HomeMy WebLinkAbout[05] Public Hearing - Woodcrest of Country Manor
Council Agenda Item 5
MEETING DATE: May 20, 2019
AGENDA ITEM: Public Hearing – Woodcrest of Country Manor
Issuance of Revenue Bonds
SUBMITTED BY: Administration
BOARD/COMMISSION/COMMITTEE RECOMMENDATION:
PREVIOUS COUNCIL ACTION:
BACKGROUND INFORMATION: The City has been requested to allow for issuance of conduit
debt for the Country Manor Project. Conduit debt is limited-obligation revenue bonds or similar debt
instruments issued for the express purpose of providing capital financing for a specific third party. The
City in the past has issued such debt. Although these bonds bear the name of the City, the City has no
obligation for the debt. Accordingly the bonds are not reported as liabilities in the financial statements of
the City.
Staff has worked with the City bond counsel and bond advisor regarding the issuance. They have both
indicated there is no obligation to the City and there is no reason to not participate. The City fee schedule
includes the fee for conduit debt as follows: $ 50,000 fee; $ 3,000 application fee. Other than annually
requesting a confirmation letter the City does not have expenses associated. The fee allows an entity to
use the City’s name for tax exempt bonds. This practice is common in municipalities and the fees are
very similar. In addition, since the City will also be issuing bonds this year, the total bonds in the City’s
name will exceed 10 M; therefore, the City bonds will be non-bank qualified. Tammy Omdahl from
Northland Securities has calculated the difference in interest rate and that difference will be paid to the
City upfront as a deposit and is estimated to be $ 15,000.
Catherine Courtney from Briggs and Morgan has been representing the City on this matter and has
reviewed all the documents and will be present at the meeting as well. The process does require a public
hearing and representatives from Woodcrest, County Manor will be present.
BUDGET/FISCAL IMPACT: $ 50,000 Revenue
ATTACHMENTS: Request for Action
Public Hearing Notice
Resolution 2019-037
Resolution 2019-038
Assignment of Tax Abatement Agreement
Assignment and Pledge Agreement
Indenture of Trust
Purchase Agreement
Mortgage Agreement
Loan Agreement
Limited Guaranty Agreement
Preliminary Official Statement
REQUESTED COUNCIL ACTION: Authorize the Mayor and Administrator to execute the
following:
Resolution 2019-037 Providing for the Approval of A Housing Program and the Issuance and
Sale of Senior Housing and Healthcare Revenue Bonds (Woodcrest of Country Manor Project),
Series 2019 Relating to A Senior Housing and Health Care Project
Resolution 2019-038 Providing for the Consent to an Assignment of a Tax Abatement Agreement
Assignment of Tax Abatement Agreement, Assignment and Pledge Agreement, Indenture of
Trust, Purchase Agreement, Mortgage Agreement, Loan Agreement, and Limited Guaranty
Agreement
NOTICE OF PUBLIC HEARING ON A
PROPOSAL FOR A HOUSING PROGRAM FOR, AND
THE ISSUANCE OF REVENUE BONDS TO FINANCE,
A SENIOR HOUSING AND HEALTH CARE PROJECT
(WOODCREST OF COUNTRY MANOR PROJECT)
Notice is hereby given that the City Council of the City of St. Joseph, Minnesota (the
"City"), will meet in the City Council Chambers at the City Hall, located at 75 Callaway Street
East, in the City of St. Joseph, Minnesota, at or after 6:00 p.m. on May 20, 2019, to consider the
proposal of Country Manor St. Joseph, LLC (the "Borrower"), the sole member of which is The
Foundation for Health Care Continuums (the "Sole Member"), that the City adopt a housing
program for and finance the Project hereinafter described, pursuant to Minnesota Statutes,
Chapter 462C, by the issuance of revenue obligations.
The proceeds of such obligations will be used to (i) finance the acquisition of an
approximately 84-unit assisted living and memory care senior housing and health care facility
located at 1200 Lanigan Way SW within the City; (ii) fund required reserve funds; and (iii) pay
all or a portion of the costs of issuance (the "Project"). The Project will be owned by the
Borrower. The Project will be managed by Continuums Management Services LLC (the
"Manager"), an affiliate of the Borrower and the Sole Member. 24-hour nursing services will be
provided at the Project.
The maximum aggregate estimated principal amount of tax-exempt and/or taxable bonds
or other obligations to be issued in one or more series to finance the Project and related costs will
be $25,000,000.
Said bonds or other obligations, as and when issued, will not constitute a charge, lien or
encumbrance upon any property of the City except the Project and the revenues to be derived
from the Project. Such bonds or obligations will not be a charge against the City's general credit
or taxing powers but are payable from sums to be paid by the Borrower pursuant to a revenue
agreement.
A draft copy of the proposed housing finance program is available for inspection at City
Hall during normal business hours.
At the time and place fixed for the public hearing, the City Council of the City will give
all persons who appear at the hearing an opportunity to express their views with respect to the
proposal for the housing program and the revenue bonds. Written comments will be considered
if submitted to the City Administrator-Clerk at the above City office on or before the date of the
hearing.
CITY OF ST. JOSEPH, MINNESOTA
By Judy Weyrens
Its City Administrator-Clerk
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Extract of Minutes of a Meeting of the
City Council of the
City of St. Joseph, Minnesota
Pursuant to due call and notice thereof, a regular meeting of the City Council of the City
of St. Joseph, Minnesota, was duly held at the City Hall in such City on Monday, the 20th day of
May, 2019 at 6:00 o'clock p.m.
The following Council members were present:
and the following Council members were absent:
Member _____________ introduced the following resolution and moved its adoption:
CITY OF ST. JOSEPH
RESOLUTION NO. 2019-037
A RESOLUTION PROVIDING FOR THE APPROVAL OF
A HOUSING PROGRAM AND THE ISSUANCE AND SALE OF
SENIOR HOUSING AND HEALTHCARE REVENUE BONDS
(WOODCREST AT COUNTRY MANOR PROJECT), SERIES 2019
RELATING TO A SENIOR HOUSING AND HEALTH CARE PROJECT
BE IT RESOLVED by the City Council of the City of St. Joseph, Minnesota (the "City"),
as follows:
1. Authority. The City is, by the Constitution and laws of the State of Minnesota,
including Minnesota Statutes, Chapter 462C, as amended (the "Act"), authorized to issue and sell
its revenue bonds for the purpose of financing the cost of housing, assisted living, and memory
care facilities for the elderly and to enter into agreements necessary or convenient in the exercise
of the powers granted by the Act.
2. Authorization of Project; Documents Presented. Country Manor St. Joseph, LLC,
a Tennessee limited liability company (the "Borrower"), the sole member of which is The
Foundation For Health Care Continuums, a Tennessee nonprofit corporation (the "Sole
Member"), has proposed that the City issue and sell its Senior Housing and Healthcare Revenue
Bonds (Woodcrest at Country Manor Project), in one or more series of senior and/or subordinate
tax-exempt and taxable bonds, in an amount not to exceed $25,000,000 (the "Bonds") in
substantially the form set forth in the Indenture (as hereafter defined) pursuant to the Act and
loan the proceeds thereof to the Borrower, in order to finance the acquisition of an approximately
84-unit assisted living and memory care senior housing and health care facility located at 1200
Lanigan Way SW in the City (the "Project"). The Borrower has indicated that 24-hour nursing
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services will be provided at the Project. Forms of the following documents relating to the Bonds
have been submitted to the City, all of which are dated as of the first day of the month in which
the Bonds are issued, unless otherwise indicated:
(a) The Loan Agreement (the "Loan Agreement") between the City and the
Borrower, whereby the City agrees to make a loan of the proceeds of sale of the Bonds to
the Borrower and pursuant to which agreement the Borrower agrees to acquire the Project
and to pay amounts in repayment of the loan sufficient to provide for the full and prompt
payment of the principal of, premium, if any, and interest on the Bonds; and
(b) The Indenture of Trust (the "Indenture") between the City and U.S. Bank
National Association, as trustee (the "Trustee"), authorizing the issuance of the Bonds
and pledging certain revenues, including those to be derived from the Loan Agreement,
as security for the Bonds, and setting forth proposed recitals, covenants and agreements
relating thereto; and
(c) A Combination Mortgage, Security Agreement, Fixture Financing
Statement, and Assignment of Leases and Rents (the "Mortgage"), which may be
amended and restated, between the Borrower, as mortgagor, and the Trustee, as
mortgagee, granting to the Trustee a first mortgage lien on and security interest in the
Project as security for repayment of the Bonds (this document not executed by the City);
and
(d) The Purchase Agreement (the "Bond Purchase Agreement"), between
Dougherty & Company, LLC (the "Underwriter"), the Borrower, the Sole Member, and
the City, providing for the purchase of the Bonds from the City by the Underwriter and
setting forth the terms and conditions of purchase; and
(e) The Preliminary Official Statement (together with the form of final
Official Statement and the insertion of the final underwriting details of the Bonds,
including the interest rates thereon, and any other changes deemed necessary or desirable,
intended to constitute the form of the final Official Statement, and including all
Appendices thereto, the "Official Statement"), describing the offering of the Bonds, and
certain terms and provisions of the foregoing documents relating to the Bonds
3. Findings. It is hereby found, determined and declared that:
(a) Based on Borrower representations to the City, the Project constitutes a
project authorized by and described in the Act as elderly rental housing and health care
facilities.
(b) A public hearing on the Project and the housing finance program was held
this same date, after notice was published in the official newspaper of the City not less
than 15 days in advance of said public hearing, and materials were made available for
public inspection at the City Hall, all as required by the Act and Section 147(f) of the
Internal Revenue Code of 1986, as amended (the "Code"), at which public hearing all
those appearing who desired to speak were heard and written comments were accepted.
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(c) There is no regional development commission operating in the jurisdiction
of the City for submission of the housing finance program pursuant to Section 462C.04 of
the Act.
