondholders would be so affected by any such amendment,
change, or modification of the Loan Agreement.
62
4812-3022-2866.4
ARTICLE XI
MISCELLANEOUS
SECTION 11.01. EVIDENCE OF SIGNATURE OF BONDHOLDERS
AND OWNERSHIP OF BONDS. Any request, consent, or other instrument which this
Bond Indenture may require or permit to be signed and executed by the Bondholders may
be in one or more instruments of similar tenor, and shall be signed or executed by such
Bondholders in person or by their attorneys appointed in writing. Proof of the execution
of any such instrument or of an instrument appointing any such attorney, or of the
ownership of Bonds shall be sufficient (except as otherwise herein expressly provided) if
made in the following manner, but the Bond Trustee may, nevertheless, in its discretion,
require further or other proof in cases where it deems the same desirable:
(a) The fact and date of the execution by any Bondholder or his attorney of
such instrument may be proved by the certificate of any officer authorized to take
acknowledgments in the jurisdiction in which he purports to act that the person signing
such request or other instrument acknowledged to him the execution thereof, or by an
affidavit of a witness of such execution, duly sworn to before a notary public.
(b) The ownership of any fully registered Bond and the amount and numbers of
such Bonds and the date of holding the same shall be proved by the registration books of
the Issuer kept by the Bond Trustee.
Any request or consent of the owner of any Bond shall bind all future owners of
such Bond in respect of anything done or suffered to be done by the Issuer or the Bond
Trustee in accordance therewith.
SECTION 11.02. NO PERSONAL LIABILITY. No recourse under or upon
any obligation, covenant or agreement contained in this Bond Indenture, or in any Bond
hereby secured, or under any judgment obtained against the Issuer, or by the enforcement
of any assessment or by any legal or equitable preceding by virtue of any constitution or
statute or otherwise or under any circumstances, under or independent of this Bond
Indenture, shall be had against any elected official, officer, director, agent or employee,
as such, past, present or future, of any of the Issuer, the Bond Trustee, or Duval County,
Florida, either directly or through the Issuer, or otherwise, for the payment for or to the
Issuer or any receiver thereof, or for or to the holder of any Bond issued hereunder or
otherwise of any sum that may be due and unpaid by the Issuer upon any such Bond.
Any and all personal liability of every nature, whether at common law or in equity, or by
statute or by constitution or otherwise, of any such person to respond by reason of any act
or omission on his part or otherwise, for the payment for or to the Issuer or any receiver
thereof or for or to the holder of any Bond issued hereunder or otherwise, of any sum that
may remain due and unpaid upon the Bonds hereby secured or any of them, is hereby
expressly waived and released as a condition of and consideration for the execution of
this Bond Indenture and the issue of such Bonds.
63
4812-3022-2866.4
SECTION 11.03. LIMITED OBLIGATION. The Issuer, Duval County,
Florida, or any political subdivision thereof, except the Issuer to the extent set forth
herein, shall in any event be liable for the payment of the principal of, premium, if any, or
interest on any of the Bonds issued hereunder. The Bonds are limited obligations of the
Issuer payable solely from the revenues, receipts and resources of the Issuer pledged to
their payment and not from any other revenues, funds or assets of the Issuer. None of the
Bonds of the Issuer issued hereunder shall be construed or constitute an indebtedness of
the Issuer or an indebtedness or obligation (special, moral or general) of the Issuer, Duval
County, Florida, or any political subdivision thereof, except the Issuer to the extent set
forth herein, within the meaning of any constitutional or statutory provision whatsoever.
SECTION 11.04. PARTIES INTERESTED HEREIN. With the exception of
rights herein expressly conferred on the Obligor, nothing in this Bond Indenture
expressed or implied is intended or shall be construed to confer upon, or to give to, any
person other than the Issuer, the Bond Trustee, the Paying Agents, and the owners of the
Bonds, any right, remedy, or claim under or by reason of this Bond Indenture, and any
covenants, stipulations, promises, and agreements in this Bond Indenture contained by
and on behalf of the Issuer shall be for the sole and exclusive benefit of the Issuer, the
Bond Trustee and the owners of the Bonds.
SECTION 11.05. TITLES, HEADINGS, ETC. The titles and headings of the
articles, sections, and subdivisions of this Bond Indenture have been inserted for
convenience of reference only and shall in no way modify or restrict any of the terms or
provisions hereof.
SECTION 11.06. SEVERABILITY. In the event any provision of this Bond
Indenture shall be held invalid or unenforceable by any court of competent jurisdiction,
such holding shall not invalidate or render unenforceable any other provision hereof.
SECTION 11.07. GOVERNING LAW. This Bond Indenture shall be
governed and construed in accordance with the laws of the State of Florida.
SECTION 11.08. EXECUTION OF COUNTERPARTS. This Bond
Indenture may be executed in several counterparts, each of which shall be an original and
all of which shall constitute but one and the same instrument.
SECTION 11.09. CONSEQUENTIAL/PUNITIVE DAMAGES. Anything in
this Bond Indenture to the contrary notwithstanding, in no event shall the Bond Trustee
be liable for special, indirect, punitive or consequential loss or damage of any kind
whatsoever (including but not limited to lost profits), even if the Bond Trustee has been
advised of the likelihood of such loss or damage and regardless of the form of action.
SECTION 11.10. WAIVER OF JURY TRIAL. Each party hereto hereby
agrees not to elect a trial by jury of any issue triable of right by jury, and waives any right
64
4812-3022-2866.4
to trial by jury fully to the extent that any such right shall now or hereafter exist with
regard to this Bond Indenture, or any claim, counterclaim or other action arising in
connection herewith. This waiver of right to trial by jury is given knowingly and
voluntarily by each party, and is intended to encompass individually each instance and
each issue as to which the right to a trial by jury would otherwise accrue.
SECTION 11.11. NO LIABILITY OF BOND TRUSTEE'S OFFICERS. No
recourse under or upon any obligation, covenant, or agreement contained in this Bond
Indenture, or in the Bonds, or for any claim based thereon, or under any judgment
obtained against the Bond Trustee, or by the enforcement of any assessment or penalty or
otherwise or by any legal or equitable proceeding by virtue of any constitution, rule of
law or equity, or statute or otherwise or under any other circumstances, under or
independent of this Bond Indenture, shall be had against any incorporator, member, or
officer, as such, past, present, or future of the Bond Trustee, or any incorporator,
member, or officer of any successor corporation, as such, either directly or through the
Bond Trustee, or any successor corporation, or otherwise, for the payment for or to the
Bond Trustee as trustee hereunder or otherwise, of any sum that may be due and unpaid
by the Issuer upon the Bonds. Any and all personal liability of every nature, whether at
common law or in equity, or by statute or by constitution or otherwise, of any such
incorporator, member, or officer, as such, to respond by reason of any act or omission on
his part, on the part of the Bond Trustee, or otherwise, for or to the Bond Trustee as
trustee hereunder or otherwise, of any sum that may remain due and unpaid hereunder, is
hereby expressly waived and released as a condition of and in consideration for the
execution of this Bond Indenture
SECTION 11.12. NOTICES. Any notice, request or other communication
under this Loan Agreement shall be given in writing and shall be deemed to have been
given by either party to the other party at the addresses shown below upon any of the
following dates:
(a) The date of notice by facsimile, electronic mail or similar communications,
which is confirmed promptly in writing;
(b) Three Business Days after the date of the mailing thereof, as shown by the
post office receipt if mailed to the other party hereto by registered or certified mail;
(c) The date of the receipt thereof by such other party if not given pursuant to
(a) or (b) above.
The address for notice for each of the parties shall be as follows:
65
4812-3022-2866.4
To the Issuer: City of Atlantic Beach, Florida
800 Seminole Road
Atlantic Beach, Florida 32233-5445
Attn: City Manager
Telephone: (904) 247-5809
Telecopier: (904) 247-5805
To the Obligor: Naval Continuing Care Retirement
Foundation, Inc.
1 Fleet Landing Boulevard
Atlantic Beach, Florida 32233
Attn: Chief Executive Officer
Telephone: (904) 246-9900
Telecopier: (904) 246-9447
To the Bond Trustee: U.S. Bank National Association
225 Water Street, Suite 700
Jacksonville, Florida 32202
Attention: Stephanie Moore
Telephone: (904) 358-5363
Telecopier: (904) 358-5374
Notwithstanding the foregoing, notices to the Bond Trustee shall be effective only
upon receipt.
SECTION 11.13. PAYMENTS DUE ON HOLIDAYS. Ifthe date for making
any payment or the last day for perfonnance of any act or the exercising of any right, as
provided in this Bond Indenture, shall be a legal holiday or a day on which banking
institutions in Jacksonville, Florida, are authorized by law to remain closed, such
payment may be made or act performed or right exercised on the next succeeding day not
a legal holiday or a day on which such banking institutions are authorized by law to
remain closed with the same force and effect as if done on the nominal date provided in
this Bond Indenture.
66
4812-3022-2866.4
IN WITNESS WHEREOF, CITY OF ATLANTIC BEACH, FLORIDA has
caused this Bond Indenture to be executed on its behalf by its Chairman, and U.S. BANK
NATIONAL ASSOCIATION has caused this Bond Indenture to be executed on its
behalf by its duly authorized officer to evidence its acceptance of the trusts hereby
created, all as of the date first above written.
4812-3022-2866.4
CITY OF ATLANTIC BEACH, FLORIDA
By:
Mayor
U.S. BANK NATIONAL ASSOCIATION, as
Bond Trustee
By:
Vice President
67
4816-6105-6018.3
EXHIBITB
LOAN AGREEMENT
4827-7379-227 4.4
F&L Draft dated 2/5/2013
LOAN AGREEMENT
by and among
CITY OF ATLANTIC BEACH, FLORIDA
and
NAVAL CONTINUING CARE RETIREMENT FOUNDATION, INC.
Dated as of Aprill, 2013
RELATING TO
CITY OF ATLANTIC BEACH, FLORIDA
HEALTH CARE FACILITIES REVENUE AND REFUNDING BONDS
(FLEET LANDING PROJECT),
SERIES 2013A
SECTION 1.1.
SECTION 2.1.
SECTION 2.2.
SECTION 3.1.
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS
Page
DEFINITIONS .................................................................................... 2
ARTICLE II
REPRESENTATIONS
REPRESENTATIONS BY THE ISSUER ......................................... 9
REPRESENTATIONS BY THE OBLIGOR ................................... 10
ARTICLE III
TERM OF LOAN AGREEMENT
TERM OF THIS LOAN AGREEMENT .......................................... 13
ARTICLE IV
ISSUANCE OF THE BONDS; CONSTRUCTION OF PROJECTS; DISBURSEMENTS
SECTION 4.1.
SECTION 4.2.
SECTION 4.3.
SECTION 4.4.
SECTION 4.5.
SECTION 4.6.
SECTION 4.7.
SECTION 4.8.
SECTION 4.9.
SECTION 4.10.
SECTION 4.11.
SECTION 4.12.
SECTION 4.13.
AGREEMENT TO ISSUE BONDS, APPLICATION OF BOND
PROCEEDS ................................................................................. 14
PROJECT; COMPLETION CERTIFICATE ................................... 14
COST OF CONSTRUCTION .......................................................... 15
PLANS; MODIFICATIONS OF PROJECT .................................... 15
COMPLIANCE WITH REGULATORY REQUIREMENTS ......... 15
REQUESTS FOR DISBURSEMENTS ............................................ 16
COST OF ISSUANCE FUND .......................................................... 16
MODIFICATION OF DISBURSEMENTS ..................................... 16
COVENANTS REGARDING TAX EXEMPTION ........................ 16
ALLOCATION OF, AND LIMITATION ON,
EXPENDITURES FOR THE PROJECT .................................... 17
REPRESENTATIONS AND WARRANTIES AS TO TAX
EXEMPT STATUS OF OBLIGOR ............................................ 17
DISPOSITION OF PROJECT .......................................................... 19
SURPLUS PROJECT FUND MONEYS ......................................... 19
ARTICLEV
LOAN OF BOND PROCEEDS; NOTE; PROVISION FOR PAYMENT
SECTION 5.1.
SECTION 5.2.
4827-7379-2274.4
LOAN OF BOND PROCEEDS ........................................................ 20
REPAYMENT OF LOAN ................................................................ 20
SECTION 5.3.
SECTION 5.4.
SECTION 5.5.
SECTION 5.6.
SECTION 5.7.
SECTION 5.8.
SECTION 5.9.
SECTION 6.1.
SECTION 6.2.
SECTION 7.1.
SECTION 7.2.
SECTION 7.3.
SECTION 7.4.
SECTION 7.5.
SECTION 7.6.
SECTION 7.7.
SECTION 7.8.
SECTION 7.9.
SECTION 8.1.
SECTION 8.2.
CREDITS .......................................................................................... 20
NOTE ................................................................................................ 20
PAYMENT OF BOND TRUSTEE'S AND PAYING AGENT'S
FEES AND EXPENSES ............................................................. 21
RESERVE FUND ............................................................................. 21
PAYMENT OF ADMINISTRATION EXPENSES ......................... 21
PAYEES OF PAYMENTS ............................................................... 21
OBLIGATIONS OF OBLIGOR HEREUNDER
UNCONDITIONAL .................................................................... 22
ARTICLE VI
MAINTENANCE AND INSURANCE
MAINTENANCE AND MODIFICATIONS OF PROJECT BY
OBLIGOR ................................................................................... 23
INSURANCE .................................................................................... 23
ARTICLE VII
SPECIAL COVENANTS
NO WARRANTY OF MERCHANTABILITY, CONDITION
OR SUITABILITY BY THE ISSUER ....................................... 24
RIGHT OF ACCESS TO THE PROJECT ....................................... 24
NONSECTARIAN USE ................................................................... 24
FURTHER ASSURANCES ............................................................. 24
INDEMNIFICATION ....................................................................... 24
AUTHORITY OF OBLIGOR .......................................................... 26
AUTHORITY OF ISSUERREPRESENTATIVE ........................... 27
NO PERSONAL LIABILITY .......................................................... 27
FEES AND EXPENSES ................................................................... 27
ARTICLE VIII
ASSIGNMENT AND LEASING
ASSIGNMENT AND LEASING BY OBLIGOR ............................ 28
ASSIGNMENT AND PLEDGE BY ISSUER ................................. 28
ARTICLE IX
FAILURE TO PERFORM COVENANTS AND REMEDIES THEREFOR
SECTION 9 .1.
SECTION 9.2.
SECTION 9.3.
SECTION 9.4.
4827-7379-227 4.4
FAILURE TO PERFORM COVENANTS ...................................... 29
REMEDIES FOR FAILURE TO PERFORM .................................. 29
DISCONTINUANCE OF PROCEEDINGS .................................... 29
NO REMEDY EXCLUSIVE ............................................................ 29
11
SECTION 9.5.
SECTION 9.6.
LOAN AGREEMENT TO PAY ATTORNEYS' FEES AND
EXPENSES ................................................................................. 30
WAIVERS ........................................................................................ 30
ARTICLE X
PREPAYMENT OF NOTE
SECTION 1 0.1. GENERAL OPTION TO PREPAY NOTE ...................................... 31
SECTION 1 0.2. CONDITIONS TO EXERCISE OF OPTION .................................. 31
SECTION 11.1.
SECTION 11.2.
SECTION 11.3.
SECTION 11.4.
SECTION 11.5.
SECTION 11.6.
SECTION 11.7.
SECTION 11.8.
SECTION 11.9.
SECTION 11.10.
SECTION 11.11.
SECTION 11.12.
EXHIBIT A
EXHIBITB
4827-7379-227 4.4
ARTICLE XI
MISCELLANEOUS
NOTICES .......................................................................................... 32
BINDING EFFECT .......................................................................... 33
SEVERABILITY .............................................................................. 33
AMOUNTS REMAINING IN FUNDS ........................................... 33
AMENDMENTS, CHANGES, AND MODIFICATIONS .............. 33
EXECUTION IN COUNTERPARTS .............................................. 33
PAYMENT ....................................................................................... 33
GOVERNING LAW ......................................................................... 33
NO PECUNIARY LIABILITY OF ISSUER ................................... 33
PAYMENTS DUE ON HOLIDAYS ............................................... 34
NO INDIVIDUAL LIABILITY ....................................................... 34
SURVIVAL OF COVENANTS ....................................................... 34
PROJECT DESCRIPTION
FORM FOR COST OF ISSUANCE DISBURSEMENT
111
LOAN AGREEMENT
THIS LOAN AGREEMENT is dated as of April 1, 2013 (the "Loan
Agreement"), between CITY OF ATLANTIC BEACH, a municipality duly organized
and existing under the laws of the State of Florida (the "Issuer"), and the NAVAL
CONTINUING CARE RETIREMENT FOUNDATION, INC., a nonprofit corporation
duly organized and validly existing under the laws of the State of Florida (the "Obligor"),
W IT N E S S E T H:
WHEREAS, pursuant to the provisions of the Act, the Issuer has determined to
issue, sell and deliver its Bonds and to loan the proceeds derived from the sale thereof to
the Obligor for the purpose of (i) financing all or a portion of the cost of the Project, (ii)
refunding the Refunded Bonds, (iii) funding a debt service reserve fund and (ii) paying a
portion of the costs of issuance of the Bonds; and
WHEREAS, the Obligor and the Issuer each have full right and lawful authority
to enter into this Loan Agreement and to perform and observe the provisions hereof on
their respective parts to be performed and observed;
NOW, THEREFORE, for and in consideration of the premises and the mutual
covenants hereinafter contained, the parties hereto formally covenant, agree and bind
themselves as follows:
1
4827-7379-2274.4
ARTICLE I
DEFINITIONS
SECTION 1.1. DEFINITIONS. Except as otherwise provided herein, the
terms used in this Loan Agreement shall have the meanings given such terms in the
Master Indenture (as defined below). In addition to such terms defined in the Master
Indenture, the following terms, except where the context indicates otherwise, shall have
the respective meanings set forth below.
"Account" means any account established within a Fund.
"Act" means Part II, Chapter 159, Florida Statutes, and other applicable
provisions of law.
"Administration Expenses" means the reasonable and necessary fees and
expenses incurred by the Issuer pursuant to this Loan Agreement and the Bond Indenture.
"Aggregate Principal Amount" means the outstanding principal amount
including, in the case of a security sold at a discount to the purchaser thereof the accreted
value of such discount calculated in accordance with the documents authorizing such
security, or if not so defined, generally accepted accounting principles.
"Authorized Denominations" means the denomination of $5,000 or any integral
multiple thereof.
"Bond Fund" means the Bond Fund created m Section 3.02 of the Bond
Indenture.
"Bond Indenture" means the Indenture of Trust of even date herewith relating to
the Bonds between the Issuer and the Bond Trustee, including any indentures
supplemental thereto made in conformity therewith.
"Bondholder" or "Owner" of the Bonds mean the registered owner of any fully
registered Bond.
"Bonds" means the City of Atlantic Beach, Florida Health Care Facilities
Revenue and Refunding Bonds (Fleet Landing Project), Series 2013A issued pursuant to
the Bond Indenture.
"Bond Trustee" means U.S. Bank National Association, being the registrar, a
paying agent and the trustee under the Bond Indenture, or any successor corporate
trustee.
"Claims" shall mean all claims, lawsuits, causes of action and other legal actions
and proceedings of whatever nature brought against (whether by way of direct action,
2
4827-7379-2274.4
counter claim, cross action or impleader) any Indemnified Party, even if groundless,
false, or fraudulent, so long as the claim, lawsuit, cause of action or other legal action or
proceeding is alleged or determined, directly or indirectly, to arise out of, to result from,
to relate to or to be based upon, in whole or in part: (a) the issuance of the Bonds, (b) the
duties, activities, acts or omissions (even if negligent) of any Person in connection with
the issuance of the Bonds, or the obligations of the various parties arising under the Bond
Indenture, this Loan Agreement or the Master Indenture, or (c) the duties, activities, acts
or omissions (even if negligent) of any Person in connection with the design,
construction, installation, operation, use, occupancy, maintenance or ownership of the
Project or any part thereof.
"Completion Certificate" means a certificate of the Obligor delivered pursuant
to Section 4.2(b) hereof.
"Continuing Disclosure Agreement" means (i) with respect to the Bonds, the
Continuing Disclosure Agreement between the Obligor and the Bond Trustee, as
dissemination agent, dated the Delivery Date of the Bonds, and (ii) with respect to any
other series of Bonds, the continuing disclosure certificate or agreement delivered by the
Obligor in connection with the issuance of such series of Bonds in order to comply with
the provisions of Rule 15c2-12 of the Securities Exchange Act of 1934.
"Cost" or "Costs" as applied to a Project means and includes any and all costs
permitted by the Code and the Act.
"Cost of Issuance" means (a) with respect to any tax exempt Bonds all costs that
are treated as issuance costs within the meaning of Section 1.150-1 (b) of the Code, and
(b) with respect to any Bonds, all costs associated with the issuance of such Bonds
including, but not limited to, (i) underwriter's spread (whether realized directly or derived
through purchase of the Bonds at a discount below the price at which they are expected to
be sold to the public); (ii) counsel fees (including Bond Counsel, underwriter's counsel,
Issuer's counsel, Bond Trustee's counsel and Obligor's counsel fees that relate to the
issuance of the Bonds, as well as any other specialized counsel fees incurred in
connection with the issuance of the Bonds); (iii) financial advisory fees incurred in
connection with the issuance of the Bonds; (iv) Rating Agency fees; (v) Bond Trustee
fees incurred in connection with the issuance of the Bonds; (vi) Paying Agent and
certifying registrar and authenticating agent fees related to issuance of the Bonds; (vii)
accountant fees related to the issuance of the Bonds; (viii) printing costs of the Bonds and
of the preliminary and final offering materials; (ix) publication costs associated with the
financing proceedings; (x) any fees paid to the Issuer; and (xi) costs of engineering and
feasibility studies necessary to the issuance of the Bonds; provided, that bond insurance
premiums and certain credit enhancement fees, to the extent treated as interest expense
under the Code, shall not be treated as "Costs of Issuance" in connection with the
issuance of tax exempt Bonds.
3
4827-7379-227 4.4
"Cost of Issuance Fund" means the cost of issuance fund created under Section
3.17 of the Bond Indenture.
"Delivery Date" means the date the Bonds are delivered to the initial purchasers
against payment therefor.
"Event of Default" means those defaults specified in Section 8.01 of the Bond
Indenture.
"Facilities" means the continuing care retirement facilities known as "Fleet
Landing" which are located at One Fleet Landing Boulevard in Atlantic Beach, Florida
and all land, buildings, structures, improvements, equipment, fixtures, machinery,
furniture, furnishings and other real and personal property located thereon and all land,
buildings, structures, improvements, equipment, fixtures, machinery, furniture,
furnishings and other real and personal property now or hereafter attached to, or located
in, or used in connection with, any such land, buildings, structures or improvements and
all additions thereto, substitutions therefor and replacements thereof, whether now owned
or hereafter acquired by the Borrower.
"Funds" means the Cost of Issuance Fund, Bond Fund, the Reserve Fund, Rebate
Fund and the Project Fund.
"Indemnified Party" shall mean the Issuer and any of its respective officers,
directors, members, officials, consultants, agents, servants and employees, and any
successor to any of such Persons.
"Indemnified Persons" means the Indemnified Parties and the Bond Trustee.
"Interest Account" means the account of such name in the Bond Fund created in
Section 3.02 of the Bond Indenture.
"Interest Payment Date" means each and , commencing
_____ , 20[13], or, if such day is not a Business Day, the immediately succeeding
business day in the years during which the Bonds are Outstanding under the provisions of
the Bond Indenture.
"Issuer" means City of Atlantic Beach, Florida, or any public corporation
succeeding to its rights and obligations under this Loan Agreement.
"Issuer Representative" means the Chairman of the Issuer or such other person
at the time, and from time to time, designated by written certificate of the Issuer
furnished to the Obligor and the Bond Trustee containing the specimen signature of such
person and signed on behalf of the Issuer by its Chairman. Such certificate shall
designate an alternate or alternates, any of whom may act at any time as Issuer
Representative.
4
4827-7379-227 4.4
"Loan Agreement" means this Loan Agreement and any amendments and
supplements hereto made in conformity herewith and with the Bond Indenture.
"Losses" means losses, costs, damages, expenses, judgments, and liabilities of
whatever nature (including, but not limited to, reasonable attorney's, accountant's and
other professional's fees, litigation and court costs and expenses, amounts paid in
settlement and amounts paid to discharge judgments and amounts payable by
Indemnified Persons to any other Person under any arrangement providing for
indemnification of that Person) directly or indirectly resulting from arising out of or
relating to one or more Claims.
"Master Indenture" means the Master Trust Indenture dated as of April 1, 2013,
between the Obligor and the Master Trustee, as supplemented by the Supplemental
Indenture and any supplements or amendments thereto and modifications thereof.
"Maximum Annual Debt Service Requirement" means an amount equal to the
maximum principal and interest requirements (taking into account all mandatory sinking
fund payments) due in any calendar year on the Bonds calculated in accordance with the
provisions of the Master Indenture; provided, however, that principal of the Bonds in its
final year shall be excluded from the determination of Maximum Annual Debt Service
Requirement to the extent moneys are on deposit as of the date of calculation in the
Reserve Fund.
"Maximum Rate" means the lesser of (a) 15% per annum, or (b) the maximum
interest rate permitted by applicable Florida law.
"Minimum Liquid Reserve Account" means the account maintained pursuant to
the Escrow Agreement, dated as of October 1, 1994 and reissued on October 23, 2002, as
amended by the Escrow Agreement Amendment, dated as of May 9, 2007, each between
the Obligor and U.S. Bank National Association or predecessor entity, as escrow agent,
as acknowledged by the Florida Department of Insurance, in order to satisfy the
minimum liquid reserve requirements of Section 651.035, Florida Statutes. In accordance
with said Section 651.035, Florida Statues, amounts on deposit in the Reserve Fund shall
be credited against the amounts required to be on deposit in the Minimum Liquid Reserve
Account.
"Mortgage" means the Mortgage and Security Agreement dated as of April 1,
2013, from the Obligor as Mortgagor, to the Master Trustee, as mortgagee.
"Note" means the promissory note issued by the Obligor pursuant to the
Supplemental Indenture relating to the Bonds.
"Obligor Documents" means this Loan Agreement, the Master Indenture, the
Supplemental Indenture and the Mortgage.
5
4827-7379-227 4.4
"Outstanding" means, as of any particular time, all Bonds which have been duly
authenticated and delivered by the Bond Trustee under the Bond Indenture, except:
(a) Bonds theretofore cancelled by the Bond Trustee or delivered to the Bond
Trustee for cancellation after purchase in the open market or because of payment at or
redemption prior to maturity;
(b) Bonds for the payment or redemption of which cash funds (or Government
Obligations to the extent permitted in Section 7.01 of the Bond Indenture) shall have
been theretofore deposited with the Bond Trustee (whether upon or prior to the maturity
or redemption date of any such Bonds); provided that if such Bonds are to be redeemed
prior to the maturity thereof, notice of such redemption shall have been given or
arrangements satisfactory to the Bond Trustee shall have been made therefor, or waiver
of such notice satisfactory in form to the Bond Trustee, shall have been filed with the
Bond Trustee and provided further that prior to such payment or redemption, the Bonds
to be paid or redeemed shall be deemed to be Outstanding for the purpose of transfers and
exchanges under Section 2.05 of the Bond Indenture; and
(c) Bonds in lieu of which other Bonds have been authenticated under Section
2.06 of the Bond Indenture.
"Paying Agent" means any bank or trust company, including the Bond Trustee,
designated pursuant to the Bond Indenture to serve as a paying agency or place of
payment for the Bonds, and any successor designated pursuant to the Bond Indenture.
"Payment Office" with respect to the Bond Trustee or other Paying Agent means
the office maintained by the Bond Trustee or any affiliate of the Bond Trustee or of
another Paying Agent for the payment of interest and principal on the Bonds.
"Premium Security" means any Permitted Investment purchased or to be
purchased at a premium from funds in the Project Fund.
"Principal Account" means the account of such name in the Bond Fund created
in Section 3.02 of the Bond Indenture.
"Project" means the project described in EXHIBIT A attached hereto.
"Project Fund" means the project fund created under Section 3.06 of the Bond
Indenture.
"Qualified Project Costs" means Costs of the Project which constitute costs for
property which is to be owned by the Obligor or another member of the Obligated Group
and will not be used in an "unrelated trade or business" (as such term is used in Section
513(a) of the Code) of the Obligor (or any other organization described in Section
50l(c)(3) of the Code) or in the trade or business of a person who is neither a
6
4827-7379-2274.4
governmental unit nor an organization described in Section 50l(c)(3) of the Code. Costs
of Issuance are not Qualified Project Costs and any fees paid to banks for letters of credit,
for municipal bond insurance premiums or other guaranty fees and any capitalized
interest on the Bonds shall be allocated between Qualified Project Costs to be paid or
reimbursed from proceeds of the Bonds and Costs other than Qualified Project Costs to
be paid or reimbursed from the proceeds of the Bonds. Qualified Project Costs shall not
include costs or expenses paid more than sixty (60) days prior to the adoption by the
Issuer, the Obligor or another member of the Obligated Group of a reimbursement
resolution unless those expenditures qualify as "preliminary expenditures" within the
meaning of the Code.
"Rebate Fund" means that special fund established in the name of the Issuer with
the Bond Trustee pursuant to Section 3.16 of the Bond Indenture.
"Refunded Bonds" means, collectively, the Series 1999 Bonds and the Series
2006 Bonds.
"Refunded Bonds Projects" means the capital improvement projects at the
Facilities financed or refinanced with proceeds of the Refunded Bonds.
"Registered Owner" or "Owners" means the person or persons in whose name
or names a Bond shall be registered on books of the Issuer kept by the Bond Trustee for
that purpose in accordance with the terms of the Bond Indenture.
"Regular Record Date" means the last day of the month preceding each
regularly scheduled interest payment date therefor.
"Reserve Fund" means the Debt Service Reserve Fund created in Section 3.08 of
the Bond Indenture.
"Reserve Fund Obligations" means cash and Permitted Investments.
"Reserve Fund Requirement" means an amount equal to Maximum Annual
Debt Service Requirement on the Bonds.
"Responsible Officer" when used with respect to the Bond Trustee means an
officer of the Bond Trustee having direct responsibility for administration of the Bond
Indenture.
"Securities Depository" means The Depository Trust Company, New York, New
York, and any successor thereto as permitted by the Bond Indenture.
"Series 1999 Bonds" means the Issuer's outstanding Health Care Facilities
Revenue Refunding Bonds (Fleet Landing Project), Series 1999.
7
4827-7379-227 4.4
"Series 2006 Bonds" means the Issuer's outstanding Variable Rate Demand
Health Care Facilities Revenue Bonds (Fleet Landing Project), Series 2006.
"Special Record Date" means a special date fixed to determine the names and
addresses of owners of Bonds for purposes of paying interest on a special interest
payment date for the payment of defaulted interest, all as further provided in Section 2.03
of the Bond Indenture.
"Supplemental Indenture" means the Supplemental Master Trust Indenture
Number 1, dated as of April 1, 2013, by the Obligor executed and delivered to the Master
Trustee, supplementing the Master Trust Indenture and providing for the issuance of the
Note.
"Surplus Project Fund Moneys" means all moneys (including moneys earned
pursuant to the provisions of Article VI of the Bond Indenture) remaining in the Project
Fund after completion or termination of the Project (as evidenced by a Completion
Certificate) and payment of all other costs then due and payable from the Project Fund.
"Tax Compliance Agreement" means the Tax Compliance Agreement dated as
of , 2013, among the Issuer, the Obligor and the Bond Trustee related to the
Bonds.
"Trust Estate" means the property pledged and assigned to the Bond Trustee
pursuant to the granting clauses of the Bond Indenture.
8
4827-7379-227 4.4
ARTICLE II
REPRESENTATIONS
SECTION 2.1.
represents that:
REPRESENTATIONS BY THE ISSUER. The Issuer
(a) The Issuer is a municipality duly organized and validly existing under and
pursuant to the laws of the State of Florida and has full power and authority under the
laws of the State of Florida (including, in particular, the Act) to enter into the transactions
contemplated by this Loan Agreement and to carry out its obligations hereunder. By
proper action the Issuer has duly authorized the execution and delivery of this Loan
Agreement and the Bond Indenture and the performance of its obligations under this
Loan Agreement and the Bond Indenture.
(b) To the best of the Issuer's knowledge, neither the execution and delivery of
the Bonds, the Bond Indenture or this Loan Agreement, the consummation of the
transactions contemplated thereby and hereby nor the fulfillment of or compliance with
the terms and conditions or provisions of the Bonds, the Bond Indenture or this Loan
Agreement conflict with or result in the breach of any of the terms, conditions or
provisions of any constitutional provision or statute of the State of Florida or of any
agreement or instrument or judgment, order or decree of which the Issuer has notice that
it is a party or constitutes a default under any of the foregoing or result in the creation or
imposition of any prohibited lien, charge or encumbrance of any nature upon any
property or assets of the Issuer under the terms of any instrument or agreement.
(c) The Issuer has the power and authority to issue the Bonds for the purpose
of financing all or a portion of the Cost of the Project, refunding the Refunded Bonds,
funding a debt service reserve fund and paying a portion of the Cost of Issuance. The
Bonds shall be in the principal amount, mature, bear interest, be subject to redemption
prior to maturity, be secured, and have such other terms and conditions as are set forth in
the Bond Indenture.
(d) The Bonds are to be issued under and secured by the Bond Indenture
pursuant to which the Issuer's interest in this Loan Agreement and in the Note, and the
revenues and receipts derived by the Issuer from the Note, will be pledged and assigned
to the Bond Trustee as security for payment of the principal of, premium, if any, and
interest on the Bonds.
(e) The Obligor has represented to the Issuer that that the Project and the
Refunded Bonds Projects constitute "projects" within the meaning of the Act.
(f) The issuance of the Bonds and the execution of this Loan Agreement and
the Bond Indenture have been approved by the Issuer at a duly constituted meeting.
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4827-7379-227 4.4
(g) Except as otherwise permitted by this Loan Agreement, the Issuer
covenants that it has not and will not pledge the income and revenues derived from this
Loan Agreement other than to secure the Bonds.
(h) After reasonable public notice given by publication in The Financial News
and Daily Record, a newspaper published and of general circulation in the City of
Atlantic Beach, Florida on January 28, 2013, the Issuer held a public hearing on February
11, 2013 concerning the issuance of the Bonds, the refunding of the Refunded Bonds,
financing of the Project and the location of the Project. After such hearing, the Issuer
authorized the issuance ofthe Bonds by duly adopting a resolution on February 11, 2013.
(i) After reasonable public notice given by publication in The Financial News
and Daily Record, a newspaper published and of general circulation in Duval County,
Florida on January 16, 2013, the City of Jacksonville, Florida held a public hearing on
January 30, 2013, concerning the issuance of the Bonds, the refunding of the Refunded
Bonds, the financing of the Project, and the location of the Project.
SECTION 2.2.
represents that:
REPRESENTATIONS BY THE OBLIGOR. The Obligor
(a) The Obligor is a nonprofit corporation duly incorporated and in good
standing under the laws of the State of Florida, has power to enter into the Obligor
Documents and by proper corporate action has duly authorized the execution and delivery
of the Obligor Documents.
(b) Neither the execution and delivery of any of the Obligor Documents, the
consummation of the transactions contemplated hereby and thereby, nor the fulfillment of
or compliance with the terms and conditions of the Obligor Documents, conflict with or
result in a breach of any of the terms, conditions or provisions of any corporate restriction
or any agreement or instrument to which the Obligor is now a party or by which it is
bound or constitute a default under any of the foregoing.
(c) No event of default or any event which, with the giving of notice or the
lapse of time, or both, would constitute an event of default under the Master Indenture,
has occurred.
(d) To the best of the Obligor's knowledge, information and belief, all of the
documents, instruments and written information supplied by or on behalf of the Obligor,
which have been reasonably relied upon by Bond Counsel in rendering their opinion with
respect to the exclusion from gross income of the interest on the Bonds for federal
income tax purposes or counsel to the Obligor in rendering its opinion with respect to the
status of the Obligor under Section 501 ( c )(3) of the Code, are true and correct in all
material respects, do not contain any untrue statement of a material fact and do not omit
to state any material fact necessary to be stated therein to make the information provided
10
4827-7379-227 4.4
therein, in light of the circumstances under which such information was provided, not
misleading.
(e) The Project and the Refunded Bonds Projects consist entirely of property
that is owned, or to be owned, and operated by the Obligor. Neither the Project nor the
Refunded Bonds Projects will be used in an "unrelated trade or business" (as such term is
used in Section 513( a) of the Code) of the Obligor (or any other organization that is
exempt from federal income tax under Section 50l(c)(3) of the Code that may rent or use
any portion of the Project or the Refunded Bonds Projects) or for any private business use
(other than by an organization that is exempt from federal income tax under Section
501(c)(3) of the Code) within the meaning and contemplation of Section 141(b) of the
Code.
(f) The Tax Compliance Agreement executed and delivered by the Obligor
concurrently with the issuance and delivery of the Bonds is true, accurate and complete in
all material respects as of the date on which executed and delivered.
(g) The Obligor agrees that it and any other Obligated Group Member (i) shall
not perform any act or enter into any agreement which would adversely affect its
members' federal income tax status and shall conduct its operations in the manner which
conforms to the standards necessary to qualify the members as a charitable organization
within the meaning of Section 50l(c)(3) of the Code or any successor provisions of
federal income tax law, (ii) shall not perform any act, enter into any agreement or use or
permit the Facilities, or any portion thereof, to be used in any manner, or for any trade or
business or other non-exempt use related to the purposes of the Obligor, which would
adversely affect the exclusion of interest on the Bonds, from federal gross income
pursuant to Section 103 of the Code, (iii) shall not do or fail to do any act or undertaking
which may give rise to unrelated trade or business income with respect to its operations at
the Facilities, and (iv) shall not directly or indirectly use or permit the use (including the
making of any investment) of any proceeds of the Bonds or any other funds of the Issuer
or the Obligated Group, or take or omit to take any action, that would cause the Bonds to
be "arbitrage bonds" within the meaning of Section 148(a) of the Code.
(h) The Obligor agrees that neither it nor any related party to the Obligor (as
defined in Section 1.150-l(b) of the Code) will purchase any of the Bonds in an amount
related to the obligation represented by this Loan Agreement, as described in Section
1.148-1(b) ofthe Code.
(i) Any information that has been or will be supplied by the Obligor that has
been or will be relied upon by the Issuer, the Bond Trustee and Bond Counsel with
respect to the exclusion from gross income for federal income tax purposes of interest on
the Bonds is true and cmTect.
11
4827-7379-2274.4
G) The Obligor is duly authorized to operate the Facilities under the laws,
rulings, regulations and ordinances of the State of Florida and the departments, agencies
and political subdivisions thereof.
(k) The Project and the Refunded Bonds Projects constitute a "project" within
the meaning of the Act. All proceeds of the Bonds will be used to finance a "cost" within
the meaning of the Act.
(1) Based on current facts, estimates and circumstances, it is currently expected
that neither the Project nor the Refunded Bonds Projects will be sold or disposed of in a
manner producing sale proceeds which, together with accumulated proceeds of the Bonds
or earnings thereon, would be sufficient to enable the Obligor to retire substantially all of
the Bonds prior to the maturity of the Bonds.
(m) The Obligor will construct the Project and operate its Facilities in
accordance with all applicable zoning, planning, building and environmental laws,
ordinances, rules and regulations of governmental authorities rating or inspection
organizations, bureaus, associations, or offices having jurisdiction over the Facilities or
the Project, as the case may be. The Obligor has obtained or will cause to be obtained all
requisite approvals of the State of Florida and of other federal, state, regional and local
governmental bodies for the Facilities and the Project.
(n) Substantially all of the net proceeds of the Bonds, including earnings from
the investment thereof, were used, or will be used, to pay Qualified Project Costs and to
refund the Refunded Bonds.
( o) The Obligor will not discriminate against the residents of its Facilities or
the Project on the basis of race, religion, sex or national origin.
(p) The Obligor agrees to perform all obligations imposed upon it by the
express terms of the Bond Indenture.
12
4827-7379-227 4.4
ARTICLE III
TERM OF LOAN AGREEMENT
SECTION 3.1. TERM OF THIS LOAN AGREEMENT. Subject to
Section 11.12 herein, this Loan Agreement shall remain in full force and effect from the
date of delivery hereof until such time as all of the Bonds shall have been fully paid or
provision made for such payment pursuant to the Bond Indenture and all reasonable and
necessary fees and expenses of the Bond Tmstee and the Issuer accmed and to accrue
through final payment of the Bonds and all liabilities of the Obligor with respect to the
Bonds accrued and to accrue through final payment of the Bonds have been paid.
13
4827-7379-227 4.4
ARTICLE IV
ISSUANCE OF THE BONDS; CONSTRUCTION OF PROJECTS;
DISBURSEMENTS
SECTION 4.1.
BOND PROCEEDS.
AGREEMENT TO ISSUE BONDS, APPLICATION OF
The Issuer will ·sell and cause to be delivered to the initial
purchasers thereof the Bonds and will deliver the proceeds thereof to the Bond Trustee
for disposal as follows:
(a) Payment of the redemption price and discharge of the Series 1999 Bonds on
the date of issuance ofthe Series 2013A Bonds;
(b) Reimbursement to Wells Fargo Bank, N.A., successor to Wachovia Bank,
N.A., as provider of the letter of credit securing the Series 2006 Bonds, for the payment
of the redemption price and discharge of the Series 2006 Bonds on the date of issuance of
the Series 20 13A Bonds;
(c) Deposit, into the Reserve Fund, the amount specified in the request and
authorization to the Bond Trustee described in Section 2.07(d) ofthe Bond Indenture.
(d) Deposit, into the Cost of Issuance Fund, the amount specified in the request
and authorization to the Bond Trustee described in Section 2.07(d) of the Bond Indenture.
(e) Deposit into the Project Fund $ ____ for Costs of the Project.
SECTION 4.2. PROJECT; COMPLETION CERTIFICATE. The Obligor
anticipates that the Project will consist entirely of previously acquired land (as further
described in Exhibit A hereto) and that the Obligor shall, upon providing the Bond
Trustee with a proper reimbursement request in accordance with Section 4.6 hereof, be
reimbursed on the date of issuance of the Bonds for costs previously incurred to acquire
such Project. In such case, no moneys will remain on deposit in the Project Fund after the
date of issuance of the Bonds and Section 4.2(b ), Section 4.3 and Section 4.13 will not be
applicable.
(a) The Obligor shall cause the Project to be acquired, constructed and
improved, as applicable, with due diligence and pursuant to the requirements of the
applicable laws of the State of Florida in all material respects.
(b) The Obligor shall deliver to the Bond Trustee within 90 days after the final
completion or termination of the Project a certificate (the "Completion Certificate") of an
Obligor to the effect that:
4827-7379-227 4.4
(i) the Project has been completed substantially in accordance with the
plans and specifications, as then amended, and the date of completion;
14
(ii) the Cost of the Project has been fully paid for and no claim or claims
exist against the Obligor or against the Project out of which a lien based on
furnishing labor or material exists or might ripen; provided, however, there may be
excepted from the foregoing statement any claim or claims out of which a lien
exists or might ripen in the event that the Obligor intends to contest such claim or
claims in accordance with this Loan Agreement, in which event such claim or
claims shall be described; provided, further, that it shall be stated that moneys are
on deposit in the applicable account of the Project Fund sufficient to make
payment of the full amount that might in any event be payable in order to satisfY
such claim or claims; provided, further, that there may also be excepted from the
foregoing statement any claim that has been insured over pursuant to an
endorsement to any title insurance; and
(iii) all permits, certificates and licenses necessary for the occupancy and
use of the Project have been obtained and are in full force and effect.
SECTION 4.3. COST OF CONSTRUCTION. The Obligor represents and
warrants that it will use its best efforts to construct or cause the construction of the
Project at a price which will permit completion of the Project within the amount of the
funds to be deposited in the Construction Fund and within the amount of other available
funds ofthe Obligor.
SECTION 4.4. PLANS; MODIFICATIONS OF PROJECT. The Obligor
hereby covenants and agrees that no changes or modifications, or substitutions, deletions,
or additions shall be made with respect to the Project if such change disqualifies the
Project under the Act.
SECTION 4.5. COMPLIANCE WITH REGULATORY
REQUIREMENTS. The Obligor agrees that the Project shall be constructed strictly in
accordance with all applicable ordinances and statutes, and in accordance with the
requirements of all regulatory authorities in all material respects, and any rating or
inspection organization, bureau, association, or office having jurisdiction, and it will
furnish to the Issuer all information necessary for the Issuer to comply with all of the
foregoing and all laws, regulations, orders and other governmental requirements.
The Obligor shall, at no expense to the Issuer, promptly comply in all material
respects or cause compliance in all material respects with all laws, ordinances, orders,
rules, regulations and requirements of duly constituted public authorities which may be
applicable to the Obligor or to its Facilities and operations, including without limitation,
Chapter 651, Florida Statutes. The Obligor shall cause the Minimum Liquid Reserve
Account to be maintained and funded in an amount which, together with the moneys on
deposit in the Reserve Fund, shall satisfY all of the Obligor's escrow requirements under
Section 651.035, Florida Statutes.
15
4827-7379-227 4.4
SECTION 4.6. REQUESTS FOR DISBURSEMENTS. (a) The Obligor
shall be entitled to disbursements of moneys in the Project Fund to pay the Costs related
to the Project. The Obligor shall request disbursements from the Project Fund on the
form attached hereto as EXHIBIT C to pay Costs of the Project, and to reimburse itself
for Costs of the Project paid by the Obligor, upon presentation to the Bond Trustee of a
request for disbursement signed by the Obligor, but in no event more often than once a
month.
(b) Notwithstanding the foregoing, the Obligor shall make no request for
disbursement of moneys from the Project Fund for payment of Cost of Issuance.
SECTION 4.7. COST OF ISSUANCE FUND. The Obligor shall be
entitled to disbursement of moneys in the Cost of Issuance Fund to pay the Cost of
Issuance. The Obligor shall request disbursements from the Cost of Issuance Fund on the
form attached hereto as EXHIBIT B to pay Cost of Issuance, and to reimburse itself for
Cost of Issuance paid by the Obligor, upon presentation to the Bond Trustee of a request
for disbursement signed by the Obligor, but in no event more often than four times a
month.
SECTION 4.8. MODIFICATION OF DISBURSEMENTS. The making of
any disbursement or any part of a disbursement shall not be deemed an approval or
acceptance by the Bond Trustee of the work theretofore done. Upon prior notice to the
Obligor and in order to satisfy requirements specified in the Master Indenture, the Bond
Trustee may deduct from any disbursement to be made under this Loan Agreement any
amount necessary for the payment of fees and expenses required to be paid under this
Loan Agreement and any insurance premiums, taxes, assessments, water rates, sewer
rents and other charges, liens and encumbrances upon the facilities, whether before or
after the making of this Loan Agreement, and any amounts necessary for the discharge of
mechanic's liens, and apply such amounts in payment of such fees, expenses, premiums,
taxes, assessments, charges, liens and encumbrances. All such sums so applied shall be
deemed disbursements under this Loan Agreement.
SECTION 4.9. COVENANTS REGARDING TAX EXEMPTION. The
Obligor hereby represents and covenants as follows:
(a) the Obligor will, at the expense of the Obligor, comply with, and make all
filings required by, all effective rules, rulings or regulations promulgated by the
Department of the Treasury or the Internal Revenue Service with respect to the
obligations such as the Bonds, if any;
(b) the Obligor will continue to conduct its operations in a manner that will
result in its continuing to qualify as an organization described in Section 501(c)(3) of the
Code including but not limited to the timely filing of all returns, reports and requests for
determination with the Internal Revenue Service and the timely notification of the
16
4827-7379-227 4.4
Internal Revenue Service of all changes in its organization and purposes from the
organization and purposes previously disclosed to the Internal Revenue Service;
(c) the Obligor will not divert any substantial part of its corpus or income for a
purpose or purposes other than those for which it is organized and operated as described
in Section 4.11 hereof;
(d) the Obligor will use no portion of the proceeds of the Bonds to provide any
airplane, sky-box or other private luxury box, facility primarily used for gambling, or
store the principal business of which is the sale of alcoholic beverages for consumption
off premises; and
(e) the Obligor agrees to provide to the Bond Trustee, at such time as required
by the Bond Trustee, all information required by the Bond Trustee with respect to
Nonpurpose Investments (as defined in Section 148 of the Code) not held in any fund
under the Bond Indenture.
SECTION 4.10. ALLOCATION OF, AND LIMITATION ON,
EXPENDITURES FOR THE PROJECT. The Obligor covenants to account for the
expenditure of sale proceeds and investment earnings to be used for the Cost of the
Project on its books and records by allocating proceeds to expenditures within 18 months
of the later of the date that (1) the expenditure is made, or (2) the Project is completed.
The foregoing notwithstanding, the Obligor shall not expend sale proceeds or investment
earnings thereon more than 60 days after the earlier of (1) the fifth anniversary of the
delivery of the Bonds, or (2) the date the Bonds are retired, unless the Obligor obtains an
Opinion of Bond Counsel that such expenditure will not adversely affect the tax-exempt
status of the Bonds. For purposes hereof, the Obligor shall not be obligated to comply
with this covenant if it obtains an opinion that such failure to comply will not adversely
affect the excludability for federal income tax purposes from gross income of the interest.
SECTION 4.11. REPRESENTATIONS AND WARRANTIES AS TO
TAX EXEMPT STATUS OF OBLIGOR. The Obligor hereby represents and warrants
as follows:
(a) the Obligor is an organization exempt from federal income taxation under
Section 501(a) of the Code by virtue of being described in Section 501(c)(3) of the Code;
(b) the purposes, character, activities and methods of operation of the Obligor
have not changed materially since its organization and are not materially different from
the purposes, character, activities and methods of operation at the time of its receipt of a
determination by the Internal Revenue Service that it is an organization described in
Section 501(c)(3) of the Code (the "Determination");
17
4827-7379-227 4.4
(c) the Obligor has not divetied a substantial part of its corpus or income for a
purpose or purposes other than the purpose or purposes for which it is organized or
disclosed to the Internal Revenue Service in connection with its Determination;
(d) the Obligor has not operated since its organization in a manner that would
result in it being classified as an "action" organization within the meaning of Section
1.501 ( c )(3 )-1 ( c )(3) of the Code including, but not limited to, promoting or attempting to
influence legislation by propaganda or otherwise as a substantial part of its activities;
(e) with the exception of the payment of compensation (and the payment or
reimbursement of expenses) which is not excessive and is for personal services which are
reasonable and necessary to carrying out the purposes of the Obligor, no person
controlled by any such individual or individuals nor any person having a personal or
private interest in the activities of the Obligor has acquired or received, directly or
indirectly, any income or assets, regardless of form, of the Obligor during the current
Fiscal Year and the period, if any, preceding the cun·ent Fiscal Year, other than as
reported to the Internal Revenue Service by the Obligor;
(f) the Obligor is not a "private foundation" within the meaning of Section
509(a) of the Code;
(g) the Obligor has not received any indication or notice whatsoever to the
effect that its exemption under Section 501(a) of the Code as an organization described in
Section 501(c)(3) of the Code has been revoked or modified, or that the Internal Revenue
Service is considering revoking or modifying such exemption, and such exemption is still
in full force and effect;
(h) the Obligor has filed with the Internal Revenue Service all requests for
determination, reports and returns required to be filed by it and such requests for
determination, reports and returns have not omitted or misstated any material fact and has
notified the Internal Revenue Service of any changes in its organization and operation
since the date of its Determination;
(i) the Obligor has not devoted more than an insubstantial part of its activities
in furtherance of a purpose other than an exempt purpose within the meaning of Section
501(c)(3) ofthe Code; and
(j) the Obligor has not taken any action, nor does it know of any action that
any other person has taken, nor does it know of the existence of any condition, which
would cause the Obligor to lose its exemption from taxation under Section 501(a) of the
Code or cause the interest on the Bonds to become taxable to the recipient thereof
because such interest is not excludable from the gross income of such recipient for
federal income tax purposes under Section 103(a) of the Code.
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4827-7379-227 4.4
SECTION 4.12. DISPOSITION OF PROJECT. The Obligor covenants that
the property constituting the Project or any portion thereof will not be sold or otherwise
disposed in a transaction resulting in the receipt by the Obligor of cash or other
compensation, unless the Obligor obtains an Opinion of Bond Counsel that such sale or
other disposition will not adversely affect the tax-exempt status of the Bonds.
SECTION 4.13. SURPLUS PROJECT FUND MONEYS. If, upon delivery
of the Completion Certificate, there shall be any Surplus Project Fund Moneys, such
Surplus Project Fund Moneys (to the extent not otherwise required to be rebated to the
United States in accordance with section 148(f) of the Code) shall, upon the written
request of the Obligor to the Bond Trustee, be used by the Bond Trustee either (i) to
purchase for cancellation Bonds at any reasonable price as determined by the Obligor,
which price, however, shall not exceed the principal amount thereof plus accrued interest
thereon; (ii) unless the Project has been canceled, for application toward the costs of
acquisition, construction, and improvement of additional facilities related thereto; or (iii)
for any combination of (i) and (ii) above all as set forth in such written request. If the
Bonds are then subject to redemption at par, any of such Surplus Project Fund Moneys
not to be used in a manner set forth in (i), (ii) or (iii) above shall be applied to redeem
Bonds in the largest principal amount then subject to redemption at par that does not
exceed the amount of such Surplus Project Fund Moneys. Prior to any such application
described above the Bond Trustee shall have been furnished with an Opinion of Bond
Counsel to the effect that such action will not adversely affect any exclusion of interest
on the Bonds from the gross income of the owners thereof for federal income tax
purposes. Any of such Surplus Project Fund Moneys not to be applied for the purposes
set forth in (i), (ii) or (iii) above or which may not be applied to redeem Bonds as set
forth above shall be deposited in an escrow account and moneys on deposit in such
escrow account shall at the written request of the Obligor be applied to pay the principal
of Bonds upon redemption thereof on the earliest practicable redemption date upon which
such Bonds may be redeemed at par; provided, that any moneys held in such escrow
account shall be invested in accordance with Section 6.01 of the Bond Indenture but may
not be invested to produce a yield greater than the yield on the Bonds except to the extent
permitted by the Code. In lieu of treating the Surplus Project Fund Moneys as set forth
above, upon the written request of the Obligor, such Surplus Project Fund Moneys shall
either be deposited or disbursed by the Bond Trustee in any manner designated in writing
by the Obligor if the Bond Trustee shall have been furnished with an Opinion of Bond
Counsel to the effect that such action will not adversely affect any exclusion of interest
on the Bonds from the gross income of the owners thereof for federal income tax
purposes and is authorized by the Act.
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4827-7379-227 4.4
ARTICLE V
LOAN OF BOND PROCEEDS; NOTE; PROVISION FOR PAYMENT
SECTION 5.1. LOAN OF BOND PROCEEDS. The Issuer hereby agrees
to loan to the Obligor the proceeds of the Bonds to provide financing and refinancing for
the Costs of the Project. The Obligor hereby agrees to repay the loan pursuant to the
conditions set forth in Section 5.2 hereof.
SECTION 5.2. REPAYMENT OF LOAN. The Obligor agrees to pay to the
Bond Trustee for the account of the Issuer all payments when due on the Note pursuant to
the payment provisions contained in such Note. If for any reason the amounts paid to the
Bond Trustee by the Obligor on the Note, together with any other amounts available in
the Bond Fund, are not sufficient to pay principal of, premium, if any, and interest on the
Bonds when due, the Obligor agrees to pay the amount required to make up such
deficiency.
SECTION 5.3. CREDITS. Any amount in an account of the Bond Fund at
the close of business of the Bond Trustee on the day immediately preceding any payment
date on the Note in excess of the aggregate amount then required to be contained in such
account of the Bond Fund pursuant to Section 5.2 hereof shall be credited pro rata against
the payments due by the Obligor on such next succeeding principal or interest payment
date on the Note.
In the event that all of the Bonds then Outstanding are called for redemption, any
amounts contained in the Reserve Fund and the Bond Fund at the close of business of the
Bond Trustee on the day immediately preceding such redemption date shall be credited
against the payments due by the Obligor on the Note, as provided below.
The principal amount of any Bonds to be applied by the Bond Trustee as a credit
against any sinking fund payment pursuant to Section 5.02 of the Bond Indenture shall be
credited against the obligation of the Obligor with respect to payment of installments of
principal of the Note as described in the Supplemental Indenture.
The cancellation by the Bond Trustee of any Bonds purchased by the Obligor or of
any Bonds redeemed or purchased by the Issuer through funds other than funds received
on the Note shall constitute payment of a principal amount of the Note equal to the
principal amount of the Bonds so cancelled. Upon receipt of written notice from the
Bond Trustee of such cancellation, the Master Trustee shall at the request of the Obligor
endorse on the Note such payment of such principal amount thereof.
SECTION 5.4. NOTE. Concurr-ently with the sale and delivery by the Issuer
of the Bonds, the Obligor shall execute and deliver the Note substantially in the form set
forth in the Supplemental Indenture.
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4827-7379-227 4.4
SECTION 5.5. PAYMENT OF BOND TRUSTEE'S AND PAYING
AGENT'S FEES AND EXPENSES. The Obligor agrees to pay the reasonable and
necessary fees and expenses (including attorney's fees) of the Bond Trustee and any
Paying Agents as and when the same become due, upon submission by the Bond Trustee
or any Paying Agent of a statement therefor.
SECTION 5.6. RESERVE FUND. (a) In the event any moneys in the
Reserve Fund are transferred to the Bond Trustee for deposit to the Bond Fund pursuant
to Section 3.10 or 3.11 of the Bond Indenture, except if such moneys are transferred due
to the redemption of all Bonds, the Obligor agrees to deposit additional Reserve Fund
Obligations into the Reserve Fund in an amount sufficient to satisfy the Reserve Fund
Requirement, such amount to be deposited in accordance with Section 6.03(d) of the
Bond Indenture.
(b) In the event the value of the Reserve Fund Obligations (as determined
pursuant to the statement of the Bond Trustee furnished in accordance with Section
6.03(b) of the Bond Indenture) on deposit in the Reserve Fund is less than 90% of the
Reserve Fund Requirement as a result of a decline in the market value of investments on
deposit in the Reserve Fund, the Obligor agrees to deposit additional Reserve Fund
Obligations into the Reserve Fund in an amount sufficient to satisfy the Reserve Fund
Requirement, such amount to be deposited in accordance with Section 6.03(c) of the
Bond Indenture.
SECTION 5.7. PAYMENT OF ADMINISTRATION EXPENSES. In
consideration of the agreement of the Issuer to issue the Bonds and loan the proceeds
thereof to provide financing for the Project, the Obligor hereby agrees to pay any and all
costs paid or incurred by the Issuer in connection with the financing or refinancing of the
Project, whenever incurred, including out of pocket expenses and compensation in
connection with the issuance of Bonds, including, without limitation, reasonable sums for
reimbursement of the fees and expenses incurred by the Issuer's financial advisors,
consultants and legal counsel in connection with the Project and the issuance of the
Bonds.
SECTION 5.8. PAYEES OF PAYMENTS. The payments on the Note
pursuant to Section 5.2 hereof shall be paid in funds immediately available at the
Payment Office of the Bond Trustee, directly to the Bond Trustee for the account of the
Issuer and shall be deposited into the appropriate account of the Bond Fund. The
amounts provided for in Section 5.6 hereof shall be paid to the Bond Trustee for the
account of the Issuer and shall be deposited into the Reserve Fund. The payments to be
made to the Bond Trustee and the Paying Agent under Section 5.5 hereof shall be paid
directly to the Bond Trustee and the Paying Agent for their own use. The payments for
Administration Expenses under Section 5. 7 hereof shall be paid directly to the Issuer for
its own use.
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4827-7379-227 4.4
SECTION 5.9. OBLIGATIONS OF OBLIGOR HEREUNDER
UNCONDITIONAL. The obligations of the Obligor to make the payments required in
Section 5.2 hereof shall be absolute and unconditional. The Obligor will not suspend or
discontinue, or permit the suspension or discontinuance of, any payments provided for in
Section 5.2 hereof for any cause including, without limiting the generality of the
foregoing, any acts or circumstances that may constitute failure of consideration, eviction
or constructive eviction, destruction of or damage to the Project, commercial frustration
of purpose, any change in the tax or other laws or administrative rulings of or
administrative actions by the United States of America or the State of Florida or any
political subdivision of either, or any failure of the Issuer to perform and observe any
agreement, whether express or implied, or any duty, liability, or obligation arising out of
or connected with this Loan Agreement, whether express or implied. Nothing contained
in this Section shall be construed to release the Issuer from the performance of any
agreements on its part herein contained; and in the event the Issuer shall fail to perform
any such agreement, the Obligor may institute such action against the Issuer as the
Obligor may deem necessary to compel performance, provided that no such action shall
violate the agreements on the part of the Obligor contained herein and the Issuer shall not
be required to pay any costs, expenses, damages or any amounts of whatever nature
except for amounts received pursuant to this Loan Agreement. Nothing herein shall be
construed to impair the Obligor's right to institute an independent action for any claim
that it may have against the Issuer, the Bond Trustee, any Bondholder or any other third
party. The Obligor may, however, at its own cost and expense and in its own name or in
the name of the Issuer, prosecute or defend any action or proceedings or take any other
action involving third persons which the Obligor deems reasonably necessary in order to
secure or protect this right of possession, occupancy, and use hereunder, and in such
event the Issuer hereby agrees to cooperate fully with the Obligor.
22
4827-7379-227 4.4
SECTION 6.1.
ARTICLE VI
MAINTENANCE AND INSURANCE
MAINTENANCE AND MODIFICATIONS OF
PROJECT BY OBLIGOR. The Obligor may, at its own expense, cause to be made
from time to time any additions, modifications or improvements to the Project provided
such additions, modifications or improvements do not impair the character of the Project
as a "health care facility" and a "project" within the meaning of the Act or impair the
extent of the exemption of interest on the Bonds from Federal income taxation.
SECTION 6.2. INSURANCE. Throughout the term of this Loan
Agreement, the Obligor will, at its own expense, provide or cause to be provided
insurance against loss or damage to the Project in accordance with the terms of the
Master Indenture.
23
4827-7379-2274.4
ARTICLE VII
SPECIAL COVENANTS
SECTION 7.1. NO WARRANTY OF MERCHANTABILITY,
CONDITION OR SUITABILITY BY THE ISSUER. The Issuer makes no warranty,
either express or implied, as to the condition of the Project or that the Project will be
suitable for the Obligor's purposes or needs. Without limiting the effect of the preceding
sentence, it is expressly agreed that in connection with each sale or conveyance pursuant
to this Loan Agreement (i) the Issuer makes no warranty of merchantability and (ii) there
are no warranties which extend beyond the description contained herein.
SECTION 7.2. RIGHT OF ACCESS TO THE PROJECT. The Obligor
agrees that the Issuer, the Bond Trustee, and any of their duly authorized agents shall
have the right at all reasonable times upon reasonable notice to the Obligor to examine
and inspect the Project to determine that the Obligor is in compliance with the terms and
conditions of this Loan Agreement; provided that any such inspection will be conducted
in a manner that will minimize any intrusion on the operations of the Project.
SECTION 7.3. NONSECTARIAN USE. The Obligor agrees that no
proceeds of the Bonds will be used to construct, acquire or install any portion of the
Project which is intended to be used or which is being used for sectarian purposes.
SECTION 7.4. FURTHER ASSURANCES. The Issuer and the Obligor
agree that they will, from time to time, execute, acknowledge, and deliver, or cause to be
executed, acknowledged, and delivered, such supplements hereto and such further
instruments as may reasonably be required for carrying out the intention of or facilitating
the performance of this Loan Agreement.
SECTION 7.5. INDEMNIFICATION. (a) THE OBLIGOR AGREES
THAT IT WILL AT ALL TIMES INDEMNIFY AND HOLD HARMLESS EACH OF
THE INDEMNIFIED PARTIES AGAINST ANY AND ALL LOSSES, LIABILITIES,
CLAIMS OR DEMANDS OR EXPENSES (INCLUDING ATTORNEYS FEES),
INCLUDING LOSSES AS A RESULT OF THE NEGLIGENT ACTS OR OMISSIONS
OF ANY INDEMNIFIED PARTY, OTHER THAN LOSSES RESULTING FROM
FRAUD, WILLFUL MISCONDUCT OR THEFT ON THE PART OF THE
INDEMNIFIED PARTY CLAIMING INDEMNIFICATION. THE OBLIGOR ALSO
SHALL INDEMNIFY THE BOND TRUSTEE FOR, AND DEFEND AND HOLD IT
HARMLESS AGAINST, ANY LOSSES, LIABILITIES, CLAIMS OR DEMANDS OR
EXPENSES (INCLUDING ATTORNEYS FEES) INCURRED WITHOUT
NEGLIGENCE OR BAD FAITH ON ITS PART, ARISING OUT OF OR IN
CONNECTION WITH THE ACCEPTANCE OR ADMINISTRATION OF THE
TRUST CREATED UNDER THE BOND INDENTURE OR THE PERFORMANCE OF
ITS DUTIES UNDER THE BOND INDENTURE, INCLUDING THE COSTS AND
EXPENSES OF DEFENDING ITSELF AGAINST ANY CLAIM OR LIABILITY IN
24
4827-7379-227 4.4
CONNECTION WITH THE EXERCISE OR PERFORMANCE OF ANY OF ITS
POWERS OR DUTIES UNDER THE BOND INDENTURE. THE BOND TRUSTEE
MAY ENFORCE ITS RIGHTS UNDER THE PRECEDING SENTENCE AS A THIRD
PARTY BENEFICIARY OF THIS LOAN AGREEMENT.
(b) NONE OF THE INDEMNIFIED PERSONS SHALL BE LIABLE TO
THE OBLIGOR FOR, AND THE OBLIGOR HEREBY RELEASES EACH OF THEM
FROM, ALL LIABILITY TO THE OBLIGOR FOR, ALL INJURIES, DAMAGES OR
DESTRUCTION TO ALL OR ANY PART OF ANY PROPERTY OWNED OR
CLAIMED BY THE OBLIGOR THAT DIRECTLY OR INDIRECTLY RESULT
FROM, ARISE OUT OF OR RELATE TO THE DESIGN, CONSTRUCTION,
OPERATION, USE, OCCUPANCY, MAINTENANCE OR OWNERSHIP OF THE
PROJECT OR ANY PART THEREOF, EVEN IF SUCH INJURIES, DAMAGES OR
DESTRUCTION DIRECTLY OR INDIRECTLY RESULT FROM, ARISE OUT OF
OR RELATE TO, IN WHOLE OR IN PART, ONE OR MORE ACTS OR OMISSIONS,
INCLUDING ACTS OR OMISSIONS CONSTITUTING NEGLIGENCE ON THE
PART OF ANY INDEMNIFIED PERSON (BUT NOT INCLUDING ACTS OR
OMISSIONS CONSTITUTING FRAUD, WILLFUL MISCONDUCT OR THEFT ON
THE PART OF THE INDEMNIFIED PERSON CLAIMING RELEASE) IN
CONNECTION WITH THE ISSUANCE OF ANY SERIES OF THE BONDS OR IN
CONNECTION WITH THE PROJECT.
(c) Each Indemnified Person, as appropriate, shall reimburse the Obligor for
payments made by the Obligor pursuant to this Section to the extent of any proceeds, net
of all expenses of collection, actually received by it from any other source (but not from
the proceeds of any claim against any other Indemnified Person) with respect to any Loss
to the extent necessary to prevent a recovery of more than the Loss by such Indemnified
Person with respect to such Loss. At the request and expense of the Obligor, each
Indemnified Person shall claim or prosecute any such rights of recovery from other
sources (other than any claim against another Indemnified Person) and such Indemnified
Person shall assign its rights to such rights of recovery from other sources (other than any
claim against another Indemnified Person), to the extent of such required reimbursement,
to the Obligor.
(d) In case any Claim shall be brought or, to the knowledge of any Indemnified
Person, threatened against any Indemnified Person in respect of which indemnity may be
sought against the Obligor, such Indemnified Person promptly shall notify the Obligor in
writing; provided, however, that any failure so to notify shall not relieve the Obligor of
its obligations under this Section.
(e) The Obligor shall have the right to assume the investigation and defense of
all Claims, including the employment of counsel and the payment of all expenses. Each
Indemnified Person shall have the right to employ separate counsel in any such action
and participate in the investigation and defense thereof, but the fees and expenses of such
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4827-7379-227 4.4
counsel shall be paid by such Indemnified Person unless (i) the employment of such
counsel has been specifically authorized by the Obligor, in writing, (ii) the Obligor has
failed after receipt of notice of such Claim to assume the defense and to employ counsel,
or (iii) the named parties to any such action (including any impleaded parties) include
both an Indemnified Person and the Obligor, and the Indemnified Person shall have been
advised by counsel that there may be one or more legal defenses available to it which are
different from or additional to those available to the Obligor (in which case, if such
Indemnified Person notifies the Obligor in writing that it elects to employ separate
counsel at the Obligor's expense, the Obligor shall not have the right to assume the
defense of the action on behalf of such Indemnified Person; provided, however, that the
Obligor shall not, in connection with any one action or separate but substantially similar
or related actions in the same jurisdiction arising out of the same general allegation or
circumstances, be liable for the reasonable fees and expenses of more than one separate
firm of attorneys for the Indemnified Parties, which firm shall be designated in writing by
the Indemnified Parties).
(f) Each Indemnified Person shall cooperate with the Obligor, and the Obligor
shall cooperate with each Indemnified Person, in the defense of any action or Claim.
(g) The Obligor shall not be liable for any settlement of any action or Claim
without the Obligor's consent but, if any such action or Claim is settled with the consent
of the Obligor or there be final judgment for the plaintiff in any such action or with
respect to any such Claim, the Obligor shall indemnify and hold harmless the
Indemnified Persons from and against any Loss by reason of such settlement or judgment
to the extent provided in subsection (a) above.
(h) The provisions of this Section shall survive the termination of this Loan
, Agreement, and the obligations of the Obligor hereunder shall apply to Losses or Claims
under subsection (a) above whether asserted prior to or after the termination of this Loan
Agreement or the resignation or removal of the Bond Trustee. In the event of failure by
the Obligor to observe the covenants, conditions and agreements contained in this
Section, any Indemnified Person may take any action at law or in equity to collect
amounts then due and thereafter to become due, or to enforce perfonnance and
observance of any obligation, agreement or covenant of the Obligor under this Section.
The obligations of the Obligor under this Section shall not be affected by any assignment
or other transfer by the Issuer of its rights, titles or interests under this Loan Agreement to
the Bond Trustee pursuant to the Bond Indenture and will continue to inure to the benefit
of the Indemnified Parties after any such transfer. The provisions of this Section shall be
cumulative with and in addition to any other agreement by the Obligor to indemnify any
Indemnified Person.
SECTION 7.6. AUTHORITY OF OBLIGOR. Whenever under the
provisions of this Loan Agreement the approval of the Obligor is required, or the Issuer
or the Bond Trustee are required to take some action at the request of the Obligor, such
26
4827-7379-2274A
approval or such request shall be made by the Obligor unless otherwise specified in this
Loan Agreement and the Issuer or the Bond Trustee shall be authorized to act on any
such approval or request and the Obligor shall have no complaint against the Issuer or the
Bond Trustee as a result of any action taken.
SECTION 7.7. AUTHORITY OF ISSUER REPRESENTATIVE.
Whenever under the provisions of this Loan Agreement the approval of the Issuer or the
Bond Trustee are required, or the Obligor is required to take some action at the request of
the Issuer, such approval or such request shall be made by the Issuer Representative
unless otherwise specified in this Loan Agreement and the Obligor or the Bond Trustee
shall be authorized to act on any such approval or request and the Issuer shall have no
complaint against the Obligor or the Bond Trustee as a result of any such action taken.
SECTION 7.8. NO PERSONAL LIABILITY. No obligations contained in
the Bonds, the Bond Indenture or this Loan Agreement shall be deemed to be the
obligations of any officer, director, member, trustee, agent or employee of the Issuer, the
Bond Trustee or the Obligor in his or her individual capacity, and neither the governing
body of the Obligor or the Bond Trustee, nor any official of the Issuer executing the
Bonds, the Bond Indenture or this Loan Agreement shall be liable personally thereon or
be subject to any personal liability or accountability with respect thereto.
SECTION 7.9. FEES AND EXPENSES. The Obligor agrees to pay
promptly upon demand therefor all costs paid, incurred or charged by the Issuer in
connection with the Bonds, including without limitation, (i) all fees required to be paid to
the Issuer with respect to the Bonds, (ii) all out of pocket expenses and Cost of Issuance
(including reasonable fees and expenses of attorneys employed by the Issuer) reasonably
incurred by the Issuer in connection with the issuance of the Bonds, and (iii) all out of
pocket expenses (including reasonable fees and expenses of attorneys employed by the
Issuer) reasonably incurred by the Issuer in connection with the enforcement of any of its
rights or remedies or the performance of its duties under the Bond Indenture or this Loan
Agreement.
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4827-7379-227 4.4
SECTION 8.1.
ARTICLE VIII
ASSIGNMENT AND LEASING
ASSIGNMENT AND LEASING BY OBLIGOR. This
Loan Agreement may be assigned, and all or any portion of the Project may be leased by
the Obligor without the consent of either the Issuer or the Bond Trustee, provided that
each of the following conditions is complied with:
(a) No assignment or leasing shall relieve the Obligor from primary liability
for any of its obligations hereunder, and in the event of any such assignment or leasing
the Obligor shall continue to remain primarily liable for payment of the loan payments
and other payments specified in Article V hereof and for performance and observance of
the other covenants and agreements contained herein; provided that if: (i) the Obligor
withdraws from the Obligated Group (as defined in the Master Indenture) and is released
from its obligations on the Note by the Master Trustee pursuant to the Master Indenture;
and (ii) this Loan Agreement has been assigned to a remaining member of the Obligated
Group in accordance with this Section 8.1, the Obligor shall also be released from its
liability for its obligations hereunder, including payment of the loan payments and other
payments specified in Article V hereof and the performance and observance of the other
covenants and agreements contained herein.
(b) The assignee or lessee shall assume in writing the obligations of the
Obligor hereunder to the extent of the interest assigned or leased, provided that the
provisions of this subsection shall not apply to a lease of a portion of the Project or an
operating contract for the performance by others of Obligor or medical services on or in
connection with the Project, or any part thereof.
(c) The requirements relating to assignment and leasing contained in the Tax
Compliance Agreement and Master Indenture are met.
(d) The Obligor shall, within 30 days after the delivery thereof, furnish or
cause to be furnished to the Issuer and the Bond Trustee a true and complete copy of each
such assumption of obligations and assignment or lease of the Project, as the case may
be.
SECTION 8.2. ASSIGNMENT AND PLEDGE BY ISSUER. Solely
pursuant to the Bond Indenture, the Issuer may assign its interest in and pledge any
moneys receivable under the Note and this Loan Agreement (except in respect of certain
rights to indemnification and for Administration Expenses, indemnification and payment
of attorneys' fees and expenses pursuant to Sections 5.7, 7.5 and 9.5 hereof and to the
right to receive notices) to the Bond Trustee as security for payment of the principal of,
premium, if any, and interest on the Bonds. The Obligor consents to such assignment and
pledge.
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4827-7379-227 4.4
ARTICLE IX
FAILURE TO PERFORM COVENANTS AND REMEDIES THEREFOR
SECTION 9.1. FAILURE TO PERFORM COVENANTS. Upon failure
of the Obligor to pay when due any payment (other than failure to make any payment on
any Note, which default shall have no grace period) required to be made under this Loan
Agreement or to observe and perform any covenant, condition or agreement on its part to
be observed or performed hereunder, and continuation of such failure for a period of 60
days after written notice, specifYing such failure and requesting that it be remedied, is
given to the Obligor by the Issuer or the Bond Trustee, the Issuer or the Bond Trustee
shall have the remedies provided in Section 9.2 hereof.
SECTION 9.2. REMEDIES FOR FAILURE TO PERFORM. Upon the
occurrence of a failure of the Obligor to perform as provided in Section 9.1 hereof, the
Issuer or the Bond Trustee, as assignee or successor of the Issuer, upon compliance with
all applicable law, in its discretion may take any one or more of the following steps:
(a) by mandamus, or other suit, action or proceeding at law or in equity,
enforce all rights of the Issuer, and require the Obligor to carry out any agreements with
or for the benefit of the Bondholders and to enforce performance and observance of any
duty, obligation, agreement or covenant of the Obligor under the Act or this Loan
Agreement; or
(b) by action or suit in equity require the Obligor to account as if it were the
trustee of an express trust for the Issuer; or
(c) by action or suit in equity enjoin any acts or things which may be unlawful
or in violation of the rights of the Issuer; or
(d) upon the filing of a suit or other commencement of judicial proceedings to
enforce the rights of the Bond Trustee and the Bondholders, have appointed a receiver or
receivers of the Trust Estate upon a showing of good cause with such powers as the court
making such appointment may confer.
SECTION 9.3. DISCONTINUANCE OF PROCEEDINGS. In case any
proceeding taken by the Issuer or the Bond Trustee on account of any failure to perform
under Section 9.1 shall have been discontinued or abandoned for any reason, or shall
have been determined adversely to the Issuer or the Bond Trustee, then and in every case
the Issuer and the Bond Trustee shall be restored to their former positions and rights
hereunder, respectively, and all rights, remedies and powers of the Issuer and the Bond
Trustee shall continue as though no such proceeding had been taken.
SECTION 9.4. NO REMEDY EXCLUSIVE. No remedy herein conferred
upon or reserved to the Issuer or the Bond Trustee is intended to be exclusive of any
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4827-7379-227 4.4
other available remedy or remedies, but each and every such remedy shall be cumulative
and shall be in addition to every other remedy given under this Loan Agreement or now
or hereafter existing at law or in equity or by statute. No delay or omission to exercise
any right or power accruing upon any default shall impair any such right or power or
shall be construed to be a waiver thereof, but any such right or power may be exercised
from time to time and as often as may be deemed expedient. In order to entitle the Issuer
or the Bond Trustee to exercise any remedy reserved to it in this Article IX, it shall not be
necessary to give any notice, other than notice required in Section 9.1 hereof. Such rights
and remedies given the Issuer hereunder shall also extend to the Bond Trustee and the
holders of the Bonds, subject to the Bond Indenture.
SECTION 9.5. LOAN AGREEMENT TO PAY ATTORNEYS' FEES
AND EXPENSES. In the event the Issuer or the Bond Trustee should employ attorneys
or incur other expenses for the enforcement of perfonnance or observance of any
obligation or agreement on the part of the Obligor herein or in the Bond Indenture
contained, the Obligor agrees that it will on demand therefor pay to the Issuer or the
Bond Trustee, as the case may be, the reasonable fee of such attorneys and such other
reasonable expenses incuiTed by the Issuer or the Bond Trustee.
SECTION 9.6. WAIVERS. In the event any agreement contained in this
Loan Agreement should be breached by either party and thereafter waived by the other
party, such waiver shall be limited to the particular breach waived and shall not be
deemed to waive any other breach hereunder. In view of the assignment of the Issuer's
rights in and under this Loan Agreement to the Bond Trustee under the Bond Indenture,
the Issuer shall have no power to waive any failure to perform under Section 9.1
hereunder without the consent of the Bond Trustee (other than a failure to observe the
covenants contained in Section 4.10 hereof, which may be waived by the Issuer without
the consent of the Bond Trustee).
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4827-7379-227 4.4
ARTICLE X
PREPAYMENT OF NOTE
SECTION 10.1. GENERAL OPTION TO PREPAY NOTE. The Obligor
shall have and is hereby granted the option exercisable at any time to prepay all or any
portion of its payments due or to become due on the Note by depositing with the Bond
Trustee for payment into the Bond Fund an amount of money or Government Obligations
the principal and interest on which when due, will be equal to an amount sufficient to pay
the principal of, premium, if any, and interest on any portion of the Bonds then
Outstanding under the Bond Indenture, without penalty. The exercise of the option
granted by this Section shall not be cause for redemption of Bonds unless such
redemption is permitted at that time under the provisions of the Bond Indenture and the
Obligor specifies the date for such redemption. In the event the Obligor prepays all of its
payments due and to become due on the Note by exercising the option granted by this
Section and upon payment of all reasonable and necessary fees and expenses of the Bond
Trustee, the Issuer and any Paying Agent accrued and to accrue through final payment of
the Bonds called for redemption as a result of such prepayment and of all Administration
Expenses through final payment of the Bonds called for redemption as a result of such
prepayment, this Loan Agreement shall terminate; provided that no such termination shall
occur unless all of the Bonds are no longer Outstanding.