(d) No public official of the City has either a direct or indirect financial
interest in the Project nor will any public official either directly or indirectly benefit
financially from the Project.
(e) There is no litigation pending or, to the City's actual knowledge,
threatened against the City relating to the Bonds, the Loan Agreement, the Bond
Purchase Agreement, or the Indenture (collectively, the "City Bond Documents") or
questioning the due organization of the City, or the powers or authority of the City to
issue the Bonds and undertake the transactions contemplated hereby.
(f) The execution, delivery and performance of the City's obligations under
the City Bond Documents do not and will not violate any order of any court or other
agency of government of which the City is aware or in which the City is a party, or any
indenture, agreement or other instrument to which the City is a party or by which it or
any of its property is bound, or be in conflict with, result in a breach of, or constitute
(with due notice or lapse of time or both) a default under any such indenture, agreement
or other instrument.
(g) It is desirable that the Bonds be issued by the City upon the terms set forth
in the Indenture under the provisions of which the City's interest in the Loan Agreement
will be pledged to the Trustee as security for the payment of principal of, premium, if
any, and interest on the Bonds.
(h) Under the provisions of the Act, and as provided in the City Bond
Documents, the Bonds are not to be payable from nor charged upon any funds other than
amounts payable pursuant to the Loan Agreement and moneys in the funds and accounts
held by the Trustee which are pledged to the payment thereof; the City is not subject to
any liability thereon; no owners of the Bonds shall ever have the right to compel the
exercise of the taxing power of the City to pay any of the Bonds or the interest thereon,
nor to enforce payment thereof against any property of the City; the Bonds shall not
constitute a general or moral obligation of the City or a charge, lien or encumbrance,
legal or equitable, upon any property of the City (other than the interest of the City in the
Loan Repayments to be made by the Borrower under the Loan Agreement); and each
Bond issued under the Indenture shall recite that such Bond, including interest thereon,
shall not constitute or give rise to a charge against the general credit or taxing powers of
the City.
4. Approval and Execution of Documents. The form of the Bonds and the City
Bond Documents are approved. The City Bond Documents, together with such other documents
necessary in connection therewith, are authorized to be executed in the name and on behalf of the
City by the Mayor and the City Administrator–Clerk at such time, if any, as they may deem
appropriate, or executed or attested by other officers of the City, in substantially the form on file,
but with all such changes therein, not inconsistent with the Act or other law, as may be approved
by the officers executing the same, which approval shall be conclusively evidenced by the
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execution thereof; and then shall be delivered to the Trustee. Modifications to the form of
Mortgage may be made at the discretion of the parties thereto.
5. Approval, Execution and Delivery of Bonds. The City is authorized to issue the
Bonds, in one or more series of senior and/or subordinate taxable or tax-exempt obligations, in
an aggregate principal amount of not to exceed $25,000,000, in the form and upon the terms set
forth in the Indenture which terms are for this purpose incorporated in this resolution and made a
part hereof; provided, however, that the initial aggregate principal amount of and the maturities
of the Bonds, the interest rates thereon, and any provisions for the optional or mandatory
redemption thereof shall all be as set forth in the final form of the Indenture to be approved,
executed and delivered by the officers of the City authorized to do so by the provisions of this
Resolution, which approval shall be conclusively evidenced by such execution and delivery. The
Underwriter has agreed pursuant to the provisions of the Bond Purchase Agreement and subject
to the conditions therein set forth, to purchase the Bonds at the purchase price set forth in the
Bond Purchase Agreement and said purchase price is hereby accepted. The Mayor, City
Administrator–Clerk, and other City officers are authorized to execute the Bonds as prescribed in
the Indenture at such time, if any, as they may deem appropriate, and to deliver them to the
Trustee, together with a certified copy of this Resolution and the other documents required by
Section 3.03 of the Indenture for authentication, registration, and delivery to the Underwriter.
6. Official Statement. As requested by the Underwriter, the City hereby consents to
the circulation by the Underwriter of the Official Statement in offering the Bonds for sale;
provided, however, that the City has not participated in the preparation of the Official Statement
or independently verified the information in the Official Statement except with respect to the
information under the heading "THE ISSUER" and with respect to litigation against the City
relating to issuance of the Bonds (of which there is none) under the heading "ABSENCE OF
MATERIAL LITIGATION–The Issuer" and takes no responsibility for, and makes no
representations or warranties as to, the accuracy, completeness or sufficiency of such
information.
7. Certificates, etc. The Mayor, City Administrator–Clerk, and other officers of the
City are authorized at such time, if any, as they may deem appropriate, to prepare and furnish to
bond counsel and the purchaser of the Bonds, when issued, certified copies of all proceedings
and records of the City relating to the Bonds, and such other affidavits and certificates as may be
required to show the facts appearing from the books and records in the officers custody and
control or as otherwise known to them; and all such certified copies, certificates and affidavits,
including any heretofore furnished, shall constitute representations of the City as to the truth of
all statements contained therein.
8. Housing Program. The housing program in substantially the form attached hereto
as Exhibit A is hereby approved.
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Adopted by the City Council of the City of St. Joseph, Minnesota, this 20th day of May,
2019.
_______________________________________
Richard Schultz, Mayor
ATTEST:
Judy Weyrens, City Administrator–Clerk
The motion for the adoption of the foregoing resolution was duly seconded by member
____________________, and after full discussion thereof and upon vote being taken thereon, the
following voted in favor thereof:
and the following voted against the same:
whereupon said resolution was declared duly passed and adopted.
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EXHIBIT A
CITY OF ST. JOSEPH, MINNESOTA
HOUSING FINANCE PROGRAM
WOODCREST OF COUNTRY MANOR PROJECT
This housing finance program is undertaken by the City of St. Joseph, Minnesota (the
"City") for an existing Facility, hereinafter described, located within the City. The Project,
hereinafter described, will be financed by the issuance of revenue bonds or other obligations (the
"Bonds") pursuant to Minnesota Statutes, Chapter 462C, as amended (the "Act"), issued by the
City and in accordance with a loan agreement between the City and Country Manor St. Joseph,
LLC, a Tennessee limited liability company (the "Borrower") (the "Loan Agreement"), the sole
member of which is The Foundation for Health Care Continuums, a Tennessee nonprofit
corporation and an organization described in Section 501(c)(3) of the Internal Revenue Code of
1986, as amended (the "Sole Member").
The Project will consist of (i) financing the acquisition of an approximately 84-unit
assisted living and memory care senior housing and health care facility located at 1200 Lanigan
Way SW within the City (the "Facility"); (ii) funding required reserve funds; and (iii) paying all
or a portion of the costs of issuance (the "Project"). The Facility will be owned by the Borrower,
and managed by Continuums Management Services LLC (the "Manager"), an affiliate of the
Borrower and the Sole Member.
The Facility has been designed and is intended for residency solely by elderly and
disabled persons, and consequently, no income limits apply under the Act or other state law.
The City will issue the Bonds in one or more series of tax-exempt and/or taxable
obligations to finance the Project in a principal amount not to exceed $25,000,000. The
Borrower will be required, pursuant to the Loan Agreement, to make payments sufficient to pay
when due the principal of, premium, if any, and interest on the Bonds. The Bonds may be
structured so as to take advantage of whatever means are available or necessary and are
permitted by law to enhance the security for and marketability of the Bonds. Substantially all of
the net proceeds of the Bonds (the initial principal amount thereof, less amounts deposited in a
reasonably required reserve or paid out as costs of issuance of the Bonds) will be used to pay the
costs of the Project, including any functionally related and subordinate facilities.
Because the Borrower is disregarded as an entity separate from the Sole Member for
federal income tax purposes, no allocation of authority to issue tax-exempt bonds is required
pursuant to Minnesota Statutes, Chapter 474A. The Bonds will be issued pursuant to Section
462C.05 Subd. 7 of the Act, as the Facility will consist of a multifamily housing development
and a health care facility as defined in Minnesota Statutes, Section 469.153, and shall be payable
primarily from revenues of the Facility. The multifamily housing development is designed and
used for rental occupancy primarily by elderly, and nursing, medical, personal care, and other
health-related assisted living services are available on a 24-hour basis to all of the residents in the
Facility.
Issuance of the Bonds is anticipated to be in the summer of 2019.
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The Project will be carried out in accordance with applicable land use and development
restrictions, and any new construction and rehabilitation of the existing buildings is subject to
applicable state and local building codes. The Project is not inconsistent with any Housing Plan
adopted by the City under Minnesota Statutes, Chapter 462C. The Borrower and Manager will
be required to operate the Facility in accordance with state and local anti-discrimination laws and
ordinances.
The City has adequate existing capacity to administer, monitor, and supervise the Project,
although the City has reserved the right to contract with other public agencies or private parties
for these purposes.
The costs of the Project and the program of financing the Project, including specifically
the costs of the City, generally will be paid or reimbursed by the Borrower.
Adopted May 20, 2019
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11708988v3
STATE OF MINNESOTA )
) ss.
COUNTY OF STEARNS )
I, the undersigned, being the duly qualified and acting Administrator–Clerk of the City of
St. Joseph, Minnesota, DO HEREBY CERTIFY that I have compared the attached and foregoing
extract of minutes with the original thereof on file in my office, and that the same is a full, true
and complete transcript of the minutes of a meeting of the City Council of said City duly called
and held on the date therein indicated, insofar as such minutes relate to approval of a housing
program and the issuance of senior housing and healthcare revenue bonds by the City.
WITNESS my hand this ____ day of ____________, 2019.
______________________________
Judy Weyrens, City Administrator–Clerk
11708988v3
Extract of Minutes of a Meeting of the
City Council of the
City of St. Joseph, Minnesota
Pursuant to due call and notice thereof, a regular meeting of the City Council of the City
of St. Joseph, Minnesota, was duly held at the City Hall in such City on Monday, the 20th day of
May, 2019 at 6:00 o'clock p.m.