SECTION 10.2. CONDITIONS TO EXERCISE OF OPTION. To exercise
the option granted in Section 10.1 hereof, the Obligor shall give written notice to the
Bond Trustee which shall specify therein the date of such redemption, which date shall be
not less than 30 days from the date the notice is mailed.
31
4827-7379-227 4.4
ARTICLE XI
MISCELLANEOUS
SECTION 11.1. NOTICES. Any notice, request or other communication
under this Loan Agreement shall be given in writing and shall be deemed to have been
given by either party to the other party at the addresses shown below upon any of the
following dates:
(a) The date of notice by facsimile, electronic mail or similar communications,
which is confirmed promptly in writing;
(b) Three Business Days after the date of the mailing thereof, as shown by the
post office receipt if mailed to the other party hereto by registered or certified mail; or
(c) The date of the receipt thereof by such other party if not given pursuant to
(a) or (b) above.
The address for notice for each of the parties shall be as follows:
To the Issuer: City of Atlantic Beach, Florida
800 Seminole Road
Atlantic Beach, Florida 32233-5445
Attn: City Manager
Telephone: (904) 247-5809
Telecopier: (904) 247-5805
To the Borrower: Naval Continuing Care Retirement
Foundation, Inc.
1 Fleet Landing Boulevard
Atlantic Beach, Florida 32233
Attn: ChiefExecutive Officer
Telephone: (904) 246-9900
Telecopier: (904) 246-9447
To the Bond Trustee: U.S. Bank National Association
225 Water Street, Suite 700
Jacksonville, Florida 32202
Attention: Stephanie Moore
Telephone: (904) 358-5363
Telecopier: (904) 358-5374
Notwithstanding the foregoing, notices to the Bond Trustee shall be effective only
upon receipt.
32
4827-7379-227 4.4
SECTION 11.2. BINDING EFFECT. This Loan Agreement shall inure to
the benefit of and shall be binding upon the Issuer, the Obligor, and their respective
successors and assigns, subject, however, to the limitations contained in Sections 8.1, 8.2
and 11.9 hereof.
SECTION 11.3. SEVERABILITY. In the event any provision of this Loan
Agreement shall be held invalid or unenforceable by any court of competent jurisdiction,
such holding shall not invalidate or render unenforceable any other provision hereof.
SECTION 11.4. AMOUNTS REMAINING IN FUNDS. It is agreed by the
parties hereto that any amounts remaining in the Cost of Issuance Fund, Bond Fund, the
Reserve Fund and any Project Fund upon expiration or sooner termination of this Loan
Agreement, after payment in full of the Bonds (or provision for payment thereof having
been made in accordance with the provisions of the Bond Indenture), the fees, charges,
and expenses of the Bond Trustee, the Issuer and the Paying Agent in accordance with
the Bond Indenture, the Administration Expenses and all other amounts required to be
paid under this Loan Agreement and the Bond Indenture, shall belong to and be paid to
the Obligor by the Bond Trustee or the Issuer.
SECTION 11.5. AMENDMENTS, CHANGES, AND MODIFICATIONS.
Except as otherwise provided in this Loan Agreement or in the Bond Indenture,
subsequent to the initial issuance of Bonds and prior to their payment in full (or provision
for the payment thereof having been made in accordance with the provisions of the Bond
Indenture), this Loan Agreement may not be effectively amended, changed, modified,
altered, or terminated without the written consent of the Bond Trustee.
SECTION 11.6. EXECUTION IN COUNTERPARTS. This Loan
Agreement may be executed in several counterparts, each of which shall be an original
and all of which shall constitute but one and the same instrument.
SECTION 11.7. PAYMENT. At such time as the principal of, premium, if
any, and interest on all Bonds Outstanding under the Bond Indenture shall have been
paid, or shall be deemed to be paid, in accordance with the Bond Indenture, and all other
sums payable by the Obligor under this Loan Agreement shall have been paid, the Note
shall be deemed to be fully paid and shall be delivered by the Bond Trustee to the
Obligor.
SECTION 11.8. GOVERNING LAW. This Loan Agreement shall be
governed and construed in accordance with the law of the State of Florida.
SECTION 11.9. NO PECUNIARY LIABILITY OF ISSUER. No
provision, covenant, or agreement contained in this Loan Agreement, or any obligations
herein imposed upon the Issuer, or the breach thereof, shall constitute an indebtedness of
the Issuer within the meaning of any Florida constitutional provision or statutory
33
4827-7379-227 4.4
limitation or shall constitute or give rise to a pecuniary liability of the Issuer or a charge
against its general credit. In making the agreements, provisions, and covenants set forth
in this Loan Agreement, the Issuer has not obligated itself except with respect to the
application of the revenues, income, and all other property therefrom, as hereinabove
provided.
SECTION 11.10. PAYMENTS DUE ON HOLIDAYS. Ifthe date for making
any payment or the last date for performance of any act or the exercising of any right, as
provided in this Loan Agreement, shall be a legal holiday or a day on which banking
institutions in Jacksonville, Florida are authorized by law to remain closed, such payment
may be made or act performed or right exercised on the next succeeding day not a legal
holiday or a day on which such banking institutions are authorized by law to remain
closed with the same force and effect as if done on the nominal date provided in this
Loan Agreement.
SECTION 11.11. NO INDIVIDUAL LIABILITY. No covenant or agreement
contained in this Loan Agreement or the Bond Indenture shall be deemed to be the
covenant or agreement of any member of the governing body of the Obligor or the Bond
Trustee or of any officer, director, trustee, agent or employee of the Issuer, the Bond
Trustee or the Obligor or the governing body of Duval County, Florida, in his or her
individual capacity, and none of such persons shall be subject to any personal liability or
accountability by reason of the execution hereof, whether by virtue of any constitution,
statute or rule oflaw, or by the enforcement or any assessment or penalty, or otherwise.
SECTION 11.12. SURVIVAL OF COVENANTS. All covenants,
agreements, representations and watTanties made by the Obligor in this Loan Agreement,
the Bond Indenture, the Note and the Bonds, and in any certificates or other documents or
instruments delivered pursuant to this Loan Agreement or the Bond Indenture, shall
survive the execution and delivery of this Loan Agreement, and the Bond Indenture and
the Note and shall continue in full force and effect until the Bonds and the Note are paid
in full and all of the Obligor's other payment obligations (including without limitation the
indemnification obligation under Section 7.5 hereof and the obligations under Sections
5.5, 5.7 and 9.5 hereof) under this Loan Agreement, the Bond Indenture, the Note and the
Bonds are satisfied. All such covenants, agreements, representations and warranties shall
be binding upon any successor and assigns of the Obligor.
34
4827-7379-227 4.4
IN WITNESS WHEREOF, the Issuer and the Obligor have caused this Loan
Agreement to be executed in their respective corporate names, all as of the date first
above written.
4827-7379-227 4.4
CITY OF ATLANTIC BEACH, FLORIDA
By:
Mayor
NAVAL CONTINUING CARE
RETIREMENT FOUNDATION, INC.
By:
Chief Executive Officer
35
EXHIBIT A
PROJECT DESCRIPTION
The Project consists of the acquisition of approximately two (2) acres of land (the
"Additional Land") to be used as a future site for a facility operations center, located
immediately south/southwest of and adjacent to the existing Facilities. A legal description
of the Additional Land is attached hereto as Schedule I.
A-1
4827-7379-227 4.4
4827-7379-227 4.4
SCHEDULE I
(Legal Description)
Schedule I to Exhibit A
EXHIBITB
FORM FOR COST OF ISSUANCE DISBURSEMENT
NO. ---U.S. Banlc National Association
225 Water Street, Suite 700
Jacksonville, Florida 32202
Attention: Corporate Trust Department
Re: City of Atlantic Beach, Florida Health Care Facilities Revenue and
Refunding Bonds (Fleet Landing Project), Series 2013A
Ladies and Gentlemen:
This request for disbursement is submitted to you pursuant to Section 4.7 of the
Loan Agreement (the "Loan Agreement") dated as of April 1, 2013, between the City of
Atlantic Beach, Florida and the Naval Continuing Care Retirement Foundation, Inc. (the
"Obligor") relating to the captioned Bonds. Terms used in this requisition shall have the
meanings specified for them in the Loan Agreement. The Bond Trustee is hereby
authorized and directed to make payment from the Project Fund as specified in
SCHEDULE A attached hereto. The undersigned authorized representative of the
Obligor hereby certifies to you in connection with the amount for which payment is
requested by this requisition, as follows:
1. The obligations in the amounts stated on Schedule A hereto have been
incurred by the Obligor for the Cost of the Project and are presently due and payable or to
be reimbursed for the payment thereof.
2. All previous disbursements, if any, made pursuant to Section 4.7 of the
Loan Agreement have been expended for Costs of Issuance described in prior
requisitions, if any, submitted by the authorized representative of the Obligor;
3. This requisition is for costs that were properly incurred and are proper
charges against the Project Fund;
4. Nothing has come to the attention of the Obligor that would cause it to
conclude that the representations and warranties contained in the Loan Agreement are not
true and correct as of the date hereof; and
B-1
4827-7379-227 4.4
5. No event has occurred and is continuing which constitutes an Event of
Default under the Bond Indenture or the Loan Agreement.
Date: ------------------
4827-7379-227 4.4
NAVAL CONTINUING CARE
RETIREMENT FOUNDATION, INC., as
Obligor
By:
Authorized Officer
B-2
EXHIBIT C
FORM FOR COST OF ISSUANCE DISBURSEMENT
NO. __ _
U.S. Bank National Association
225 Water Street, Suite 700
Jacksonville, Florida 32202
Attention: Corporate Trust Department
Re: City of Atlantic Beach, Florida Health Care Facilities Revenue and
Refunding Bonds (Fleet Landing Project), Series 2013A
Ladies and Gentlemen:
This request for disbursement is submitted to you pursuant to Section 4.7 of the
Loan Agreement (the "Loan Agreement") dated as of , 2013, between the City
of Atlantic Beach, Florida and the Naval Continuing Care Retirement Foundation, Inc.
(the "Obligor") relating to the captioned Bonds. Terms used in this requisition shall have
the meanings specified for them in the Loan Agreement. The Bond Trustee is hereby
authorized and directed to make payment from the Cost of Issuance Fund as specified in
SCHEDULE A attached hereto. The undersigned authorized representative of the
Obligor hereby certifies to you in connection with the amount for which payment is
requested by this requisition, as follows:
1. The obligations as set forth on this requisition were incurred in connection
with the issuance of the Bonds;
2. All previous disbursements, if any, made pursuant to Section 4.7 of the
Loan Agreement have been expended for Costs of Issuance described in prior
requisitions, if any, submitted by the authorized representative of the Obligor;
3. This requisition is for costs that were properly incurred and are proper
charges against the Cost of Issuance Fund;
4. The expenditures of the amount requested under this requisition, when
added to all disbursements under previous requisitions, will result in no more than two
percent (2%) of the aggregate face amount of the Bonds being used for payment of Costs
of Issuance related to the Bonds;
5. Nothing has come to the attention of the Obligor that would cause it to
conclude that the representations and warranties contained in the Loan Agreement are not
true and correct as of the date hereof; and
C-1
4827-73 79-227 4.4
6. No event has occurred and is continuing which constitutes an Event of
Default under the Bond Indenture or the Loan Agreement.
Date: -------------------
4827-7379-2274.4
NAVAL CONTINUING CARE
RETIREMENT FOUNDATION, INC., as
Obligor
By:
Authorized Officer
C-2
EXHIBITC
BOND PURCHASE AGREEMENT
4816-6105-6018.3
City of Atlantic Beach, Florida
DRAFT #2: 01/29/13
073-00030.G2
Health Care Facilities Revenue and Refunding Bonds
(Fleet Landing Project),
Series 20 13A
April 1, 2013
Bond Purchase Agreement
City of Atlantic Beach, Florida
Atlantic Beach, Florida
Naval Continuing Care Retirement
Foundation, Inc.
Atlantic Beach, Florida
To the Addressees:
The undersigned, B.C. Ziegler and Company (the "Underwriter"), being duly
authorized, hereby offers to enter into this Bond Purchase Agreement (this "Purchase
Agreement") with the City of Atlantic Beach, Florida (the "Issuer") and Naval
Continuing Care Retirement Foundation, Inc. (the "Obligor"), for the purchase by the
Underwriter and the sale by the Issuer of the Bonds referred to in Section 1 hereof. This
offer is made subject to acceptance by the Issuer and the Obligor of this Purchase
Agreement, which acceptance shall be evidenced by the execution of this Purchase
Agreement by duly authorized officers of the respective parties prior to 5:00P.M.,
Eastem Daylight Time on , 2013. Upon such acceptance, execution and
delivery, this Purchase Agreement shall be in full force and effect in accordance with its
terms and shall be binding upon the Issuer, the Obligor and the Underwriter. Capitalized
terms used herein, but not otherwise defined herein, shall have the meanings assigned to
them in the Indenture (as defined below) or in the Official Statement refened to in
Section 2 hereof.
1. Purchase and Sale. Upon the terms and conditions and based on the
representations, wananties and covenants hereinafter set forth, the Underwriter hereby
agrees to purchase from the Issuer, and the Issuer hereby agrees to sell to the
Underwriter, all (but not less than all) of$ in aggregate principal amount of
City of Atlantic Beach, Florida Health Care Facilities Revenue and Refunding Bonds
(Fleet Landing Project), Series 2013A (the "Bonds"), at the purchase price of
$ (which represents the par amount of the Bonds less underwriter's discount
of$ plus net original issue premium of$ ____ _/
2. Authorizing Instruments. The Bonds shall be as described in, and shall be
authorized by a resolution adopted by the Issuer on February 11, 2013 (the "Resolution").
The Bonds shall be issued and secured under and pursuant to an Indenture of Trust dated
as of April 1, 2013 (the "Indenture"), between the Issuer and U.S. Bank National
Association, as bond trustee (in such capacity, the "Bond Trustee"), and shall be payable
from the Trust Estate (as defined in the Indenture), including the revenues derived by the
Issuer under a Loan Agreement dated as of April1, 2013 (the "Agreement"), between the
Issuer and the Obligor. The Obligor will evidence its obligations with respect to the
Bonds by issuing a Series 2013A Note relating to the Bonds (the "Note") pursuant to
Supplemental Master Trust Indenture No. 1 dated as of April 1, 2013 (the "Supplement")
to the Master Trust Indenture dated as of April 1, 2013 (the "Master Indenture"), each
between the Obligor and U.S. Bank National Association, as master trustee (the "Master
Trustee").
Notes issued under the Master Indenture are secured by a security interest in
ce1iain revenues of the Obligor and by a Mmigage and Security Agreement dated as of
April 1, 2013, between the Obligor and the Master Trustee, relating to ce1iain prope1iy of
the Obligor (the "Mmigage").
The Bonds shall be dated their date of delivery (the "Closing Date"), and shall
have the terms specified in the Preliminary Official Statement dated , 20 13
(the "Preliminary Official Statement") and the Final Official Statement dated
_____ , 2013 (the Final Official Statement"), including the maturities and interest
rates set fmih in Exhibit A annexed hereto. The Bonds shall be subject to optional and
mandatory sinking fund redemption as described in Exhibit B hereto and otherwise as set
forth in the Indenture.
3. Public Offering of Bonds. The Underwriter agrees to make a bona fide
public offering of the Bonds, solely pursuant to the Preliminary Official Statement and
the Final Official Statement at the initial offering prices set fmih on the inside cover page
of the Final Official Statement, reserving, however, the rights to (i) change such initial
offering prices as the Underwriter shall deem necessary in connection with the marketing
of the Bonds and (ii) offer and sell the Bonds to ce1iain dealers (including dealers
depositing the Bonds into investment trusts) at concessions to be determined by the
Underwriter. The Underwriter also reserves the right to over-allot or effect transactions
that stabilize or maintain the market prices of the Bonds at levels above that which might
otherwise prevail in the open market and to discontinue such stabilizing, if commenced,
at any time.
The Issuer and the Obligor acknowledge and agree that (i) the purchase and sale of
the Bonds pursuant to this Purchase Agreement is an arm's-length commercial transaction
between the Issuer and the Underwriter; (ii) in connection with such transaction, the
Underwriter is acting solely as a principal and not as an agent or fiduciary of the Issuer or
the Obligor; (iii) the Underwriter has not assumed a fiduciary responsibility in favor of
2
the Issuer or the Obligor with respect to the offering of the Bonds or the process leading
thereto (whether or not the Underwriter, or any affiliate of the Underwriter, has advised
or is currently advising the Issuer or the Obligor on other matters) nor has it assumed any
other obligation to the Issuer or the Obligor except the obligations expressly set forth in
this Purchase Agreement; (iv) the Underwriter has financial and other interests that differ
from those of the Issuer and the Obligor; and (v) the Issuer and the Corporation have
consulted with their own legal and financial advisors to the extent they deemed
appropriate in connection with the offering ofthe Bonds.
4. Use of Proceeds. The proceeds to be received by the Issuer from the sale of
the Bonds will be loaned to the Obligor pursuant to the Agreement for the purpose of
(i) cmTently refunding all of the Issuer's outstanding Health Care Facilities Revenue
Refunding Bonds (Fleet Landing Project), Series 1999 and Variable Rate Demand Health
Care Facilities Revenue Bonds (Fleet Landing Project), Series 2006, (ii) financing the
cost of the acquisition of approximately 2 acres of land contiguous to the Obligor's
existing campus known as Fleet Landing in the City of Atlantic Beach, Florida (the
"Community"), (iii) fund a debt service reserve fund to secure the Bonds, and (iv) pay the
costs of issuance of the Bonds.
5. Preliminary and Final Official Statements.
(a) The Obligor has caused to be prepared, and the Issuer and the
Obligor hereby confirm that they have heretofore made available to the
Underwriter the Preliminary Official Statement. The Obligor agrees to deliver to
the Underwriter, at such address as the Underwriter shall specify, as many copies
of the Final Official Statement as the Underwriter shall reasonably request as
necessary to comply with paragraph (b)(4) of Rule 15c2-12 of the Securities and
Exchange Commission (the "Rule") under the Securities Exchange Act of 1934, as
amended, (the "1934 Act") and with Rule G-32 and all other applicable rules of
the Municipal Securities Rulemaking Board. The Obligor agrees to deliver such
Final Official Statement within seven business days after the execution hereof.
The Issuer is not unde1iaking any responsibility for the accuracy or completeness
of any of the information in the Preliminary Official Statement or the Final
Official Statement except for the infonnation contained under the captions "THE
ISSUER" and "LITIGATION-Issuer."
(b) The Issuer and the Obligor by their acceptance hereof, ratify and
approve the Preliminary Official Statement as of its date and authorize and
approve the Final Official Statement (the Final Official Statement and any
amendments or supplements that may be authorized for use with respect to the
Bonds are herein refen·ed to collectively as the "Official Statement"), consent to
their distribution and use by the Underwriter and authorize the execution of the
Final Official Statement by duly authorized officers of the Obligor. The Obligor
3
agrees to obtain the approval in writing of Moore Stephens Lovelace, P.A. to use
its report in Appendix B of the Preliminary and Final Official Statements.
(c) The Underwriter shall give notice to the Issuer and the Obligor on
the date after which no participating underwriter, as such term is defined in the
Rule, remains obligated to deliver Final Official Statements pursuant to paragraph
(b)(4) of the Rule.
6. Disclosure. As of the date hereof, the Underwriter has filed with the Issuer
a disclosure and truth-in-bonding statement pursuant to Section 218.385, Florida Statutes,
as amended.
7. Agreed Upon Procedures and Auditor Consents.
(a) On or prior to the date of delivery of the Preliminary Official
Statement, there has been delivered to the Underwriter (i) a letter of Moore
Stephens Lovelace, P.A. dated the date ofthe Preliminary Official Statement, with
agreed upon procedures performed to a date not more than five (5) business days
prior to the date thereof in substantially the form attached as Appendix C hereto
("Agreed Upon Procedures Letter") and (ii) a letter from Moore Stephens
Lovelace, P.A. consenting to the inclusion of their report on the Obligor's audited
financial statements and to references to them under the heading
"INDEPENDENT AUDITORS" in the Preliminary Official Statement.
(b) At least three (3) business days prior to the printing of the Final
Official Statement there shall be delivered to the Underwriter (i) a letter of Moore
Stephens Lovelace, P.A., to the effect that such accountants reaffirm, the
statements made given in the Agreed Upon Procedures Letter and (ii) a letter from
Moore Stephens Lovelace, P .A. consenting to the inclusion of their report on the
Obligor's audited financial statements and to references to them under the heading
"INDEPENDENT AUDITORS" in the Final Official Statement.
8. Representations, WatTanties and Covenants of the Issuer. The Issuer
hereby represents, wan-ants and covenants to the Underwriter as follows:
(a) The Issuer is a municipal corporation and a political subdivision of
the State of Florida.
(b) The Issuer is authorized under the laws of the State of Florida (i) to
issue the Bonds for the purposes described in Section 4 hereof; (ii) to pledge the
Trust Estate to the Bond Trustee under and pursuant to the Indenture, for the
benefit of the owners of the Bonds; (iii) to execute and deliver this Purchase
Agreement, the Bonds, the Indenture and the Agreement; and (iv) to can-y out and
consummate all of the transactions contemplated on its part by this Purchase
4
Agreement, the Resolution, the Bonds, the Indenture, the Agreement, and the
Preliminary and Final Official Statements (collectively, the "Issuer Documents").
(c) The information relating to the Issuer under the captions "THE
ISSUER" and "LITIGATION-Issuer" contained in the Preliminary Official
Statement is, and as of the date of closing such information in the Final Official
Statement will be, true and correct in all material respects, and the Preliminary
Official Statement does not and the Final Official Statement will not contain any
untrue or misleading statement of a material fact relating to the Issuer or omit to
state any material fact relating to the Issuer necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading. It is understood and agreed to by the patiies hereto that the Issuer's
representations with respect to the information contained in the Preliminary
Official Statement and Final Official Statement is limited to the information
contained under the captions "THE ISSUER" and "LITIGATION-Issuer."
(d) If, at any time prior to the earlier of (i) receipt of notice from the
Underwriter pursuant to Section 5( c) hereof that the Final Official Statement is no
longer required to be delivered under the Rule or (ii) 90 days after the Closing, any
event occurs with respect to the Issuer as a result of which the Preliminary Official
Statement or the Final Official Statement as then amended or supplemented might
include an untrue statement of a material fact, or omit to state any material fact
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, the Issuer shall promptly notify the
Underwriter in writing of such event. Any information supplied by the Issuer for
inclusion in any amendments or supplements to the Preliminary Official Statement
or Final Official Statement will not contain any untrue or misleading statement of
a material fact relating to the Issuer or omit to state any material fact relating to the
Issuer necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading.
(e) The Issuer has duly adopted the Resolution and has duly authorized
all actions required to be taken by it for (i) the issuance and sale of the Bonds upon
the terms set forth herein and in the Indenture; (ii) the execution, delivery and due
performance of this Purchase Agreement, the Bonds, the Indenture and the
Agreement; and (iii) the delivery of the Preliminary and Final Official Statements,
and any and all such other agreements and documents as may be required to be
executed, delivered, or performed by the Issuer in order to can·y out, give effect to
and consummate the transactions contemplated on its pati hereby and by each of
the aforesaid documents.
(f) Except as may be described in the Preliminary and Final Official
Statements, there is no action, suit, proceeding, inquiry or investigation, at law or
in equity, before or by any court, public board or body, pending or, to the
5
knowledge of the Issuer, threatened against or affecting the Issuer (or, to the
knowledge of the Issuer, any meritorious basis therefor) (i) attempting to limit,
enjoin or otherwise restrict or prevent the Issuer from functioning or contesting or
questioning the existence of the Issuer or the titles of the present officers of the
Issuer to their offices or (ii) wherein an unfavorable decision, ruling or finding
would (A) adversely affect the existence or powers of the Issuer or the validity or
enforceability of the Bonds, the Indenture, the Agreement, the this Purchase
Agreement or any agreement or instrument to which the Issuer is a party and
which is used or contemplated for use in the consummation of the transactions
contemplated hereby including, without limitation, the Issuer Documents or by the
aforesaid documents; or (B) materially adversely affect (i) the transactions
contemplated by the Issuer Documents; or (ii) the exclusion of the interest on the
Bonds from federal income taxation.
(g) The adoption by the Issuer of the Resolution and the execution and
delivery by the Issuer of this Purchase Agreement, the Bonds, the Indenture, the
Agreement and the other documents contemplated hereby and by the Preliminary
and Final Official Statements, and the compliance with the provisions thereof, will
not conflict with or constitute on the part of the Issuer a violation of, breach of or
default under (i) any constitutional provision, statute, indent~re, mortgage, lease,
resolution, note, agreement or other agreement or instrument to which the Issuer is
a party or by which the Issuer is bound; or (ii) any order, rule or regulation of any
court or govemmental agency or body having jurisdiction over the Issuer or any of
its propetiies.
(h) The Issuer is not in breach of or in default under the Resolution, the
Indenture, the Agreement, any applicable law or administrative regulation of the
State of Florida or the United States of America, or any applicable judgment or
decree, or any loan agreement, note, resolution or other agreement or instrument to
which the Issuer is a party or is otherwise subject, which breach or default would
in any way materially adversely affect the authorization or issuance of the Bonds
and the transactions contemplated hereby, and no event has occurred and is
continuing which, with the passage of time or the giving of notice or both, would
constitute such a breach or default.
(i) All consents, approvals, authorizations and orders of govemmental
or regulatory authorities, if any, that are required to be obtained by the Issuer in
connection with the issuance and sale of the Bonds, the execution and delivery of
this Purchase Agreement, and the consummation of the transactions contemplated
by this Purchase Agreement, the Resolution, the Indenture, the Agreement, and the
Preliminary and Final Official Statements have been duly obtained and remain in
full force and effect, except that no representation is made as to compliance with
any applicable state securities or "Blue Sky" laws.
6
G) Neither the Issuer nor anyone acting on its behalf has, directly or
indirectly, offered the Bonds or any similar securities of the Issuer relating in any
way to any related project or facility or to the Obligor for sale to, or solicited any
offer to buy the same from, anyone other than the Underwriter.
(k) The Preliminary and Final Official Statements have been duly
authorized by the Issuer, and the Issuer has consented to the use of the Preliminary
and Final Official Statements by the Underwriter in connection with the offering
of the Bonds.
(1) Neither the Securities and Exchange Commission nor any state
securities commission has issued or, to the best of the Issuer's knowledge,
threatened to issue, any order preventing or suspending the use of the Preliminary
Official Statement or of the Final Official Statement.
(m) Any cetiificate signed by an authorized officer of the Issuer
delivered to the Underwriter shall be deemed a representation and warranty by the
Issuer to the Underwriter as to the statements made therein.
(n) The Issuer, as a conduit issuer, issues its bonds as limited obligations
of the Issuer, payable solely from payments to be made by the respective non-
governmental entities which use or own the projects financed. Some bonds issued
by the Issuer may have been, and may continue to be, in default, but to the best
knowledge of the Issuer, the borrowers under the related loan or lease agreements
are umelated to the Obligor and other Members of the Obligated Group, if any.
To the best knowledge of the Issuer, the Issuer has not been in default as to
principal or interest at any time after December 31, 1975, as to any debt
obligations relating to the Obligor or any other member of the Obligated Group.
( o) This Purchase Agreement, the Indenture and the Agreement are in
the fmms approved by the Issuer and upon the execution and delivery thereof by
the Issuer and the other pmiies thereto, each will constitute the legal, valid and
binding obligation of the Issuer, enforceable in accordance with its terms (subject
in each case to principles of equity, regardless of whether proceedings for
enforcement be of a legal or equitable nature, and to any applicable bankruptcy,
reorganization, insolvency, moratorium or other laws affecting the enforcement of
creditors' rights generally from time to time in effect).
(p) The Bonds will be duly authorized, executed, authenticated, issued
and delivered and will constitute legal, valid and binding obligations of the Issuer
and are entitled to the benefits and security of the Indenture (subject to principles
of equity, regardless of whether proceedings for enforcement be of a legal or
equitable nature, and any applicable bankruptcy, reorganization, insolvency,
7
moratorium or other laws affecting the enforcement of creditors' rights generally
from time to time in effect).
( q) The Bonds will be limited obligations of the Issuer, payable from
and secured by the Trust Estate, including the moneys derived by the Issuer from
the Obligor pursuant to the Agreement, and will not constitute an obligation or
debt of the Issuer, or the State of Florida, or any political subdivision thereof, and
neither the faith nor credit of the Issuer, or the State of Florida, or any political
subdivision thereof, is pledged to the payment of the Bonds.
(r) The Issuer has not been advised by the Commissioner, any District
Director, or any other official of the Intemal Revenue Service that cetiifications by
the Issuer with respect to arbitrage may not be relied upon.
(s) The Issuer has and will cooperate with any reasonable request of the
Underwriter and its counsel in any endeavor to qualify the Bonds for offering and
sale under the securities or "Blue Sky" laws of such jurisdictions of the United
States of America as the Underwriter may request; provided, however, that the
Issuer will not be required to pay any expenses or costs (including but not limited
to legal fees) incurred in connection with such qualification or to qualify as a
foreign corporation or to file any general or special consent to service of process
under the laws of any state or other jurisdictions of the United States.
9. Representations, Warranties and Covenants of the Obligor. In order to
induce the Underwriter and the Issuer to enter into this Purchase Agreement and in order
to induce the Issuer to enter into the Agreement and this Purchase Agreement, the
Obligor represents, warrants and covenants to the Underwriter and the Issuer as follows:
(a) The Obligor is a not for profit corporation duly organized, validly
existing and in good standing under the laws of the State of Florida and is
qualified to transact business as a corporation in good standing under the laws of
the State of Florida.
(b) The Obligor is authorized under the laws of the State of Florida to
carry out and consummate all of the transactions contemplated on its pati by this
Purchase Agreement, the Agreement, the Master Indenture, the Note, the
Supplement, the Continuing Disclosure Certificate dated as of April 1, 2013 (the
"Continuing Disclosure Cetiificate") from the Obligor, as representative of the
Obligated Group, the Mortgage, the Preliminary Official Statement and the Final
Official Statement (collectively, the "Obligor Documents").
(c) The Obligor has been determined to be and is exempt from federal
income taxes under Section 501(a) of the Internal Revenue Code of 1986, as
amended (the "Code") by vitiue of being an organization described in Section
8
501(c)(3) ofthe Code, is not a "private foundation" as defined in Section 509(a) of
the Code and is exempt from federal income taxation under Section 50l(a) of the
Code, with the exception of any taxation deemed to be unrelated business taxable
income and with the exception of any amounts deemed taxable by virtue of
Section 527(f) of the Code. The Obligor (i) has not impaired its status as an
organization exempt from federal income taxes under the Code, (ii) is in
compliance with the provisions of the Code and any applicable regulations
thereunder necessary to maintain such status, (iii) is organized and operated
exclusively for charitable, educational or benevolent purposes and not for
pecuniary profit, and (iv) is organized and operated such that no pati of the net
earnings of the Obligor will inure to the benefit of any private shareholder or
individual.
(d) The Obligor (i) agrees to file annual returns of an exempt
organization on Form 990 for each fiscal year as required by law; and (ii) is not
currently and does not expect to be the subject of any claim by the IRS that its
operations or activities constitute a trade or business that, within the meaning of
Section 513 of the Code, is unrelated to senior living and health care purposes for
which the Obligor is organized and operated.
(e) The Obligor has all necessary corporate power and authority (i) to
conduct its business and operate all of its properties and facilities, including the
Community; (ii) to execute and deliver the Obligor Documents and to perform its
obligations under the Obligor Documents; and (iii) to carry out and consummate
all the transactions contemplated on its pati by the Obligor Documents.
(f) The information relating to the Obligor and its properties contained
in the Preliminary Official Statement is, and as of the date of closing such
information in the Final Official Statement will be, true and cmTect in all material
respects, and the Preliminary Official Statement does not and the Final Official
Statement will not contain any untrue or misleading statement of a material fact
relating to the Obligor or omit to state any material fact relating to the Obligor
necessary to make the statements therein, in the light of the circumstances under
which they were made, not misleading.
(g) The Obligor has duly authorized all actions required to be taken by it
for the execution and delivery of the Obligor Documents, and due performance of
the Obligor Documents.
(h) The Agreement, the Master Indenture, the Note, the Supplement, the
Continuing Disclosure Cetiificate, the Mortgage and this Purchase Agreement are
in the fonns approved or otherwise authorized by the Obligor and upon the
execution and delivery thereof, each will constitute the valid and legally binding
obligation of the Obligor, enforceable in accordance with its terms (subject in each
9
case to usual principles of equity and to any applicable bankruptcy, reorganization,
insolvency, moratorium or other laws affecting the enforcement of creditors'
rights generally from time to time in effect).
(i) The Obligor will apply the moneys loaned by the Issuer from the
proceeds of the sale of the Bonds as specified in the Indenture, the Agreement, the
Preliminary and Final Official Statements and this Purchase Agreement.
(j) Except as described in the Preliminary and Final Official Statements,
there is no action, suit, proceeding, inquiry or investigation, at law or in equity,
before or by any court, public board or body, pending (as to which the Obligor has
received notice or service of process) or, to the knowledge of the Obligor,
threatened against or affecting any Obligated Group Member (or, to the
knowledge of the Obligor, any meritorious basis therefor) (i) attempting to limit,
enjoin or otherwise restrict or prevent any Obligated Group Member from
functioning, or contesting or questioning the existence of the Obligor or the titles
of the cunent officers of any of the Obligated Group Members to their offices or
(ii) wherein an unfavorable decision, ruling or finding would adversely affect
(A) the existence or powers of the Obligated Group Members; (B) the financial
position of the Obligated Group Members; (C) the tax-exempt status of the
Obligated Group Members under Sections 501(a) and 501(c)(3) of the Code;
(D) the transactions contemplated hereby or by the documents referred to in
(E) immediately below; (E) the validity or enforceability of the Bonds, the
Indenture, the Agreement, the Master Indenture, the Note, the Supplement, this
Purchase Agreement, the Continuing Disclosure Certificate, the Mmigage or any
agreement or instrument to which any of the Obligated Group Members is a pmiy
and which is used or contemplated for use in the consummation of the transactions
contemplated hereby or by the aforesaid documents; or (F) the exclusion of the
interest on the Bonds from gross income for purposes of federal income taxation.
(k) The execution and delivery by the Obligor of this Purchase
Agreement, the Agreement, the Master Indenture, the Note, the Supplement, the
Mmigage, the Continuing Disclosure Cetiificate and the other documents
contemplated hereby and by the Preliminary and Final Official Statements, and the
compliance by the Obligor with the provisions thereof, do not conflict with or
constitute on the part of the Obligor a violation of, breach of or default under (i) its
Atiicles of Incorporation, Bylaws or any other governing instruments; (ii) any
constitutional provision, statute, indenture, mortgage, lease, resolution, note,
agreement or other agreement or instrument to which it is a party or by which it is
bound; or (iii) any order, rule or regulation of any comi or governmental agency or
body having jurisdiction over the Obligor or any of its propetiies. All consents,
approvals, authorizations and orders of governmental or regulatory authorities, if
any, that are required to be obtained by the Obligor in connection with the
10
issuance and sale of the Bonds, the execution and delivery of this Purchase
Agreement, and the consummation of the transactions contemplated by this
Purchase Agreement, the Indenture, the Agreement, the Master Indenture, the
Note, the Supplement, the Mortgage, the Continuing Disclosure Certificate and the
Preliminary and Final Official Statements have been duly obtained and remain in
full force and effect, except that no representation is made as to compliance with
any applicable state securities or "Blue Sky" laws.
(1) Neither the Obligor nor anyone acting on its behalf has, directly or
indirectly, offered the Bonds for sale to, or solicited any offer to buy the same
from, anyone other than the Underwriter.
(m) The Preliminary and Final Official Statements have been duly
authorized by the Obligor, and the Obligor has consented to the use of the
Preliminary and Final Official Statements by the Underwriter in connection with
the offering of the Bonds.
(n) Neither the Securities and Exchange Commission nor any state
securities commission has issued or, to the best of the knowledge of the Obligor,
threatened to issue, any order against the Obligor preventing or suspending the use
of the Preliminary Official Statement or the Final Official Statement or otherwise
seeking to enjoin the offer or sale of the Bonds.
( o) Any certificate signed by an authorized officer of the Obligor and
delivered to the Issuer or the Underwriter shall be deemed a representation and
watTanty by the Obligor to the Issuer or the Underwriter as to the statements made
therein.
(p) The Obligor has never defaulted in the payment of principal of or
interest on any of its bonds, notes or other securities.
( q) The Obligor has and will cooperate with the Underwriter and its
counsel in any endeavor to qualify the Bonds for offering and sale under the
securities or "Blue Sky" laws of such jurisdictions of the United States of America
as the Underwriter may request; provided, however, that the Obligor will not be
required to qualify as a foreign corporation or file any special or general consents
to service of process under the laws of any state.
10. Closing. By no later than 1:00 P.M., Eastern Daylight Time, on April 1,
2013 (the "Closing Date"), the Issuer will deliver, or cause to be delivered, to or upon the
order of the Underwriter, the Bonds, in definitive form, duly executed and authenticated,
together with the other documents required in Section 11 hereof, and the Underwriter will
accept such delivery and pay the purchase price of the Bonds. Payment for the Bonds
II
shall be made in immediately available funds by check or by bank wire transfer payable
to the order ofthe Bond Trustee on behalf of the Issuer.
The closing of the sale of the Bonds as aforesaid (the "Closing") shall be held at
the offices of Foley & Lardner LLP, Jacksonville, Florida, except that physical delivery
of the Bonds shall be made to the Bond Trustee as agent for The Depository Trust
Obligor, for the account of the Underwriter. Unless otherwise requested by the
Underwriter at or prior to the Closing, the Bonds will be delivered at the Closing in fully
registered form, registered to Cede & Co., and in the form of one certificate for each
maturity of the Bonds.
11. Closing Conditions. The obligations of the Underwriter hereunder shall be
subject (i) to the performance by the Issuer and the Obligor of their respective obligations
to be performed hereunder at and prior to the Closing or such earlier time as may be
specified herein; (ii) to the accuracy of each of the representations and wan·anties of the
Issuer and the Obligor contained herein as of the date hereof and as of the time of the
Closing, as if made at and as of the time of the Closing; and (iii) to the following
conditions, including the delivery by the Issuer and the Obligor of such documents as are
contemplated hereby in form and substance satisfactory to the Underwriter and
its counsel:
(a) At the time of the Closing (i) the Final Official Statement, the
Indenture, the Agreement, the Master Indenture, the Note, the Continuing
Disclosure Certificate, the Supplement and the Mortgage shall be in full force and
effect and shall not have been amended, modified or supplemented, except as may
have been agreed to in writing by the Underwriter; (ii) the Issuer shall have duly
adopted and there shall be in full force and effect such resolutions, including the
Resolution as, in the reasonable opinion of Bond Counsel, shall be necessary in
connection with the transactions contemplated hereby;
(b) At or prior to the Closing, the Underwriter shall have received the
following documents:
(i) The approving opinion of Bond Counsel, dated the date of
the Closing and in a form reasonably acceptable to the Underwriter and its
counsel.
(ii) The supplemental opinion ofBond Counsel, dated the date
of the Closing and in a form reasonably acceptable to the Underwriter and
its counsel.
(iii) An opinion of counsel to the Obligor, dated the date of the
Closing and in a form reasonably acceptable to the Underwriter, its counsel
and Bond Counsel.
12
(iv) An opinion of Counsel to the Issuer, dated the date of the
Closing, and in a form reasonably acceptable to the Underwriter, its counsel
and Bond Counsel.
(v) A certificate of the Issuer, dated the date of Closing,
signed by an authorized officer of the Issuer in form and substance
reasonably satisfactory to the Underwriter, its counsel and Bond Counsel,
to the effect that the representations and watTanties of the Issuer contained
herein are true and cotTect in all material respects as of the Closing and that
the Issuer has performed its obligations under this Purchase Agreement.
(vi) A certificate of the Obligor, dated the Closing Date,
signed by an authorized officer of the Obligor in form and substance
reasonably satisfactory to the Underwriter, its counsel and Bond Counsel,
to the effect that the representations and watTanties of the Obligor contained
herein are true and cotTect in all material respects as of the Closing and that
the Obligor has performed its obligations under this Purchase Agreement.
(vii) The Preliminary and Final Official Statements duly
executed, as applicable, by the Obligor by duly authorized officers together
with evidence of the consent by Moore Stephens Lovelace, P .A. to the
inclusion of their repoti in Appendix B to the Preliminary and Final Official
Statements.
(viii) Executed counterparts of the Indenture, the Agreement,
the Master Indenture, the Note, the Supplement, the Continuing Disclosure
Certificate and the Mortgage, together with due evidence of the recording
of any Uniform Commercial Code financing statements required with
respect thereto.
(ix) Certified copy of the Resolution, authorizing the issuance,
sale, execution and delivery of the Bonds and the execution, delivery and
performance of the Indenture, the Agreement and this Purchase Agreement,
and authorizing the use of the Preliminary and Final Official Statements by
the Underwriter in connection with the offering of the Bonds.
(x) Certified copy of resolutions of the Obligor authorizing
the execution, delivery and performance of the Agreement and this
Purchase Agreement, and authorizing the use of the Preliminary and Final
Official Statements by the Underwriter in connection with the offering of
the Bonds.
(xi) A specimen of the Bonds.
13
(xii) Evidence of maintenance of insurance required by the
Master Indenture.
(xiii) A letter from Moore Stephens Lovelace, P.A., dated the
Closing Date, addressed to the Issuer and the Underwriter, substantially in
the form of Exhibit C hereto, to the effect that such accountants reaffirm, as
of a date not more than three business days before the Closing, the
statements made and the consents given in the letters furnished by such
accountants pursuant to Sections 7 and 11 (b)( vii) hereof.
(xiv) Copies of the (A) Articles of Incorporation of the Obligor,
certified as of a recent date by the Secretary of State of Florida and
(B) Bylaws of the Obligor, together with a certificate of an officer of the
Obligor that such Articles of Incorporation and bylaws have not been
amended, modified, revoked or rescinded and are in full force and effect as
of the Closing Date.
(xv) A Certificate of the Secretary of State of the State of
Florida with respect to the good standing of the Obligor.
(xvi) Internal Revenue Service Form 8038, signed by an
authorized officer of the Issuer.
(xvii) Evidence that Form BF2003/2004 has been executed by
the Issuer, to be filed with the Florida Division of Bond Finance.
(xviii) Evidence satisfactory to Bond Counsel and counsel to the
Underwriter that the Obligor is an organization described in Section
501(c)(3) of the Code and is not a private foundation as described in
Section 509(a) of the Code.
(xix) Evidence of the Issuer's public hearing and approval
relating thereto as required by Section 147(f) of the Code.
(xx) The cetiificates and opinions required by the Master
Indenture for the issuance thereunder of the Note.
(xxi) One executed copy of the Tax Regulatory Agreement
dated as of April1, 2013, between the Obligor and the Issuer.
(xxii) One signed copy of a request and authorization to the
Bond Trustee to authenticate and deliver the Bonds.
[(xxiii) Fitch Rating Letter.]
14
(xxiv) Such additional legal opinions, certificates, proceedings,
instruments and other documents as counsel for the Underwriter may
reasonably request to evidence compliance by the Issuer and the Obligor
with the legal requirements, the truth and accuracy, as of the time of
Closing, of the representations of the Issuer and the Obligor herein
contained and the due performance or satisfaction by the Issuer and the
Obligor, at or prior to the Closing, of all agreements then required to be
perfmmed and all conditions then required to be satisfied by the Issuer and
the Obligor at the Closing.
12. Conditions to Obligations of the Underwriter. The Underwriter shall have
the right to cancel its obligations to purchase and accept delivery of the Bonds hereunder
by notifying the Issuer and the Obligor, in writing, of its election to do so between the
date hereof and the Closing if, on or after the date hereof and prior to the Closing:
(a) legislation shall be enacted or be actively considered for enactment
by the Congress, or recommended to the Congress for passage by the President of
the United States, or favorably reported for passage to either House of the
Congress by a committee of such House to which such legislation has been
refen-ed for consideration, a decision by a court of the United States or the United
States Tax Court shall be rendered, or a ruling, regulation or official statement by
or on behalf of the Treasury Department of the United States, the IRS or other
govemmental agency shall be made or proposed to be made with respect to federal
taxation upon revenues or other income of the general character to be derived by
the Obligor or the Issuer or by any similar body, or upon interest on obligations of
the general character of the Bonds, or other action or events shall have transpired
that have the purpose or effect, directly or indirectly, of changing the federal
income tax consequences of any of the transactions contemplated in connection
herewith, including but not limited to any challenge of the Obligor as to its status
as an organization described in Sections 501(a) and 501(c)(3) ofthe Code, that, in
the reasonable opinion of the Underwriter, materially and adversely affects the
market price of the Bonds or the market price generally of obligations of the
general character of the Bonds; or
(b) any legislation, ordinance or regulation shall be enacted or be
actively considered for enactment by the Issuer, any govemmental body,
department or agency of the State of Florida or a decision by any court of
competent jurisdiction within the State of Florida shall be rendered that, in the
reasonable opinion of the Underwriter, materially and adversely affects the market
price of the Bonds; or
(c) any action shall have been taken by the Securities and Exchange
Commission that would require the registration of the Bonds under the Securities
Act of 1933, as amended (the "1933 Act"), or the qualification of the Resolution,
15
the Indenture or the Master Indenture under the Trust Indenture Act of 1939, as
amended (the "TIA"); or
(d) any event shall have occmTed or shall exist that, in the opinion of the
Underwriter, either (i) makes untrue or incorrect in any material respect any
statement or information contained in the Preliminary and Final Official
Statements, or (ii) is not reflected in the Preliminary and Final Official Statements
and should be reflected therein in order to make the statements and information
contained therein not misleading in any material respect, and the Issuer and the
Obligor shall not agree to supplement the Preliminary and Final Official
Statements to con·ect the same; or
(e) there shall have occun·ed any outbreak of, or escalation in, hostilities
or other national or international calamity or crisis or a financial crisis, including,
but not limited to, (i) the United States engaging in hostilities or (ii) a declaration
of war or a national emergency by the United States (including acts of terrorism)
on or after the date hereof which, in the sole opinion of the Underwriter, would
affect materially and adversely the ability of the Underwriter to market the Bonds
(it being understood that no such situation exists on the date hereof); or
(f) trading shall be suspended, or new or additional trading or loan
restrictions shall be imposed, by the New York Stock Exchange or other national
securities exchange or governmental authority with respect to obligations of the
general character of the Bonds or a general banking moratorium shall be declared
by federal, Florida or New York authorities; or
(g) there shall have occurred any change in the financial condition or
affairs ofthe Obligor, the effect of which, in the sole judgment of the Undetwriter,
is so material and adverse as to make it impracticable or inadvisable to proceed
with the offering or delivery of the Bonds on the terms and in the manner
contemplated by the Preliminary and Final Official Statements; or
(h) Any litigation shall be instituted, pending or threatened to restrain or
enjoin the issuance, sale or delivery of the Bonds or in any way contesting or
questioning any authority for or the validity of the Bonds or the money or
revenues pledged to the payment thereof or any of the proceedings of the Issuer or
the Obligor taken with respect to the issuance and sale thereof;
[(i) Fitch shall withdraw its rating.]
13. Termination. If the Issuer or the Obligor is unable to satisfy the conditions
to the obligations of the Underwriter contained in this Purchase Agreement, or if the
obligations of the Underwriter to purchase and accept delivery of the Bonds shall be
terminated for any reason permitted by this Purchase Agreement, this Purchase
16
Agreement shall terminate at the option of the Underwriter and neither the Underwriter
nor the Issuer nor the Obligor shall be under fmiher obligation hereunder; except that the
respective obligations to indemnify and pay expenses, as provided in Sections 14 and 17
hereof, shall continue in full force and effect.
14. Indemnification. (a) To the fullest extent permitted by applicable law, the
Obligor agrees to indemnify and hold harmless the Underwriter, the Issuer or the other
persons described in subsection (b) below against any and all losses, damages, expenses
(including reasonable legal and other fees and expenses), liabilities or claims (or actions
in respect thereof), (i) to which the Underwriter, the Issuer or the other persons described
in subsection (b) below may become subject under any federal or state securities laws or
other statutory law or at common law or otherwise, caused by or arising out of or based
upon any untrue statement or misleading statement or alleged untrue statement or alleged
misleading statement of a material fact contained in the Preliminary and Final Official
Statements and not furnished by the indemnified party (it being understood and agreed
that the Issuer is solely responsible for the infonnation contained under the captions
"THE ISSUER" and "LITIGATION-Issuer") or in the information furnished by the
Obligor, directly or indirectly or caused by any omission or alleged omission of
information regarding the Obligor from the Preliminary and Final Official Statements and
(ii) to which the patiies indemnified hereunder or any of them may become subject under
the 1933 Act, the 1934 Act, the TIA, the rules or regulations under said Acts, insofar as
such losses, claims, damages, expenses, actions or liabilities arise out of or are based
upon the failure to register the Bonds or any security therefor under the 1933 Act or to
qualify the Indenture or the Master Indenture under the TIA; provided, however, that
with respect to (i) above, the Obligor shall not be required to indemnify or hold harmless
the Issuer with respect to statements in the Preliminary and Final Official Statements
under the captions "THE ISSUER" and "LITIGATION-Issuer" and with respect to (ii)
above, the Obligor shall not be required to indemnify or hold harmless the Issuer or the
Underwriter with respect to willful misconduct of the Issuer or the negligence or willful
misconduct of the Underwriter, respectively.
(b) The indemnity provided under this Section 14 shall extend upon the
same terms and conditions to each officer, director, employee, agent or attorney of
the Underwriter or the Issuer, and each person, if any, who controls the
Underwriter or the Issuer within the meaning of Section 15 of the 1933 Act or
Section 20 of the 1934 Act. Such indemnity shall also extend, without limitation,
to any and all expenses whatsoever reasonably incurred by any indemnified party
in connection with investigating, preparing for or defending against, or providing
evidence, producing documents or taking any other reasonable action in respect of
any such loss, damage, expense, liability or claim (or action in respect thereof),
whether or not resulting in any liability, and shall include any loss to the extent of
the aggregate amount paid in settlement of any litigation, commenced or
17
threatened, or of any claim whatsoever as set forth herein if such settlement is
effected with the written consent of the Obligor.
(c) Within a reasonable time after an indemnified patiy under
paragraphs (a) and (b) of this Section 14 shall have been served with the summons
or other first legal process or shall have received written notice of the threat of a
claim in respect of which an indemnity may be claimed, such indemnified patiy
shall, if a claim for indemnity in respect thereof is to be made against the Obligor
under this Section 14, notify the Obligor in writing of the commencement thereof;
but the omission to so notify the Obligor shall not relieve it from any liability that
it may have to any indemnified patiy other than pursuant to paragraphs (a) and (b)
of this Section 14. The Obligor shall be entitled to patiicipate at its own expense
in the defense, and if the Obligor so elects within a reasonable time after receipt of
such notice, or all indemnified patiies seeking indemnification in such notice so
direct in writing, the Obligor shall assume the defense of any suit brought to
enforce any such claim, and in either such case, such defense shall be conducted
by counsel chosen promptly by the Obligor and reasonably satisfactory to the
indemnified party; provided however, that, if the defendants in any such action
include such an indemnified patiy and the Obligor, or include more than one
indemnified patiy and any such indemnified patiy shall have been advised by its
counsel that there may be legal defenses available to such indemnified party that
are different from or additional to those available to the Obligor or another
defendant indemnified patiy, and that in the reasonable opinion of such counsel
are sufficient to make it undesirable for the same counsel to represent such
indemnified party and the Obligor, or another defendant indemnified patiy, such
indemnified party shall have the right to employ separate counsel (who are
reasonably acceptable to the Obligor) in such action, and in such event the
reasonable fees and expenses of such counsel shall be borne by the Obligor.
Nothing contained in this paragraph (c) shall preclude any indemnified pmiy, at its
own expense, from retaining additional counsel to represent such patiy in any
action with respect to which indemnity may be sought from the hereunder.
(d) If the indemnification provided for in paragraphs (a) and (b) of this
Section 14 is unavailable or insufficient to hold harmless and indemnify any
indemnified party in respect of any losses, damages, expenses, liabilities, or claims
(or actions in respect thereof) referred to therein, then the Obligor, on the one
hand, and the Underwriter, on the other hand, shall contribute to the amount paid
or payable by the indemnified party as a result of such losses, claims, damages,
expenses, actions or liabilities in such proportion as is appropriate to reflect the
relative benefits received by the Obligor on the one hand and the Underwriter on
the other hand from the offering of the Bonds. If, however, the allocation
provided by the immediately preceding sentence is not permitted by applicable
law, or if the indemnified party failed to give the notice required under subsection
18
(c) above, the Obligor on the one hand and the Undetwriter on the other hand shall
contribute to such amount paid or payable by the indemnified party in such
proportion as is appropriate to effect not only such relative benefits but also the
relative fault of the Obligor on the one hand and the Underwriter on the other in
connection with the statements or omissions that resulted in such losses, claims,
damages, expenses, actions or liabilities, as well as any other relevant equitable
considerations. The relative benefits received by the Obligor on the one hand and
the Underwriter on the other hand shall be deemed to be in such proportion so that
the Underwriter is responsible for that portion represented by the percentage that
the underwriting discount payable to the Undetwriter hereunder (i.e., the excess of
the aggregate public offering price for the Bonds as set forth on the inside cover
page ofthe Final Official Statement over the price to be paid by the Undetwriter to
the Issuer upon delivery of the Bonds as specified in Section 1 hereof) bears to the
aggregate public offering price as described above, and the Obligor is responsible
for the balance. The relative fault shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact or
the omission or alleged omission to state a material fact relates to information
supplied by the Obligor on the one hand or the Underwriter on the other hand and
the parties' relative intent, knowledge, access to information and opportunity to
conect or prevent such statement or omission.
The Obligor and the Undetwriter agree that it would not be just and equitable if
contribution pursuant to this subsection (d) were determined by pro rata allocation or by
any other method of allocation that does not take account of the equitable considerations
refen·ed to above in this subsection (d). The amount paid or payable by an indemnified
pmiy as a result of the losses, damages, expenses, liabilities, claims or actions refetTed to
above in this subsection (d) shall be deemed to include any legal or other expenses
reasonably incmTed by such indemnified pmiy in connection with investigating or
defending any such action or claim.
15. Survival of Indemnity. The indemnity and contribution provided by
Section 14 hereof shall be in addition to any other liability that the Obligor may
otherwise have hereunder, at common law or otherwise, and is provided solely for the
benefit of the Underwriter, the Issuer and each director, officer, employee, agent, attorney
and controlling person referred to therein, and their respective successors, assigns and
legal representatives, and no other person acquire or have any right under or by virtue of
such provisions of this Purchase Agreement. The indemnity and contribution provided
by Section 14 hereof shall survive the termination or performance of this Purchase
Agreement.
16. Survival of Representations. All representations, wananties and
agreements of the Obligor set fmih in or made pursuant to this Purchase Agreement shall
19
remain operative and in full force and effect, regardless of any investigations made by or
on behalf of the Underwriter and shall survive the delivery of and payment for the Bonds.
17. Payment of Expenses. If the Bonds are sold to the Underwriter by the
Issuer, the Obligor shall pay, out of the proceeds of the Bonds or from their own funds,
any expenses incident to the performance of its obligations hereunder, including but not
limited to: (i) the cost of the preparation, reproduction, printing, distribution, mailing,
execution, delivery, filing and recording, as the case may be, of this Purchase Agreement,
the Indenture, the Agreement, the Master Indenture, the Note, the Supplement, the
Continuing Disclosure Cetiificate, the Mortgage, the Preliminary Official Statement, the
Final Official Statement, Blue Sky Memoranda, and all other agreements and documents
required in connection with the consummation of the transactions contemplated hereby;
(ii) the cost of the preparation, engraving, printing, execution and delivery of the
definitive Bonds; (iii) the fees and disbursements of Bond Counsel, financial advisor to
the Issuer, counsel for the Issuer, counsel for the Obligor, counsel for the Bond Trustee
and the Master Trustee, counsel for the Underwriter, accountants, and any other experts
retained by the Obligor; (iv) the acceptance fees of the Bond Trustee and Master Trustee;
(v) the cost of transpmiation and lodging for officials and representatives of the Issuer
and the Obligor in connection with attending meetings and the Closing; and (vi) the cost
of qualifying the Bonds under the laws of such jurisdictions as the Underwriter may
designate, including filing fees and fees and disbursements of counsel for the Underwriter
in connection with such qualification and the preparation of Blue Sky Memoranda.
The Obligor shall also pay any expenses incident to the performance of its
obligations hereunder and, if the Bonds are not sold by the Issuer to the Underwriter, the
Obligor shall pay all expenses incident to the performance of the Issuer's obligations
hereunder as provided above.
The Undetwriter shall pay (i) the cost of preparing and publishing all
advetiisements approved by it relating to the Bonds upon commencement of the offering
of the Bonds; (ii) the cost of the transpmiation and lodging for officials and
representatives of the Undetwriter to attend meetings and the Closing; (iii) any fees of the
Municipal Securities Rulemaking Board in connection with the issuance of the Bonds;
and (iv) the cost of obtaining a CUSIP number assignment for the Bonds.
18. Benefit of the Agreement. This Purchase Agreement shall inure to the
benefit of and be binding upon the Issuer, the Obligor and the Underwriter and their
respective successors and assigns. Nothing in this Purchase Agreement is intended or
shall be construed to give any person, firm or corporation, other than the parties hereto
and their respective successors and assigns, and the persons entitled to indemnity and
contribution under Section 0 hereof, and their respective successors, assigns and legal
representatives, any legal or equitable right, remedy or claim under or in respect of this
Purchase Agreement or any provision herein contained. This Purchase Agreement and
all conditions and provisions hereof are intended to be for the sole and exclusive benefit
20
of the parties hereto and their respective successors and assigns, and the persons entitled
to indemnity and contribution under Section 0 hereof, and their respective successors,
assigns and legal representatives, and for the benefit of no other person, fitm or
corporation. No Underwriter who purchases the Bonds from the Undetwriter or other
person or entity shall be deemed to be a successor merely by reason of such purchase.
19. Notices. Any notice or other communication to be given to the Issuer or
the Obligor under this Purchase Agreement may be given by delivering the same in
writing or by telex or telecopy to the address shown below, and any notice under this
Purchase Agreement to the Underwriter may be given by delivering the same in writing
to the Underwriter, as follows:
To the Issuer: City of Atlantic Beach, Florida
800 Seminole Road
Atlantic Beach, Florida 32233
Attention: City Manager
To the Obligor: Naval Continuing Care Retirement Foundation
1 Fleet Landing Boulevard
Atlantic Beach, Florida 32233
Attn: ChiefExecutive Officer
To the Underwriter: B.C. Ziegler and Company
One South Wacker Drive, Suite 3080
Chicago, IL 60606
Attn: Daniel J. Hermann
together with a copy to: Nabors, Giblin & Nickerson, P.A.
2502 Rocky Point Drive
Tampa, FL 33607
Attn: John R. Stokes, Esq.
20. Waiver and Release of Personal Liability. No recourse under or upon any
obligation, indemnity, covenant or agreement contained in this Purchase Agreement or
under any judgment obtained against the Issuer, or by the enforcement of any assessment
or by legal or equitable proceedings by virtue of any constitution or statute or otherwise
or under any circumstances, under or independent of this Purchase Agreement, shall be
had against any trustee, director, member, commissioner, officer, employee or agent, as
such, past, present or future, of the Issuer, either directly or through the Issuer, or
otherwise, for the payment for or to the Issuer or any receiver thereof, or to the
Underwriter or otherwise of any amount that may become owed by the Obligor
hereunder. Any and all personal liability of every nature, whether at common law or in
equity, or by statute or constitution or otherwise, of any trustee, director, member,
21
commissioner, officer, employee or agent, as such, to respond by reason of any act or
omission on his part or otherwise, for the payment for or to the Issuer or any receiver
thereof, the Underwriter or otherwise, of any amount that may become owed by the
Issuer hereunder is hereby expressly waived and released as a condition of and in
consideration for the execution of this Purchase Agreement.
21. Governing Law. This Purchase Agreement shall be governed by and
construed in accordance with the laws of the State of Florida.
22. Effective Time of this Agreement. This Purchase Agreement shall become
effective upon the acceptance hereof by the Issuer and the Obligor.
23. Severability. If any provisions of this Purchase Agreement shall be held or
deemed to be or shall, in fact, be inoperative or unenforceable as applied in any patiicular
case in any jurisdiction or jurisdictions or in all jurisdictions, or in all cases because it
conflicts with any other provision or provisions hereof or any constitution or statute or
rule of public policy, or for any other reason, such circumstance shall not have the effect
of rendering the provision in question inoperative or unenforceable in any other case or
circumstance, or of rendering any other provision or provisions herein contained invalid,
inoperative, or unenforceable to any extent whatever. The invalidity of any one or more
phrases, sentences, clauses or Sections in this Purchase Agreement contained, shall not
affect the remaining portions of this Purchase Agreement, or any part thereof.
22
24. Execution in Counterparts. This Purchase Agreement may be signed in any
number of counterparts, each of which shall be an original, but all of which shall
constitute but one and the same instrument.
Very truly yours,
B.C. ZIEGLER AND COMPANY,
as Undetwriter
By: _____________ _
Richard Scanlon, Managing Director
[Signature Page to Bond Purchase Agreement.]
Accepted and agreed to as
of the date first above written:
CITY OF ATLANTIC BEACH, FLORIDA,
as Issuer
By: _____________ _
Mayor
[Signature Page to Bond Purchase Agreement.]
Accepted and agreed to as NAVAL CONTINUING CARE
of the date first above written: RETIREMENT FOUNDATION, INC.
By: _____________ _
Chief Executive Officer
[Signature Page to Bond Purchase Agreement.]
EXHIBIT A
Maturities, Amounts, Interest Rates, Yields and Prices of Bonds
Maturity Date
(October 1)
$ _____ Serial Bonds
Principal
Amount Interest Rate
Term Bonds
Price Yield
$ _________ % Due October 1, 20_ Yield __ % Price
A-1
EXHffiiTB
Mandatory Sinking Fund and Optional Redemption of the Bonds
Mandatory Sinking Fund and Optional Redemption Provisions
Mandatory Sinking Fund Redemption. The Bonds are subject to mandatory
sinking fund redemption from amounts deposited to the Principal Account of the Bond
Fund established pursuant to the Bond Indenture by the Obligor, at a redemption price
equal to 100% of the principal amount to be redeemed, together with accmed interest to
the date fixed for redemption, on October 1 in each of the years and amounts as follows:
Maturing
October 1, 20 _
$
*Stated Maturity
Principal
Amount
Maturing
October 1, 20 _
$
Principal
Amount
Maturing
October 1, 20 _
Principal
Amount
$
Optional Redemption. The Bonds maturing on and after October 1, 20_ are
subject to optional redemption prior to maturity by the Issuer at the written direction of
the Obligor in whole or in part on October 1, 20_ or on any date thereafter, at a
redemption price equal to the principal amount of such Bonds to be redeemed, together
with accmed interest to the date of redemption.
B-1
EXHIBITC
Form of Agreed Upon Procedures Letter
C-1
4816-6105-6018.3
EXHIBITD
OFFICIAL STATEMENT
DRAFT #2: 1/29/13
073-00030.E2
PRELIMINARY OFFICIAL STATEMENT DATED FEBRUARY_, 2013
BOOK ENTRY ONLY Fitch Rating: __
(See "RATING" herein)
In the opinion of Foley & Lardner LLP, Bond Counsel, based upon an analysis of
existing laws, regulations, rulings and court decisions, and assuming, among other
matters, the accuracy of certain representations and compliance with certain covenants,
interest on the Bonds is excluded fi·om gross income for federal income tax purposes
under Section 103 ofthe Internal Revenue Code of 1986 (the "Code''). Bond Counsel is
of the fitrther opinion that interest on the Bonds is not a specific preference item for
purposes of the federal individual or corporate alternative minimum taxes. See the
heading "TAX MATTERS" herein for a more detailed discussion of some of the federal
tax consequences of owning the Bonds . A complete copy of the proposed form of opinion
of Bond Counsel is set forth in APPENDIX D hereto. Prospective Bondholders should
consult with their own financial advisors on the impact of federal and Florida law on
their particular situations.
$ *
CITY OF ATLANTIC BEACH, FLORIDA
Health Care Facilities Revenue and Refunding Bonds
(Fleet Landing Project)
Series 2013A
Dates, Interest Rates, Prices or Yields, and Maturities
Are Shown on the Inside of the Front Cover
The City of Atlantic Beach, Florida (the "Issuer") is issuing its Health Care
Facilities Revenue and Refunding Bonds (Fleet Landing Project), Series 2013A (the
"Bonds") under an Indenture of Trust, dated as of April 1, 2013 (the "Bond Indenture"),
between the Issuer and U.S. Bank National Association, as Bond Trustee (the "Bond
Trustee"). The proceeds of the Bonds will be loaned to Naval Continuing Care
Retirement Foundation, Inc., a Florida nonprofit corporation (the "Obligor") pursuant to a
Loan Agreement dated as of April 1, 2013 (the "Loan Agreement"), between the Issuer
and the Obligor. The Obligor will use the proceeds of the Bonds, together with certain
other moneys, to (i) currently refund the Issuer's outstanding Health Care Facilities
Revenue Refunding Bonds (Fleet Landing Project), Series 1999 and Variable Rate
Demand Health Care Facilities Revenue Bonds (Fleet Landing Project), Series 2006,
(ii) pay or reimburse the Obligor for the cost of acquiring approximately two acres of
land adjacent to the Obligor's existing campus known as Fleet Landing in the City of
Atlantic Beach, Florida, (as more fully described herein, the "Project"), (iii) fund a debt
service reserve fund for the Bonds, and (iv) pay a portion of the costs associated with
issuing the Bonds. See "PLAN OF FINANCE" herein.
Except as described in this Official Statement, the Bonds and the interest payable
thereon are limited obligations of the Issuer and are payable solely from and secured
exclusively by the funds pledged thereto under the Bond Indenture, the payments to be
made by the Obligor pursuant to the Loan Agreement, and the Series 2013A Note (as
defined herein) issued by the Obligor under a Master Trust Indenture, as supplemented by
Supplemental Indenture Number 1, each dated as of April 1, 2013 (as supplemented, the
"Master Indenture"), and each between U.S. Bank National Association, as Master
Trustee, and the Obligor. The sources of payment of, and security for, the Bonds are
more fully described in this Official Statement.
The Bonds are subject to acceleration of maturity and optional and mandatory
redemption, in whole or in part, prior to maturity at the prices and under the
circumstances described herein.
The Bonds when issued will be registered only in the name of Cede & Co., as
registered owner and nominee of The Depository Trust Company, New York, New York
("DTC"). DTC will act as securities depository for the Bonds. Purchasers of the Bonds
will not receive certificates representing their interest in the Bonds purchased.
Ownership by the beneficial owners of the Bonds will be evidenced by book-entry only.
Principal of and interest on the Bonds will be paid by the Bond Trustee to DTC, which in
turn will remit such principal and interest to its participants for subsequent disbursement
to the beneficial owners of the Bonds. As long as Cede & Co. is the registered owner as
nominee of DTC, payments on the Bonds will be made to such registered owner, and
disbursement of such payments will be the responsibility of DTC and its participants.
See APPENDIX E-Book-Entry Only System.
An investment in the Bonds involves a cetiain degree of risk related to, among
other things, the nature of the Obligor's business, the regulatory environment, and the
provisions of the principal documents. A prospective Bondholder is advised to read
"SECURITY FOR THE BONDS" and "RISK FACTORS" herein for a discussion of
cetiain risk factors that should be considered in connection with an investment in the
Bonds.
THE BONDS ARE LIMITED OBLIGATIONS OF THE ISSUER. THE
PRINCIPAL AND INTEREST ARE PAYABLE SOLELY OUT OF CERTAIN
PAYMENTS UNDER THE LOAN AGREEMENT BETWEEN THE ISSUER AND
THE OBLIGOR AND THE RELATED NOTE ISSUED UNDER THE MASTER
INDENTURE AS DESCRIBED HEREIN, BY RECOURSE TO THE MORTGAGE
AND FROM MONEYS PLEDGED UNDER THE BOND INDENTURE AS
DESCRIBED HEREIN. THE BONDS SHALL NOT DIRECTLY, INDIRECTLY OR
CONTINGENTLY OBLIGATE, AND DO NOT CONSTITUTE AN INDEBTEDNESS
OF THE STATE OF FLORIDA, DUVAL COUNTY, FLORIDA ("DUVAL
COUNTY"), THE ISSUER OR ANY POLITICAL SUBDIVISION THEREOF WITHIN
THE MEANING OF ANY CONSTITUTIONAL PROVISION OR STATUTORY
LIMITATION AND DO NOT CONSTITUTE NOR GIVE RISE TO A PECUNIARY
LIABILITY OF THE STATE, DUVAL COUNTY, THE ISSUER OR ANY
POLITICAL SUBDIVISION THEREOF OR A CHARGE AGAINST THE GENERAL
CREDIT OR TAXING POWER OF THE STATE, DUVAL COUNTY OR ANY
POLITICAL SUBDIVISION THEREOF.
The Bonds are being offered, subject to prior sale and withdrawal of such offer
without notice, when, as and if issued by the Issuer and accepted by the Undetwriter
subject to the approving opinion of Foley & Lardner LLP, Jacksonville, Florida, Bond
Counsel. Certain legal matters will be passed upon for the Issuer by its counsel,
Alan C. Jensen, Attorney at Law, Jacksonville Beach, Florida; for the Obligor by its
counsel, Foley & Lardner LLP, Jacksonville, Florida; and for the Undetwriter by its
counsel, Nabors, Giblin & Nickerson, P.A., Tampa, Florida. It is expected that the Bonds
will be available for delivery through the facilities of DTC, against payment therefor, on
or about April 1, 2013.
~Ziegler
CAPITAL:: INVESTMl:NTS !! ADVICE
The date of this Official Statement is , 2013. ------
*Preliminary, subject to change.
$ *
CITY OF ATLANTIC BEACH, FLORIDA
Health Care Facilities Revenue and Refunding Bonds
(Fleet Landing Project)
Series 2013A
Dated Date of Delivery Due: As shown below
The Bonds will be issuable in fully registered form without coupons in minimum
denominations of $5,000 and any integral multiple of $5,000 in excess thereof. Interest
on the Bonds will be payable on each May 15 and November 15, commencing
____ 15, 2013.
Maturity Date
November 15,
$ ___ _
$ ___ _
Principal
Amount
MATURITY SCHEDULE
$ _____ Serial Bonds
Interest
Rate
$ ____ Term Bonds
% Due November 15,
%Due November 15,
Yield
Yield
%Price __ ; CUSIP No.
%Price __ ; CUSIP No.
*Preliminary, subject to change.
CUSIP No.<ll
(I) CUSIP is a registered trademark of the American Bankers Association. CUSIP data contained herein is provided by Standard & Poor's, CUSIP Service Bureau, a
division of The McGraw Hill Companies, Inc. CUSIP numbers have been assigned by an independent company not affiliated with the Issuer, the Underwriter, or
the Obligor, and are included solely for the convenience of the holders of the Bonds. Neither the Issuer nor the Underwriter nor the Obligor is responsible for the
selection or uses of these CUSIP numbers, and no representation is made as to their correctness on the Bonds or as indicated above. The CUSIP number for a
specific maturity is subject to being changed after the execution and delivery of the Bonds as a result of various subsequent actions including, but not limited to, a
refunding in whole or in part of such maturity or as a result of the procurement of secondary market portfolio insurance or other similar enhancement by investors
that is applicable to all or a portion of the Bonds.
[COMMUNITY PICTURES]
No dealer, salesman or other person has been authorized to give any information or to
make any representations other than those contained in this Official Statement, and if given or
made, such information or representations must not be relied upon as having been authorized by
the Obligor, the Issuer, or the Underwriter. The information set forth herein concerning the
Obligor has been furnished by the Obligor and is believed to be reliable, but is not guaranteed as
to accuracy or completeness by, and is not to be construed as a representation by, the Issuer or
the Underwriter. This Official Statement does not constitute an offer to sell or a solicitation of
an offer to buy any of the securities offered hereby in any state to any person to whom it is
unlawful to make such offer in such state. Except where otherwise indicated, this Official
Statement speaks as of the date hereof. The information and expressions of opinion herein are
subject to change without notice and neither the delivery of this Official Statement nor any sale
hereunder will under any circumstances create any implication that there has been no change in
the affairs of the Obligor since the date hereof.
The Underwriter has provided the following sentence for inclusion in this Official
Statement. The Underwriter has reviewed the information in this Official Statement in
accordance with, and as pati of, its responsibilities to investors under the federal securities laws
as applied to the facts and circumstances of this transaction, but the Underwriter does not
guarantee the accuracy or completeness of such information. The information contained in this
Official Statement has been furnished by the Obligor, the Issuer, DTC and other sources that are
believed to be reliable, but such information is not guaranteed as to accuracy or completeness by,
and is not to be construed as a representation of, the Underwriter. The information and
expressions of opinion herein are subject to change without notice, and neither the delivery of
this Official Statement nor any sale made hereunder shall, under any circumstances, create any
implication that there has been no change in the affairs of the parties referred to above since the
date hereof.
THE BONDS HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, AND THE BOND INDENTURE AND THE MASTER INDENTURE
HAVE NOT BEEN QUALIFIED UNDER THE TRUST INDENTURE ACT OF 1939, AS
AMENDED, IN RELIANCE UPON EXEMPTIONS CONTAINED IN SUCH ACTS. THE
REGISTRATION OR QUALIFICATION OF THE BONDS IN ACCORDANCE WITH
APPLICABLE PROVISIONS OF LAWS OF THE STATES IN WHICH BONDS HAVE BEEN
REGISTERED OR QUALIFIED AND THE EXEMPTION FROM REGISTRATION OR
QUALIFICATION IN OTHER STATES CANNOT BE REGARDED AS A
RECOMMENDATION THEREOF. NEITHER THESE STATES NOR ANY OF THEIR
AGENCIES HAVE PASSED UPON THE MERITS OF THE BONDS OR THE ACCURACY
OR COMPLETENESS OF THIS OFFICIAL STATEMENT. ANY REPRESENTATION TO
THE CONTRARY MAY BE A CRIMINAL OFFENSE.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY OVER
ALLOT OR EFFECT TRANSACTIONS THAT STABILIZE OR MAINTAIN THE MARKET
PRICE OF THE BONDS AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE
PREY AIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME WITHOUT NOTICE.
CAUTIONARY STATEMENT REGARDING FORWARD LOOKING
STATEMENTS IN THIS OFFICIAL STATEMENT
Certain statements included or incorporated by reference in this Official Statement
constitute "forward looking statements" within the meaning of the United States Private
Securities Litigation Reform Act of 1995, Section 21E of the United States Securities
Exchange Act of 1934, as amended, and Section 27 A of the United States Securities Act
of 1933, as amended. Such statements are generally identifiable by the terminology used
such as "plan," "expect," "estimate," "budget" or other similar words. Such forward
looking statements include, but are not limited to, certain statements contained in the
information in APPENDIX A to this Official Statement.
THE ACHIEVEMENT OF CERTAIN RESULTS OR OTHER EXPECTATIONS
CONTAINED IN SUCH FORWARD LOOKING STATEMENTS INVOLVE KNOWN
AND UNKNOWN RISKS, UNCERTAINTIES AND OTHER FACTORS THAT MAY
CAUSE ACTUAL RESULTS, PERFORMANCE OR ACHIEVEMENTS DESCRIBED
TO BE MATERIALLY DIFFERENT FROM ANY FUTURE RESULTS,
PERFORMANCE OR ACHIEVEMENTS EXPRESSED OR IMPLIED BY SUCH
FORWARD LOOKING STATEMENTS. THE OBLIGOR DOES NOT PLAN TO
ISSUE ANY UPDATES OR REVISIONS TO THOSE FORWARD LOOKING
STATEMENTS IF OR WHEN ITS EXPECTATIONS, OR EVENTS, CONDITIONS
OR CIRCUMSTANCES ON WHICH SUCH STATEMENTS ARE BASED OCCUR.
TABLE OF CONTENTS
Page
INTRODUCTION ............................................................................................................... 1
Purpose of this Official Statement. ........................................................................... 1
Purpose ofthe Bonds ................................................................................................ 1
Security for the Bonds .............................................................................................. 2
THE ISSUER ....................................................................................................................... 3
THE OBLIGOR AND THE COMMUNITY ...................................................................... 4
PLAN OF FINANCE .......................................................................................................... 4
ESTIMATED SOURCES AND USES OF FUNDS ........................................................... 5
Sources of Funds ...................................................................................................... 5
Uses of Funds ........................................................................................................... 5
ESTIMATED ANNUAL DEBT SERVICE REQUIREMENTS ....................................... 6
THE BONDS ....................................................................................................................... 6
Optional Redemption ................................................................................................ 8
Mandatory Sinking Fund Redemption ..................................................................... 9
Extraordinary Optional Redemption ........................................................................ 9
Partial Redemption ................................................................................................. 10
Notice ofRedemption ............................................................................................. 10
SECURITY FOR THE BONDS ....................................................................................... 11
General ................................................................................................................... 11
Limited Obligations ................................................................................................ 11
Debt Service Reserve Fund for the Bonds ............................................................. 11
The Loan Agreement .............................................................................................. 12
The Master Indenture ............................................................................................. 13
Ce1iain Covenants of the Obligor and any Future Members of the Obligated
Group ........................................................................................................... 14
Rating .................................................................................................................... 19
Approval of Consultants ......................................................................................... 19
Revenue Fund ......................................................................................................... 20
RISI( FACTORS ............................................................................................................... 21
General Risk Factors .............................................................................................. 21
Impact of Market Turmoil ...................................................................................... 22
Additions to the Obligated Group .......................................................................... 22
Limited Obligations ................................................................................................ 22
Unce1iainty of Revenues ........................................................................................ 23
Failure to Maintain Occupancy .............................................................................. 23
Competition ............................................................................................................ 23
Regulation of Residency Agreements .................................................................... 24
Liquidation of Security May Not be Sufficient in the Event of a Default ............. 24
The Nature of the Income of the Elderly ................................................................ 25
Sale ofHomes ......................................................................................................... 25
Utilization Demand ................................................................................................ 25
Factors Affecting Real Estate Taxes ...................................................................... 25
Malpractice Claims and Losses .............................................................................. 26
Healthcare Reform Act ........................................................................................... 26
Nursing Staff Shortage ........................................................................................... 27
Third-Party Payments and Managed Care .............................................................. 27
Fraud and Abuse Enforcement ............................................................................... 27
Other Sources of Liability for Health Care Providers ............................................ 34
Medicare and Medicaid Programs .......................................................................... 35
Medicare Reimbursement ....................................................................................... 36
Possible Changes in Tax Status .............................................................................. 3 8
Intermediate Sanctions ........................................................................................... 38
Rights ofResidents ................................................................................................. 39
Other Tax Status Issues .......................................................................................... 39
Lack of Marketability for the Bonds ...................................................................... 40
Bankruptcy ............................................................................................................. 40
Additional Indebtedness ......................................................................................... 41
Certain Matters Relating to Enforceability of the Master Indenture ...................... 41
Environmental Matters ........................................................................................... 43
Taxation of Interest on the Bonds .......................................................................... 44
Bond Examinations ................................................................................................ 44
Revision of IRS Service Form 990 for Nonprofit Corporations ............................ 45
Property and Casualty Insurance ............................................................................ 46
Amendments to Documents ................................................................................... 46
Other Possible Risk Factors ................................................................................... 46
FLORIDA REGULATION OF CONTINUING CARE FACILITIES ............................. 47
Certificate of Authority .......................................................................................... 48
Required Reserves .................................................................................................. 48
Continuing Care Agreements and Residents' Rights .............................................. 49
Examinations and Delinquency Proceedings ......................................................... 50
DISCLOSURE OF POTENTIAL RELATIONSHIPS ..................................................... 51
FINANCIAL REPORTING AND CONTINUING DISCLOSURE ................................. 52
Financial Reporting ................................................................................................ 52
Continuing Disclosure ............................................................................................ 53
DISCLOSURE REQUIRED BY FLORIDA BLUE SKY REGULATIONS ................... 56
LITIGATION .................................................................................................................... 57
Issuer ...................................................................................................................... 57
Obligor ................................................................................................................... 57
LEGAL MA TIERS .......................................................................................................... 57
TAX MATTERS ........................................................................ , ...................................... 58
Original Issue Discount .......................................................................................... 60
Original Issue Premium .......................................................................................... 61
ii
ADDITIONAL RISK FACTORS REGARDING
FEDERAL INCOME TAX MATTERS ...................................................................... 61
INDEPENDENT AUDITORS .......................................................................................... 63
RATING ............................................................................................................................ 64
UNDERWRITING ............................................................................................................ 64
MISCELLANEOUS .......................................................................................................... 64
APPENDIX A -THE OBLIGOR AND THE COMMUNITY
APPENDIX B -AUDITED FINANCIALS
APPENDIX C -DEFINITIONS OF CERTAIN TERMS AND EXCERPTS
OF CERTAIN PROVISIONS OF CERTAIN PRINCIPAL
DOCUMENTS
APPENDIX D -PROPOSED FORM OF BOND COUNSEL OPINION
APPENDIX E -BOOK-ENTRY ONLY SYSTEM
lll
OFFICIAL STATEMENT
relating to the
$ *
CITY OF ATLANTIC BEACH, FLORIDA
Health Care Facilities Revenue and Refunding Bonds
(Fleet Landing Project),
Series 2013A
INTRODUCTION
Purpose of this Official Statement
This Official Statement, including the cover page, inside cover page and
Appendices hereto, is provided to furnish information with respect to the issuance, sale
and delivery by City of Atlantic Beach, Florida (the "Issuer") of its Health Care Facilities
Revenue and Refunding Bonds (Fleet Landing Project), Series 2013A (the "Bonds").