The following Council members were present:
and the following Council members were absent:
Member _____________ introduced the following resolution and moved its adoption:
CITY OF ST. JOSEPH
RESOLUTION NO. 2019-038
A RESOLUTION PROVIDING FOR THE CONSENT TO AN ASSIGNMENT OF A TAX
ABATEMENT AGREEMENT
WHEREAS, the City Council of the City of St. Joseph, Minnesota (the “City”) has
previously entered into a certain Tax Abatement Agreement, by and between the City and CM
St. Joe, LLC (the “Assignor”), dated August 1, 2016 (the “Abatement Agreement”); and,
WHEREAS, the Assignor now wishes to sell the property subject to the Abatement
Agreement (the “Property”), and, therefore, assign all of its rights and obligations in and under
the Abatement Agreement, to Country Manor St. Joseph, LLC, a Tennessee limited liability
company (the "Assignee"); and,
WHEREAS, pursuant to Section 3.5 of the Abatement Agreement, the Assignor is
required, and has requested, to receive written approval of the City prior to the transfer and
assignment of the Project, as defined in the Abatement Agreement;
NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of St. Joseph,
Minnesota (the "City"), as follows:
1. Findings. The City hereby finds that:
(a) the Assignee has the qualifications and financial responsibility, in the
reasonable judgment of the City, necessary and adequate to fulfill the obligations
undertaken in the Abatement Agreement by the Assignor; and,
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(b) the Assignment of Tax Abatement Agreement, by and between the
Assignor and the Assignee, in substantially the form presented, is satisfactory to the City;
and that the Assignee, for itself and its successors and assigns, and expressly for the
benefit of the City, has expressly assumed all of the obligations of the Assignor under the
Abatement Agreement and agreed to be subject to all the conditions and restrictions to
which the Assignor is subject.
2. Consent to Assignment of Tax Abatement Agreement. The City hereby consents
to the Assignment, and the Mayor and Administrator-Clerk are authorized to execute any
documents necessary to effectuate the same.
3. Assignment by Assignee for Financing. The City acknowledges that the Assignee
will assign the Abatement Agreement, and the payments to be received thereunder, to U.S. Bank
National Association, as bond trustee, as security for conduit revenue bonds to be issued by the
City for purposes of financing the acquisition of the Property. The appropriate City officials are
hereby authorized to execute and deliver any necessary documents required to document the
subordination of the Abatement Agreement to a mortgage securing the Assignee’s acquisition of
the Property.
Adopted by the City Council of the City of St. Joseph, Minnesota, this 20th day of May,
2019.
_______________________________________
Richard Schultz, Mayor
ATTEST:
Judy Weyrens, City Administrator–Clerk
The motion for the adoption of the foregoing resolution was duly seconded by member
____________________, and after full discussion thereof and upon vote being taken thereon, the
following voted in favor thereof:
and the following voted against the same:
whereupon said resolution was declared duly passed and adopted.
11737242v2
STATE OF MINNESOTA )
) ss.
COUNTY OF STEARNS )
I, the undersigned, being the duly qualified and acting Administrator–Clerk of the City of
St. Joseph, Minnesota, DO HEREBY CERTIFY that I have compared the attached and foregoing
extract of minutes with the original thereof on file in my office, and that the same is a full, true
and complete transcript of the minutes of a meeting of the City Council of said City duly called
and held on the date therein indicated, insofar as such minutes relate to the consent of the City to
a certain Assignment of a Tax Abatement Agreement, by and between CM St. Joe, LLC, and
Country Manor St. Joseph, LLC.
WITNESS my hand this ____ day of ____________, 2019.
______________________________
Judy Weyrens, City Administrator–Clerk
11737242v2
ASSIGNMENT OF TAX ABATEMENT AGREEMENT
THIS ASSIGNMENT OF TAX ABATEMENT AGREEMENT (this “Assignment”) is
dated as of ________________, 2019 (the “Effective Date”) and is by and between CM St. Joe,
LLC, a Minnesota limited liability company (“Assignor”) and Country Manor St. Joseph, LLC, a
Tennessee limited liability company (“Assignee”).
RECITALS
A. Assignor, as developer, and the City of St. Joseph, Minnesota (the “City”) entered
into that certain Tax Abatement Agreement, dated as of August 1, 2016 (the “Abatement
Agreement”), to assist in the financing of certain costs of a Project, as defined in the Abatement
Agreement.
B. Assignor now wishes to sell the Tax Abatement Property, as defined in, and
subject to, the Abatement Agreement, and, therefore, assign all of its rights and obligations in
and under the Abatement Agreement, to the Assignee.
C. Assignor has agreed to sell to Assignee and Assignee has agreed to purchase the
Property from Assignor.
D. Subject to the terms and conditions of this Assignment, Assignor shall assign to
Assignee and Assignee shall assume from Assignor, all rights, obligations, and liabilities of
Assignor under the Abatement Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of mutual promises and of other good and
valuable consideration each party hereto acknowledges, the parties hereby agree as follows:
1. Definitions. Any capitalized term used but not defined herein shall have the
meaning given such term in the Abatement Agreement.
2. Assignment. Assignor does hereby assign, transfer, and convey to Assignee all of
Assignor’s right, title, and interest in and to the Abatement Agreement, together with all of
Assignor’s obligations and liabilities associated therewith accruing from and after the Effective
Date.
3. Assumption. Assignee does hereby accept such assignment, and assumes all of
Assignor’s right, title, and interest in and to the Abatement Agreement, together with all of
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Assignor’s obligations and liabilities associated therewith accruing from and after the Effective
Date.
4. Indemnification. Assignor shall indemnify and hold harmless Assignee from and
against all obligations of the Assignor under the Abatement Agreement to the extent such
obligations were applicable to the period and required to be performed prior to the Effective
Date. Assignee shall indemnify and hold harmless Assignor from and against all obligations
assumed by Assignee under the Abatement Agreement to the extent that such obligations are
applicable to the period and required to be performed from and after the Effective Date.
5. Governing Law. This Assignment shall be construed and enforced in accordance
with the laws of the State of Minnesota.
6. Counterparts. This Assignment may be executed in any number of counterparts,
and each such counterpart hereof shall be deemed to be an original instrument, but all of such
counterparts together shall constitute but one agreement.
(Remainder of page intentionally left blank.)
11737442v1
Assignor and Assignee have caused this Assignment of Tax Abatement Agreement to be
signed on the Effective Date.
ASSIGNOR:
CM ST. JOE, LLC,
a Minnesota limited liability company
By: ________________________________
Its: ________________________________
STATE OF MINNESOTA )
) SS.
COUNTY OF ___________ )
The foregoing instrument was acknowledged before me this ___ day of _____________,
2019, by ___________________, the _______________________ of CM St. Joe, LLC, a
Minnesota limited liability company, on behalf of the company.
____________________________________
Notary Public
ASSIGNEE:
COUNTRY MANOR ST. JOSEPH, LLC,
a Tennessee limited liability company
By: ________________________________
Its: ________________________________
STATE OF ______________ )
) SS.
COUNTY OF ___________ )
The foregoing instrument was acknowledged before me this ___ day of _____________,
2019, by ___________________, the _______________________ of Country Manor St. Joseph,
LLC, a Tennessee limited liability company, on behalf of the company.
____________________________________
Notary Public
The City of St. Joseph, Minnesota (the “City”) hereby consents and agrees to this
Assignment of Tax Abatement Agreement.
CITY OF ST. JOSEPH,
a municipal corporation under the laws of
the State of Minnesota
By: ________________________________
Its: Mayor
By: ________________________________
Its: Administrator-Clerk
STATE OF MINNESOTA )
) SS.
COUNTY OF STEARNS )
The foregoing instrument was acknowledged before me this ___ day of _____________,
2019, by Richard Schultz and Judy Weyrens, the Mayor and Administrator-Clerk of the City of
St. Joseph, Minnesota, a municipal corporation under the laws of the State of Minnesota, on
behalf of the City.
____________________________________
Notary Public
First Draft
Wednesday, May 15, 2019
ASSIGNMENT AND PLEDGE AGREEMENT
between
COUNTRY MANOR ST. JOSEPH, LLC,
as Company,
CITY OF ST. JOSEPH, MINNESOTA,
as City,
ST. CLOUD AREA SCHOOL DISTRICT #742,
as District,
and
U.S. BANK NATIONAL ASSOCIATION,
as Trustee
Dated as of July 1, 2019
Relating to:
$________ $________
City of St. Joseph, Minnesota City of St. Joseph, Minnesota
Senior Housing and Healthcare Revenue Bonds Taxable Senior Housing and Healthcare Revenue Bonds
(Woodcrest of Country Manor Project) (Woodcrest of Country Manor Project)
Series 2019A Series 2019A-T
This instrument drafted by:
Ballard Spahr LLP (BWJ)
2000 IDS Center
th
80 South 8 Street
Minneapolis, Minnesota 55402
ASSIGNMENT AND PLEDGE AGREEMENT
THIS ASSIGNMENT AND PLEDGE AGREEMENT, dated as of July 1, 2019 (the “Pledge
Agreement”), is between COUNTRY MANOR ST. JOSEPH, LLC, a Tennessee limited liability
company (the “Company”), CITY OF ST. JOSEPH, MINNESOTA (the “City”), a municipal corporation
under the laws of the State of Minnesota, ST. CLOUD AREA SCHOOL DISTRICT #742, STEARNS
COUNTY, MINNESOTA (the “District”), and U.S. BANK NATIONAL ASSOCIATION, a national
banking association, as trustee (together with its successors and assigns, the “Trustee”) under the
Indenture (hereinafter defined).
Recitals
The City entered into a Tax Abatement Agreement, dated as of August 1, 2016 (the “City
Abatement Agreement”) with CM St. Joe, LLC, a Minnesota limited liability company (the “Seller”) to
assist in the financing of certain project costs. The Seller has sold the property subject to the City
Abatement Agreement to the Company and assigned its obligations under the City Abatement Agreement
to the Company pursuant to an Assignment of Tax Abatement Agreement, dated as of ________, 2019
(the “City Assignment”).
The District entered into a Tax Abatement Agreement, dated as of August 1, 2016 (the “District
Abatement Agreement” and together with the City Abatement Agreement, the “Abatement Agreements”)
with CM St. Joe, LLC, a Minnesota limited liability company (the “Seller”) to assist in the financing of
certain project costs. The Seller has sold the property subject to the District Abatement Agreement to the
Company and assigned its obligations under the District Abatement Agreement to the Company pursuant
to an Assignment of Tax Abatement Agreement, dated as of ________, 2019 (the “District Assignment”
and together with the City Assignment, the “Prior Assignments”).
The Company has requested that the City provide assistance in financing the acquisition of an 84-
unit assisted living and memory care senior housing and healthcare facility comprised of a 24-unit
memory care facility, known as Woodcrest Memory Care Suites (the “Memory Suites”), and a 60-unit
assisted living facility known as Woodcrest Senior Apartments (the “Senior Apartments,” and together
with the Memory Suites, the “Project”), located at 1200 Lanigan Way Southwest in St. Joseph,
Minnesota, the City is issuing the following obligations: (i) Senior Housing and Healthcare Revenue
Bonds (Woodcrest of Country Manor Project), Series 2019A (the “Series 2019A Bonds”), and (ii)
Taxable Senior Housing and Healthcare Revenue Bonds (Woodcrest of Country Manor Project), Series
2019A-T (the “Series 2019A-T Bonds,” and together with the Series 2019A Bonds, the “Series 2019
Bonds”).
The Series 2019 Bonds are being issued pursuant to an Indenture of Trust, dated as of July 1,
2019 (the “Indenture”), between the City and the Trustee. The proceeds of the Series 2019 Bonds will be
loaned to the Company pursuant to a Loan Agreement , dated as of July 1, 2019 (the “Loan Agreement”),
between the City and the Company. Capitalized terms not defined herein, shall have the meaning given
to them in the Indenture and the Loan Agreement.
By the terms of the Loan Agreement and this Pledge Agreement, the Company has pledged its
interest in the Abatement Agreements to the repayment of the Loan, and by the terms of the Indenture, the
City has assigned to the Trustee its interest in the Loan Agreement.
In order to further evidence such pledge and assignment, and as a condition to the issuance of the
Series 2019 Bonds and the making of the Loan, the execution and delivery of this Pledge Agreement is
necessary and desirable.
NOW, THEREFORE, in consideration of the premises, the truth and correctness of which are
hereby confirmed by the Company, and intending to be legally bound hereby, the Company and the
Trustee hereby agree as follows:
1. The Agreement.
(a) Pledge and Assignment. As security for the payment and performance by the
Company of all of its covenants, agreements and obligations under the Loan Agreement, the
Company hereby grants, bargains, pledges, assigns, transfers, conveys and sets over to the
Trustee all of its rights, titles and interests in, to and under all proceeds of the Abatement
Agreements (collectively, the “Collateral”).
(b) Subordination. The Mortgage (as defined in the Indenture) and all supplements,
amendments, modifications, renewals, replacements and extensions of and to them shall be and
will remain at all times a lien or charge on the Project prior and superior to the Company
Abatement Agreements. The City and the District subordinate all rights and privileges arising in
favor or the City and District under the terms of the Abatement Agreements to the lien or charge
of the Mortgage in favor of the Trustee. The City and the District consent to the Company and
the Trustee’s entering into the Mortgage.
(c) Enforcement. Upon the occurrence of an Event of Default under the Loan
Agreement, the Trustee may declare all indebtedness evidenced and/or secured thereby to be
immediately due and payable as therein provided and shall also have all of the rights, remedies
and recourses with respect to a secured party under the Abatement Agreements and the Minnesota
Uniform Commercial Code or otherwise existing at law. Mere delay or failure to act shall not
preclude the exercise or enforcement of any rights and remedies available to the Trustee. All
rights and remedies of the Trustee shall be cumulative and may be exercised singly in any order
or sequence, or concurrently, at the Trustee’s option, and the exercise or enforcement of any such
right or remedy shall neither be a condition to, nor bar the exercise or enforcement of, any other.
(d) Waiver of Notice and Hearing. THE COMPANY HEREBY WAIVES ALL
RIGHTS TO A JUDICIAL HEARING OF ANY KIND PRIOR TO THE EXERCISE BY THE
AGENT OF ITS RIGHTS UNDER THE ABATEMENT AGREEMENT, TO RECEIVE ALL
PAYMENTS UNDER AND PROCEEDS OF THE ABATEMENT AGREEMENT WITHOUT
PRIOR NOTICE OR HEARING. THE COMPANY ACKNOWLEDGES THAT IT HAS BEEN
ADVISED BY COUNSEL OF ITS CHOICE WITH RESPECT TO THIS PROVISION AND
THIS PLEDGE AGREEMENT. If notice of intended disposition of all or any of the Collateral,
or of any other intended action hereunder, is required by law in any particular instance, such
notice shall be deemed commercially reasonable if given at least ten (10) calendar days prior to
the date of intended disposition or other action.
(e) Negative Pledge. The Company will not sell, abandon, release, waive, pledge,
mortgage, grant any other security interest in, encumber, assign or otherwise dispose of its
interest in the Collateral or any of its rights therein without the Trustee’s prior written consent.
(f) Appointment of the Trustee as Attorney-in-Fact. The Company hereby appoints
the Trustee as the Company’s attorney-in-fact in its name, place and stead to exercise and
perform to the exclusion of the Company all of the Company’s rights and privileges with respect
to the Collateral, to perform the obligations of the Company hereunder and under the Loan
Agreement, if the Company fails to do so in a timely fashion, and to apply the Collateral to repay
any amounts expended and/or loaned under the Loan Agreement or the Indenture. Said
appointment is given as security for the prompt payment and performance, when due, of the
2
obligations of the Company hereunder and under the Loan Agreement, and is irrevocable until
such time as this Pledge Agreement is terminated in accordance with its terms.
2. Representations and Warranties of the Company. The Company represents and warrants
to the Trustee and agrees as follows:
(a) The Abatement Agreements are valid and enforceable agreements against the
parties thereto, the Company is not in default thereunder or the Prior Assignment, and all
covenants, conditions, and agreements of the Company required by the Abatement Agreements
have been performed as required therein.
(b) There have been no defaults on the part of the Company under the Abatement
Agreements.
3. Covenants of the Company. The Company covenants and agrees that:
(a) It shall perform each and every of its duties and obligations under the Abatement
Agreements and observe and comply with each and every term, covenant, condition, agreement
requirement, restriction and provision of the Abatement Agreements.
(b) It shall give prompt notice to the Trustee of any claim of or notice of default
under the Abatement Agreements, the Indenture, the Loan Agreement, and the Mortgage, known
or given to it together with a copy of any such notice or claim if in writing.
(c) At the sole cost and expense of the Company it will enforce the full and complete
performance of each and every duty and obligation to be performed by the other party to the
Abatement Agreements.
(d) It will appear in and defend any action arising out of or in any manner connected
with the Abatement Agreements and the duties and obligations of the Company thereunder.
(e) The Company will not without the prior written consent of the Trustee modify,
amend, supplement, terminate, surrender or change in any manner whatsoever the Abatement
Agreements and will not release or discharge the obligations of any party thereto or modify or
extend the time of performance thereunder or the scope of the work thereunder.
4. Costs and Expenses; Indemnity. The Company will pay or reimburse the Trustee on
demand for all out-of-pocket expenses (including in each case all filing and recording fees and taxes and
all reasonable fees and expenses of counsel and of any experts and agents) incurred by the Trustee in
connection with the creation, perfection, protection, satisfaction, foreclosure or enforcement of the
security interest granted hereunder and the preparation, administration, continuance, amendment or
enforcement of this Pledge Agreement, all of which shall be secured hereby. The Company shall
indemnify and hold the Trustee and its officers, directors, employees, agents, and representatives
harmless from and against any and all claims, losses and liabilities (including reasonable attorneys’ fees)
growing out of or resulting from this Pledge Agreement and the security interest hereby created
(including enforcement of this Pledge Agreement) or the Trustee’s actions pursuant hereto, except claims,
losses or liabilities resulting from the Trustee’s gross negligence or willful misconduct as determined by a
final judgment of a court of competent jurisdiction. Any liability of the Company to indemnify and hold
the Trustee harmless pursuant to the preceding sentence shall be the personal obligation of the Company
to the Trustee and shall be secured hereby. The obligations of the Company under this Section 3 shall
survive any termination of this Pledge Agreement.
3
5. Waivers. This Pledge Agreement can be waived, modified, amended, terminated or
discharged, and the security interest granted hereunder can be released, only explicitly in a writing signed
by the Trustee. A waiver so signed shall be effective only in the specific instance and for the specific
purpose given. Execution of this Pledge Agreement by the Trustee constitutes acceptance hereof, and the
Company hereby waives any other notice of acceptance hereof by the Trustee.
6. Notices. Unless otherwise required by the specific provisions hereof or by law in respect
to any matter, any demand, notice or other communication to any party in connection with this Pledge
Agreement shall be in writing and shall be sent by manual delivery, overnight courier or United States
mail, registered or certified, return receipt requested, postage prepaid, addressed as follows:
To the Trustee: U. S. Bank National Association
60 Livingston Avenue, Third Floor
EP-MN-WS3C
Saint Paul, MN 55107-2292
Attention: Corporate Trust Services
To the Company: Country Manor St. Joseph, LLC
520 First Street NE
Sartell, MN 56377
Attention: ____________
with copies to: Wornson Goggins Zard Neisen Morris & Brever, PC
119 East Main Street
New Prague, MN 56071
Attention: Eric B. Brever
or addressed to any such party at such other address in the United States of America as such party shall
hereafter furnish by written notice to the other party hereto, at least ten (10) days prior to the effective
date of said change in address, and all periods of notice shall be measured from the date of delivery
thereof if manually delivered, from the first business day after the date of sending if sent by overnight
courier, or from four (4) days after the date of mailing if mailed.