The Bonds are being issued pursuant to Part II, Chapter 159, Florida Statutes, as
amended (the "Act"), in conformity with the provisions, restrictions and limitations
thereof and pursuant to the Indenture of Trust dated as of April 1, 2013 (the "Bond
Indenture"), between the Issuer and U.S. Bank National Association, as bond trustee (the
"Bond Trustee").
Certain capitalized terms used herein are defined in "DEFINITIONS OF
CERTAIN TERMS" in APPENDIX C hereto. The descriptions and summaries of
various documents hereinafter set forth do not purport to be comprehensive or definitive,
and reference is made to each document for the complete details of its terms and
conditions. All statements herein are qualified in their entirety by reference to each
document.
Purpose of the Bonds
The proceeds of the Bonds will be loaned to Naval Continuing Care Retirement
Foundation, Inc., a Florida nonprofit corporation (the "Obligor" or the "Obligated Group
Representative") pursuant to a Loan Agreement dated as of April 1, 2013, between the
Issuer and the Obligor (the "Loan Agreement") and will be used, together with other
available moneys described herein, to (i) cun-ently refund the Issuer's outstanding Health
Care Facilities Revenue Refunding Bonds (Fleet Landing Project), Series 1999 (the
"Series 1999 Bonds") and Variable Rate Demand Health Care Facilities Revenue Bonds
(Fleet Landing Project), Series 2006, (collectively, the "Refunded Bonds"), (ii) pay or
reimburse the Obligor for the cost of acquiring approximately two acres of land adjacent
to the Obligor's existing campus known as Fleet Landing in the City of Atlantic Beach,
Florida; (iii) fund the debt service reserve fund to secure the Bonds; and (iv) pay a
portion of the costs associated with the issuance of the Bonds. See "THE OBLIGOR
AND THE COMMUNITY," "PLAN OF FINANCE" and "ESTIMATED SOURCES
AND USES OF FUNDS" herein.
Risk Factors. Certain risks are inherent in the successful operation of facilities
such as the Community (defined below) on a basis such that sufficient cash will be
available to pay interest on and to retire indebtedness. See "RISK FACTORS" below for
a discussion of ce1iain of these risks.
Security for the Bonds
General. The Bonds will be issued under and will be equally and ratably secured
under the Bond Indenture, pursuant to which the Issuer will assign and pledge to the
Bond Trustee, (1) the hereinafter described Series 2013A Note relating to the Bonds,
(2) certain rights of the Issuer under the hereinafter described Loan Agreement, (3) the
funds and accounts (excluding the Rebate Fund), including the money and investments in
them, which the Bond Trustee holds under the terms of the Bond Indenture, and ( 4) such
other property as may from time to time be pledged to the Bond Trustee as additional
security for such Bonds or which may come into possession of the Bond Trustee pursuant
to the terms of the Loan Agreement or the Series 20 13A Note.
Pursuant to the Loan Agreement, the Obligor has agreed to make loan payments
sufficient, among other things, to pay in full when due all principal of, premium, if any,
and interest on the Bonds and the administrative fees of the Bond Trustee, and, to make
payments as required to restore any deficiencies in the debt service reserve fund. See
"SECURITY FOR THE BONDS-The Loan Agreement." See also "EXCERPTS FROM
LOAN AGREEMENT" in APPENDIX C hereto.
The obligation of the Obligor to repay the loan from the Issuer will be evidenced
by a promissory note of the Obligor (the "Series 2013A Note"), issued under and entitled
to the benefit and security of a Master Trust Indenture, as supplemented by Supplemental
Indenture Number 1, each dated as of April 1, 2013, and each between U.S. Bank
National Association, as master trustee (the "Master Trustee") and the Obligor
(collectively, the "Master Indenture"). See "SECURITY FOR THE BONDS-The
Master Indenture." See also "EXCERPTS FROM MASTER TRUST INDENTURE" in
APPENDIX C hereto. The Series 20 13A Note will constitute an unconditional promise
by each Obligated Group Member (as defined in the Master Indenture) to pay amounts
sufficient to pay principal of (whether at maturity, by acceleration or call for redemption)
and premium, if any, and interest on the Bonds; and the Series 2013A Note will be
secured on a parity basis with any other Obligations hereafter issued under the Master
Indenture, by a lien on and security interest in the Mortgaged Property granted to the
Master Trustee pursuant to a Mmigage and Security Agreement, dated as of April 1,
2013, executed by the Obligor and delivered to U.S. Bank National Association, in its
capacity as Master Trustee under the Master Indenture (the "Mmigage") and a security
2
interest in the Gross Revenues of the Obligated Group and the Funds established under
the Master Indenture. CmTently, only the Obligor and the Master Trustee are patiies to
the Master Indenture, and the Obligor is the only Obligated Group Member. The Obligor
and each Obligated Group Member admitted in the future will be jointly and severally
liable for the payment for all obligations entitled to the benefits of the Master Indenture
and will be subject to the financial and operating covenants thereunder.
Pledge of Gross Revenues. In order to secure the payment of the principal of,
premium, if any, and interest on the Series 2013A Note, the Obligated Group Members
will pledge, assign, confirm and grant a security interest unto the Master Trustee in the
Gross Revenues of the Obligated Group Members as well as all moneys and securities
from time to time held by the Master Trustee under the terms of the Master Indenture.
See "SECURITY FOR THE BONDS-Revenue Fund" herein.
Debt Service Reserve Fund. As additional security for the Bonds, a debt service
reserve fund (the "Reserve Fund") will be established pursuant to the Bond Indenture and
will be funded from the proceeds of the Bonds. The Reserve Fund is required to be
funded in an amount equal to the Maximum Annual Debt Service on the Bonds
outstanding. See "SECURITY FOR THE BONDS-Debt Service Reserve Fund for the
Bonds." See also "EXCERPTS FROM INDENTURE OF TRUST" in APPENDIX C
hereto.
THE ISSUER
The Issuer is a political subdivision of the State of Florida. The Issuer is
authorized under the provisions of the Act to issue the Bonds for the purpose of refunding
the Refunded Bonds and financing the Project, to enter into the Indenture and the Loan
Agreement and to secure the Bonds by an assignment to Bond Trustee of the payments to
be made by the Issuer under the Loan Agreement and a pledge of other moneys deposited
with the Bond Trustee under the Indenture.
The Issuer has not undertaken to review this Official Statement nor has it assumed
any responsibility for the matters contained herein except solely as to matters relating to
the Issuer. All findings and determinations by the Issuer have been made for its own
internal uses and purposes in performing its duties under the Act. Notwithstanding its
approval of the Bonds for purposes of Section 147(f) of the Internal Revenue Code of
1986, as amended (the "Code"), the Issuer does not endorse or in any manner, directly or
indirectly, guarantee or promise to pay the Bonds from any source of funds or guarantee,
warrant or endorse the creditwmihiness or credit standing of the Obligor or in any
manner guarantee, wanant or endorse the investment quality or value of the Bonds. The
Bonds are payable solely as described in this Official Statement and are not in any
manner payable wholly or partially from any funds or prope1iies otherwise belonging to
the Issuer. By its issuance of the Bonds, the Issuer does not in any manner, directly or
3
indirectly, guarantee, warrant or endorse the creditworthiness of the Obligor or the
investment quality or value of the Bonds.
The Issuer has not participated in the preparation of this Official Statement and
makes no representation with respect to the accuracy or completeness of any of the
material contained in this Official Statement other than in this section and the section
entitled "LITIGATION-Issuer." The Issuer is not responsible for providing any
purchaser of the Bonds with any information relating to the Bonds or any ofthe parties or
transactions referred to in this Official Statement or for the accuracy or completeness of
any such information obtained by any purchaser.
THE OBLIGOR AND THE COMMUNITY
The Obligor is a Florida not for profit corporation formed in 1985 and has
received a determination letter from the Internal Revenue Service that it is an
organization exempt from federal income tax under Section 501(c)(3) (a "qualified
501(c)(3) organization") ofthe Internal Revenue Code of 1986, as amended (the "Code").
The Obligor owns and operates a continuing care retirement community known as
"Fleet Landing" (the "Community") which opened in 1990 and is designed to meet the
needs of former military officers, their spouses and others of retirement age. Located on
an approximately 1 00-acre campus in the City of Atlantic Beach, Florida, the Community
cun-ently has available for occupancy 354 residential independent living units (including
164 congregate living units), 76 assisted living units and 80 skilled nursing beds, together
with a variety of related common and suppoti areas. The Community is managed by the
Obligor.
For more information regarding the Obligor and the Community, see APPENDIX
A hereto.
PLAN OF FINANCE
The Refunded Bonds. Concun-ently with the issuance of the Bonds, a portion of
the proceeds will be applied to fully redeem and pay the Refunded Bonds. The proceeds
of the Refunded Bonds were used to finance or refinance costs related to the acquisition,
construction, equipping and improvement of the Community.
The Project. A portion of the proceeds of the Bonds will be deposited in the
Project Fund and disbursed by the Bond Trustee to the Obligor to pay the costs related to
the acquisition of approximately two acres of land adjacent to the Community to be used
by the Obligor for future expansion of Community facilities (the "Project").
4
ESTIMATED SOURCES AND USES OF FUNDS
The estimated sources and uses of funds in connection with the issuance of the
Bonds are as follows:
Sources of Funds
Bonds
Net Original Issue Premium (Discount)
Obligor Contribution(!)
Uses ofFunds
Redemption of Refunded Bonds
Project Fund
Reserve Fund(2)
Costs of Issuance(3)
(I) Represents funds of the Obligor to be used to pay a portion of the costs of issuance.
$
$
$
$
(2) A Debt Service Reserve Fund will be established at closing in an amount equal to Maximum Annual Debt Service
on the Bonds.
(3) Includes legal fees, auditor fees, underwriter's fee, and other costs associated with the issuance ofthe Bonds.
5
ESTIMATED ANNUAL DEBT SERVICE REQUIREMENTS
The following table sets forth the estimated amounts required for the payment of
principal of the Bonds at maturity or by mandatory sinking fund redemption and for the
payment of interest on the Bonds for each Bond Year ending November 15.
Bond Year
Ending
November 15
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
2035
2036
2037
Principal
$ $
THE BONDS
Interest
$
Total Debt
Service
Specific information about the Bonds is contained below. Infmmation about
security for the Bonds is contained in "SECURITY FOR THE BONDS."
6
General; Book-Entry-Only System. The Bonds provide that no recourse under any
obligation, covenant or agreement contained in the Bond Indenture, or in any Bond, or
under any judgment obtained against the Issuer or by the enforcement of any assessment
or by any legal or equitable proceeding by virtue of any constitution or statute or
otherwise or under any circumstances, under or independent of the Bond Indenture, will
be had against any past, present or future director, incorporator, agent, representative,
member, officer or employee of the Issuer, as such, either directly or through the Issuer,
for the payment for or to the Issuer or for or to the registered owner of any Bond, whether
by virtue of any constitution, statute or rule of law, or by the enforcement of any
assessment or penalty, or otherwise, all such liability being by the acceptance of the
Bonds and, as a material part of the consideration for the issue of the Bonds, expressly
waived and released.
So long as DTC acts as securities depository for the Bonds, as described in
APPENDIX E hereto, all references herein to "Owner," "owner," "Holder" or "holder" of
any Bonds or to Series 2013A "Bondowner," "Bondholder," "bondowner" or
"bondholder" are deemed to refer to Cede & Co., as nominee for DTC, and not to
Patiicipants, Indirect Participants or Beneficial Owners (as defined herein).
So long as the Bonds are registered in the name of Cede & Co., as nominee of
DTC, principal of, premium, if any, and interest on the Bonds will be paid as described in
APPENDIX E hereto. The following information is subject in its entirety to the
provisions described in APPENDIX E hereto
The Bonds will be issued only in fully registered form without coupons in the
denominations of $5,000 and any integral multiple thereof. The Bonds will be dated their
date of issuance and will accrue interest from the date of delivery, except as otherwise
provided in the Bond Indenture. The Bonds will bear interest (based on a 360-day year
of twelve 30-day months) at the rate set fmih on the inside cover hereof, payable
semiannually on May 15 and November 15 each year, commencing 15,
2013 (each, an "Interest Payment Date"), and mature on the dates set fmih on the inside
cover page hereof.
Payment of Principal and Interest. The principal of and premium, if any, on the
Bonds are required to be payable in lawful money of the United States of America at the
Payment Office of the Bond Trustee, or at the designated corporate trust office of its
successor, upon presentation and sun·ender of the Bonds. Payment of interest on each
Bond will be made to the person in whose name such Bond is registered on the Bond
Register at the close of business on the applicable Record Date and are required to be
paid (i) by check or draft mailed to such registered owner on the applicable Interest
Payment Date at such owner's address as it appears on the bond register or at such other
address as is furnished to the Bond Trustee in writing by the applicable Record Date by
such owner or (ii) as to any registered owner of $1,000,000 or more in aggregate
principal amount of Bonds who so elects, by wire transfer of funds to such wire transfer
7
address within the continental United States of America as the registered owner shall
have furnished to the Bond Trustee in writing on or prior to the Record Date and upon
compliance with the reasonable requirements of the Bond Trustee. In the Event of
Default in the payment of interest due on such Interest Payment Date, defaulted interest
will be payable to the person in whose name such Bond is registered at the close of
business on a Special Record Date for the payment of such defaulted interest established
by notice mailed by the Bond Trustee to the registered owners of Bonds not less than ten
days preceding such Special Record Date.
Transfers and Exchanges; Persons Treated as Owners. The Bonds are
exchangeable for an equal aggregate principal amount of fully registered Bonds of the
same maturity of other authorized denominations at the Jacksonville, Florida office of the
Bond Trustee but only in the manner and subject to the limitations and on payment of the
charges provided in the Bond Indenture.
The Bonds are fully transferable by the registered owner in person or by his or her
duly authorized attorney on the registration books kept at the principal office of the Bond
Trustee upon surrender of the Bond together with a duly executed written instrument of
transfer satisfactory to the Bond Trustee. Upon such transfer a new fully registered Bond
of authorized denomination or denominations for the same aggregate principal amount
and maturity will be issued to the transferee in exchange therefor, all upon payment of the
charges and subject to the terms and conditions set forth in the Bond Indenture.
The Bond Trustee will not be required to transfer or exchange any Bond after the
mailing of notice calling such Bond or any portion thereof for redemption has been given
as herein provided, nor during the period beginning at the opening of business 15 days
before the day of mailing by the Bond Trustee of a notice of prior redemption and ending
at the close of business on the day of such mailing except for Bondholders of $1,000,000
or more in aggregate principal amount of Bonds.
The Issuer and the Bond Trustee may deem and treat the person in whose name
the Bond is registered as the absolute owner thereof for the purpose of making payment
(except to the extent otherwise provided in the Bond Indenture with respect to Regular
and Special Record Dates for the payment of interest) and for all other purposes, and
neither the Issuer nor the Bond Trustee will be affected by any notice to the contrary.
Optional Redemption
The Bonds maturing on and after November 15, 20_ are subject to optional
redemption prior to maturity by the Issuer at the written direction of the Obligor in whole
or in part on November 15, 20_ or on any date thereafter, at a redemption price equal
to the principal amount of such Bonds to be redeemed, together with accrued interest to
the date of redemption.
8
Mandatory Sinking Fund Redemption
The Bonds are subject to mandatory sinking fund redemption from amounts
deposited to the Principal Account of the Bond Fund established pursuant to the Bond
Indenture by the Obligor, at a redemption price equal to 100% of the principal amount to
be redeemed, together with accrued interest to the date fixed for redemption, on
November 15 in each of the years and amounts as follows:
Maturing
November 15, 20_
$
*Stated Maturity
Principal
Amount
Maturing
November 15, 20_
Principal
Amount
$
Maturing
November 15, 20 _
$
Principal
Amount
The Obligor may reduce the principal amount of the Bonds of the maturity so
required to be redeemed on any such date by the principal amount of the Bonds of such
maturity either (i) purchased by or on behalf of the Obligor and surrendered to the Bond
Trustee for cancellation not later than forty-five days prior to the redemption date; or
(ii) redeemed other than through sinking fund redemption and cancelled by the Bond
Trustee not later than fmty-five days prior to the redemption date, which in either case
have not been previously made the basis for a reduction of the principal amounts of the
Bonds to be redeemed by operation of the sinking fund redemption. Any excess will be
credited against the next sinking fund redemption obligation to redeem Bonds.
Extraordinary Optional Redemption
The Bonds will be subject to optional redemption by the Issuer at the written
direction of the Obligor prior to their scheduled maturities, in whole or in part at a
redemption price equal to the principal amount thereof plus accrued interest from the
most recent interest payment date to the redemption date on any date following the
occurrence of any of the following events:
(a) in case of damage or destruction to, or condemnation of, any prope1ty,
plant, and equipment of any Obligated Group Member, to the extent that the net proceeds
of insurance or condemnation award exceed the Threshold Amount (as defined in the
Master Indenture), and the Obligor has determined not to use such net proceeds or award
to repair, rebuild or replace such property, plant, and equipment; or
9
(b) as a result of any changes in the Constitution or laws of the State of Florida
or of the United States of America or of any legislative, executive, or administrative
action (whether state or federal) or of any final decree, judgment, or order of any court or
administrative body (whether state or federal), the obligations of the Obligor under the
Agreement have become, as established by an Opinion of Counsel, void or unenforceable
in each case in any material respect in accordance with the intent and purpose of the
parties as expressed in the Loan Agreement.
Partial Redemption
In the event that less than all of the Bonds or portions thereof are to be redeemed,
the Obligor may select the particular maturities to be redeemed. If less than all Bonds or
portions thereof of a single maturity are to be redeemed, they will be selected by the
securities depository or by lot in such manner as the Bond Trustee may determine.
If a Bond is of a denomination larger than the minimum Authorized
Denomination, a portion of such Bond may be redeemed, but Bonds will be redeemed
only in the principal amount of an Authorized Denomination and no Bond may be
redeemed in part if the principal amount to be outstanding following such partial
redemption is not an Authorized Denomination.
Notice of Redemption
In case of every redemption, the Bond Trustee will cause notice of such
redemption to be given by mailing by first-class mail, postage prepaid, a copy of the
redemption notice to the owners of the Bonds designated for redemption in whole or in
part, at their addresses as the same will last appear upon the registration books, in each
case not more than 60 nor less than 30 days prior to the redemption date. In addition,
notice of redemption will be sent by first class or registered mail, return receipt requested,
or by overnight delivery service (1) contemporaneously with such mailing: (A) to any
owner of $1,000,000 or more in principal amount of the Bonds, and (B) to at least two or
more information services of national recognition that disseminate redemption
information with respect to municipal bonds; and (2) to any securities depository
registered as such pursuant to the Securities Exchange Act of 1934, as amended, that is
an owner of the Bonds to be redeemed so that such notice is received at least two days
prior to such mailing date. An additional notice of redemption will be given by certified
mail, postage prepaid, mailed not less than 60 nor more than 90 days after the redemption
date to any owner of the Fixed Bonds selected for redemption that has not sutTendered
the Bonds called for redemption, at the address as the same will last appear upon the
registration books.
Failure to give any such notice, or any defect therein, will not affect the validity of
any proceedings for the redemption of such Bonds.
10
SECURITY FOR THE BONDS
General
The Bonds will be issued under and will be equally and ratably secured under the
Bond Indenture, pursuant to which the Issuer will assign and pledge to the Bond Trustee
(1) the Series 2013A Note, (2) certain rights of the Issuer under the Loan Agreement, (3)
the funds and accounts (excluding the Rebate Fund), including the money and
investments in such funds, which the Bond Trustee holds under the terms of the Bond
Indenture, and ( 4) such other property as may from time to time be pledged to the Bond
Trustee as additional security for such Bonds or which may come into possession of the
Bond Trustee pursuant to the terms of the Loan Agreement or the Series 2013A Note.
The proceeds of the Bonds will be loaned to the Obligor, and the obligation of the
Obligor to repay that loan will be evidenced by a promissory note of the Obligor issued
pursuant to, and entitled to the benefit and security of, the Master Indenture.
Limited Obligations
THE BONDS ARE LIMITED OBLIGATIONS OF THE ISSUER. THE
PRINCIPAL AND INTEREST ARE PAYABLE SOLELY OUT OF CERTAIN
PAYMENTS UNDER THE LOAN AGREEMENT BETWEEN THE ISSUER AND
THE OBLIGOR AND THE RELATED NOTE ISSUED UNDER THE MASTER
INDENTURE AS DESCRIBED HEREIN, BY RECOURSE TO THE MORTGAGE
AND FROM MONEYS PLEDGED UNDER THE BOND INDENTURE AS
DESCRIBED HEREIN. THE BONDS SHALL NOT DIRECTLY, INDIRECTLY OR
CONTINGENTLY OBLIGATE, AND DO NOT CONSTITUTE AN INDEBTEDNESS
OF THE STATE OF FLORIDA, DUVAL COUNTY, OR THE ISSUER OR ANY
POLITICAL SUBDIVISION THEREOF WITHIN THE MEANING OF ANY
CONSTITUTIONAL PROVISION OR STATUTORY LIMITATION AND DO NOT
CONSTITUTE NOR GIVE RISE TO A PECUNIARY LIABILITY OF THE STATE,
DUVAL COUNTY, THE ISSUER OR ANY POLITICAL SUBDIVISION THEREOF
OR A CHARGE AGAINST THE GENERAL CREDIT OR TAXING POWER OF THE
STATE, DUVAL COUNTY, OR ANY POLITICAL SUBDIVISION THEREOF.
Debt Service Reserve Fund for the Bonds
The Bond Indenture creates and establishes with the Bond Trustee a Debt Service
Reserve Fund (the "Reserve Fund") with respect to the Bonds. Moneys on deposit in the
Reserve Fund will be used to provide a reserve for the payment of the principal of and
interest on the related series of Bonds. See "EXCERPTS FROM INDENTURE OF
TRUST" in APPENDIX C hereto.
11
Payments into the Reserve Fund. Pursuant to the Bond Indenture, the Reserve
Fund is required to be funded in an amount equal to the Maximum Annual Debt Service
on the Bonds outstanding.
In addition to the deposits required by the Bond Indenture, there will be deposited
into the Reserve Fund any Reserve Fund Obligations delivered by the Obligor to the
Bond Trustee pursuant to the Loan Agreement. In addition, there will be deposited into
the Reserve Fund all moneys required to be transfened thereto pursuant to the Bond
Indenture, and all other moneys received by the Bond Trustee when accompanied by
directions that such moneys are to be paid into the Reserve Fund. There will also be
retained in the Reserve Fund all interest and other income received on investments of
Reserve Fund moneys in the Reserve Fund to the extent provided in the Bond Indenture.
Use of Moneys in the Reserve Fund. Except as provided in the Bond Indenture,
moneys in the Reserve Fund will be used solely for the payment of the principal of and
interest on the Bonds in the event moneys in the Bond Fund are insufficient to make such
payments when due, whether on an interest payment date, redemption date, maturity date,
acceleration date or otherwise.
Effect of Event of Default. Upon the occun·ence of an Event of Default of which
the Bond Trustee is deemed to have notice under the Bond Indenture and the election by
the Bond Trustee of the remedy specified in the Bond Indenture, any Reserve Fund
Obligations in the Reserve Fund will, subject to the provisions of the Bond Indenture, be
transfened by the Bond Trustee to the Principal Account and applied in accordance with
the provisions of the Bond Indenture. In the event of the redemption of any series of
Bonds, any Reserve Fund Obligations on deposit in the Reserve Fund in excess of the
Reserve Fund Requirement on the Bonds to be Outstanding immediately after such
redemption may, subject to the provisions of the Bond Indenture, be transfened to the
Principal Account and applied to the payment of the principal of the Bonds to be
redeemed. On and in each year, any earnings on the Reserve
Fund Obligations on deposit in the Reserve Fund that are in excess of the Reserve Fund
Requirement will be transfened into the Interest Account of the Bond Fund for the
Bonds.
Remaining Funds. On the final maturity date or redemption date of the Bonds,
any moneys in the Reserve Fund may be used to pay the principal of, premium, if any,
and interest on the Bonds.
The Loan Agreement
Under the Loan Agreement, the Obligor is required to duly and punctually to pay
the principal of, premium, if any, and interest on the Bonds, and to make payments to the
Bond Trustee to maintain the Reserve Fund at the required amount and to make certain
12
other payments. See "EXCERPTS FROM LOAN AGREEMENT" in APPENDIX C
hereto.
The Master Indenture
General. The Master Indenture is intended to provide assurance for the repayment
of obligations entitled to its benefits by imposing financial and operating covenants
which restrict the Obligor and any other future Obligated Group Members and by the
appointment of the Master Trustee to enforce such covenants for the benefit of the
holders of such obligations. The Series 20 13A Note is the only obligation presently
entitled to the benefits of the Master Indenture. The holders of all obligations entitled to
the benefit of the Master Indenture will be on a parity with respect to the benefits of the
Master Indenture. Pursuant to the Master Indenture, the Obligor and any future
Obligated Group Members have pledged and granted to the Master Trustee (a) a security
interest in all personal propetiy owned or hereafter acquired by the Obligated Group, (b)
a security interest in all the Gross Revenues of the Obligated Group, with certain limited
exceptions, (c) a security interest in the Funds established under the Master Indenture,
and (d) a security interest in any other property from time to time subjected to the lien of
the Master Indenture. Pursuant to the Mortgage, the Obligor has pledged and granted to
the Master Trustee a lien on the Mmigaged Property and a security interest in all property
owned or hereafter acquired by the Obligor. See "EXCERPTS FROM MASTER TRUST
INDENTURE" in APPENDIX C.
"Gross Revenues" means all receipts, revenues, rentals, income, insurance
proceeds (including, without limitation, all Medicaid, Medicare and other third party
payments), condemnation awards, Entrance Fees and other moneys received by or on
behalf of any Obligated Group Member, including (without limitation) revenues derived
from (a) the ownership, operation or leasing of any potiion of the Facilities (including,
without limitation, fees payable by or on behalf of residents of the Facilities) and all
rights to receive the same (other than the right to receive Medicaid and Medicare
payments), whether in the form of accounts, general intangibles or other rights, and the
proceeds of such accounts, general intangibles and other rights, whether now existing or
hereafter coming into existence or whether now owned or held or hereafter acquired, and
(b) gifts, grants, bequests, donations and contributions heretofore or hereafter made that
are legally available to meet any of the obligations of the Obligated Group Member
incuned in the financing, operation, maintenance or repair of any potiion of the
Facilities; provided, however, that there shall be excluded from Gross Revenues (i) all
such items, whether now owned or hereafter acquired by the Obligated Group Members,
which by their terms or by reason of applicable law cannot be granted, assigned or
pledged hereunder or which would become void or voidable if granted, assigned or
pledged hereunder by the Obligated Group Members, or which cannot be granted,
pledged or assigned hereunder without the consent of other parties whose consent is not
secured, or without subjecting the Master Trustee to a liability not otherwise
13
contemplated by the provisions hereof, or which otherwise may not be, or are not, hereby
lawfully and effectively granted, pledged and assigned by the Obligated Group Members,
(ii) any amounts received by an Obligated Group Member as a billing agent for another
entity, except for fees received for serving as billing agent, (iii) gifts, grants, bequests,
donations and contributions to an Obligated Group Member heretofore or hereafter made,
and the income and gains derived therefrom, which are specifically restricted by the
donor or grantor to a particular purpose which is inconsistent with their use of payments
required under this Master Trust Indenture, (iv) any moneys received by any Obligated
Group Member from prospective residents or commercial tenants in order to pay for
customized improvements to those Independent Living Units or other areas of the
Facilities to be occupied or leased to such residents or tenants, (v) all deposits made
pursuant to Residency Agreements to be held in escrow until construction of the
Facilities is completed, a certificate of occupancy has been issued and appropriate
licenses, if required, have been issued, and (vi) all deposits and/or advance payments
made in connection with any leases of the Independent Living Units and received prior to
receipt of such certificate and licenses.
The Series 2013A Note will constitute a joint and several obligation of each
Obligated Group Member, and the Series 2013A Note will be secured on a parity basis
with any other Obligations hereafter issued under the Master Indenture by a lien on the
trust estate pledged thereunder, which includes the Mortgaged Property and the Gross
Revenues of the Obligated Group.
Currently, only the Obligor and the Master Trustee are parties to the Master
Indenture, and the Obligor is the only Obligated Group Member. The Obligor and each
Obligated Group Member that may be admitted in the future will be jointly and severally
liable for the payment for all obligations entitled to the benefits of the Master Indenture
and will be subject to the financial and operating covenants thereunder. See
"EXCERPTS FROM MASTER TRUST INDENTURE-Section 6.01-Admission of
Obligated Group Members" and "-Section 6.03-Withdrawal of Obligated Group
Members" in APPENDIX C for a description of the limitations on admission and release
of Obligated Group Members.
Certain Covenants of the Obligor and any Future Members of the Obligated Group
In addition to the covenants described below, the Master Indenture contains
additional covenants relating to, among others, the maintenance of the Obligated Group's
property, corporate existence, the maintenance of certain levels of insurance coverage,
the incurrence of additional debt, the sale or lease of certain property, and permitted liens.
For a full description of these and other covenants, see "EXCERPTS FROM MASTER
TRUST INDENTURE" in APPENDIX C hereto.
Rate Covenant. Pursuant to the Master Indenture, the Obligated Group has
covenanted to operate all of its Facilities on a revenue-producing basis and to charge such
14
fees and rates for its Facilities and services and to exercise such skill and diligence,
including obtaining payment for services provided, as to provide income from its
Property together with other available funds sufficient to pay promptly all payments of
principal and interest on its Indebtedness, all expenses of operation, maintenance and
repair of its Property and all other payments required to be made by it hereunder to the
extent permitted by law. Each Obligated Group Member has agreed that it will from time
to time as often as necessary and to the extent permitted by law, revise its rates, fees and
charges in such manner as may be necessary or proper to comply with the provisions of
the Master Indenture.
The Members covenant and agree that the Obligated Group Representative will
calculate the Historical Debt Service Coverage Ratio of the Obligated Group for each
Fiscal Year, commencing with the Fiscal Year ending December 31, 2012 in accordance
with the Master Indenture.
If the Historical Debt Service Coverage Ratio of the Obligated Group for any
Fiscal Year is less than 1.20:1, the Obligated Group Representative, at the Obligated
Group's expense, is required to select a Consultant and notify the Master Trustee of the
selection within thirty (30) days following the calculation described above, and engage a
Consultant in accordance with the Master Indenture to make recommendations with
respect to the rates, fees and charges of the Members and the Obligated Group's methods
of operation and other factors affecting its financial condition in order to increase such
Historical Debt Service Coverage Ratio to at least 1.20:1 for the following Fiscal Year;
provided, however, the Obligated Group Representative shall not be required to engage a
Consultant for a Fiscal Year in which the Historical Debt Service Coverage Ratio is less
than 1.20:1 if: (i) Days Cash on Hand exceeds two hundred (200) days; and (ii) average
occupancy of the Independent Living Units was not less than ninety-three percent (93%)
for the Fiscal Year or less than ninety percent (90%) for the last day of the Fiscal Year;
but the Obligated Group Representative shall be required to engage a Consultant,
regardless of Days Cash on Hand or Independent Living Units, if the Historical Debt
Service Coverage Ratio is less than 1.20:1 for two (2) consecutive Fiscal Years.
Within sixty (60) days of the actual engagement of any such Consultant, the
Obligated Group Representative is required to cause a copy of the Consultant's report and
recommendations, if any, to be filed with each Member of the Obligated Group and each
Required Infmmation Recipient (as defined in the Master Indenture). Each Member of
the Obligated Group is required to follow each recommendation of the Consultant to the
extent feasible (as detetmined in the reasonable judgment of the Governing Body of the
Obligated Group Representative) and petmitted by law. This provision shall not be
construed to prohibit any Member of the Obligated Group from serving indigent residents
to the extent required for such Member to continue its qualification as a Tax-Exempt
Organization or from serving any other class or classes of residents without charge or at
15
reduced rates so long as such service does not prevent the Obligated Group from
satisfying the other requirements of the Master Indenture.
If the Obligated Group fails to achieve a Historical Debt Service Coverage Ratio
of 1.20:1 for a Fiscal Year, such failure shall not constitute an Event of Default under the
Master Indenture if the Obligated Group takes all action necessary to comply with the
procedures set fmih above for preparing a report and adopting a plan and follows each
recommendation contained in such report to the extent feasible (as determined by the
reasonable judgment of the Governing Body of the Obligated Group Representative) and
permitted by law; provided, however, it shall be an Event of Default under the Master
Indenture if (i) the Obligated Group fails to achieve a Historical Debt Service Coverage
Ratio of at least 1.00:1 and the Days Cash on Hand of the Obligated Group as of the last
day of the Fiscal Year is less than [one hundred eighty (180)] days or (ii) the Obligated
Group fails to achieve a Historical Debt Service Coverage Ratio of at least 1.00:1 for two
(2) consecutive Fiscal Years.
Under cetiain circumstances, if applicable laws or regulations have prevented the
Obligated Group from generating Income Available for Debt Service during such Fiscal
Year sufficient to meet the requirements summarized above, the Obligated Group will be
relieved of that requirement if the rates charged by the Obligated Group are such that the
Obligated Group has generated the maximum amount of revenues reasonably practicable
given such laws or regulations, and the Historical Maximum Annual Debt Service
Coverage Ratio of the Obligated Group for such Fiscal Year was at least 1.00:1. See
"EXCERPTS FROM MASTER TRUST INDENTURE-Section 4.11-Rates and
Charges" in APPENDIX C hereto.
In the event that any Member of the Obligated Group incurs any Additional
Indebtedness for any acquisition, construction, renovation or replacement project, the
Debt Service Requirements on such Additional Indebtedness and the Revenues and
Expenses relating to the project or projects financed with the proceeds of such Additional
Indebtedness shall be excluded from the calculation of the Historical Debt Service
Coverage Ratio of the Obligated Group until the first full Fiscal Year following the later
of (i) the estimated completion of the acquisition, construction, renovation or replacement
project being paid for with the proceeds of such Additional Indebtedness provided that
such completion occurs no later than six months following the completion date for such
project set forth in the Consultant's repmi described in (A) below, or (ii) the first full
Fiscal Year after which Stable Occupancy is achieved in the case of construction,
renovation or replacement of elderly housing facilities or nursing facilities financed with
the proceeds of such Additional Indebtedness, which Stable Occupancy shall be projected
in the report of the Consultant refetTed to in paragraph (A) below to occur no later than
during the fifth full Fiscal Year following the incurrence of such Additional
Indebtedness, or (iii) the end of the fifth full Fiscal Year after the incun·ence of such
Additional Indebtedness, if the following conditions are met:
16
(A) there is delivered to the Master Trustee a report or opinion of a Consultant
to the effect that the Projected Debt Service Coverage Ratio for each of the first two full
Fiscal Years following the later of (1) the estimated completion of the acquisition,
construction, renovation or replacement being paid for with the proceeds of such
Additional Indebtedness, or (2) the first full Fiscal Year following the year in which
Stable Occupancy is achieved in the case of construction, renovation or replacement of
elderly housing facilities or nursing facilities being financed with the proceeds of such
Additional Indebtedness, which Stable Occupancy shall be projected to occur no later
than during the fifth full Fiscal Year following the incurrence of such Additional
Indebtedness, will be not less than 1.20:1 after giving effect to the incun·ence of such
Additional Indebtedness and the application of the proceeds thereof; provided, however,
that in the event that a Consultant shall deliver a report to the Master Trustee to the effect
that state or Federal laws or regulations or administrative interpretations of such laws or
regulations then in existence do not permit or by their application make it impracticable
for Members to produce the required ratio, then such ratio shall be reduced to the highest
practicable ratio then permitted by such laws or regulations but in no event less than
1.00:1: provided, however, that in the event a Consultant's report is not required to incur
such Additional Indebtedness, the Obligated Group may deliver an Officer's Certificate to
the Master Trustee in lieu of the Consultant's report described in this subparagraph (A);
and
(B) there is delivered to the Master Trustee an Officer's Certificate on the date
on which financial statements are required to be delivered to the Master Trustee pursuant
to the Master Indenture until the first Fiscal Year in which the exclusion from the
calculation of the Historical Debt Service Coverage Ratio no longer applies, calculating
the Historical Debt Service Coverage Ratio of the Obligated Group at the end of each
Fiscal Year, and demonstrating that such Historical Debt Service Coverage Ratio is not
less than 1.00:1, such Historical Debt Service Coverage Ratio to be computed without
taking into account ( 1) the Additional Indebtedness to be incurred if (x) the interest on
such Additional Indebtedness during such period is funded from proceeds thereof or other
funds of the Member then on hand and available therefor and (y) no principal of such
Additional Indebtedness is payable during such period, and (2) the Revenues to be
derived from the project to be financed from the proceeds of such Additional
Indebtedness. See "EXCERPTS FROM MASTER INDENTURE-Section 4.11-Rates
and Charges" in APPENDIX C hereto.
For specific information regarding the process under the Master Indenture for
selection of Consultants, see "SECURITY FOR THE BONDS-Approval of
Consultants" and APPENDIX C-"THE MASTER INDENTURE-Approval of
Consultants."
Liquidity Covenant. The Master Indenture requires that the Obligated Group
calculate the Days Cash on Hand of the Obligated Group as of June 30 and December 31
17
of each Fiscal year, commencing on June 30, 2013 (each such date being a "Testing
Date"). Each Obligated Group Member is required to conduct its business so that on
each Testing Date the Obligated Group shall have no less than [180] Days Cash on Hand
(the "Liquidity Requirement").