7. Governing Law; Waiver of Jury Trial; Consent to Jurisdiction. This Pledge Agreement
shall be governed by, and construed in accordance with, the laws of the State of Minnesota, without
giving effect to conflict of laws principles thereof, but giving effect to federal laws of the United States
applicable to national banks. The Company and the Trustee irrevocably waive any and all right to trial by
jury in any legal proceeding arising out of or relating to this Pledge Agreement. At the option of the
Trustee, this Pledge Agreement may be enforced in any federal court or Minnesota state court sitting in
Stearns County, Minnesota; and the Company consents to the jurisdiction and venue of any such court
and waives any argument that venue in such forums is not convenient. In the event the Company
commences any action in another jurisdiction or venue under any tort or contract theory arising directly or
indirectly from the relationship created by this Pledge Agreement, the Trustee, at its option, shall be
entitled to have the case transferred to one of the jurisdictions and venues above-described, or if such
transfer cannot be accomplished under applicable law, to have such case dismissed without prejudice, but
any statute of limitation shall continue to be tolled for a period of six (6) months after such dismissal.
8. Headings. The section headings in this Pledge Agreement are included herein for
convenience of reference only and shall not constitute a part of this Pledge Agreement for any other
purpose.
4
9. Defined Terms. Any capitalized terms used herein that are otherwise not defined shall
have the meanings assigned such terms in the Indenture.
10. Term of Agreement; Successors and Assigns. This Pledge Agreement shall remain in full
force and effect from the date hereof until such time as all amounts owing by the Company to the Trustee
under the Loan Agreement have been fully repaid, and any financing statement filed pursuant hereto shall
be terminated. This Pledge Agreement shall (a) be binding upon the Company and its successors and
assigns, and (b) inure to the benefit of and be enforceable by the Trustee and its successors, transferees
and assigns.
11. Electronic Signatures. The parties agree that the electronic signature of a party to this
Pledge Agreement shall be as valid as an original signature of such party and shall be effective to bind
such party to this Pledge Agreement. For purposes hereof, (i) “electronic signature” means a manually
signed original signature that is then transmitted by electronic means; and (ii) “transmitted by electronic
means” means sent in the form of a facsimile or sent via the internet as a portable document format
(“pdf’) or other replicating image attached to an electronic mail or internet message.
(The remainder of this page is intentionally left blank.)
5
IN WITNESS WHEREOF, the Company, the City, the District and the Trustee have caused this
Assignment and Pledge Agreement to be duly executed as of the date and year first written above.
COUNTRY MANOR ST. JOSEPH, LLC, as
Company
By:
Name:
Its:
(Signature page to Assignment and Pledge Agreement)
S-1
CITY OF ST. JOSEPH, MINNESOTA, as City
By:
Name: Richard Schultz
Its: Mayor
By:
Name: Judy Weyrens
Its: City Administrator-Clerk\]
(Signature page to Assignment and Pledge Agreement)
S-2
ST. CLOUD AREA SCHOOL DISTRICT #742
By:
Its: Chair
By:
Its: Clerk of the Board
(Signature page to Assignment and Pledge Agreement)
S-3
U. S. BANK NATIONAL ASSOCIATION
By:
Its Vice President
(Signature page to Assignment and Pledge Agreement)
DMNORTH #6823643 v2/521147.00/00315773
S-4
INDENTURE OF TRUST
between
CITY OF ST. JOSEPH, MINNESOTA,
as Issuer
and
U.S. BANK NATIONAL ASSOCIATION,
as Trustee
Dated as of July 1, 2019
Relating to:
$22,125,000 $300,000
City of St. Joseph, Minnesota City of St. Joseph, Minnesota
Senior Housing and Healthcare Revenue Taxable Senior Housing and Healthcare
Bonds Revenue Bonds
(Woodcrest of Country Manor Project) (Woodcrest of Country Manor Project)
Series 2019A Series 2019A-T
This instrument was drafted by:
Briggs and Morgan, Professional Association (CJC)
2200 IDS Center
80 South Eighth Street
Minneapolis, Minnesota 55402
11680673v2
TABLE OF CONTENTS
Page
GRANTING CLAUSES ............................................................................................................2
ARTICLE I DEFINITIONS AND OTHER PROVISIONS OF GENERAL
APPLICATION ................................................................................................4
Section 1.01. Definitions ............................................................................................4
Section 1.02. Compliance Certificates and Opinions ................................................. 14
Section 1.03. Form of Documents Delivered to Trustee ............................................ 15
Section 1.04. Acts of Holders ................................................................................... 16
Section 1.05. Notices, etc., to Trustee, Issuer and Company ..................................... 17
Section 1.06. Notices to Bondholders; Waiver .......................................................... 17
Section 1.07. Effect of Headings and Table of Contents ........................................... 18
Section 1.08. Successors and Assigns ....................................................................... 18
Section 1.09. Separability Clause.............................................................................. 18
Section 1.10. Execution and Counterparts ................................................................. 18
Section 1.11. Construction ........................................................................................ 18
Section 1.12. Benefit of Indenture ............................................................................ 18
Section 1.13. Limitation of Liability ......................................................................... 18
Section 1.14. Respecting the Loan Agreement .......................................................... 19
ARTICLE II GENERAL PROVISIONS OF THE BONDS ................................................. 20
Section 2.01. General Limitations ............................................................................. 20
Section 2.02. Terms of Particular Series ................................................................... 20
Section 2.03. Form and Denominations .................................................................... 21
Section 2.04. Execution, Authentication and Delivery .............................................. 21
Section 2.05. \[Intentionally Omitted\] ....................................................................... 21
Section 2.06. Registration, Transfer and Exchange ................................................... 21
Section 2.07. Mutilated, Destroyed, Lost and Stolen Bonds ...................................... 22
Section 2.08. Payment of Interest; Interest Rights Preserved ..................................... 23
Section 2.09. Persons Deemed Owners ..................................................................... 24
Section 2.10. Cancellation ........................................................................................ 24
Section 2.11. Book Entry Provisions ........................................................................ 24
ARTICLE III THE SERIES 2019 BONDS ........................................................................... 27
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TABLE OF CONTENTS
(continued)
Page
Section 3.01. Specific Title and Terms of the Series 2019 Bonds .............................. 27
Section 3.02. Interest Calculations; Payments of Principal and Interest ..................... 28
Section 3.03. Authentication and Delivery of Series 2019 Bonds .............................. 28
Section 3.04. Deposit of Series 2019 Bond Proceeds ................................................ 29
Section 3.05. Optional Redemption .......................................................................... 29
Section 3.06. Special Optional Redemption .............................................................. 29
Section 3.07. Sinking Fund Redemption of Series 2019 Term Bonds ........................ 29
Section 3.08. Extraordinary Optional Redemption .................................................... 31
Section 3.09. Mandatory Redemption of Series 2019 Bonds Upon
Determination of Taxability ................................................................ 31
ARTICLE IV AUTHENTICATION AND DELIVERY OF ADDITIONAL BONDS ........... 32
Section 4.01. General Provisions .............................................................................. 32
ARTICLE V APPLICATION OF TRUST MONEY ............................................................ 34
Section 5.01. “Trust Money” Defined ...................................................................... 34
Section 5.02. Acquisition Fund ................................................................................. 34
Section 5.03. Costs of Issuance Fund ........................................................................ 34
Section 5.04. Bond Fund .......................................................................................... 35
Section 5.05. Bond Reserve Fund ............................................................................. 36
Section 5.06. Repair and Replacement Reserve Fund................................................ 37
Section 5.07. Taxes and Insurance Escrow Fund....................................................... 38
Section 5.08. Rebate Fund ........................................................................................ 38
Section 5.09. \[Intentionally Omitted\] ........................................................................ 38
Section 5.10. Additional Payments ........................................................................... 38
Section 5.11. Investments ......................................................................................... 38
Section 5.12. Trust Money........................................................................................ 39
ARTICLE VI DEFEASANCE .............................................................................................. 40
Section 6.01. Payment of Indebtedness; Satisfaction and Discharge of
Indenture ............................................................................................. 40
Section 6.02. Defeasance of Bonds ........................................................................... 40
Section 6.03. Application of Deposited Money ......................................................... 41
Section 6.04. Final Disposition of Moneys ............................................................... 41
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TABLE OF CONTENTS
(continued)
Page
ARTICLE VII EVENTS OF DEFAULT; REMEDIES ........................................................... 42
Section 7.01. Events of Default ................................................................................ 42
Section 7.02. Acceleration of Maturity ..................................................................... 42
Section 7.03. Other Remedies ................................................................................... 43
Section 7.04. \[Intentionally Omitted\] ....................................................................... 43
Section 7.05. Application of Money ......................................................................... 43
Section 7.06. Bondholders or Trustee May Purchase; Purchaser May Apply
Bonds Toward Purchase Price ............................................................. 44
Section 7.07. Receiver .............................................................................................. 45
Section 7.08. Collection of Indebtedness by the Trustee ........................................... 45
Section 7.09. Trustee May File Proofs of Claims ...................................................... 45
Section 7.10. Trustee May Enforce Claims Without Possession of Bonds ................. 46
Section 7.11. Limitation on Suits .............................................................................. 46
Section 7.12. Unconditional Right of Bondholders to Receive Principal,
Premium and Interest .......................................................................... 47