If the Days Cash on Hand on any Testing Date is less than the Liquidity
Requirement, the Obligated Group Representative is required, within 30 days after
delivery of the Officer's Certificate disclosing such deficiency, to deliver an Officer's
Certificate approved by a resolution of the Governing Body of the Obligated Group
Representative to the Master Trustee setting forth in reasonable detail the reasons for
such deficiency and adopting a specific plan setting forth steps to be taken designed to
raise the level of Days Cash on Hand to the Liquidity Requirement for future Testing
Dates.
If the Obligated Group has not raised the level of Days Cash on Hand to the
Liquidity Requirement by the next Testing Date following delivery of the Officer's
Certificate required in the preceding paragraph, the Obligated Group Representative is
required, within 30 days after receipt of the Officer's Certificate disclosing such
deficiency, to select a Consultant in accordance with the te1ms of the Master Indenture to
make recommendations with respect to the rates, fees and charges of the Obligated Group
and the Obligated Group's methods of operation and other factors affecting its financial
condition in order to raise the level of Days Cash on Hand to the Liquidity Requirement
for future Testing Dates. A copy of the Consultant's report and recommendations, if any,
is required to be filed with each member and each Required Information Recipient within
60 days after the date such Consultant is actually engaged. Each member of the
Obligated Group is required to follow each recommendation of the Consultant to the
extent feasible (as dete1mined in the reasonable judgment of the Governing Body of such
Member) and permitted by law.
Notwithstanding any other provlSlon of the Master Indenture, failure of the
Obligated Group to achieve the required liquidity level will not constitute an Event of
Default under the Master Indenture if the Obligated Group takes all action necessary to
comply with the required procedures set fmih above for adopting a plan and follows each
recommendation contained in such plan or Consultant's repmi to the extent feasible (as
determined in the reasonable judgment of the Governing Body of such Member) and
permitted by law. See "The Master Indenture-Liquidity Covenant" in APPENDIX D
hereto.
For specific information regarding the process under the Master Indenture for
selection of Consultants, see "SECURITY FOR THE BONDS-Approval of
Consultants" and APPENDIX C-"THE MASTER INDENTURE-Approval of
Consultants."
18
Actuarial Study. [During the Fiscal Year ending December 31, 2013, and at least
once every three (3) Fiscal Years thereafter, the Obligated Group Representative, at the
Obligated Group's expense, shall provide the actuarial study described below to each
Member and each Required Information Recipient.] The actuarial study shall be
prepared by a Consultant and include: (i) the amount, if any, of the Obligated Group's
obligations to provide services under the Residency Agreements anticipated to be in
excess of those that could be satisfied using the rates, fees and charges for the Facilities
then in effect, and (ii) recommendations, if any, with respect to the rates, fees and charges
of the Members and the Obligated Group's methods of operation and other factors
affecting its financial condition in order to enable the Obligated Group to satisfy such
obligations. Each Member shall follow each recommendation of the Consultant
applicable to it to the extent feasible (as determined in the reasonable judgment of the
Governing Body of the Obligated Group Representative) and permitted by law.
Rating
The Obligated Group has covenanted to use its best effmis to maintain an
investment grade rating on the Bonds.
In the event that the Bonds lose their investment grade rating, the Obligated Group
has covenanted that it will seek a rating of the Bonds from any Rating Agency each year
after a determination is made by the Obligated Group in consultation with the
Underwriter or other such qualified entity that an investment grade rating for the Bonds is
reasonably attainable, until achievement of an investment grade rating, provided that if
during any such year the Obligated Group receives a preliminary indication from any
Rating Agency that the Bonds will not be assigned an investment grade rating, the
Obligated Group shall withdraw its rating request for such year.
Approval of Consultants
The Master Indenture provides that if at any time the Members of the Obligated
Group are required to engage a Consultant under the provisions of the Master Indenture
with respect to the Rate Covenant, Liquidity Covenant or occupancy covenants, such
Consultant shall be engaged in the manner as set forth below.
Upon selecting a Consultant as required under the prov1s10ns of the Master
Indenture, the Obligated Group Representative will notify the Master Trustee of such
selection. The Master Trustee is required to, as soon as practicable but in no case longer
than five Business Days after receipt of notice, notify the holders of all Obligations
outstanding under the Master Indenture of such selection. Such notice will (i) include the
name of the Consultant and a brief description of the Consultant, (ii) state the reason that
the Consultant is being engaged including a description of the covenant( s) of this Master
Indenture that require the Consultant to be engaged, and (iii) state that the holder of the
Obligation will be deemed to have consented to the selection of the Consultant named in
19
such notice unless such Obligation holder submits an objection to the selected Consultant
in writing (in a manner acceptable to the Master Trustee) to the Master Trustee within 15
days of the date that the notice is sent to the Obligations holders. No later than two
Business Days after the end of the 15-day objection period, the Master Trustee is required
to notify the Obligated Group of the number of objections. If 66.6% or more in aggregate
principal amount of the holders of the outstanding Obligations have been deemed to have
consented to the selection of the Consultant, the Obligated Group Representative is
required to engage the Consultant within three Business Days. If 33.4% or more in
aggregate principal amount of the owners ofthe Obligations outstanding have objected to
the Consultant selected, the Obligated Group Representative shall select another
Consultant which may be engaged upon compliance with the procedures described above
and in accordance with the Master Indenture.
For further information about the approval of Consultants, including the ability of
owners to object to the selection of a Consultant, see APPENDIX C-"THE MASTER
INDENTURE-Approval of Consultants.
Revenue Fund
If an Event of Default under the Master Indenture occurs due to failure to pay any
debt service on any Obligations when due and continues for a period of five days, each
Obligated Group Member is required to deposit with the Master Trustee for deposit into
the Revenue Fund all Gross Revenues and Federal Subsidy Payments of such Obligated
Group Member (except to the extent otherwise provided by or inconsistent with any
instrument creating any mortgage, lien, charge, encumbrance, pledge or other security
interest granted, created, assumed, incuned or existing in accordance with the provisions
of the Master Indenture) during each succeeding month, beginning on the first day
thereof and on each day thereafter, until no payment default under the Master Indenture
then exists.
On the fifth Business Day preceding the end of each month in which any
Obligated Group Member has made payments to the Master Trustee for deposit into the
Revenue Fund, the Master Trustee will withdraw and pay or deposit from the amounts on
deposit in the Revenue Fund the following amounts in the order indicated:
FIRST, to the payment of all amounts due the Master Trustee under the Master
Indenture;
SECOND, to the payment of the amounts then due and unpaid upon the
Obligations, other than Obligations constituting Subordinated Indebtedness, for principal
(and premium, if any) and interest, in respect of which or for the benefit of which such
money has been collected, ratably, without preference or priority of any kind, according
to the amounts due and payable on such Obligations for principal (and premium, if any)
and interest, respectively;
20
THIRD, to the payment of the amounts then due and unpaid upon the Obligations
constituting Subordinated Indebtedness for principal (and premium, if any) and interest,
in respect of which or for the benefit of which such money has been collected, ratably,
without preference or priority of any kind, according to the amounts due and payable on
such Obligations for principal (and premium, if any) and interest, respectively; and
FOURTH, to the Obligated Group Representative.
RISK FACTORS
General Risk Factors
The Bonds are special and limited obligations of the Issuer, payable solely from
and secured exclusively by the funds pledged thereto, including the payments to be made
by the Obligated Group under the Master Indenture.
A BONDOWNER IS ADVISED TO READ THE ENTIRE OFFICIAL
STATEMENT, INCLUDING THE APPENDICES HERETO, AND SPECIAL
REFERENCE IS MADE TO THE SECTION "SECURITY FOR THE BONDS" AND
THIS SECTION FOR A DISCUSSION OF CERTAIN RISK FACTORS WHICH
SHOULD BE CONSIDERED IN CONNECTION WITH AN INVESTMENT IN THE
BONDS.
As described herein under the caption "SECURITY FOR THE BONDS," except
to the extent that the principal of, premium, if any, and interest on the Bonds may be
payable from the proceeds thereof or investment income thereon or, under ce1iain
circumstances, proceeds of insurance, sale or condemnation awards or net amounts by
recourse to the Mortgaged Property, such principal, premium and interest will be payable
solely from amounts paid by the Obligor under the Loan Agreement or by the Obligated
Group ( culTently consisting solely of the Obligor) under the Master Indenture.
No representation or assurance is given or can be made that revenues will be
realized by the Obligated Group (which in the context of this discussion of risk factors,
should be understood to include the Obligor individually and together with future
Members of the Obligated Group, if any) sufficient to ensure the payment of the principal
and interest on the Bonds in the amounts and at the times required to pay debt service on
each series of the Bonds when due. Neither the Underwriter nor the Issuer has made any
independent investigation of the extent to which any such factors may have an adverse
effect on the revenues of the Obligated Group. The ability of the Obligated Group to
generate sufficient revenues may be impacted by a number of factors. Some, but not
necessarily all of these risk factors are discussed in this section below; these risk factors
should be considered by investors considering any purchase of the Bonds. Neither the
21
Underwriter nor the Issuer has made any independent investigation of the extent to which
any such factors may have an adverse effect on the revenues of the Obligated Group.
Impact of Market Turmoil
The dismption of the credit and financial markets in the last several years have
resulted in volatility in the financial markets, fluctuations in interest rates, reduced
economic activity, increased business failures and increased consumer and business
bankmptcies, and is considered a major cause of the current economic downturn. In
addition, as investor confidence has waned, investments previously recognized as stable,
such as tax-exempt money market funds (which are one of the largest purchasers of tax-
exempt bonds), have experienced significant withdrawals, This could affect the market
demand for the Bonds. In addition, the general market disruption has affected and could
continue to adversely affect the value of any investments the Obligor may have.
Credit market conditions may cause the Obligor's ability to bon·ow to fund capital
expenditures to be more limited and more expensive now and in the future.
Additions to the Obligated Group
Cun·ently, the Obligor is the only Member of the Obligated Group. Upon
satisfaction of certain conditions in the Master Indenture, other entities can become
members of the Obligated Group. See "THE MASTER INDENTURE-Admission of
Obligated Group Members" in APPENDIX C. Management of the Obligor currently has
no plans to add additional members to the Obligated Group. However, if and when new
members are added, the Obligated Group's financial situation and operations will likely
be altered from that of the Obligor alone.
Limited Obligations
THE BONDS ARE LIMITED OBLIGATIONS OF THE ISSUER. THE
PRINCIPAL AND INTEREST ARE PAYABLE SOLELY OUT OF CERTAIN
PAYMENTS UNDER THE LOAN AGREEMENT BETWEEN THE ISSUER AND
THE OBLIGOR AND THE RELATED NOTE ISSUED UNDER THE MASTER
INDENTURE AS DESCRIBED HEREIN, BY RECOURSE TO THE MORTGAGE
AND FROM MONEYS PLEDGED UNDER THE BOND INDENTURE AS
DESCRIBED HEREIN. THE BONDS SHALL NOT DIRECTLY, INDIRECTLY OR
CONTINGENTLY OBLIGATE, AND DO NOT CONSTITUTE AN INDEBTEDNESS
OF THE STATE OF FLORIDA, DUVAL COUNTY OR THE ISSUER OR ANY
POLITICAL SUBDIVISION THEREOF WITHIN THE MEANING OF ANY
CONSTITUTIONAL PROVISION OR STATUTORY LIMITATION AND DO NOT
CONSTITUTE NOR GIVE RISE TO A PECUNIARY LIABILITY OF THE STATE,
DUVAL COUNTY, THE ISSUER OR ANY POLITICAL SUBDIVISION THEREOF
22
OR A CHARGE AGAINST THE GENERAL CREDIT OR TAXING POWER OF THE
STATE, DUVAL COUNTY OR ANY POLITICAL SUBDIVISION THEREOF.
Uncertainty ofRevenues
The Obligor has no assets other than the Mortgaged Property and is not expected
to have any revenues except those derived from operations of the Community in the near
term. As noted elsewhere, except to the extent that the holders receive under certain
circumstances, proceeds of insurance, sale or condemnation awards, each series of the
Bonds will be payable solely from payments or prepayments to be made by the Obligor
under the Loan Agreement and by the Obligor and any other future Obligated Group
Members on the Series 20 13A Note. The ability of the Obligor to make payments under
the Loan Agreement and the ability of the Obligor and any other future Obligated Group
Members to make payments on the Series 20 13A Note is dependent upon the generation
by the Obligor of revenues in the amounts necessary for the Obligor to pay the principal,
premium, if any, and interest on the Bonds, as well as other operating and capital
expenses. The realization of future revenues and expenses are subject to, among other
things, the capabilities of the management of the Obligor, government regulation and
future economic and other conditions that are unpredictable and that may affect revenues
and payment of principal of and interest on the Bonds. No representation or assurance
can be made that revenues will be realized by the Obligor in amounts sufficient to make
the required payments with respect to debt service on the Bonds.
Failure to Maintain Occupancy
The ability of the Obligated Group to generate sufficient revenues to pay the
operating costs of their facilities and to pay debt service on the Bonds depends in part, on
the ability of the Obligor to attract sufficient numbers of residents to the Community and
to maintain substantial occupancy throughout the term of the Bonds. This depends to
some extent on factors outside management's control, such as the residents' right to
terminate their Residency Agreements, subject to the conditions provided in, the
Residency Agreements.
Competition
The Community provides services in areas where other competitive facilities exist
and may face additional competition in the future as a result of the construction or
renovation of competitive facilities in the primary or secondary market area of the
Community. There may also arise in the future competition from other continuing care
facilities, some of which may offer similar facilities, but not necessarily similar services,
at lower prices.
23
Regulation of Residency Agreements
As described herein under "FLORIDA REGULATION OF CONTINUING CARE
FACILITIES," Chapter 651 requires every continuing care facility to maintain a
certificate of authority from the Office of Insurance Regulation in order to operate. The
Obligor has received a final certificate of authority for the Community. If the Obligor
fails to comply with the requirements of Chapter 651, it would be subject to sanctions
including the possible revocation of the certificate of authority for the Community. The
certificate of authority may be revoked if certain grounds exist including, among others,
failure by the provider to continue to meet the requirement for the authority originally
granted, on account of deficiency of assets, failure of the provider to maintain escrow
accounts or funds required by Chapter 651 and failure by the provider to honor its
Residency Agreements with residents. Under cetiain circumstances the Office of
Insurance Regulation may petition for an appropriate court order for rehabilitation,
liquidation, conservation, reorganization, seizure or summary proceedings. If the Office
of Insurance Regulations has been appointed a receiver of a continuing care facility, it
may petition a court to enjoin a secured creditor of a facility from seeking to dispose of
the collateral securing its debt for a period of up to 12 months.
Liquidation of Security May Not be Sufficient in the Event of a Default
The Bond Trustee and the Issuer must look solely to the Gross Revenues, the
Mortgaged Property and any funds held under the Bond Indenture and the Master
Indenture to pay and satisfy the Bonds in accordance with their terms. The Bondholders
are dependent upon the success of the Community and the value of the assets of the
Obligated Group for the payment of the principal of, redemption price, if any and interest
on, the Bonds. [The Obligor has not made any representations to Bondholders regarding
the cunent market value of the Community.] In the event of a default, the value of the
Mortgaged Propetiy may be less than the amount of the outstanding Bonds, since the
Community exists for the narrow use as a continuing care retirement community. In
addition, even without consideration of the special purpose nature of the Community, the
sale of property at a foreclosure sale may not result in the full value of such propetiy
being obtained. The special design features of a continuing care facility and the
continuing rights of residents under continuing care and lease agreements may make it
difficult to convert the facilities to other uses, which may have the effect of reducing their
attractiveness to potential purchasers. In the event of a default and subsequent
foreclosure and sale of the Mmigaged Property, Bondholders have no assurance that the
value of the Mortgaged Property would be sufficient to pay the outstanding principal and
interest due under the terms of the Bonds. Accordingly, in the event of foreclosure and
sale of the Mortgaged Propetiy, Bondholders may not receive all principal and interest
due under the terms of the Bonds.
24
The Nature of the Income of the Elderly
A percentage of the monthly income of certain residents of the Community may
be fixed income derived from pensions and social security. In addition, some residents
may have to liquidate assets in order to pay the fees and other charges for occupancy of
the Community. If, due to inflation or otherwise, substantial increases in fees and other
charges are required to cover increased in operating costs, nursing care costs, wages,
benefits and other expenses, residents may have difficulty paying or may be unable to
pay such increased fees and other charges. Furthermore, investment income of the
residents may be adversely affected by declines in market rates and stock prices, which
may also result in payment difficulties.
Sale of Homes
It is anticipated that many future residents of the Community will come from a
personal residence. Many of these individuals may have to sell their cmTent homes prior
to occupancy to meet the financial obligations under their Residency Agreement. If
prospective residents encounter difficulties in selling their homes due to local or national
economic conditions affecting the sale of residential real estate, such prospective
residents may not have sufficient funds to pay fees or other obligations under their
Residency Agreements, thereby causing a delay in marketing vacated units. Any such
delay could have an adverse impact on the revenues of the Obligated Group and the
ability of the Obligated Group to pay debt service requirements on the Bonds.
Utilization Demand
Several factors could, if implemented, affect demand for services provided at the
Community including: (i) efforts by insurers and govemmental agencies to reduce
utilization of skilled nursing home and long-term care facilities by such means as
preventive medicine and home health care programs; (ii) advances in scientific and
medical technology; (iii) a decline in the population, a change in the age composition of
the population or a decline in the economic conditions of the service area for the
Community; and (iv) increased or more effective competition from retirement
communities and long-term care facilities now or hereafter located in the service area of
the facility. The Financial Feasibility Study should be read in its entirety, including
management's notes and assumptions set forth therein. See APPENDIX C hereto.
Factors Affecting Real Estate Taxes
In recent years various State and local legislative, regulatory and judicial bodies
have reviewed the exemption of non-profit corporations from real estate taxes. Various
State and local government bodies have challenged with increasing frequency and
success the tax-exempt status of such institutions and have sought to remove the
exemption of property from real estate taxes of part or all of the property of various non-
25
profit institutions on the grounds that a portion of such property was not being used to
further the charitable purposes of the institution. Several of these disputes have been
determined in favor of the taxing authorities or have resulted in settlements.
The Community is cmTently exempt from the payment of property taxes and the
Community is assumed by management of the Obligor to remain exempt. There can be
no assurance that future changes in the laws and regulations of State or local governments
will not materially and adversely affect the operation and revenues of the Obligated
Group by requiring the Obligor to pay real estate taxes for the Community.
Malpractice Claims and Losses
The Obligated Group has covenanted in the Master Indenture to maintain
professional liability insurance with commercial insurance catTiers unless the Obligated
Group Representative provides a certificate of an insurance consultant complying with
the terms of the Master Indenture. The operations of the Obligated Group may be
affected by increases in the incidence of malpractice lawsuits against elder care facilities
and care providers in general and by increases in the dollar amount of client damage
recoveries. These may result in increased insurance premiums and an increased difficulty
in obtaining malpractice insurance. It is not possible at this time to determine either the
extent to which malpractice coverage will continue to be available to the Obligated
Group or the premiums at which such coverage can be obtained.
Healthcare Reform Act
Health care reform has been an immediate and impmiant priority of President
Obama's administration. On November 7, 2009, the U.S. House of Representatives
passed the Affordable Health Care for America Act and on December 24, 2009, the
Senate passed the Patient Project and Affordable Care Act. To bridge the differences
between the two bills, on March 21, 2010, the House of Representatives passed the
Patient Project and Affordable Care Act (H.R. 3590) without amendment. H.R. 3590 was
signed into law by President Obama on March 23, 2010. Also on March 21, the House
passed Health Care and Education Reconciliation Act of 2010 (H.R. 4872) (the
"reconciliation bill"), which modified certain provisions in H.R. 3590. Next, the House
and Senate both passed a modified version of the reconciliation bill on March 25, 2010,
President Obama signed the reconciliation bill on March 30, 2010. Together, H.R. 3590,
which is now Public Law 111-148, and H.R. 4872, which is now, Public Law 111-152,
form the basis of the health care refmm, that impact providers ("Health Care Reform
Statutes").
Generally, the Health Care Refmm Statutes require most U.S. citizens and legal
residents to have health insurance, creates state-based health benefit exchanges and a tax
credit system to help the uninsured purchase coverage requires employers to either
provide insurance or pay tax penalties for employees that receive tax credits, imposes
26
new regulations on health plans, and expands Medicaid. The Health Care Reform
Statutes impose additional compliance and regulatory requirements on nursing homes,
some of which may adversely impact nursing home reimbursement for the Obligated
Group.
Nursing Staff Shortage
Recently the healthcare industry has experienced a shortage of nursing staff, which
has resulted in increased costs for healthcare providers due to the need to hire agency
nursing personnel at higher rates. Both the federal and state governments have
implemented, or are considering implementing, legislative efforts to combat the health
care industry's workforce shmiages, including those in nursing. If the nursing shmiage
continues, it could adversely affect the Obligated Group's operations or financial
condition.
Third-Party Payments and Managed Care
In the environment of increasing managed care, the Obligated Group can expect
additional challenges in maintaining its resident population and attendant revenues.
Third-party payors, such as health maintenance organizations, direct their subscribers to
providers who have agreed to accept discounted rates or reduced per diem charges.
Continuing care retirement communities are less sensitive to this directed utilization than
stand-alone skilled nursing facilities; however, the risk may increase and the Obligated
Group may be required to accept residents under such conditions should managed care
cost reduction measures now pervasive in the health care industry continue to grow.
Fraud and Abuse Enforcement
Health care fraud and abuse laws were enacted at the federal and state levels to
regulate both the provision of services to government program beneficiaries and the
submission of claims for services rendered to such beneficiaries. Under these laws,
individuals and organizations, such as the Obligor, can be punished for submitting claims
for services that were not provided, not medically necessary, incon-ectly coded, provided
by an improper person, accompanied by an illegal inducement to utilize or refrain from
utilizing a service or product, billed in a manner that does not comply with applicable
government requirements, furnished in a substandard manner, or other similar reasons.
Federal and state governments have a range of criminal, civil and administrative
sanctions available to penalize and remediate health care fraud and abuse, including
recoveries of amounts paid to the provider, imprisonment, exclusion of the provider from
patiicipation in the Medicare and Medicaid programs, civil monetary penalties and
suspension of payments. Fraud and abuse cases may be prosecuted by one or more
government entities and/or private individuals, and more than one of the available
penalties may be imposed for each violation. The federal government has made the
27
investigation and prosecution of health care fraud and abuse a priority, and Congress has
authorized significant funding of this effort. As a result, there have been a substantial
number of investigations, prosecutions and civil enforcement proceedings of health care-
related fraud and abuse in recent years.
Laws governing fraud and abuse apply to virtually all individuals and entities with
which a health care provider does business, including hospitals, home health agencies,
long-term care entities, infusion providers, pharmaceutical providers, insurers, health
maintenance organizations ("HMOs"), preferred provider organizations ("PPOs"), third
party administrators, physicians, physician groups, physician practice management
companies, ambulatory care entities, laboratories, diagnostic testing facilities, suppliers
of medical items and services and other potential referral sources. Fraud and abuse
prosecutions can have a catastrophic effect on such entities and a material adverse impact
on the financial condition of other entities in the health care delivery system of which that
entity is a part.
Federal Criminal Fraud and Abuse Liability of Health Care Providers. Both
individuals and organizations may be subject to prosecution under several federal
criminal fraud and abuse statutes. Criminal conviction for an offense related to a health
care provider's patiicipation in the Medicare program may result in substantial fines
and/or the provider's suspension, exclusion or debarment from all government programs,
including the Medicare program. Any such fines, exclusions or debarment could have a
material adverse effect on the Obligor's financial condition. Even the assetiion of a
violation could have an effect.
Criminal False Claims Act. The criminal False Claims Act ("Criminal FCA")
prohibits anyone from knowingly and willfully making a false statement or
misrepresentation of a material fact in submitting a claim to a government health care
program (defined as "any plan or program that provides health benefits, whether directly,
through insurance, or otherwise, which is funded directly, in whole or in part, by the
United States Government" other than the Federal Employees Health Benefit Program).
There are numerous specific rules that a health care provider must follow with respect to
the submission of claims. Violation of the Criminal FCA can result in imprisonment of
five years and a fine of up to $25,000. Violation of the Criminal FCA also results in
mandatory exclusion from patiicipation in the government health care programs.
Anti-Kickback Law. The federal anti-kickback law ("Anti-Kickback Law") is a
criminal statute that prohibits the offering, payment, solicitation or receipt of
remuneration (including any kickback, bribe or rebate), directly or indirectly, overtly or
covetily, in cash or in kind, for (1) the referral of patients or arranging for the referral of
patients to receive services for which payment may be made in whole or in part under a
government health care program or any state health care program; or (2) the purchase,
lease, order, or arranging for the purchase, lease or order of any good, facility, service or
item for which payment may be made under a government health care program.
28
Generally, courts have taken a broad interpretation of the scope of the Anti-Kickback
Law. Courts have held that the Anti-Kickback Law may be violated if merely one
purpose of a financial an·angement is to induce future referrals of federal or state health
care program covered items or services.
The criminal sanctions for a conviction under the Anti-Kickback Law are
imprisonment for not more than five years, a fine of not more than $25,000 or both, for
each incident or offense, although under 18 U.S.C. §3521, this fine may be increased to
$250,000 for individuals and $500,000 for organizations. If a party is convicted of a
criminal offense related to participation in the Medicare program or any state health care
program, or is convicted of a felony relating to health care fraud, the secretary of the
United States Department of Health and Human Services ("DHHS") is required to bar the
party from participation in federal health care programs and to notify the appropriate state
agencies to bar the individual from participation in state health care programs.
Imposition of such penalties or exclusions would result in a significant loss of
reimbursement and may have a material adverse effect on the Obligor's financial
condition. Even the assertion of a violation could have a material adverse effect on the
financial condition and results of operations of the Obligor.
OIG Advisory Opinions. In the Health Insurance Portability and Accountability
Act of 1996 ("HIPAA"), Congress provided for an advisory opinion process in
conjunction with the Anti-Kickback Law. These advisory opinions are issued only to the
requestors and cannot be relied on by any other individual or entity. The Obligor has not
requested, and does not plan to request, an OIG Advisory Opinion with respect to issues
or arrangements that the Obligor may have relating to Anti-Kickback Law, including
compliance with the safe harbor provisions discussed below.
"Safe Harbor" Regulations. The Medicare and Medicaid Patient and Program
Protection Act of 1987 required the OIG to promulgate regulations to clarify that certain
investment and payment practices in the health care industry would not violate the Anti-
Fraud and Abuse Statute. In response, the OIG has promulgated final "safe harbor"
regulations that set forth requirements that, if met, will protect cetiain payment
arrangements. The scope of these safe harbors is narrow, and the requirements are
specific. To date, the safe harbor regulations include: (i) investment interests in certain
publicly traded companies, cetiain small business entities and providers in medically
underserved areas; (ii) space rental; (iii) equipment rental; (iv) personal services and
management contracts; (v) sales of physician practices; (vi) referral services;
(vii) warranties; (viii) discounts; (ix) employees; (x) group purchasing organizations;
(xi) waiver of beneficiary coinsurance/deductible amounts; (xii) increased coverage,
reduced cost-sharing amounts, or reduced premium amounts offered by health plans;
(xiii) price reductions offered to health plans; (xiv) practitioner recmitment;
(xv) subsidies for obstetrical malpractice insurance; (xvi) investments in physician group
practices; (xvii) payments to cooperative hospital services organizations;
29
(xviii) investments in ambulatory surgery centers; (xix) specialty referral arrangements
between providers; (xx) ambulance replenishing; and (xxi) e-prescribing and electronic
health record arrangements. The OIG has also published two interim final safe harbors in
regulations for shared-risk arrangements.
The scope of the Anti-Kickback Law is not expanded by way of the safe harbor
regulations; these regulations give those who comply with a safe harbor the assurance
that they will not be prosecuted under the statute. As explained by the OIG in the
preamble to the July 1991 safe harbor regulations, failure to comply with a safe harbor
can mean one of three things: (1) the arrangement does not fall within the broad scope of
the anti-kickback provisions so there is no risk of prosecution; (2) the arrangement
clearly violates the statute and is subject to prosecution; or (3) the arrangement may
violate the statute in a less serious manner, in which case there is no way to predict the
degree of risk. Pmiies to a particular venture or contemplating entering into a specific
an·angement may seek an Advisory Opinion from the OIG to ascetiain whether the
arrangement will meet the requirements of a safe harbor or otherwise will violate the
Anti-Kickback Law.
Health care providers have exposure under the Anti-Kickback Law. Because of
the government's vigorous enforcement efforts, many health care providers may be
subject to some type of government investigation for alleged Anti-Kickback Law
violations involving relationships such as those between healthcare providers and
physicians, as well as the operations of any nursing homes, home health agencies,
hospices and ancillary service providers owned or operated by a healthcare provider. The
outcome of any government effotis to enforce the Anti-Kickback Law against health care
providers is difficult to predict and defense efforts can be costly.
Federal Civil Fraud and Abuse Liability of Health Care Providers. Unlike
criminal statutes, which require the government to prove that the health care provider
intended to violate, or recklessly disregarded, the law, civil statutes may be violated
simply by the provider's participation in a prohibited financial arrangement or actual or
assumed knowledge that its claims procedures are not in full compliance with the law.
Civil False Claims Act. The civil False Claims Act ("Civil FCA"), which has
become one of the federal government's primary weapons against health care fraud,
allows the government to recover significant damages from persons or entities that
submit false or fraudulent claims for payment to a federal agency. It also permits private
individuals to initiate actions on behalf of the government in lawsuits called qui tam
actions. These qui tam plaintiffs, or "whistle blowers," can recover significant amounts
from the damages awarded to the government.
Under the Civil FCA, health care providers may be liable if they: (1) knowingly
present or cause to be presented a false or fraudulent claim for payment to the United
States; (2) knowingly make, use, or cause to made or used a false record or statement to
30
obtain payment on a false or fraudulent claim paid by the United States; or (3) engage in
a conspiracy to defraud the United States by getting a false or fraudulent claim paid. The
"knowing" standard under the Civil FCA requires that the person or entity have actual
knowledge of the falsity of the claim or act in deliberate ignorance or reckless disregard
of the truth or falsity of the claim. In several cases, Civil FCA violations have been
alleged solely on the existence of violations of the Anti-Kickback Law, discussed above,
or the Stark Law, discussed below, even in the absence of evidence that false claims had
been submitted as a result of those arrangements. The U.S. Department of Justice has
also begun using the Civil FCA in its prosecutions of nursing homes for providing
substandard care. Most of these cases have not yet been resolved by the courts, so it is
not possible to predict with certainty whether the federal government will be successful
in prosecuting these anti-kickback, self-referral and quality of care violations as false
claims, although at least one appellate court has accepted the theory that a false
cetiification of compliance with Stark or the Anti-Kickback Law would be actionable
under the Civil FCA. If the courts ultimately determine that the Civil FCA applies to
these alleged violations, the sums necessary for even an innocent health care provider to
fight or settle the matter could have a material adverse impact on that provider and,
potentially, its affiliates.
If a health care provider is found to have violated the Civil FCA, the potential
liability is substantial. The violator can be held liable for up to triple the actual damages
incun·ed by the government and a fine of $5,500 to $11,000 for each violation of the Civil
FCA. A private party may file a qui tam suit on behalf of the government under the Civil
False Claims Act. If the government takes over the suit and is successful, the private
party may receive between 15 and 25 percent of any awarded damages. If the
government does not take over the case and the private pmiy continues the suit and
prevails, the private party may receive between 25 and 30 percent of the damage award.
Qui tam lawsuits significantly increase the possibility that a health care provider may be
challenged under the Civil FCA. In addition, the Deficit Reduction Act of 2005 (the
"DRA") introduced a new basis for liability under the Civil FCA. The DRA also
proposes financial incentives for States to enact their own false claims acts. The DRA
provides that a State that has a false claims statute that meets the minimum standards in
effect on January 1, 2007, earns an additional 10 percent of any Medicare funds
recovered under that statute. This provision creates a strong incentive for states to enact
their own false claims statutes or strengthen their additional false claims statutes.
Currently, a significant number of states have enacted their own false claims statutes. In
large part because of the enactment of the DRA, additional states have false claims
legislation pending.
On May 20, 2009, President Obama signed into law the Fraud Enforcement and
Recovery Act of 2009. The Act includes several amendments to the Civil FCA intended
to protect federal government funds disbursed to subcontractors to the same extent that
the Civil FCA protects funds distributed to prime contractors. The Act also seeks to
31
address recent judicial interpretations of the statute's so-called "presentment clause,"
which requires that a false claim be presented to a govemment employee for payment
before liability may be imposed, by clarifying that FCA liability "attaches whenever a
person knowingly makes a false claim to obtain money or property, any part of which is
provided by the Govemment without regard to whether the wrongdoer deals directly with
the Federal Govemment; with an agent acting on the Govemment's behalf; or with a third
patiy contractor, grantee, or other recipient of such money or property." The Act also
allows the attomey general to delegate to Department of Justice attomeys the power to
issue civil investigative demands for testimony, documents and intetrogatory answers in
FCA investigations and provides that information obtained through the use of the civil
investigative demands can be used in a range of federal investigations and prosecutions.
At this time, the impact of the Act on FCA enforcement actions and potential false claims
liability for health care providers, including the Obligor, is unknown.
Stark Law. Current federal law (known as the "Stark" law provisions) prohibits
providers of "designated health services" from billing Medicare when the patient is
refetTed by a physician or an immediate family member with a financial relationship with
the provider, unless the financial relationship fits into a statutory or regulatory exception.
"Designated health services" include the following: clinical laboratory services; physical
therapy services; occupational therapy services; radiology services, including magnetic
resonance imaging, computerized axial tomography scans, and ultrasound services;
radiation therapy services and supplies; durable medical equipment and services;
parenteral and enteral nutrients, equipment and supplies; prosthetics, orthotics, and
prosthetic devices and supplies; home health services; outpatient prescription drugs; and
inpatient and outpatient hospital services. The sanctions under the Stark law include
denial and refund of payments, civil monetary penalties and exclusions from the
Medicare program.
The Stark law includes specific reporting requirements providing that each entity
fumishing covered items or services, upon request, must provide the Secretary of DHHS
with cetiain information conceming its ownership, investment and compensation
alTangements. Repmiable information includes the covered items and services provided
by the entity and the names and unique physician identification numbers of all physicians
who have a financial relationship with the entity. Failure to adhere to these reporting
requirements may subject the entity to significant civil money penalties.
Management of the Obligor will have a compliance program to ensure material
compliance with the Stark law. However, in light of the scarcity of case law interpreting
the Stark law, there can be no assurances that the Obligor will not be found to have
violated the Stark law, and if so, whether any sanction imposed would have a material
adverse effect on the operations or the financial condition of the Obligor.
Civil Provisions of Anti-Kickback Law. The federal Anti-Kickback Law,
discussed above, also includes civil standards and penalties for conduct that implicates
32
this statute but falls short of the necessary level of intent and knowledge to be criminal.
In the Balanced Budget Act of 1997, Congress expanded civil sanctions under the Anti-
Kickback Law to include civil money penalties of $50,000 for each prohibited act and up
to "three times the total amount of remuneration offered, paid, solicited, or received,
without regard to whether a portion of such remuneration was offered, paid, solicited, or
received for a lawful purpose."
Administrative Enforcement. As with civil laws, administrative enforcement
provisions require a lower standard of proof of a violation than the criminal standard.
Thus, health care providers have a risk of incutTing monetary penalties as a result of an
administrative enforcement action.
Civil Monetmy Penalty Statute. The federal Civil Monetary Penalty Statute in
part prohibits a hospital from knowingly making a payment, directly or indirectly, to a
physician as an inducement to reduce or limit services to Medicare patients under the
physician's direct care. Violations of the statute can result in civil money penalties
against both the hospital and the physician in the amount of $2,000 each for each patient
affected by such an arrangement. In July 1999, the OIG issued a Special Advisory
Bulletin in which the OIG stated that it considered certain hospital/physician
"gainsharing" atTangements (typically atTangements whereby hospitals share cost savings
in patient care attributable in part to the physicians' effmis) to be in violation of this
provision of the Civil Monetary Penalty Statute. According to the bulletin, the OIG
believes that such atTangements may improperly induce physicians to reduce the level of
care provided to patients. However, since the publication of the Special Advisory
Bulletin, the OIG has issued a series of Advisory Opinions approving several proposed
arrangements under the Civil Monetary Penalty Statute and the Anti-kickback Law
whereby a hospital proposed to share with a group of physicians a percentage of the
hospital's cost savings arising from the physicians' implementation of a number of cost
reduction measures related to cetiain specified procedures. Nonetheless, each of the
Advisory Opinions was very natTow in scope, applied only to the facts of that situation
and to the parties to whom it was issued, and indicated that the OIG will still closely
scrutinize similar types of arrangements. The Centers for Medicare and Medicaid
Services ("CMS ") has proposed but not yet finalized an exception to the Stark Law for
physicians who participate in incentive payment and shared savings programs.
Exclusions from Medicare Participation. The term "exclusion" means that no
Medicare or state health care program reimbursement will be made for any services
rendered by the excluded party or for any services rendered on the order or under the
supervision of an excluded physician. The Secretary of DHHS is required to exclude
from federal health care program pmiicipation for not less than five years any individual
or entity convicted of a criminal offense relating to the delivery of any item or service
reimbursed under Medicare or a state health care program; any criminal offense relating
to patient neglect or abuse in connection with the delivery of health care; a felony relating
33
to fraud, theft, embezzlement, breach of fiduciary responsibility or other misdemeanor in
connection with the delivery of health care services or with respect to any act or omission
in a health care program (other than Medicare or a state health care program) operated by
or financed in whole or in part by a governmental agency; or a felony offense relating to
the illegal manufacture, distribution, prescription or dispensing of a controlled substance.
The Secretary also has petmissive authority to exclude individuals or entities under
certain other circumstances, such as a misdemeanor conviction for fraud in connection
with delivery of health care services or conviction for obstruction of an investigation of a
health care violation. The minimum period of exclusion for cetiain permissive
exclusions is three years. Exclusion of the Obligor could have a material impact on the
ability ofthe Obligated Group to make payments on the Series 2013A Note.
Enforcement Activity. Enforcement activity against health care providers is
increasing, and enforcement authorities are adopting more aggressive approaches. In the
current regulatory climate, it is anticipated that many hospitals, physician groups and
other health care providers will be subject to investigation, audit or inquiry regarding
billing practices or false claims. As with other health care providers, the Obligor may be
the subject of Medicare intermediary or carrier, OIG, U.S. Attorney General, Department
of Justice, state attomey general investigations, audits or inquiries in the future. Because
of the complexity of these laws, the instances in which an alleged violation may arise to
trigger such investigations, audits or inquiries is increasing and could result in
enforcement action against the Obligor.
Regardless of the merits of a pmiicular case or cases, the Obligor could incur
significant legal and settlement costs. Prolonged and publicized investigations could be
damaging to the reputation, business and credit of the Obligor and cetiain of its affiliates,
regardless of the outcome, and could have material adverse consequences on the financial
condition ofthe Obligated Group.
Other Sources of Liability for Health Care Providers
Health care providers may be subject to criminal prosecution and civil penalties
under a variety of federal laws in addition to those discussed in the previous paragraphs.
The confidentiality and security of patient medical records and other health
information is subject to considerable regulation by state and federal govemments. The
administrative simplification provisions of HIP AA as amended by the Health Information
Technology for Economic and Clinical Health Act, or the "HITECH Act," under the
American Recovery and Reinvestment Act of 2009 ("ARRA") which was signed into law
on February 17, 2009, established programs under Medicare and Medicaid for privacy
and security of patient identifiable infmmation, provided incentive payments for the
"meaningful use" of cetiified electronic health records ("HER") technology, and
mandated that standards and requirements be adopted for the electronic transmission of
34
certain health information. DHHS has issued a series of regulations to comport with
these requirements.
The ARRA contained significant changes to HIP AA including a new requirement
that covered entities must make notification in the event of a material breach of privacy,
security or integrity of protected health information to individuals, DHHS, and in cetiain
instances, depending on the number of people whose information was subject to the
breach, to the media. In addition, the ARRA increased the liability of business associates
of covered entities and places additional administrative responsibilities on health care
providers and other covered entities regarding the privacy and security of health
information. Pursuant to the ARRA, DHHS will be required to conduct periodic HIP AA
compliance audits to ensure that covered entities, including health care providers, are
complying with HIP AA and the new requirements created by the ARRA.