Section 7.13. Restoration of Positions ....................................................................... 47
Section 7.14. Rights and Remedies Cumulative ........................................................ 47
Section 7.15. Delay or Omission Not Waiver ........................................................... 47
Section 7.16. Control by Holders .............................................................................. 48
Section 7.17. Waiver of Past Defaults ....................................................................... 48
Section 7.18. Undertaking for Costs ......................................................................... 48
Section 7.19. Suits to Protect the Trust Estate and Other Property............................. 49
Section 7.20. Rights Under Loan Agreement ............................................................ 49
ARTICLE VIII THE TRUSTEE .............................................................................................. 50
Section 8.01. Certain Duties and Responsibilities ..................................................... 50
Section 8.02. Notice of Event of Default................................................................... 51
Section 8.03. Certain Rights of Trustee..................................................................... 51
Section 8.04. Not Responsible for Recitals or Issuance of Bonds .............................. 52
Section 8.05. May Hold Bonds ................................................................................. 53
Section 8.06. Money Held in Trust ........................................................................... 53
Section 8.07. Compensation and Reimbursement ..................................................... 53
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TABLE OF CONTENTS
(continued)
Page
Section 8.08. Corporate Trustee Required; Eligibility ............................................... 53
Section 8.09. Resignation and Removal; Appointment of Successor ......................... 53
Section 8.10. Acceptance of Appointment by Successor Trustee............................... 54
Section 8.11. Merger, Conversion, Consolidation or Successor to Business .............. 55
Section 8.12. Trustee and Loan Agreement ............................................................... 55
Section 8.13. Financing Statements .......................................................................... 55
ARTICLE IX \[INTENTIONALLY OMITTED\] ................................................................... 57
ARTICLE X AMENDMENT OF LOAN AGREEMENT, MORTGAGE AND
COLLATERAL DOCUMENTS ..................................................................... 58
Section 10.01. Amendment to Loan Agreement, Mortgage and Collateral
Documents Without Consent of Holders .............................................. 58
Section 10.02. Amendment to Loan Agreement, Mortgage or Collateral
Documents With Consent of Holders................................................... 59
Section 10.03. Consent to Amendments...................................................................... 59
ARTICLE XI SUPPLEMENTAL INDENTURES ................................................................ 61
Section 11.01. Supplemental Indentures Without Consent of Holders ......................... 61
Section 11.02. Supplemental Indentures With Consent of Holders .............................. 61
Section 11.03. Execution of Supplemental Indentures ................................................ 62
Section 11.04. Effect of Supplemental Indentures ....................................................... 62
Section 11.05. Reference in Bonds to Supplemental Indentures .................................. 63
Section 11.06. Consent of Company ........................................................................... 63
ARTICLE XII COVENANTS ................................................................................................ 64
Section 12.01. Payment of Principal, Premium and Interest ........................................ 64
Section 12.02. Unclaimed Moneys ............................................................................. 64
Section 12.03. Tax-Free Nature of Tax-Exempt Bonds ............................................... 64
ARTICLE XIII REDEMPTION .............................................................................................. 65
Section 13.01. Right of Redemption ........................................................................... 65
Section 13.02. Election to Redeem; Notice to Trustee ................................................ 65
Section 13.03. Selection by Trustee of Bonds to Be Redeemed ................................... 65
Section 13.04. Notice of Redemption ......................................................................... 65
Section 13.05. Deposit of Redemption Price ............................................................... 66
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TABLE OF CONTENTS
(continued)
Page
Section 13.06. Bonds Payable on Redemption Date .................................................... 66
Section 13.07. Bonds Redeemed in Part ..................................................................... 66
Section 13.08. Redemption of All Bonds .................................................................... 67
ARTICLE XIV SECONDARY MARKET DISCLOSURE ...................................................... 68
Section 14.01. Secondary Market Disclosure .............................................................. 68
EXHIBIT A FORM OF SERIES 2019A BOND .............................................................. A-1
EXHIBIT B FORM OF SERIES 2019A-T BOND ............................................................ B-1
EXHIBIT C FORM OF REPAIR AND REPLACEMENT RESERVE FUND DRAW
REQUEST .................................................................................................... C-1
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11680673v2
INDENTURE OF TRUST
THIS INDENTURE OF TRUST, dated as of July 1, 2019 (the “Indenture”), is between
the CITY OF ST. JOSEPH, MINNESOTA, a statutory city and political subdivision organized
the laws of the State of Minnesota (the “Issuer”), and U.S. BANK NATIONAL ASSOCIATION,
a national banking association with trust powers having a place of business in Saint Paul,
Minnesota (together with any successor trustee under this Indenture, referred to as the
“Trustee”).
W I T N E S S E T H
WHEREAS, the Issuer is authorized by Minnesota Statutes, Chapter 462C, as amended
(the “Act”), to carry out the public purposes described in the Act by providing for the issuance of
revenue bonds to provide funds to finance multifamily housing developments (including assisted
living and memory care facilities); and
WHEREAS, Country Manor St. Joseph, LLC, a Tennessee limited liability company (the
“Company”), the sole member of which is The Foundation For Health Care Continuums, a
Tennessee nonprofit corporation (the “Sole Member”), has requested that the Issuer issue its
(i) Senior Housing and Healthcare Revenue Bonds (Woodcrest of Country Manor Project),
Series 2019A (the “Series 2019A Bonds”), in the original aggregate principal amount of
$22,125,000; and (ii) Taxable Senior Housing and Healthcare Revenue Bonds (Woodcrest of
Country Manor Project), Series 2019A-T (the “Series 2019A-T Bonds,” and together with the
Series 2019A Bonds, the “Series 2019 Bonds”), in the original aggregate principal amount of
$300,000; and
WHEREAS, the Issuer has authorized the issuance of the Series 2019 Bonds pursuant to
a resolution adopted by the City Council of the Issuer on May 20, 2019, the Act, and this
Indenture; and
WHEREAS, the Issuer will loan the proceeds of the Series 2019 Bonds to the Company
pursuant to a Loan Agreement, dated as of July 1, 2019 (the “Loan Agreement”), between the
Issuer and the Company, and the Company will apply the proceeds of the loan to (i) finance the
acquisition of an approximately 84-unit assisted living and memory care senior housing and
health care facility located at 1200 Lanigan Way SW, St. Joseph, Minnesota (the “Facilities”);
(ii) fund required reserve funds; and (iii) pay all or a portion of the costs of issuance of the Series
2019 Bonds; and
WHEREAS, to secure the payment of the principal of, premium, if any, and interest on
the Series 2019 Bonds and the Company’s obligations under the Loan Agreement, the Company
will execute and deliver to the Trustee a Combination Mortgage, Security Agreement, Fixture
Financing Statement, and Assignment of Leases and Rents, dated as of July 1, 2019; and
WHEREAS, to provide additional security for the Company’s obligations under the Loan
Agreement, the Sole Member will execute and deliver to the Trustee a Limited Guaranty
Agreement, dated as of July 1, 2019 (the “Limited Guaranty Agreement”), which will provide a
limited guaranty for the payment of the principal of, premium, if any, and interest on the Series
2019 Bonds, subject to reduction and termination; and
1
11680673v2
WHEREAS, all conditions, acts and things necessary and required by the Constitution
and laws of the State of Minnesota, or otherwise, to exist, to have happened or to have been
performed precedent to and in the execution and delivery of this Indenture, and in the issuance of
the Series 2019 Bonds, do exist, have happened or have been performed in regular form, time
and manner, and the execution and delivery of this Indenture have been in all respects duly
authorized; and
WHEREAS, the Trustee has accepted the trust created by this Indenture and in evidence
thereof has joined in the execution;
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
GRANTING CLAUSES
NOW, THEREFORE, THIS INDENTURE WITNESSETH, that, to secure payment of
the principal of, premium, if any, and interest on the Bonds (hereinafter defined) according to
their tenor and effect, and the performance of all covenants and conditions therein and herein
contained, and in consideration of the premises, and of the purchase of the Bonds by the Holders
(hereinafter defined) thereof, the Issuer by these presents does pledge and grant to the Trustee
and its successors in trust a security interest in the following described property, rights,
privileges and franchises (collectively, the “Trust Estate”), to wit:
GRANTING CLAUSE FIRST
All rights, title, interest and privilege of the Issuer in, to and under the Loan Agreement,
including, but not limited to, all Loan Repayments and Additional Payments, but excluding the
rights of the Issuer to its portion of said Additional Payments under Section 2.3(A), 2.3(C), and
2.3(D) of the Loan Agreement and to indemnification under Section 7.4, release under Section
9.3, legal expenses under Section 11.11, and limitation of liability under Section 13.8 of the Loan
Agreement.
GRANTING CLAUSE SECOND
All rights, title, interest, and privilege in and to the Limited Guaranty Agreement.
GRANTING CLAUSE THIRD
All other property of every kind which is now or hereafter subjected to the lien of this
Indenture or pledged or assigned to the Trustee pursuant to the provisions of this Indenture,
including without limitation the Mortgaged Property, proceeds derived from the Limited
Guaranty Agreement, all cash and securities now or hereafter held in the Trust Funds created or
established under this Indenture, and all insurance proceeds and condemnation awards or other
moneys represented by Trust Moneys (all as such terms are hereinafter defined).
TO HAVE AND TO HOLD the Trust Estate unto the Trustee and its successors and
assigns forever.
2
11680673v2
BUT IN TRUST, NEVERTHELESS, for the equal and proportionate benefit and security
of the Holders from time to time of all the Bonds without any priority of any Bonds over any
other except as elsewhere herein expressly provided.
UPON THE TRUSTS and subject to the covenants and conditions hereinafter set forth.
(The remainder of this page is intentionally left blank.)
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ARTICLE I
DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION
Section 1.01. Definitions. For all purposes of this Indenture, except as otherwise
expressly provided or unless the context clearly otherwise requires:
(A) All references in this instrument to designated “Articles,” “Sections” and
other subdivisions are to the designated Articles, Sections and other subdivisions of this
instrument as originally executed.