Congress also established criminal penalties for knowingly violating patient
privacy. Criminal penalties include up to $50,000 and one year in prison for obtaining or
disclosing protected health information; up to $100,000 and up to five years in prison for
obtaining protected health information under "false pretenses"; and up to $250,000 and
up to ten years in prison for obtaining or disclosing protected health information with the
intent to sell, transfer or use it for commercial advantage, personal gain or malicious
harm. In addition, the ARRA authorizes state attorneys general to bring civil actions
seeking either an injunction or damages in response to violations of HIP AA privacy and
security regulations that threaten state residents.
The Obligor incurs significant costs in implementing the policies and systems
required to comply with these new requirements. The Obligor is considered a covered
entity under HIP AA and intends to continue operating in compliance with HIP AA.
If the Obligor is found to have violated any state or federal statute or regulation
with regard to the security, confidentiality, dissemination or use of patient medical
information, it could be liable for damages, or civil or criminal penalties. These
standards impose very complex procedures and operational requirements with which the
Obligor is required to comply. There can be no assurance that differing interpretations of
existing laws and regulations or the adoption of new laws and regulations would not have
a material adverse effect on the ability of the Obligor to obtain or use health information
which, in tum, could have a material adverse effect on the business of the Obligor.
Similarly, because of the complexity of these regulations, there can be no assurances that
the Obligor would not be reviewed, found to violate these standards and assessed
penalties for such violations.
Medicare and Medicaid Programs
Currently, the Obligor's Health Center is licensed for Medicare. For the Fiscal
Year ended December 31,2012, approximately 18.8% of the revenues from nursing beds
35
at the Health Center were generated by Medicare patients. See "THE COMMUNITY-
Health Center" in APPENDIX A hereto.
The Obligor is subject to highly technical regulations by a number of federal, state
and local government agencies and private agencies, including those that administer the
Medicare program. Changes in the structure of the Medicare system, as well as potential
limitations on payments from governmental and other third party payors, could
potentially have an adverse effect on the results of operations of the Obligated Group.
Actions by governmental agencies concerning the licensure and certification of the
Community or the initiation of audits and investigations concerning billing practices
could also potentially have an adverse effect on the results of operations of the Obligated
Group.
There is an expanding and increasingly complex body of law, regulation and
policy (both federal and state) relating to the Medicare program, which is not directly
related to payments under such programs. This includes reporting and other technical
rules as well as broadly stated prohibitions regarding improper inducements for referrals,
referrals by physicians for designated health services to entities with which the physicians
have a prohibited financial relationship, and payment of kickbacks in connection with the
purchase of goods and services (see "Fraud and Abuse Enforcement" and "Administrative
Enforcement" above). Violations of prohibitions against false claims, improper
inducements and payments, prohibited physician refenals, and illegal kickbacks may
result in civil and/or criminal sanctions and penalties. Civil penalties range from
monetary fines that may be levied on a per-violation basis to temporary or permanent
exclusion from the Medicare program. The determination that any of the facilities of the
Obligated Group were in violation of these laws could have a material adverse effect on
finances ofthe Obligated Group.
Medicare Reimbursement
Medicare reimbursement to skilled nursing facilities ("SNFs") depends on several
factors, including the character of the facility, the beneficiary's circumstances, and the
type of items and services provided. Extended care services furnished by SNFs are
covered only if the patient spent at least three consecutive days as a hospital inpatient
prior to admission to the SNF and if the patient was admitted to the SNF within thitiy
(30) days of discharge from a qualifying hospital stay. Medicare Pmi A covers nursing
services furnished by or under the supervision of a registered professional nurse, as well
as physical, occupational, and speech therapy provided by the SNF. "Ancillary" services
furnished to the non-Medicare Pmi A SNF patients are also covered under Medicare
Part B. SNF services for Medicare Part A inpatient stays are reimbursed for up to one
hundred (100) days for each spell of illness. Medicare payments are subject to
coinsurance and deductibles from the patient.
36
Payments of Medicare patients in SNFs are now based on a Prospective Payment
System ("PPS "). Under the PPS, SNFs are paid a single per diem rate per resident
according to the Resource Utilization Group ("RUG") to which the patient is assigned.
RUG rates are based on the expected resource needs of patients and cover routine
services, therapy services, and nursing costs. SNF PPS payment rates are adjusted
annually based on the skilled nursing facility "market basket" index, or the cost of
providing SNF services. There is no guarantee that the SNF rates, as they may change
from time to time, will cover the actual costs of providing care to Medicare SNF patients.
In March 2010, the Medicare Payment Advisory Commission recommended eliminating
the market based update for skilled nursing facilities. In addition, the Health Care
Reform Statutes contain certain changes to Medicare reimbursement that may negatively
impact the Medicare reimbursement levels for the Obligated Group. Commencing in
2013, the market basket adjustment is reduced by a productivity adjustment, which may
result in payments lower than previous years.
The Health Care Reform Statutes also required the Secretary of DHHS to develop
a "value based" purchasing program (based on performance and quality measures and
other factors) for skilled nursing facilities. DHHS is required to publish the measures
selected with respect to fiscal year 2014, including procedures for the public to review
such data. This will eventually result in a mandatory requirement for nursing homes
reporting on key perfmmance and other quality performance measures and the
development of a pay for performance program for SNFs which will impact
reimbursement to skilled nursing facilities. Compliance with the perfmmance and other
quality performance measures will be essential for full reimbursement under the
Medicare Program. In 2014, the Health Care Reform Statutes require that the annual
update to the standard federal rate for discharges during the rate year will be reduced by
two percentage points for each facility that does not report quality data. The Secretary is
also required to study the impact of expanding Medicare's healthcare acquired conditions
reduced payment policy to skilled nursing facilities. Because the Health Care Reform
Statutes are relatively new, the full impact of these provisions is unknown and subsequent
laws, regulation and guidance impacting Medicare policy and reimbursement may
provide additional changes which may adversely impact skilled nursing homes.
Medicare has also increased its effmis to recover overpayments. CMS is
expanding its use of Recovery Audit Contractors ("RACs") to further assure accurate
payments to providers. RACs search for potentially improper Medicare payments from
prior years that may have been detected through CMS existing program integrity efforts.
RACs use their own software and review processes to determine areas for review. Once
a RAC identifies a potentially improper claim as a result of an audit, it applies an
assessment to the provider's Medicare reimbursement in an amount estimated to equal the
overpayment from the provider pending resolution of the audit. In 2007, during which
time the RAC project was limited to five states including Florida, it returned
approximately $24 7 million to the Medicare program. The permanent RAC program has
37
been implemented in all 50 states. Such audits may result in reduced reimbursement for
past alleged overpayments and may slow future Medicare payments to providers pending
resolution of appeals process with RACs, as well as increase purpmied Medicare
overpayments and associated costs for the Obligated Group.
Other future legislation, regulation or actions by the federal govemment are
expected to continue to trend toward more restrictive limitations on reimbursement for
the long term care services. At present, no determination can be made conceming
whether, or in what form, such legislation could be introduced and enacted into law.
Similarly, the impact of future cost control programs and future regulations upon the
financial performance of the Obligated Group cannot be determined at this time.
Possible Changes in Tax Status
The possible modification or repeal of certain existing federal income or state tax
laws or other loss by the Obligor of the present advantages of cetiain provisions of the
federal income or state tax laws could materially and adversely affect the status of the
Obligor and thereby the revenues of the Obligor. The Obligor has obtained a letter from
the Internal Revenue Service determined that it is exempt from federal income taxation
under Section 501(a) of the Code by vitiue of being an organization described in Section
501(c)(3) ofthe Code. As an exempt organization, the Obligor is subject to a number of
requirements affecting its operation. The failure of the Obligor to remain qualified as an
exempt organization would affect the funds available to the Obligor for payments to be
made under the Loan Agreement. Failure of the Obligor or the Issuer to comply with
certain requirements of the Code, or adoption of amendments to the Code to restrict the
use of tax-exempt bonds for facilities such as those being financed with Bond proceeds,
could cause interest on the Bonds to be included in the gross income of Bondholders or
former Bondholders for federal income tax purposes.
It is not possible to predict the scope or effect of future legislative or regulatory
actions with respect to taxation of nonprofit corporations. There can be, however, no
assurance that future changes in the laws and regulations of the federal, state or local
govemments will not materially and adversely affect the operations and revenues of the
Obligated Group by requiring it to pay income taxes.
Intermediate Sanctions
On July 31, 1996, the Taxpayers Bill ofRights 2 (the "Taxpayers Act") was signed
into law. The Taxpayers Act provides the IRS with an "intermediate" tax enforcement
tool to combat violations by tax-exempt organizations of the private inurement
prohibition of the Code. Previous to the "intetmediate sanctions law," the IRS could
punish such violations only through revocation of an entity's tax-exempt status.
38
Intermediate sanctions may be imposed where there is an "excess benefit
transaction," defined to include a disqualified person (i.e., a director, officer or other
related party) (1) engaging in a non-fair market value transaction with the tax-exempt
organization; (2) receiving excessive compensation from the tax-exempt organization; or
(3) receiving payment in an alTangement that violates the private inurement proscription.
A disqualified person who benefits from an excess benefit transaction will be
subject to a "first tier" penalty excise tax equal to 25% of the amount of the excess
benefit. Organizational managers who participate in an excess benefit transaction
knowing it to be improper are subject to a first-tier penalty excise tax of 10% of the
amount of the excess benefit, subject to a maximum penalty of $10,000. A "second tier"
penalty excise tax of 200% of the amount of the excess benefit may be imposed on the
disqualified person (but not the organizational manager) if the excess benefit transaction
is not conected in a specified time period.
Rights of Residents
Although the Residency Agreements given to each resident of the Community a
contractual right to use space and not any ownership rights in the Mortgaged Property, in
the event that the Bond Trustee or the registered holders of the Bonds seek to enforce any
of the remedies provided by the Bond Indenture, the Loan Agreement, the Series 20 13A
Note or the Mortgage upon the occurrence of a default under any or all of such
documents, it is impossible to predict the resolution that a court might make of competing
claims between the Bond Trustee or the registered holders of the Bonds and a resident of
the Community who has full complied with all the terms and conditions of his or her
Residency Agreement.
Other Tax Status Issues
The IRS has also issued Revenue Rulings dealing specifically with the manner in
which a facility providing residential services to the elderly must operate in order to
maintain its exemption under Section 501 ( c )(3 ). Revenue Rulings 61-72 and 72-124 hold
that, if otherwise qualified, a facility providing residential services to the elderly is
exempt under Section 501(c)(3) if the organization (1) is dedicated to providing, and in
fact provides or otherwise makes available services for, care and housing to aged
individuals who otherwise would be unable to provide for themselves without hardship,
(2) to the extent of its financial ability, renders services to all or a reasonable proportion
of its residents at substantially below actual cost, and (3) renders services that minister to
the needs of the elderly and relieve hardship or distress. Revenue Ruling 79-18 holds that
a facility providing residential services to the elderly may admit only those tenants who
are able to pay full rental charges, provided that those charges are set at a level that is
within the financial reach of a significant segment of the community's elderly persons,
and that the organization is committed by established policy to maintaining persons as
39
residents, even if they become unable to pay the monthly charges after being admitted to
the facility.
Lack of Marketability for the Bonds
Although the Underwriter intends, but is not obligated, to make a market for the
Bonds, there can be no assurance that there will be a secondary market for the Bonds, and
the absence of such a market for the Bonds could result in investors not being able to
resell the Bonds, or at a particular price, should they need to or wish to do so.
Bankruptcy
If the Obligor were to file a petition for relief under the Federal Bankruptcy Code,
its revenues and certain of its accounts receivable and other property acquired after the
filing (and under certain conditions some or all thereof acquired within 120 days prior to
the filing) would not be subject to the security interests created under the Master
Indenture. The filing would operate as an automatic stay of the commencement or
continuation of any judicial or other proceeding against the Obligor and its property and
as an automatic stay of any act or proceeding to enforce a lien upon its property. If the
bankruptcy court so ordered, the Obligor's property, including their accounts receivable
and proceeds thereof, could be used for the benefit of the Obligor despite the security
interest of the Master Trustee therein, provided that "adequate protection" is given to the
lienholder.
In a bankruptcy proceeding, the petitioner could file a plan for the adjustment of
its debts which modifies the rights of creditors generally, or any class of creditors,
secured or unsecured. The plan, when confirmed by the court, binds all creditors who
had notice or knowledge of the plan and discharges all claims against the debtor provided
for in the plan. No plan may be confirmed unless, among other conditions, the plan is in
the best interests of creditors, is feasible and has been accepted by each class of claims
impaired thereunder. Each class of claims has accepted the plan if at least two-thirds in
dollar amount and more than one-half in number of the allowed claims of the class that
are voted with respect to the plan are cast in its favor. Even if the plan is not so accepted,
it may be confirmed if the court finds that the plan is fair and equitable with respect to
each class of non-accepting creditors impaired thereunder and does not discriminate
unfairly in favor of junior creditors. Cetiain judicial decisions have cast doubt upon the
right of a trustee, in the event of a health care facility's bankruptcy, to collect and retain
for the benefit of bondholders pmiions of revenues consisting of Medicare and other
governmental receivables.
On Aptil 20, 2005, the Healthcare Bankruptcy Bill was enacted (the "Healthcare
Bankruptcy Act"). The stated goal of the Healthcare Bankruptcy Act was to encourage
healthcare companies to consider the patients' rights and interests when administering
their bankruptcy cases related to (1) disposal of patient records, (2) transferring patients
40
to new facilities, (3) appointment of a patient ombudsman, and (4) exclusions of a debtor
from Medicare and other federal healthcare programs.
In the event of bankruptcy of the Obligor, there is no assurance that certain
covenants, including tax covenants, contained in the Bond Indenture, the Loan
Agreement, the Master Indenture and certain other documents would survive.
Accordingly, the Obligor, as debtor in possession, or a bankruptcy trustee could take
action that would adversely affect the exclusion of interest on the Bonds from gross
income of the Owners for federal income tax purposes.
Additional Indebtedness
The Master Indenture permits the Obligated Group to incur Additional
Indebtedness which may be equally and ratably secured with the Series 2013A Note.
Any such additional parity indebtedness would be entitled to share ratably with the
holders of the Series 20 13A Note in any moneys realized from the exercise of remedies
in the event of a default under the Master Indenture. The issuance of additional parity
indebtedness could reduce the maximum Annual Debt Service Coverage Ratio and could
impair the ability of the Obligated Group to maintain its compliance with certain
covenants described in "The Master Indenture" in APPENDIX C hereto. There is no
assurance that, despite compliance with the conditions upon which Additional
Indebtedness may be incun·ed at the time such debt is created, the ability of the Obligated
Group to make the necessary payments to repay the Series 2013A Note may not be
materially adversely affected upon the incmTence of Additional Indebtedness.
Certain Matters Relating to Enforceability of the Master Indenture
The obligations of the Obligor and any future Member of the Obligated Group
under the Series 2013A Note will be limited to the same extent as the obligations of
debtors typically are affected by bankruptcy, insolvency and the application of general
principles of creditors' rights and as additionally described below.
The accounts of the Obligor and any future Member of the Obligated Group will
be combined for financial reporting purposes and will be used in determining whether
various covenants and tests contained in the Master Indenture (including tests relating to
the incunence of Additional Indebtedness) are met, notwithstanding the uncertainties as
to the enforceability of certain obligations of the Obligated Group contained in the
Master Indenture which bear on the availability of the assets and revenues of the
Obligated Group to pay debt service on Obligations, including the Series 20 13A Note
pledged under the related Bond Indenture as security for the related series of Bonds. The
obligations described herein of the Obligated Group to make payments of debt service on
Obligations issued under the Master Indenture (including transfers in connection with
voluntary dissolution or liquidation) may not be enforceable to the extent (1)
enforceability may be limited by applicable bankruptcy, moratorium, reorganization or
41
similar laws affecting the enforcement of creditors' rights and by general equitable
principles and (2) such payments (i) are requested with respect to payments on any
Obligations issued by a member other than the member from which such payment is
requested, issued for a purpose which is not consistent with the charitable purposes of the
Member of the Obligated Group from which such payment is requested or issued for the
benefit of a Member of the Obligated Group which is not a Tax-Exempt Organization;
(ii) are requested to be made from any moneys or assets which are donor-restricted or
which are subject to a direct or express trust which does not permit the use of such
moneys or assets for such a payment; (iii) would result in the cessation or discontinuation
of any material portion of the health care or related services previously provided by the
Member of the Obligated Group from which such payment is requested; or (iv) are
requested to be made pursuant to any loan violating applicable usury laws. The extent to
which the assets of any future Member of the Obligated Group may fall within the
categories (ii) and (iii) above with respect to the Obligations cannot now be determined.
The amount of such assets which could fall within such categories could be substantial.
A Member of the Obligated Group may not be required to make any payment on
any Obligation, or portion thereof, the proceeds of which were not loaned or otherwise
disbursed to such Member of the Obligated Group to the extent that such payment would
render such Member of the Obligated Group insolvent or which would conflict with or
not be permitted by or which is subject to recovery for the benefit of other creditors of
such Member of the Obligated Group under applicable laws. There is no clear precedent
in the law as to whether such payments from a Member of the Obligated Group in order
to pay debt service on the Series 20 13A Note may be voided by a trustee in bankruptcy in
the event of bankruptcy of a Member of the Obligated Group, or by third-party creditors
in an action brought pursuant to Florida fraudulent conveyance statutes. Under the
United States Bankruptcy Code, a trustee in bankruptcy and, under Florida fraudulent
conveyance statutes and common law, a creditor of a related guarantor, may avoid any
obligation incuned by a related guarantor if, among other bases therefor, (1) the
guarantor has not received fair consideration or reasonably equivalent value in exchange
for the guaranty and (2) the guaranty renders the guarantor insolvent, as defined in the
United States Bankruptcy Code or Florida fraudulent conveyance statutes, or the
guarantor is undercapitalized.
Application by comis of the tests of "insolvency," "reasonably equivalent value"
and "fair consideration" has resulted in a conflicting body of case law. It is possible that,
in an action to force a Member of the Obligated Group to pay debt service on an
Obligation for which it was not the direct beneficiary, a court might not enforce such a
payment in the event it is determined that such member is analogous to a guarantor of the
debt of the Obligated Group who directly benefited from the bonowing and that
sufficient consideration for such member's guaranty was not received and that the
incun·ence of such Obligation has rendered or will render the such member insolvent.
42
The effectiveness of the security interest in the Obligated Group's Gross Revenues
granted in the Master Indenture may be limited by a number of factors, including:
(i) present or future prohibitions against assignment contained in any applicable statutes
or regulations; (ii) certain judicial decisions which cast doubt upon the right of the Master
Trustee, in the event of the bankruptcy of any Member of the Obligated Group, to collect
and retain accounts receivable from Medicare, Medicaid, general assistance and other
governmental programs; (iii) commingling of the proceeds of Gross Revenues with other
moneys of a Member of the Obligated Group not subject to the security interest in Gross
Revenues; (iv) statutory liens; (v) rights arising in favor of the United States of America
or any agency thereof; (vi) constructive trusts, equitable or other rights impressed or
conferred by a federal or state court in the exercise of its equitable jurisdiction; (vii)
federal bankruptcy laws which may affect the enforceability of the mortgage or the
security interest in the Gross Revenues of the Obligated Group which are earned by the
Obligated Group within 90 days preceding or, in certain circumstances with respect to
related corporations, within one year preceding and after any effectual institution of
bankruptcy proceedings by or against a Member of the Obligated Group; (viii) rights of
third parties in Gross Revenues converted to cash and not in the possession of the Master
Trustee; and (ix) claims that might arise if appropriate financing or continuation
statements are not filed in accordance with the Florida Uniform Commercial Code as
from time to time in effect.
Pursuant to the Master Indenture, each Member of the Obligated Group who
pledges its Gross Revenues under the Master Indenture covenants and agrees that, if an
Event of Default involving a failure to pay any installment of interest or principal on an
Obligation should occur and be continuing, it will deposit daily the proceeds of its Gross
Revenues. Such deposits will continue daily until such default is cured.
It is unclear whether the covenant to deposit the proceeds of Gross Revenues with
the Master Trustee is enforceable. In light of the foregoing and of questions as to
limitations on the effectiveness of the security interest granted in such Gross Revenues,
as described above, no opinion will be expressed by counsel to the Obligor as to
enforceability of such covenant with respect to the required deposits.
Environmental Matters
Health care providers are subject to a wide variety of federal, state and local
environmental and occupational health and safety laws and regulations which address,
among other things, health care operations, facilities and properties owned or operated by
health care providers. Among the type of regulatory requirements faced by health care
providers are (a) air and water quality control requirements, (b) waste management
requirements, including medical waste disposal, (c) specific regulatory requirements
applicable to asbestos, polychlorinated biphenyls and radioactive substances,
(d) requirements for providing notice to employees and members of the public about
hazardous materials handled by or located at the clinics, (e) requirements for training
43
employees in the proper handling and management of hazardous materials and wastes
and (f) other requirements.
In its role as the owner and operator of properties or facilities, each Member of the
Obligated Group may be subject to liability for investigating and remedying any
hazardous substances that may have migrated off of its property. Typical health care
operations include, but are not limited to, in various combinations, the handling, use,
storage, transportation, disposal and discharge of hazardous, infectious, toxic,
radioactive, flammable and other hazardous materials, wastes, pollutants or contaminants.
As such, health care operations are particularly susceptible to the practical, financial and
legal risks associated with compliance with such laws and regulations. Such risks may
(a) result in damage to individuals, property or the environment, (b) intenupt operations
and increase their cost, (c) result in legal liability, damages, injunctions or fines and
(d) result in investigations, administrative proceedings, penalties or other govemmental
agency actions. There is no assurance that a Member of the Obligated Group will not
encounter such risks in the future, and such risks may result in material adverse
consequences to the operations or financial condition of the Obligated Group.
The Mortgaged Property was subject to a "Phase I" environmental assessment
which concluded [that no significant environmental issues are present on the Mmigaged
Property and no fmiher testing is recommended at this time.] At the present time
management of the Obligor is not aware of any pending or threatened claim, investigation
or enforcement action regarding such environmental issues which, if determined
adversely to the Obligor, would have a material adverse effect on its operations or
financial condition.
Taxation of Interest on the Bonds
Because the existence and continuation of the excludability of the interest on the
Bonds from federal gross income depends upon events occuning after the date of
issuance of the Bonds, the opinion of Bond Counsel described under the caption "TAX
MATTERS" herein assumes the compliance by the Obligor and the Issuer with the
provisions of the Code and the regulations relating thereto. No opinion is expressed by
Bond Counsel with respect to the excludability of the interest on the Bonds in the event
of noncompliance with such provisions. The failure of the Obligor or the Issuer to
comply with the provisions of the Code and the regulations thereunder may cause the
interest on the Bonds to become includable in gross income as of the date of issuance.
Bond Examinations
IRS officials have recently indicated that more resources will be invested in audits
of tax-exempt bonds in the charitable organization sector with specific review of private
use. In 2007 the IRS sent approximately two hundred post-issuance compliance
questionnaires to nonprofit corporations that have bonowed on a tax-exempt basis
44
regarding their post-issuance compliance with various requirements for maintaining the
federal tax exemption of interest on their bonds. The questionnaire included questions
relating to the nonprofit corporation's (i) record retention, which the IRS has particularly
emphasized, (ii) qualified use of bond-financed property, (iii) arbitrage yield restriction
and rebate requirements, (iv) debt management policies and (v) voluntary compliance and
education. On September 11, 2008, the IRS issued an interim report analyzing the
responses from the completed questionnaires. The report indicates that there are
significant gaps in the implementation by nonprofit corporations of post-issuance and
record retention procedures for tax-exempt bonds. IRS representatives indicate that after
analyzing responses from the first wave of questionnaires, thousands more will be sent.
Revision of IRS Service Form 990 for Nonprofit Corporations
The IRS Form 990 is used by 50 1 ( c )(3) not-for-profit organizations (including the
Obligor) to submit information required by the federal govemment for tax exemption.
On December 20, 2007, the IRS released a revised Form 990 that requires detailed public
disclosure of compensation practices, corporate govemance, loans to management and
others, joint ventures and other types of transactions, political campaign activities, and
other areas the IRS deems to be compliance risk areas. The revised form also requires
the disclosure of a significantly greater amount of both hard data and anecdotal
information on community benefit information on Schedule H to the Form, and
establishes uniform standards for reporting of information relating to tax exempt bonds,
including compliance with the arbitrage rules and rules limiting private use of bond-
financed facilities, including compliance with the safe harbor guidance in connection
with management contracts and research contracts. The redesigned Form 990 is intended
to result in enhanced transparency as to the operations of exempt organizations. It is also
likely to result in enhanced enforcement, as the redesigned Form 990 will make a wealth
of detailed information on compliance risk areas to the IRS and other stakeholders.
Nonprofit health care organizations also became subject to additional reporting for tax-
exempt bonds. These reporting and recordkeeping requirements go beyond what many
hospitals have done historically and require substantial additional effmis on the part of
hospitals with outstanding tax-exempt bonds. A new schedule to the Form 990 retum
(Schedule K) is intended to address what the IRS believes is significant noncompliance
with recordkeeping and record retention requirements. These concems were reinforced,
in the IRS's view, by the results of a bond questionnaire distributed to select hospitals in
September 2007, the results of which were released in September 2008 and described
above. Schedule K also focuses on the investment of bond proceeds that could violate
the arbitrage rebate requirements and the private use of bond-financed facilities. At this
time it is difficult to predict the additional burden that completion of the revised Form
990 may place on the Obligor and its operations.
45
Property and Casualty Insurance
Pursuant to the Master Indenture, the Obligated Group maintains insurance
coverage (including one or more self-insurance or shared or pooled-insurance programs)
to protect it and its Propetiy and operations, including without limitation professional
liability claims. Recent hmTicane seasons and the performance of the stock markets have
reduced the number and quality of providers in the insurance industry which has led to
increased premiums and reduced coverage for purchasers of insurance. Management of
the Obligor believes that the cutTent coverage limits provide reasonable coverage under
the circumstances to protect the Community, which coverage is consistent with the
coverage generally available to similarly situated communities. Nevertheless, should
losses exceed insurance coverage, it could have a material adverse effect on the financial
condition of the Obligated Group. Moreover, the Obligor is unable to predict the cost or
availability of any such property and casualty insurance when its cun·ent coverage
exptres.
Amendments to Documents
Certain amendments to the Master Indenture, the Bond Indenture, the Loan
Agreement and the Mortgage may be made without notice to or the consent of the holders
of the Bonds. Such amendments could affect the security for the Bonds. Cetiain
amendments, however, are not permitted without the consent of the holder of each
outstanding Bond affected thereby, including (1) extensions in the stated maturity of the
principal, or any installment of interest on, any Bond, or (2) any reduction in the principal
amount of or interest on any Bond. See "The Master Indenture-Amendments and
Waivers," "The Bond Indenture-Supplemental Bond Indenture," and "The Loan
Agreement-Amendments, Changes and Modifications" in APPENDIX C hereto.
Other Possible Risk Factors
The occutTence of any of the following events, or other unanticipated events,
could adversely affect the operations of the Obligor:
1. Reinstatement or establishment of mandatory govemmental wage, rent or
price controls;
2. Inability to control increases in operating costs, including salaries, wages
and fringe benefits, supplies and other expenses, given an inability to obtain
cotTesponding increases in revenues from residents whose incomes will largely be fixed;
3. Unionization, employee strikes and other adverse labor actions which could
result in a substantial increase in expenditures without a corresponding increase in
revenues;
46
4. Adoption of other federal, state or local legislation or regulations having an
adverse effect on the future operating or financial performance of the Obligor;
5. The cost and availability of energy;
6. Increased unemployment or other adverse economic conditions in the
service areas of the Obligor which would increase the proportion of patients who are
unable to pay fully for the cost of their care;
7. Any increase in the quantity of indigent care provided which is mandated
by law or required due to increased needs of the community in order to maintain the
charitable status of the Obligor;
8. Inflation or other adverse economic conditions;
9. Changes in tax, pension, social security or other laws and regulations
affecting the provisions of health care and other services to the elderly;
10. Inability to control the diminution of patients' assets or insurance coverage
with the result that the patients' charges are reimbursed from govemment reimbursement
programs rather than private payments;
11. The occurrence of natural disasters, including hurricanes, volcanic
eruptions and typhoons, floods or earthquakes, or failures of storm water detention
devices during such naturally occurring events, which may damage the Community and
other facilities of the Obligated Group, interrupt utility service to the Community and
such facilities, or otherwise impair the operation and generation of revenues from said
facilities; or
12. Cost and availability of any insurance, such as malpractice, fire, automobile
and general comprehensive liability, that organizations such as the Obligor and any other
Members of the Obligated Group generally carry.
FLORIDA REGULATION OF CONTINUING CARE FACILITIES
Continuing care facilities in Florida are regulated by the Department of Insurance
of the State of Florida (the "Insurance Department") under the provisions of Chapter 651,
Florida Statutes, as amended ("Chapter 651 "). Under Chapter 651, "continuing care"
means furnishing pursuant to an agreement shelter, food and either nursing care or certain
personal services, whether such nursing care or personal services are provided in the
facility or in another setting designated by the agreement for continuing care, to an
individual not related by consanguinity or affinity to the provider furnishing such care,
upon payment of an entrance fee. Agreements to provide continuing care include
agreements to provide care for any duration, including agreements that are terminable by
47
either party. "Personal services" include, but are not limited to, such services as
individual assistance with or supervision of essential activities of daily living. "Entrance
fee" means an initial or defeiTed payment of a sum of money or property made as full or
paliial payment to assure the resident a place in a facility. An accommodation fee,
admission fee or other fee of similar form and application is considered to be an entrance
fee.
Certificate of Authority
Chapter 651 provides that no person may engage in the business of providing
continuing care or enter into continuing care agreements or construct a facility for the
purpose of providing continuing care without a certificate of authority issued by the
Insurance Depaliment. A final celiificate of authority may be issued after the applicant
has provided the Insurance Depaliment with the information and documents required by
Chapter 651. The Obligor received a final certificate of authority for the Community,
which remains in full force and effect.
Once issued, a celiificate of authority is renewable annually as of each September
30 upon a determination by the Insurance Depaliment that the provider continues to meet
the requirements of Chapter 651. Annual repmis containing financial and other
information about the provider and the facility are required to be filed with the Insurance
Depaliment annually on or before each June 1. If a provider fails to COITect deficiencies
within 20 days of notice from the Insurance Depaliment, and if the time for colTection is
not extended, the Insurance Depmiment may institute delinquency proceedings against
the provider, as described below.
Required Reserves
Chapter 651 requires that each continuing care provider maintain: (a) a debt
service reserve in an amount equal to the principal and interest payments becoming due
during the current fiscal year (18 months' interest on the financing if no principal
payments are currently due) on any moligage loan or other long term financing, including
taxes and insurance; (b) an operating reserve in an amount equal to 15% of the facility's
average total annual operating expenses set folih in the annual reports filed pursuant to
Chapter 651 for the immediate preceding 3-year period, subject to adjustment in the event
there is a change in the number of facilities owned; and (c) a renewal and replacement
reserve in an amount equal to 15% of the total accumulated depreciation based on the
audited financial statements included in the facility's annual repm1 filed pursuant to
Chapter 651, not to exceed 15% of the facility's average operating expenses for the past 3
fiscal years based on the audited financial statements for each of such years. These
reserves are required to be held in a segregated escrow account maintained with a Florida
bank, savings and loan association or trust company acceptable to the Insurance
Depmiment and, in the case of the operating reserve, must be in an unencumbered
account held in escrow for the benefit of the residents. The Reserve Account established
48
with the Bond Tmstee pursuant to the Bond Indenture and the escrow account established
with First National Bank of South Miami, as escrow agent, are intended to meet the
requirements of Chapter 651 for those reserves (the "Required Reserves").
Chapter 651 requires the escrow agent holding the Required Reserves to deliver to
the Insurance Department quarterly repmis on the status of the escrow funds, including
balances, deposits and disbursements. Chapter 651 provides that withdrawals can be
made from the Required Reserves only after ten days' prior written notice to the
Insurance Department, except that in an emergency the provider may petition for a
waiver of such ten-day notice requirement (a waiver being deemed granted if not denied
by the Insurance Department within three working days). Fines may be imposed for
failure to deliver the quarterly repmis or notices of withdrawal within the required time
periods.
Continuing Care Agreements and Residents' Rights
Chapter 651 prescribes certain requirements for continuing care agreements and
requires Insurance Department approval of the form of an agreement before it is used and
of any changes to the terms of an agreement once it has been approved. In addition to
requiring that the agreement state the amounts payable by the resident, the services to be
provided and the health and financial conditions for acceptance of a resident, Chapter 651
requires that the agreement may be canceled by either party upon at least 30 days' notice.
A provider that does not give its residents a transferable membership right or ownership
interest in the facility may retain 2% of the entrance fee per month of occupancy prior to
cancellation, plus a processing fee not exceeding 4% of the entrance fee, and must pay
the refund within 120 days of notice of cancellation. The Resident Agreements for the
Community meet the requirements of this provision.
Chapter 651 requires that a prospective resident have the right to cancel without
penalty a continuing care agreement within seven days of signing the continuing care
agreement. During this seven-day period, any entrance fee or deposit must be held in
escrow or, at the request of the prospective resident, held by the provider. If the
prospective resident rescinds the continuing care contract during the seven-day rescission
period, the entrance fee or deposit must be refunded to the prospective resident without
deduction. If cancellation occurs after seven days, but prior to occupancy, the entire
entrance fee must be refunded, less a processing fee not exceeding 4%, within 60 days of
notice of cancellation. However, if cancellation occurs prior to occupancy due to death,
illness, injury or incapacity of the prospective resident, the entire entrance fee must be
refunded, less any costs specifically incutTed by the provider at the written request of the
resident.
Chapter 651 further requires that a resident may not be dismissed or discharged
without just cause. Failure to pay monthly maintenance fees will not be considered just
cause until such time as the amounts paid by the resident, plus any benefits under
49
Medicare or third party insurance, exceed the cost of caring for the resident, based on the
per capita cost to the facility (which cost may be adjusted propmiionately for amounts
paid above the minimum charge for above-standard accommodations).
Chapter 651 also contains provisions giving residents the right: to form residents'
organizations and choose representatives; to attend quatierly meetings with the provider;
and to inspect the provider's annual reports to the Insurance Department and any
examination reports prepared by the Insurance Department or any other governmental
agencies (except those which are required by law to be kept confidential). Prior to the
implementation of any increase in the monthly maintenance fee, the provider must
provide, at a quatierly meeting of the residents, the reasons, by department cost centers,
for any increase in the fee that exceeds the most recently published Consumer Price Index
for all Urban Consumers, all items, Class A Areas of the Southern Region. Residents
must also be notified of any plans filed with the Insurance Depatiment relating to
expansion of the facility or any additional financing or refinancing.
Examinations and Delinquency Proceedings
The Insurance Depatiment is required to examine the business of each continuing
care provider at least once every three years, in the same manner as provided under
Florida law for examination for insurance companies. Inspections may also be requested
by any interested party. The Insurance Depatiment is required to notify the provider of
any discrepancies and to set a reasonable time for con-ective action and compliance by
the provider.
The Insurance Depatiment may deny, suspend, revoke or refuse to renew a
cetiificate of authority for various grounds relating to: the insolvent condition of the
provider or the provider's being in a condition which renders its conduct of fmiher
business hazardous or injurious to the public; lack of one or more of the qualifications for
a certificate of authority; material misstatements, misrepresentation, fraud,
misappropriation of moneys or demonstrated lack of fitness or untmstworthiness;
violations of Chapter 651 or any regulation or order of the Insurance Department; or
refusal to permit examination or to furnish required information.
Suspension of a cetiificate of authority may not exceed one year, during which
period the provider may continue to operate and must file annual reports, but may not
issue new continuing care agreements. At the end of the suspension period, the
cetiificate of authority is to be reinstated, unless the Insurance Department finds that the
causes for suspension have not been removed or that the provider is otherwise not in
compliance with Chapter 651 (in which event the cetiificate of authority is deemed to
have been revoked as of the end of the suspension period). In lieu of suspension,
administrative fines may be levied, not exceeding $1,000 per violation, or $10,000 for
knowing and willful violations.
50
If the Insurance Department finds that sufficient grounds exist as to a continuing
care provider for the rehabilitation (i.e., receivership), liquidation, conservation,
reorganization, seizure or summary proceedings of an insurer as provided under Florida
law petiaining to insurance companies, the Insurance Department may petition for an
appropriate court order or pursue such other relief as is afforded under Part I of Chapter
631, Florida Statutes, as amended (the "Insurers Rehabilitation and Liquidation Act"), for
insurance companies generally. Such grounds include, but are not limited to, insolvency
or failure or refusal to comply with Insurance Depatiment requirements.
Chapter 651 provides that the rights of the Insurance Department are subordinate
to the rights of a trustee or lender pursuant to an indenture, loan agreement or mortgage
securing bonds issued to finance or refinance the facility. However, if the Insurance
Department has been appointed as receiver of the facility, the court having jurisdiction
over the receivership proceeding is authorized to enjoin a secured creditor from seeking
to dispose of the collateral securing its mortgage for up to 12 months, upon a showing of
good cause, such as a showing that the collateral should be retained in order to protect the
life, health, safety or welfare of the residents or to provide sufficient time for relocation
of the residents.
If a trustee or lender becomes the mmigagee under the Mmigage pursuant to a
foreclosure sale or otherwise through the exercise of remedies upon the default of the
mortgagor, the rights of a resident of any pmiion of the applicable Mortgaged Propetiy
govemed by Chapter 651, Florida Statutes, under a continuing care agreement, shall be
honored and shall not be disturbed or affected (except as described below) as long as the
resident continues to comply with all provisions of the continuing care agreement and has
assetied no claim inconsistent with the rights of the trustee or lender. In such event, the
Insurance Department shall not exercise its remedial rights provided under Chapter 651
with respect to the facility, including its right to enjoin disposal of the facility as
described in the preceding paragraph. Upon acquisition of a facility by a trustee or lender
pursuant to remedies under the Mortgage, the Insurance Department shall issue a 90-day
temporary cetiificate of authority to operate the facility, provided that the trustee or
lender will not be required to continue to engage in the marketing or resale of new
continuing care agreements, pay any refunds of entrance fees otherwise required to be
paid under a resident's continuing care agreement until expiration of such 90-day period,
be responsible for acts or omissions of the operator of the facility arising prior to the
acquisition of the facility by the trustee or lender, or provide services to the residents to
the extent that the trustee or lender would be required to advance funds that have not been
designated or set aside for such purposes.
DISCLOSURE OF POTENTIAL RELATIONSHIPS
In connection with this financing, the Obligor will establish a Project Fund,
Reserve Fund, Cost of Issuance Fund or other such account with the Bond Trustee that
51
will hold net bond proceeds and various funds held with the Master Trustee that will be
funded with funds provided for the benefit of the Project, in each case, until they are
withdrawn and expended. Under the terms of the Bond Indenture and the Master
Indenture, the Obligor may direct the Bond Trustee and/or the Master Trustee,
respectively to invest some or all of the funds within the investment parameters
established in the Bond Indenture or the Master Indenture, as applicable. It is possible
that the Obligor will elect to hire Ziegler Lotsoff Capital Management LLC, an affiliate
ofthe Underwriter, to direct the investment of these funds. If that occurs, Ziegler Lotsoff
Capital Management, LLC will receive a fee for managing those assets. At this time, no
relationship has been formally established.
FINANCIAL REPORTING AND CONTINUING DISCLOSURE
Financial Reporting
The Master Indenture requires that the Obligated Group Representative provide to
each Required Information Recipient, the following:
(i) Quarterly unaudited financial statements of the Obligated Group as soon as
practicable after they are available but in no event more than 45 days after the completion
of such fiscal quarter, including a combined or combining statement of revenues and
expenses and statement of cash flows of the Obligated Group dming such period, a
combined or combining balance sheet as of the end of each such fiscal quarter, and a
calculation of Days Cash on Hand, Historical Debt Service Coverage Ratio and
Occupancy, for such fiscal quarter all prepared in reasonable detail and certified, subject
to year-end adjustment, by an officer of the Obligated Group Representative. Such
financing statements and calculations will be accompanied by a comparison to the annual
budget provided pursuant to subparagraph (iii) below.