(B) The words “herein,” “hereof,” and “hereunder,” and other words of similar
import, without reference to any particular Article, Section or subdivision, refer to this
Indenture as a whole and not to any particular Article, Section or other subdivision.
(C) The terms defined in this Article have the meanings assigned to them in
this Article and include the plural as well as the singular.
(D) All accounting terms not otherwise defined herein have the meanings
assigned to them in accordance with generally accepted accounting principles.
(E) All computations herein provided for shall be made in accordance with
generally accepted accounting principles.
Accountant means an Independent certified public accountant or accountants retained by
the Company.
Acquisition Fund means the fund created in Section 5.02 hereof.
Act means Minnesota Statutes, Chapter 462C, as amended.
Additional Bonds means any Bonds issued pursuant to this Indenture in accordance with
the requirements of Article IV hereof.
Additional Payments means the payments required to be made by the Company by
Section 2.3 of the Loan Agreement.
Affiliate means any Person directly or indirectly controlling or controlled by or under
direct or indirect common control with the Company. For the purposes of this definition,
“control” when used with respect to any specified Person means the power to direct the
management and policies of such Person, directly or indirectly, whether through the ownership
of voting securities, by contract or otherwise; and the terms “controlling” and “controlled” have
meanings correlative to the foregoing.
Audited Fiscal Year means a Fiscal Year for which the audit report and opinion referred
to in Section 4.7(B) of the Loan Agreement have been completed.
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Balloon Indebtedness means any Indebtedness twenty-five percent (25%) or more of the
original principal amount of which (A) is due in any twelve (12) month period or (B) may, at the
option of the holder thereof, be required to be redeemed, prepaid, or purchased directly or
indirectly by the Company or otherwise paid in any twelve (12) month period; provided, that, in
calculating the principal amount of such Balloon Indebtedness due or required to be redeemed,
prepaid, purchased or otherwise paid in any twelve (12) month period, such principal amount
shall be reduced to the extent that all or any portion of such amount is required to be amortized
prior to such twelve (12) month period.
Beneficial Holder or Beneficial Owner means any person which (a) has the power,
directly or indirectly, to vote or consent with respect to, or to dispose of ownership of, any Bonds
(including persons holding Bonds through nominees, depositories or other intermediaries), or (b)
is treated as the owner of any Bonds for federal income tax purposes.
Board of Directors means the governing body of the Company or any duly authorized
committee thereof.
Bond Counsel means any attorney or firm of attorneys nationally recognized as
experienced in matters relating to the tax-exempt financing of facilities of the same character as
the Facilities, retained by the Company and acceptable to the Issuer.
Bond Fund means the fund created in Section 5.04 hereof.
Bondholder means a Person in whose name a Bond is registered in the Bond Register.
Bond Issuance Costs means any and all costs relating to the issuance, sale and delivery of
the Bonds including, without limitation, all fees and expenses of legal counsel, financial
consultants, underwriters and accountants, the cost of preparation and printing of any preliminary
and final official statement and the Bonds, and the initial fees of the Trustee.
Bond Purchase Agreement means a contract between the Issuer, the Company, and the
Original Purchaser of a series of Bonds. The Bond Purchase Agreement for the Series 2019
Bonds is dated June __, 2019.
Bond Register has the respective meanings specified in Section 2.06 hereof.
Bond Registrar has the respective meanings specified in Section 2.06 hereof.
Bond Reserve Fund means the fund created in Section 5.05 hereof.
Bond Reserve Requirement means, for the Series 2019 Bonds and any Additional Bonds,
the least of the following: (i) ten percent (10%) of the “proceeds” of such Bonds within the
meaning of Section 148(d)(1) of the Code, (ii) one hundred twenty-five percent (125%) of the
average annual amount of principal and interest due on such Bonds in any future calendar year,
or (iii) the maximum amount of principal and interest due on such Bonds in any future calendar
year (excluding therefrom the year final payment is made for each series of Bonds), with the
amount of principal and interest on each series of Bonds calculated on the assumption that each
bond will be paid at its Stated Maturity or corresponding sinking fund payment dates. With
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respect to the Series 2019A Bonds, the Bond Reserve Requirement to be deposited in the Bond
Reserve Fund shall be $_______________. With respect to the Series 2019A-T Bonds, the Bond
Reserve Requirement to be deposited in the Bond Reserve Fund shall be $_____________.
Bonds means the Series 2019 Bonds and any Additional Bonds.
Business Day means any day other than a Saturday, Sunday or other day on which the
designated trust office of the Trustee is not open for business.
Cash and Marketable Securities means all cash and marketable securities of the
Company, whether or not classified as current assets, as determined under generally accepted
accounting principles, excluding amounts in any funds or accounts held by the Trustee under the
Indenture, excluding the proceeds of any Short-Term Indebtedness incurred by the Company,
and excluding any restricted assets as defined under generally accepted accounting principles.
Code means the Internal Revenue Code of 1986, as amended. All references in this
instrument to sections of the Code are to the sections thereof as they exist on the date of
execution of this instrument.
Collateral Document means any written instrument other than the Loan Agreement, the
Indenture and the Mortgage, whereby any property, interest in property or promise of any kind is
granted, pledged, conveyed, assigned, or transferred to the Issuer or Trustee, or both, as security
for payment of the Bonds or performance by the Company of its obligations under the Loan
Agreement.
Company means Country Manor St. Joseph, LLC, a Tennessee limited liability company,
the sole member of which is the Sole Member, and any permitted successor to such Company
under Section 7.1 of the Loan Agreement.
Company Certificate means a certificate signed by any officer of the Company and
delivered to the Trustee.
Company Request, Company Order, or Company Consent means, respectively, a written
request, order, or consent signed in the name of the Company by any officer of the Company,
and delivered to the Trustee.
Company Resolution means a resolution certified by an officer of the Company to have
been duly adopted by the governing body of the Company and to be in full force and effect on
the date of such certification and delivered to the Trustee.
Company Tax Certificate means the Tax Certificate of the Company and the Sole
Member executed and delivered by the Company and the Sole Member on the Issue Date for a
series of Tax-Exempt Bonds.
Continuing Disclosure Agreement means, for the Series 2019 Bonds, that certain
Continuing Disclosure Agreement, dated as of July 1, 2019, between the Company and the
Dissemination Agent, as originally executed and as it may be amended from time to time in
accordance with the terms thereof.
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Costs of Issuance Fund means the fund created in Section 5.03 hereof.
Days Cash on Hand means, as of the date of calculation, the quotient determined by
dividing (a) the Company’s Cash and Marketable Securities, the dollar amount of which is
derived from amounts shown on the most recent audited financial statements, by (b) the quotient
obtained by dividing the sum of the Operating Expenses (the dollar amount of which is derived
from amounts shown on said audited financial statements, but including interest expense and
excluding amortization and depreciation expense), by the actual number of days in the twelve
(12) month period for which such calculation is being made.
Defaulted Interest means interest on any Bond which is payable but is not punctually paid
or duly provided for on any Interest Payment Date.
Defeasance Obligations means Government Obligations which are not subject to
redemption.
Determination of Taxability means receipt by the Trustee of a statutory notice of
deficiency by the Internal Revenue Service, a ruling from the National Office of the Internal
Revenue Service, or a final decision of a court of competent jurisdiction which holds in effect
that interest payable on the Tax-Exempt Bonds is includable for federal income tax purposes in
the gross income of a Bondholder because of any act or omission of the Company (or any
successor or transferee) or of the Trustee; provided, however, that the Company shall have an
opportunity for no more than one hundred eighty (180) days after receipt by the Trustee to
contest any such statutory notice, ruling or final decision and that no such statutory notice, ruling
or final decision shall be deemed a “Determination of Taxability” if the Company is contesting
the same during such one hundred eighty (180) day period in good faith until the earliest of (a)
abandonment of such contest by the Company, (b) the date on which such statutory notice, ruling
or final decision becomes final, or (c) the one hundred eighty-first day after the initial receipt by
the Trustee of such statutory notice, ruling or final decision; and provided further that no
Determination of Taxability shall arise from the interest on the Tax-Exempt Bonds being
included (1) in income for purposes of calculating alternative minimum taxable income of any
taxpayer; (2) in earnings and profits of branches of foreign corporation for purposes of
calculating the “branch profits tax”; (3) within gross income to certain recipients of social
security or railroad retirement benefits; or (4) as passive investment income to certain S
corporations which have subchapter C earnings and profits.
Dissemination Agent means U.S. Bank National Association, a national banking
association, and any successor or assign, under the Continuing Disclosure Agreement.
Event of Default means any event defined as such in Section 7.01 hereof or Section 11.1
of the Loan Agreement.
Facilities means the facilities described in Exhibit A of the Loan Agreement located on
the Land and any Improvements or additional structures, buildings or other facilities hereinafter
acquired or constructed by the Company and located on the Land, and used, directly or
indirectly, for housing or healthcare purposes, as such properties may at any time exist.
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Fiscal Year means the period commencing on October 1 of any year and ending on
September 30 of the following year, or any other twelve (12) month period specified in a
Company Resolution as the fiscal year of the Company.
Government Obligations means direct obligations of, or obligations the principal of and
the interest on which are fully and unconditionally guaranteed by, the United States of America,
or securities or receipts evidencing ownership interests in any of the foregoing obligations or in
specified portions (such as principal or interest) of any of the foregoing obligations.
Gross Revenues means total revenues of the Company for a specified period including
contributions from members of the Company or other Affiliates but excluding unrealized gains
on investments, as determined in accordance with generally accepted accounting principles.
Guaranty means an obligation of the Company guaranteeing in any manner an obligation
of another Person, whether or not an Affiliate, which would constitute Indebtedness if such other
Person were the Company or such guaranteed obligation were the obligation of the Company.
Holder means a Bondholder.
Improvement means any addition, betterment, capital repair, enlargement, improvement,
extension or alteration of or to the Facilities as they then exist.