If the Historical Debt Service Coverage Ratio for the Obligated Group for any
Fiscal Year is less than 1.00:1 and Days Cash on Hand of the Obligated Group is less
than the Liquidity Requirement for any Testing Date as provided in the Master Indenture,
the Obligated Group will deliver the financial infmmation and the calculations described
in the above paragraph on a monthly basis within 45 days of the end of each month until
the Historical Debt Service Coverage Ratio of the Obligated Group is at least 1.00:1 and
Days Cash on Hand of the Obligated Group is at least equal to the applicable Liquidity
Requirement.
(ii) Within 150 days of the end of each Fiscal Year, an annual audited financial
report of the Obligated Group prepared by a firm of ce1iified public accountants,
including a combined and an unaudited combining balance sheet as of the end of such
Fiscal Year and a combined and an unaudited combining statement of cash flows for such
Fiscal Year and a combined and an unaudited combining statement of revenues and
52
expenses for such Fiscal Year, showing in each case in comparative form the financial
figures for the preceding Fiscal Year, together with a separate written statement of the
accountants preparing such report containing calculations of the Obligated Group's
Historical Debt Service Coverage Ratio and Days Cash on Hand for said Fiscal Year and
a statement that such accountants have no knowledge of any default under the Master
Indenture, or if such accountants have obtained knowledge of any such default or
defaults, they are required to disclose in such statement the default or defaults and the
nature thereof.
(iii) On or before the date of delivery of the financial reports referred to in
paragraph (ii) above, an Officer's Certificate of the Obligated Group Representative (A)
stating that the Obligated Group is in compliance with all of the terms, provisions and
conditions of the Master Indenture or, if not, specifying all such defaults and the nature
thereof, (B) calculating and certifying Days Cash on Hand and the Historical Debt
Service Coverage Ratio as of the end of such month or Fiscal Year, as appropriate, and
(C) attaching a summary of the Obligated Group's annual operating and capital budget for
the coming Fiscal Year.
(iv) On or before the date of delivery of the financial repmis referred to in
paragraphs (i) and (ii) above, a management's discussion and analysis of results for the
applicable fiscal period.
(v) Copies of (A) any board-approved revisions to the summary of the annual
budget provided pursuant to paragraph (iii) above, or (B) any correspondence to or from
the Internal Revenue Service concerning the status of the Obligor as an organization
described in Section 50l(c)(3) of the Code or with respect to the tax-exempt status of the
Bonds, promptly upon receipt.
(vi) Such additional information as the Master Trustee, the Bond Trustee or
Bondholder may reasonably request concerning any Member of the Obligated Group.
Continuing Disclosure
General. Inasmuch as the Bonds are limited obligations of the Issuer, the Issuer
has determined that no fmancial or operating data concerning it is material to any
decision to purchase, hold or sell the Bonds, and the Issuer will not provide any such
information. The Obligor has undertaken all responsibilities for any continuing
disclosure to holders of the Bonds as described below, and the Issuer shall have no
liability to the holders or any other person with respect to such disclosures. The Obligor
has covenanted for the benefit of the holders of the Bonds and the Beneficial Owners (as
hereinafter defined under this caption), pursuant to a Continuing Disclosure Certificate
(the "Disclosure Agreement") to be executed and delivered by the Obligor, to provide or
cause to be provided (i) each year, certain financial information and operating data
relating to the Obligated Group (the "Annual Report") by not later than each April 30
53
after the last day of the fiscal year of the Obligated Group, commencing with the Annual
Report for the fiscal year ending December 31, 2012; provided, however, that if the
audited financial statements of the Obligated Group are not available by such date,
unaudited financial statements will be included in the Annual Report and audited
financial statements will be provided when and if available; and (ii) timely notices of the
occun·ence of certain enumerated events, if materiaL Cun·ently the fiscal year of the
Obligated Group commences on January 1. "Beneficial Owners" means the beneficial
owner of any Bond held in a book-entry only system. In addition, the Obligor will
provide the Dissemination Agent and the Repositories, as defined in the Disclosure
Agreement, a copy of any information provided pursuant to the Master Indenture as
described above under the subcaption "Financial Reporting" (the "Additional
Information").
The Annual Report and the Additional Information will be filed by or on behalf of
the Obligor and made available to holders of the Bonds through EMMA
(http://emma.msrb.org), the information repository of the Municipal Securities
Rulemaking Board, to comply with Rule 15c2-12 (as amended from time to time the
"Rule") of the Securities and Exchange Commission (the "SEC"). These covenants have
been made in order to assist the Underwriter and registered brokers, dealers and
municipal securities dealers in complying with the requirements of the Rule.
Notice of Certain Events, If Material. The Obligor covenants to provide, or cause
to be provided, notice of the occun·ence of any of the following events with respect to the
Bonds, if material, in a timely manner and in accordance with the Rule:
(1) Principal and interest payment delinquencies;
(2) Non-payment related defaults;
(3) Unscheduled draws on debt service reserves reflecting financial difficulties;
(4) Unscheduled draws on credit enhancements reflecting financing
difficulties;
(5) Substitution of credit or liquidity providers, or their failure to perform;
( 6) Adverse tax opinions or events adversely affecting the tax-exempt status of
the Bonds;
(7) Modifications to rights of the owners of the Bonds;
(8) Bond calls;
(9) Defeasances;
54
(10) Release, substitution, or sale ofpropetiy securing repayment ofthe Bonds;
(11) Rating changes;
(12) Bankruptcy, insolvency, receivership or similar event of the obligated
person;
(13) The consummation of a merger, consolidation or acquisition involving the
obligated person or sale of all or substantially all of the assets of the
obligated person, other than in the ordinary course of business, the entry
into a definitive agreement to undertake such action, or the termination of a
definitive agreement relating to any such actions, other than pursuant to its
terms, if material; and
( 14) Appointment of a successor or additional trustee or the change of name of a
trustee, if material.
Annual Report. The Annual Repmi will contain or incorporate by reference at
least the following items:
(a) The audited financial statements of the Obligated Group for the fiscal year
ending immediately preceding the due date of the Annual Repmi; provided, however, that
if such audited financial statements are not available by the deadline for filing the Annual
Report, they shall be provided when and if available, and unaudited financial statements
shall be included in the Annual Repmi. The financial statements shall be audited and
prepared pursuant to accounting and repmiing policies conforming in all material
respects to generally accepted accounting principles.
(b) The Additional Information required by the Master Indenture.
The Obligor may modify from time to time the specific types of information
provided to the extent necessary to conform to changes in legal requirements, provided
that any such modification will be done in a manner consistent with the Rule and will not
materially impair the interests of the Bondowners.
Any or all of the items listed above may be included by specific reference to other
documents which previously have been provided to each of the repositories described
above or filed with the SEC. If the document included by reference is a final official
statement, it must be available from the Municipal Securities Rulemaking Board. The
Obligor shall clearly identify each such other document as included by reference.
Failure to Comply. In the event of a failure of the Obligor to comply with any
provision of the Disclosure Agreement, any owner of Bonds or Beneficial Owner may
take such actions as may be necessary and appropriate, including seeking specific
performance by court order, to cause the Obligor to comply with the obligations under
55
the Disclosure Agreement. A failure to comply with the Disclosure Agreement shall not
be deemed an Event of Default under the Bond Indenture. The sole remedy under the
Disclosure Agreement in the event of any failure of the Obligor to comply with the
Disclosure Agreement shall be an action to compel performance, and no person or entity
shall be entitled to recover monetary damage thereunder under any circumstances.
This will be the first Disclosure Agreement to which the Obligor will be a party,
and consequently, there have been no previous instances of the Obligor's failure to
comply with the Rule.
Amendment of the Disclosure Agreement. The provisions of the Disclosure
Agreement, including but not limited to the provisions relating to the accounting
principles pursuant to which the financial statements are prepared, may be amended as
deemed appropriate by an authorized officer of the Obligor but any such amendment
must be adopted procedurally and substantively in a manner consistent with the Rule,
including any interpretation thereof made from time to time by the SEC. Such
interpretations cmTently include the requirements that (a) the amendment may only be
made in connection with a change in circumstances that arises from a change in legal
requirements, change in law, or change in the identity, nature or status of the Obligated
Group or the type of activities conducted thereby, (b) the undertaking, as amended, would
have complied with the requirements of the Rule at the time of the primary offering of the
Bonds, after taking into account any amendments or interpretations of the Rule, as well as
any change in circumstances, and (c) the amendment does not materially impair the
interests of Bondowners, as determined by parties unaffiliated with the Obligor (such as
independent legal counsel). The foregoing interpretations may be changed in the future.
Compliance with Prior Undertakings. In connection with the issuance of the
Series 1999 Bonds (which are pmi of the Refunded Bonds) the Obligor entered into an
undetiaking in accordance with the Rule. During the period 2007 -2011, the Obligor
failed to either provide the required information or did not do so in a timely manner in
accordance with such undetiaking. The Obligor has subsequently filed all of the required
information and, in connection with the issuance of the Bonds, has implemented
procedures to ensure that the Annual Report and other required information under the
Disclosure Agreement are filed in a timely manner.
DISCLOSURE REQUIRED BY FLORIDA BLUE SKY REGULATIONS
Pursuant to Section 517.051, Florida Statutes, as amended, no person may directly
or indirectly offer or sell securities of the Issuer except by an offering circular containing
full and fair disclosure of all defaults as to principal or interest on its obligations since
December 31, 1975, as provided by rule of the Florida Department of Financial Services
(the "Depmiment"). Pursuant to Rule 69W-400.003, Florida Administrative Code, the
Depmiment has required the disclosure of the amounts and types of defaults, any legal
56
proceedings resulting from such defaults, whether a tmstee or receiver has been
appointed over the assets of the Issuer, and certain additional financial information,
unless the Issuer believes in good faith that such information would not be considered
material by a reasonable investor.
As described herein, the Issuer has the power to issue bonds for the purpose of
financing other projects for other bon·owers which are payable from the revenues of the
particular project or borrower. Revenue bonds issued by the Issuer for other projects may
be in default as to principal and interest. The source of payment, however, for any such
defaulted bond is separate and distinct from the source of payment of the Bonds and,
therefore, any default on such bonds would not, in the judgment of the Issuer, be
considered material by a potential purchaser of the Bonds.
The Obligor has not defaulted in any payment of principal or interest after
December 31, 1975.
LITIGATION
Issuer
There is not now pending or, to the Issuer's knowledge, threatened any litigation
restraining or enjoining the issuance or delivery of the Bonds or the execution and
delivery by the Issuer of the Bond Indenture, or the Loan Agreement or questioning or
affecting the validity of the Bonds or the security therefor or the proceedings or Issuer
under which they are or are to be issued, respectively.
Obligor
There is no litigation pending or, to the Obligor's knowledge, threatened against
the Obligor, wherein an unfavorable decision would (i) adversely affect the ability of the
Obligor to constmct the Project or to operate its facilities or to carry out its obligations
under the Master Indenture, the Loan Agreement or the Mmigage or (ii) would have a
material adverse impact on the financial position or results of operations of the Obligor.
LEGAL MATTERS
Legal matters incident to the authorization, issuance and sale of the Bonds are
subject to the unqualified opinion of Bond Counsel. Foley & Lardner LLP has acted in
the capacity as Bond Counsel for the purpose of rendering an opinion with respect to the
authorization, issuance, delivery, legality and validity of the Bonds and for the purpose of
rendering an opinion on the exclusion of the interest on the Bonds from gross income for
federal income tax purposes and cetiain other tax matters and as Counsel to the Obligor.
57
Certain matters will be passed upon for the Issuer by its counsel, Alan C. Jensen,
Attorney at Law, Jacksonville Beach, Florida; for the Obligor by its counsel, Foley
& Lardner LLP; and for the Underwriter by its counsel, Nabors, Giblin &
Nickerson, P .A.
The various legal opinions to be delivered concun·ently with the delivery of the
Bonds express the professional judgment of the attomeys rendering the opinions as to the
legal issues explicitly addressed therein. In rendering a legal opinion, the attomey does
not become an insurer or guarantor of the expression of professional judgment, of the
transaction opined upon, or of the future performance of the parties to the transaction, nor
does the rendering of an opinion guarantee the outcome of any legal dispute that may
arise out of the transaction.
TAX MATTERS
In the opinion of Foley & Lardner LLP, Bond Counsel, based upon an analysis of
existing laws, regulations, rulings and court decisions, and assuming, among other
matters, the accuracy of certain representations and compliance with certain covenants,
interest on the Bonds is excluded from gross income for federal income tax purposes
under Section 103 of the Internal Revenue Code of 1986 (the "Code"). Bond Counsel is
of the fmiher opinion that interest on the Bonds is not a specific preference item for
purposes of the federal individual or corporate altemative minimum taxes, although Bond
Counsel observes that such interest is included in adjusted current eamings when
calculating corporate altemative minimum taxable income. A complete copy of the
proposed form of opinion of Bond Counsel is set forth in APPENDIX D hereto.
The Code imposes various restrictions, conditions and requirements relating to the
exclusion from gross income for federal income tax purposes of interest on obligations
such as the Bonds. The Issuer and the Obligor have covenanted to comply with certain
restrictions, conditions and requirements designed to ensure that interest on the Bonds
will not be included in federal gross income. Failure to comply with these covenants may
result in interest on the Bonds being included in gross income for federal income tax
purposes, possibly from the date of original issuance of the Bonds. The opinion of Bond
Counsel assumes compliance with these covenants. Bond Counsel has not undertaken to
determine (or to inform any person) whether any actions taken (or not taken) or events
occurring (or not occurring) or any matters coming to Bond Counsel's attention after the
date of issuance of the Bonds may adversely affect the value of, or the tax status of
interest on, the Bonds.
The opinion of Bond Counsel relies on factual representations made by the Issuer,
the Obligor and other persons, including but not limited to the Underwriter. These
factual representations include but are not limited to certifications by the Obligor
regarding the investment of proceeds of the Bonds and regarding use of prope1iy financed
58
and refinanced with proceeds of the Bonds that is reasonably expected to occur during the
entire term of the Bonds. Bond Counsel has not verified these representations by
independent investigation. Bond Counsel does not purport to be an expe1i in financial
analysis, financial projections or similar disciplines. Failure of any of these factual
representations to be correct may result in interest on the Bonds being included in gross
income for federal income tax purposes, possibly from the date of original issuance of the
Bonds.
Cetiain requirements and procedures contained or referred to in the Bond
Indenture, the Loan Agreement, the Tax Agreement, and other relevant documents may
be changed and certain actions (including, without limitation, defeasance of the Bonds)
may be taken or omitted under the circumstances and subject to the terms and conditions
set fmih in such documents. Bond Counsel expresses no opinion as to any Bond or the
interest thereon if any such change occurs or action is taken or omitted upon the advice or
approval of bond counsel other than Foley & Lardner LLP.
Although Bond Counsel is of the opinion that interest on the Bonds is excluded
from gross income for federal income tax purposes and is exempt from State of Florida
taxation to the extent described herein, the ownership or disposition of, or the accrual or
receipt of interest on, the Bonds may otherwise affect a Beneficial Owner's federal or
state tax liability. The nature and extent of these other tax consequences will depend
upon the particular tax status of the Beneficial Owner or the Beneficial Owner's other
items of income or deduction. Bond Counsel expresses no opinion regarding any such
other tax consequences.
Future legislation, if enacted into law, or clarification of the Code may cause
interest on the Bonds to be subject, directly or indirectly, to federal income taxation, or
otherwise prevent Beneficial Owners from realizing the full current benefit of the tax
status of such interest. The introduction or enactment of any such future legislation or
clarification of the Code may also affect the market price for, or marketability of, the
Bonds. Prospective purchasers of the Bonds should consult their own tax advisers
regarding any pending or proposed federal tax legislation, as to which Bond Counsel
expresses no opmwn.
The opinion of Bond Counsel is based on current legal authorities, covers celiain
matters not directly addressed by such authorities, and represents Bond Counsel's
judgment as to the proper treatment of the Bonds for federal income tax purposes. It is
not binding on the Intemal Revenue Service, or the courts, and is not a guarantee of
result. Fulihermore, Bond Counsel cannot give and has not given any opinion or
assurance about the future activities of the Issuer or the Obligor or about the effect of
future changes in the Code, the applicable regulations, the interpretation thereof or the
enforcement thereof by the Intemal Revenue Service. The Issuer and the Obligor have
covenanted, however, to comply with the requirements of the Code.
59
Bond Counsel's engagement with respect to the Bonds ends with the issuance of
the Bonds, and, unless separately engaged, Bond Counsel is not obligated to defend the
Issuer, the Obligor or the Beneficial owners regarding the tax-exempt status of the Bonds
in the event of an examination by the Internal Revenue Service. Under cunent
procedures, parties other than the Issuer, the Obligor and their appointed counsel,
including the Beneficial Owners, may have little, if any, right to participate in the
examination process. Moreover, because achieving judicial review in connection with an
examination of tax-exempt bonds is difficult, obtaining an independent review oflntemal
Revenue Service positions with which the Issuer or the Obligor legitimately disagrees,
may not be practicable. Any action of the Internal Revenue Service, including but not
limited to selection of the Bonds for examination, or the course or result of such
examination, or an examination of bonds presenting similar tax issues may affect the
market price for, or the marketability of, the Bonds, and may cause the Issuer, the
Obligor or the Beneficial Owners to incur significant expense.
Original Issue Discount
Some of the Bonds may have an issue price that is less than the amount payable at
the maturity of such Bonds (hereinafter called the "Discount Bonds"). Under existing
law, the original issue discount in the selling price of the Discount Bonds, to the extent
properly allocable to each owner of a Discount Bond, is excluded from gross income for
federal income tax purposes to the same extent that any interest payable on such Discount
Bond is or would be excluded from gross income for federal income tax purposes. The
original issue discount is the excess of the stated redemption price at maturity of such
Discount Bond over the initial offering price to the public, excluding underwriters or
other intermediaries, at which price a substantial amount of such Discount Bonds were
sold (the "issue price").
Under Section 1288 of the Code, original issue discount on tax-exempt obligations
accrues on a compound interest basis. The amount of original issue discount that accrues
to an owner of a Discount Bond during any accrual period generally equals (i) the issue
price of such Discount Bond plus the amount of original issue discount accrued in all
prior accrual periods multiplied by (ii) the yield to maturity of such Discount Bond
(determined on the basis of compounding at the close of each accrual period and properly
adjusted for the length of each accrual period), less (iii) any interest payable on such
Discount Bond during such accrual period.
The amount of original issue discount so accrued in a particular accrual period will
be considered to be received ratably on each day of the accrual period, and will increase
the owner's tax basis in such Discount Bond. The adjusted tax basis in a Discount Bond
will be used to determine taxable gain or loss upon a disposition (e.g., upon a sale,
exchange, redemption, or payment at maturity) of such Discount Bond.
60
Owners of Discount Bonds who did not purchase such Discount Bonds in the
initial offering at the issue price should consult their own tax advisors with respect to the
tax consequences of owning such Discount Bonds.
Owners of Discount Bonds should consult their own tax advisors with respect to
the state and local tax consequences of the Discount Bonds. It is possible that under the
applicable provisions governing the detennination of state and local income taxes,
accrued original issue discount on the Discount Bonds may be deemed to be received in
the year of accrual, even though there will not be a conesponding cash payment until a
later year.
Original Issue Premium
Some of the Bonds may have an issue price that is greater than the amount payable
at the maturity of such Bonds (hereinafter called the "Premium Bonds"). Any Premium
Bond purchased in the initial offering at the issue price will have "amortizable bond
premium" within the meaning of Section 171 of the Code. An owner of a Premium Bond
that has amortizable bond premium is not allowed any deduction for the amortizable
bond premium. During each taxable year, such an owner must reduce his or her tax basis
in such Premium Bond by the amount of the amortizable bond premium that is allocable
to the portion of such taxable year during which the owner held such Premium Bond.
The adjusted tax basis in a Premium Bond will be used to determine taxable gain or loss
upon a disposition (e.g., upon a sale, exchange, redemption, or payment at maturity) of
such Premium Bond.
Owners of Premium Bonds who did not purchase such Premium Bonds in the
initial offering at an issue price should consult their own tax advisors with respect to the
tax consequences of owning such Premium Bonds. Owners of Premium Bonds should
consult their own tax advisors with respect to the state and local tax consequences of the
Premium Bonds.
ADDITIONAL RISK FACTORS REGARDING
FEDERAL INCOME TAX MATTERS
The tax-exempt status of the Bonds currently depends, among other things, upon
the maintenance by the Obligor of its status as an organization described in Section
501(c)(3) of the Code. The maintenance by the Obligor of its status as an organization
described in Section 501(c)(3) of the Code is contingent upon compliance with general
rules promulgated in the Code and related regulations regarding the organization and
operation of tax-exempt entities, including their operation for charitable purposes and
their avoidance of transactions that may cause their assets to inure to the benefit of
private individuals. As these general principles were developed primarily for public
charities that do not conduct large-scale technical operations and business activities, they
61
often do not adequately address the myriad of operations and transactions entered into by
organizations such as the Obligor. The Internal Revenue Service has announced that it
intends to closely scrutinize transactions between not-for-profit corporations and for-
profit entities. In addition, Foley & Lardner, in its capacity as Bond Counsel or counsel
to the Obligor, has not rendered any opinion relating to whether actions that may be taken
upon default by the Obligor under covenants relating to the Bonds or other obligations of
the Obligor may adversely affect the status of the Obligor as an organization described in
section 501 ( c )(3) of the Code.
If a tax-exempt entity is found to have operated in such a manner as to result in an
inurement or unlawful private benefit, the only remedy available to the IRS under the
Code against that entity is revocation of that entity's tax-exempt status. Although the IRS
has not often revoked such 501 ( c )(3) tax-exempt status of an organization, it could do so
in the future. The loss of tax-exempt status by the Obligor could result in loss of the tax
exempt status of the Bonds and of other tax-exempt debt of the Obligor retroactively to
the date of issuance of such Bonds or debt, and, in turn, could cause defaults in the
Obligor's covenants relating to the Bonds and other the Obligor tax-exempt debt.
With increasing frequency, the IRS has imposed substantial monetary penalties
and future charity care or public benefit obligations on tax-exempt organizations that own
and operate hospitals in lieu of revoking tax-exempt status, as well as requiring that
certain transactions be altered, terminated or avoided in the future and/or requiring
governance or management changes. These penalties and obligations typically are
imposed on the tax-exempt organization pursuant to a "closing agreement." The
imposition of such penalties could have an adverse effect on the Obligor.
Less onerous sanctions have been enacted, which sanctions focus enforcement on
private persons that transact business with an exempt organization rather than the exempt
organization itself, but these sanctions do not replace the other remedies available to the
IRS as mentioned above. For example, the Taxpayers Bill of Rights 2, referred to for
purposes of this Official Statement as the Intermediate Sanctions Law, allows the Internal
Revenue Service to impose "intermediate sanctions" against certain individuals in
circumstances involving the violation by tax-exempt organizations of the prohibition
against private inurement. Intermediate sanctions may be imposed in situations in which
a "disqualified person" (such as an "insider") (i) engages in a transaction with a tax-
exempt organization on other than a fair market value basis, (ii) receives umeasonable
compensation from a tax-exempt organization or (iii) receives payment in an arrangement
that violates the prohibition against private inurement. These transactions are referred to
as "excess benefit transactions." Intermediate sanctions may be imposed in addition to
revocation of tax-exempt status.
In recent years, the Internal Revenue Service and state, county and local taxing
authorities have been undertaking audits and reviews of the operations of tax-exempt
organizations with respect to their exempt activities and the generation of umelated
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business taxable income. An investigation or audit could lead to a challenge which could
result in taxes, interest and penalties with respect to unreported unrelated business taxable
income and in some cases could ultimately affect the tax-exempt status of the Obligor as
well as the exclusion from gross income for federal income tax purposes of the interest
payable on the Bonds and other tax-exempt debt of the Obligor. In addition, legislation,
if any, which may be adopted at the federal, state and local levels with respect to
unrelated business income cannot be predicted. Any legislation could have the effect of
subjecting a portion of the income of the Obligor to federal or state income taxes.
Federal legislative health care reform initiatives proposed by cetiain members of
Congress have included provisions to revise the requirements for hospitals to qualify as
organizations described in Section 501 ( c )(3) of the Code. These proposals have in
certain cases included such new provisions as a requirement for a period community
needs assessment, requirements not to charge the maximum rate for patients who would
qualify and requirements for minimum amounts of charity care. Current legislative
proposals generally do not include transitional rules for hospitals, and tax-exempt bonds
issued for the benefit of hospitals, qualifying under the existing community benefit
standard. The effect of any of these proposed revisions, if enacted, is uncertain.
In addition to the foregoing proposals with respect to income by not-for-profit
corporations, various state and local governmental bodies have challenged the tax-exempt
status of not-for-profit institutions and have sought to remove the exemption from real
estate taxes of part or all of the property of various not-for-profit institutions on the
grounds that a pmiion of its property was not being used to fmiher the charitable
purposes of the institutions or that the institutions did not provide sufficient care to
indigent persons so as to warrant exemption from taxation as a charitable institution.
Several of these disputes have been determined in favor of the taxing authorities or have
resulted in settlements.
It is not possible to predict the scope or effect of future legislative or regulatory
actions with respect to taxation of not for profit corporations. There can be no assurance
that future changes in the laws and regulations of federal, state or local governments will
not materially adversely affect the operations and financial condition of the Obligor by
requiring it to pay income or local property taxes.
INDEPENDENT AUDITORS
The audited financial statements of the Obligor as of and for the years ended
December 31, 20 1 0 and 2011, included in this Official Statement, have been audited by
Moore Stephens Lovelace, P.A., independent auditors, as stated in their report appearing
in APPENDIX B to this Official Statement.
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RATING
At the time the Bonds are issued, Fitch Ratings ("Fitch") has assigned the Bonds a
rating of"_" based on the creditworthiness of the Obligor.
The rating reflects only the view of the rating agency and is not a recommendation
to buy, sell or hold the Bonds. Certain information and materials not included in this
Official Statement were fumished to Fitch concerning the Bonds. Generally, rating
agencies base their ratings on such information and materials and on investigations,
studies and assumptions by the rating agencies. There is no assurance that the rating
mentioned above will remain for any given period of time or that such rating might not be
lowered or withdrawn entirely by Fitch, if in its judgment circumstances so warrant.
Except as set forth above under "FINANCIAL REPORTING AND CONTINUING
DISCLOSURE," none of the Issuer, the Underwriter or the Obligor has any responsibility
to bring to the attention of the holders of the Bonds any proposed revisions or withdrawal
of the rating on the Bonds. Any such downward change in or withdrawal of such rating
may have an adverse effect on the market price of the Bonds.
A further explanation of the significance of the ratings may be obtained from the
rating agency.
UNDERWRITING
The Bonds are being purchased by B.C. Ziegler and Company as Underwriter for
a purchase price of$ (representing the principal amount of the Bonds minus
an underwriter's discount of$ and a net original issue discount on the Bonds
of $ , plus accrued interest on the Bonds, pursuant to a Bond Purchase
Agreement, entered into by and between the Issuer and the Underwriter as approved by
the Obligor (the "Contract of Purchase"). Pursuant to a Letter of Representation and
Indemnification delivered concun·ently with the Contract of Purchase, the Obligor has
agreed to indemnify the Underwriter and the Issuer against certain liabilities. The
Underwriter reserves the right to join with dealers and other underwriters in offering the
Bonds to the public. The obligations of the Undetwriter to accept delivery of the Bonds
are subject to various conditions contained in the Contract of Purchase. The Contract of
Purchase provides that the Undetwriter will purchase all of the Bonds if any Bonds are
purchased.
MISCELLANEOUS
The references herein to the Act, the Bond Indenture, the Loan Agreement, the
Master Indenture, the Mortgage and other materials are only brief outlines of certain
provisions thereof and do not purport to summarize or describe all the provisions thereof.
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Reference is hereby made to such instruments, documents and other materials, copies of
which will be furnished by the Bond Trustees upon request for fmiher information.
Any statements in this Official Statement involving matters of opinion, whether or
not expressly so stated, are intended as such and not as representations of fact.
The attached APPENDICES A through E are integral patis of this Official
Statement and should be read in their entirety together with all of the foregoing
statements.
It is anticipated that CUSIP identification numbers will be printed on the Bonds,
but neither the failure to print such numbers on any Bond nor any error in the printing of
such numbers will constitute cause for a failure or refusal by the purchaser thereof to
accept delivery of or pay for any Bonds.
The information assembled in this Official Statement has been supplied by the
Obligor and other sources believed to be reliable, and, except for the statements under the
heading "THE ISSUER" herein and information relating to the Issuer under the heading
"LITIGATION-Issuer," the Issuer makes no representations with respect to nor
warrants the accuracy of such information. The Obligor has agreed to indemnify the
Issuer and the Underwriter against certain liabilities relating to the Official Statement.
NAVAL CONTINUING CARE
RETIREMENT FOUNDATION, INC.
By: __________________________ ___
President
65
APPENDIX A
THE OBLIGOR AND THE COMMUNITY
APPENDIXB
AUDITED FINANCIAL STATEMENTS
APPENDIXC
DEFINITIONS OF CERTAIN TERMS
AND EXCERPTS OF CERTAIN PROVISIONS
OF CERTAIN PRINCIPAL DOCUMENTS
APPENDIXD
PROPOSED FORM OF BOND COUNSEL OPINION
APPENDIXE
BOOK-ENTRY ONLY SYSTEM
This section describes how ownership of the Bonds is to be transferred and how
the principal of, premium, if any, and interest on the Bonds are to be paid to and credited
by DTC while the Bonds are registered in its nominee name. The information in this
section concerning DTC and the Book-Entry Only System has been provided by DTC for
use in disclosure documents such as this Official Statement. The Issuer believes the
source of such information to be reliable, but takes no responsibility for the accuracy or
completeness thereof.
The Issuer cannot and does not give any assurance that (1) DTC will distribute
payments of debt service on the Bonds, or redemption or other notices, to DTC
Participants, (2) DTC Participants or others will distribute debt service payments paid to
DTC or its nominee (as the registered owner of the Bonds), or redemption or other
notices, to the Beneficial Owners, or that they will do so on a timely basis, or (3) DTC
will serve and act in the manner described in this Official Statement. The cmTent rules
applicable to DTC are on file with the Securities and Exchange Commission, and the
current procedures of DTC to be followed in dealing with DTC Participants are on file
withDTC.
DTC will act as securities depository for the Bonds. The Bonds will be issued as
fully-registered securities registered in the name of Cede & Co. (DTC's partnership
nominee) or such other name as may be requested by an authorized representative of
DTC. One fully-registered Bond will be issued for each maturity of the Bonds, each in
the aggregate principal amount of such maturity, and will be deposited with DTC.
DTC, the world's largest securities depository, is a limited-purpose trust company
organized under the New York Banking Law, a "banking organization" within the
meaning of the New York Banking Law, a member of the Federal Reserve System, a
"clearing corporation" within the meaning of the New York Uniform Commercial Code,
and a "clearing agency" registered pursuant to the provisions of Section 17 A of the
Securities Exchange Act of 1934. DTC holds and provides asset servicing for over 3.5
million issues of U.S. and non-U.S. equity issues, corporate and municipal debt issues,
and money market instruments (from over 100 countries) that DTC's participants ("Direct
Participants") deposit with DTC. DTC also facilitates the post-trade settlement among
Direct Participants of sales and other securities transactions in deposited securities,
through electronic computerized book-entry transfers and pledges between Direct
Participants' accounts. This eliminates the need for physical movement of securities
certificates. Direct Participants include both U.S. and non-U.S. securities brokers and
dealers, banks, trust companies, clearing corporations, and certain other organizations.
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DTC is a wholly-owned subsidiary of The Depository Trust & Clearing Authority
("DTCC"). DTCC is the holding company for DTC, National Securities Clearing
Corporation, and Fixed Income Clearing Corporation, all of which are registered clearing
agencies. DTCC is owned by the users of its regulated subsidiaries. Access to the DTC
system is also available to others such as both U.S. and non-U.S. securities brokers and
dealers, banks, trust companies, and clearing corporations that clear through or maintain a
custodial relationship with a Direct Participant, either directly or indirectly ("Indirect
Participants"). DTC has Standard & Poor's highest rating: AAA. The DTC Rules
applicable to its Participants are on file with the Securities and Exchange Commission.
More information about DTC can be found at www.dtcc.com and www.dtc.org.
Purchases of Bonds under the DTC system must be made by or through Direct
Participants, which will receive a credit for the Bonds on DTC's records. The ownership
interest of each actual purchaser of each Bond ("Beneficial Owner") is in tum to be
recorded on the Direct and Indirect Participants' records. Beneficial Owners will not
receive written confirmation from DTC of their purchase. Beneficial Owners are,
however, expected to receive written confirmations providing details of the transaction,
as well as periodic statements of their holdings, from the Direct or Indirect Participant
through which the Beneficial Owner entered into the transaction. Transfers of ownership
interests in the Bonds are to be accomplished by entries made on the books of Direct and
Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not
receive certificates representing their ownership interests in Bonds, except in the event
that use of the book-entry system for the Bonds is discontinued.
To facilitate subsequent transfers, all Bonds deposited by Direct Participants with
DTC are registered in the name of DTC's pminership nominee, Cede & Co., or such other
name as may be requested by an authorized representative of DTC. The deposit of Bonds
with DTC and their registration in the name of Cede & Co. or such other DTC nominee
do not effect any change in beneficial ownership. DTC has no knowledge of the actual
Beneficial Owners of the Bonds; DTC's records reflect only the identity of the Direct
Participants to whose accounts such Bonds are credited, which may or may not be the
Beneficial Owners. The Direct and Indirect Patiicipants will remain responsible for
keeping account of their holdings on behalf of their customers.
Conveyance of notices and other communications by DTC to Direct Participants,
by Direct Participants to Indirect Patiicipants, and by Direct Participants and Indirect
Patiicipants to Beneficial Owners will be governed by arrangements among them, subject
to any statutory or regulatory requirements as may be in effect from time to time.
Beneficial Owners of the Bonds may wish to take certain steps to augment the
transmission to them of notices of significant events with respect to the Bonds, such as
redemptions, tenders, defaults, and proposed amendments to the Indenture. For example,
Beneficial Owners of Bonds may wish to ascertain that the nominee holding the Bonds
for their benefit has agreed to obtain and transmit notices to Beneficial Owners. In the
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alternative, Beneficial Owners may wish to provide their names and addresses to the
Paying Agent/Registrar and request that copies of notices be provided directly to them.
Redemption notices shall be sent to DTC. If less than all of the Bonds within an
issue are being redeemed, DTC's practice is to detetmine by lot the amount of the interest
of each Direct Participant in such issue to be redeemed.
Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote
with respect to the Bonds unless authorized by a Direct Participant in accordance with
DTC's MMI Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to
the Issuer as soon as possible after the record date. The Omnibus Proxy assigns Cede &
Co.'s consenting or voting rights to those Direct Participants to whose accounts the Bonds
are credited on the record date (identified in a listing attached to the Omnibus Proxy).
Principal and interest payments and redemption proceeds on the Bonds will be
made to Cede & Co., or such other nominee as may be requested by an authorized
representative of DTC. DTC's practice is to credit Direct Participants' accounts upon
DTC's receipt of funds and conesponding detail information from the Issuer or the
Paying Agent/Registrar, on payable date in accordance with their respective holdings
shown on DTC's records. Payments by Participants to Beneficial Owners will be
governed by standing instmctions and customary practices, as is the case with securities
held for the accounts of customers in bearer form or registered in "street name," and will
be the responsibility of such Participant and not of DTC nor its nominee, the Paying
Agent/Registrar, or the Issuer, subject to any statutory or regulatory requirements as may
be in effect from time to time. Payment of redemption proceeds, distributions, and
dividend payments to Cede & Co. (or such other nominee as may be requested by an
authorized representative of DTC) is the responsibility of the Issuer or the Paying
Agent/Registrar, disbursement of such payments to Direct Participants will be the
responsibility of DTC, and disbursement of such payments to the Beneficial Owners will
be the responsibility of Direct and Indirect Participants.
DTC may discontinue providing its services as depository with respect to the
Bonds at any time by giving reasonable notice to the Issuer or the Paying
Agent/Registrar. Under such circumstances, in the event that a successor depository is
not obtained, Bond certificates are required to be printed and delivered.
The Issuer may decide to discontinue use of the system of book-entry only
transfers through DTC (or a successor securities depository). In that event, Bond
certificates will be printed and delivered to DTC.
Use of Certain Terms in Other Sections ofthis Official Statement
In reading this Official Statement it should be understood that while the Bonds are
in the Book-Entry Only System, references in other sections of this Official Statement to
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registered owners should be read to include the person for which the Pmiicipant acquires
an interest in the Bonds, but (i) all rights of ownership must be exercised through DTC
and the Book-Entry Only System, and (ii) except as described above, notices that are to
be given to registered owners under the Indentures will be given only to DTC.
Information concerning DTC and the Book-Entry Only System has been obtained
from DTC and is not guaranteed as to accuracy or completeness by, and is not to be
construed as a representation by the Issuer or the Underwriter.
Effect of Termination ofBook-Entry Only System
In the event that the Book-Entry Only System is discontinued by DTC or the use
of the Book-Entry Only System is discontinued by the Issuer, the following provisions
will be applicable to the Bonds. The Bonds may be exchanged for an equal aggregate
principal amount of the Bonds in authorized denominations and of the same maturity
upon sunender thereof at the principal office for payment of the Bond Trustee. The
transfer of any Bond may be registered on the books maintained by the Bond Trustee for
such purpose only upon the smTender of such Bond to the Bond Trustee with a duly
executed assignment in form satisfactory to the Bond Trustee. For every exchange or
transfer of registration of Bonds, the Bond Trustee and the Issuer may make a charge
sufficient to reimburse them for any tax or other governmental charge required to be paid
with respect to such exchange or registration of transfer. The Issuer shall pay the fee, if
any, charged by the Bond Trustee for the transfer or exchange. The Bond Trustee will
not be required to transfer or exchange any Bond after its selection for redemption. The
Issuer and the Bond Trustee may treat the person in whose name a Bond is registered as
the absolute owner thereof for all purposes, whether such Bond is overdue or not,
including for the purpose of receiving payment of, or on account of, the principal of,
premium, if any, and interest on, such Bond.
Limitations
For so long as the Bonds are registered in the name of DTC or its nominee, Cede
& Co., the Issuer and the Bond Trustee will recognize only DTC or its nominee, Cede &
Co., as the registered owner of the Bonds for all purposes, including payments, notices
and voting.
Under the Bond Indenture, payments made by the Bond Trustee to DTC or its
nominee will satisfy the Issuer's respective obligations under the Bond Indenture and the
Obligor's respective obligations under the Loan Agreement to the extent of the payments
so made.
None of the Issuer, the Underwriter nor the Bond Trustee will have any
responsibility or obligation with respect to (i) the accuracy of the records of DTC, its
nominee or any DTC Participant or Indirect Pmiicipant with respect to any beneficial
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ownership interest in any Bond, (ii) the delivery to any DTC Participant or Indirect
Participant or any other Person, other than an owner, as shown in the Bond Register, of
any notice with respect to any Bond including, without limitation, any notice of
redemption, tender, purchase or any event that would or could give rise to a tender or
purchase right or option with respect to any Bond, (iii) the payment to any DTC
Participant or Indirect Participant or any other Person, other than an owner, as shown in
the Bond Register, of any amount with respect to the principal of, premium, if any, or
interest on, or the purchase price of, any Bond or (iv) any consent given by DTC as
registered owner.
Prior to any discontinuation of the book-entry only system described above, the
Issuer and the Bond Trustee may treat DTC as, and deem DTC to be, the absolute owner
of the Bonds for all purposes whatsoever, including, without limitation, (i) the payment
of principal of, premium, if any, and interest on the Bonds, (ii) giving notices of
redemption and other matters with respect to the Bonds, (iii) registering transfers with
respect to the Bonds, and (iv) the selection of Bonds for redemption.
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