Indebtedness means (i) all indebtedness, whether or not represented by bonds,
debentures, notes or other securities, for the repayment of money borrowed, (ii) all indebtedness
for the payment of the purchase price of property or assets purchased, (iii) all guaranties,
endorsements, assumptions and other contingent obligations with respect to, or to purchase or to
otherwise acquire, indebtedness of others, (iv) all indebtedness secured by any mortgage, pledge
or lien existing on property owned, subject to such mortgage, pledge or lien, whether or not
indebtedness secured thereby shall have been assumed, and (v) installment purchase contracts,
loans secured by purchase money security interests, lease-purchase agreements or capital leases
(including leases of real property), entered into by the Company in connection with the
acquisition of property not previously owned by the Company and computed in accordance with
generally accepted accounting principles; provided, however, that “Indebtedness” does not
include (a) trade accounts payable and accrued expenses incurred in the normal course of
business, or (b) subordinated indebtedness for which a subordination agreement in substantially
the form of Exhibit B attached to the Loan Agreement is provided. For purposes of this
definition no single evidence of indebtedness shall be counted more than once even though more
than one of the clauses (i) through (v) above may apply.
Indenture means this Indenture of Trust, dated as of July 1, 2019, between the Issuer and
the Trustee, as the same may from time to time be amended or supplemented in accordance with
the provisions hereof.
Independent when used with respect to any specified Person, means such a Person who
(i) is in fact independent; (ii) does not have any direct financial interest or any material indirect
financial interest in the Company or any Affiliate, other than the payment to be received under a
contract for services to be performed by such Person; and (iii) is not connected with the
Company or any Affiliate as an official, officer, employee, promoter, underwriter, trustee,
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partner, director or person performing similar functions. Whenever it is herein provided that any
Independent Person’s opinion or certificate shall be furnished to the Trustee, such Person shall
be appointed by the Issuer, the Company or the Trustee, as the case may be, and such opinion or
certificate shall state that the signer has read this definition and that the signer is Independent
within the meaning hereof.
Insurance Consultant means any Person retained by the Company experienced in matters
relating to the insurance of facilities of the same character as the Facilities.
I nterest Payment Date means a fixed date specified in a Bond and the Indenture as a date
on which an installment of interest on a Bond is due and payable. The Interest Payment Dates
for the Series 2019 Bonds shall be each January 1 and July 1, commencing January 1, 2020.
Issue Date means the date on which any series of Bonds is issued and delivered to the
Original Purchaser of such series. The Issue Date for the Series 2019 Bonds is July ___, 2019.
Issuer means the City of St. Joseph, Minnesota, a statutory city and political subdivision
organized the laws of the State, and any successor to its functions hereunder.
Issuer Certificate means a certificate signed by the Mayor or the City Administrator of
the Issuer, or other officer of the Issuer specified in an Issuer Resolution, and delivered to the
Trustee.
Issuer Request, Issuer Order, or Issuer Consent means, respectively, a written request,
order or consent of the Issuer, signed by the Mayor or the City Administrator of the Issuer, or
other officer of the Issuer designated by an Issuer Resolution, and delivered to the Trustee.
Issuer Resolution means a resolution, ordinance or other appropriate enactment by the
City Council of the Issuer certified by an appropriate officer of the Issuer to have been duly
adopted by the Issuer and to be in full force and effect on the date of such certification, and
delivered to the Trustee.
Land means the real estate described in Exhibit A to the Mortgage and any additional real
estate which may be included within the lien of the Mortgage, but excluding any real estate
released from the lien of the Mortgage pursuant to the terms of the Mortgage.
Limited Guaranty Agreement means the Limited Guaranty Agreement, dated as of July 1,
2019, by the Sole Member, as guarantor, in favor of the Trustee, as it may be amended from time
to time.
Loan means the loan by the Issuer to the Company of the proceeds of the Bonds,
exclusive of any accrued interest paid by the Original Purchaser of the Bonds upon the delivery
thereof, but including the underwriting discount, if any, in connection with the sale of Bonds by
the Issuer to the Original Purchaser.
Loan Agreement means the Loan Agreement, dated as of July 1, 2019, between the Issuer
and the Company, as the same may be from time to time amended or supplemented in
accordance with the provisions thereof and hereof.
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Loan Repayment means a payment required to be made by the Company by Section 2.2
of the Loan Agreement.
Loan Repayment Date means a date on which a Loan Repayment is due pursuant to
Section 2.2 of the Loan Agreement.
Long-Term Indebtedness means Indebtedness of the Company other than certain Short-
Term Indebtedness (as provided in Section 6.2 of the Loan Agreement). Long-Term
Indebtedness shall include the Seller Note \[and the Working Capital Note\] except for purposes
of the calculations required by Sections 4.6 and 6.4 of the Loan Agreement.
Management Consultant means an Independent Person qualified to study operations of
assisted living and senior housing facilities and having a favorable reputation for skill and
experience in such work and, unless otherwise specified in the Loan Agreement, retained by the
Company.
Manager means Continuums Management Services LLC, a Tennessee nonprofit limited
liability company, its successors and assigns.
Maturity, when used with respect to any Bond, means the date on which the principal of
such Bond becomes due and payable as therein or herein provided, whether at the Stated
Maturity or by declaration of acceleration, call for redemption or otherwise.
Monthly Repair and Replacement Deposit means, for each month of operation of the
Facilities, commencing in October 2019, the amount of $2,100 ($300 per unit times 84 units,
divided by twelve (12) months), which amount may be adjusted in accordance with the terms of
the Loan Agreement.
Monthly Taxes and Insurance Deposit means for each month one-twelfth of one hundred
percent (100%) of the amount set forth from time to time in the Company’s budget for the
current calendar year for (i) annual premiums on all insurance required to be maintained by this
Indenture and (ii) real estate taxes (or payments in lieu of such taxes), assessments or other
charges for governmental services with respect to the Facilities for the current year (exclusive of
utility charges); provided that in the first calendar year following the date of issuance of the
Bonds, the Trustee will make monthly deposits that shall cause the balance in the Taxes and
Insurance Escrow Fund to be sufficient to pay when due the annual insurance premiums and
taxes.
Mortgage means the Combination Mortgage, Security Agreement, Fixture Financing
Statement, and Assignment of Leases and Rents, dated as of July 1, 2019, by the Company in
favor of the Trustee, as the same may from time to time be amended or supplemented in
accordance with the provisions thereof and hereof.
Mortgaged Property has the meaning given such term in the Mortgage.
Net Proceeds, when used with respect to any insurance claim or condemnation award,
means the gross proceeds from such insurance claim or condemnation award remaining after
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payment of all expenses (including attorneys’ fees and any expenses of the Issuer, the Company
and the Trustee) incurred in the collection of such gross proceeds.
Net Revenues Available for Debt Service means Gross Revenues for a specified period,
whether historic or projected, less total Operating Expenses for the same specified period, as
determined in accordance with generally accepted accounting principles, to which shall be added
the amount of all depreciation, amortization and interest expense which has been included in
total Operating Expenses and other non-operating income and contributions available for debt
service, and less deposits into the Repair and Replacement Reserve Fund and the Taxes and
Insurance Escrow Fund required under the Loan Agreement, all for the same specified period.
Operating Expenses means for any period all non-capitalized expenses incurred in the
operation of the Facilities, including, for any period of calculation, the aggregate of all operating
expenses of the Company (excluding extraordinary losses and expenses, write-offs related to
debt extinguishment and unrealized losses on investments), calculated in accordance with
generally accepted accounting principles consistently applied.
Opinion of Counsel means a written opinion of legal counsel, who may (except as
otherwise specifically provided in the Loan Agreement or this Indenture) be counsel for the
Issuer or the Company.
Original Purchaser means, with respect to the Series 2019 Bonds, Dougherty & Company
LLC, and with respect to any series of Additional Bonds, the original purchaser thereof.
Outstanding, when used with reference to Bonds means, as of the date of determination,
all Bonds theretofore issued and delivered under this Indenture, except:
(A) Bonds theretofore canceled by the Trustee or delivered to the Trustee
canceled or for cancellation;
(B) Bonds defeased in accordance with the terms of this Indenture; and
(C) Bonds in exchange for or in lieu of which other Bonds shall have been
issued and delivered pursuant to this Indenture;
provided, however, that in determining whether the Holders of the requisite principal amount of
Bonds have given any request, demand, authorization, direction, notice, consent or waiver
hereunder, Bonds owned by the Issuer, the Company or any Affiliate shall be disregarded and
deemed not to be Outstanding, except that in determining whether the Trustee shall be protected
in relying upon any such request, demand, authorization, direction, notice, consent, or waiver,
only Bonds which the Trustee knows to be so owned shall be disregarded.
Permitted Encumbrances means those encumbrances set forth in Section 3.2 of the
Mortgage.
Person means any individual, corporation, partnership, joint venture, association, joint
stock company, trust, unincorporated organization or government or any agency or political
subdivision thereof.
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Principal and Interest Requirements on Long-Term Indebtedness means for any Fiscal
Year, and subject to the provisions of Section 6.4 of the Loan Agreement, the amount required to
pay the principal of and the interest on Long-Term Indebtedness becoming due in such Fiscal
Year, excluding “funded interest” from the proceeds of Indebtedness.
Principal Payment Date means the Stated Maturity of principal of any Serial Bond and
the Sinking Fund Payment Date for, or, if a Term Bond is not to be redeemed on a Sinking Fund
Payment Date, the Stated Maturity of such Term Bond; the Principal Payment Dates for the
Series 2019 Bonds shall be July 1 of the years set forth in Sections 3.01 and 3.07 hereof.
Project Revenues means Gross Revenues less any contributions from members of the
Company and other sources of revenues not derived from the operation of the Facilities.
Qualified Investments means any of the following: (i) Government Obligations; (ii)
bonds, debentures, participation certificates or notes issued by any of the following: Bank for
Cooperatives, Federal Financing Bank, Federal Land Banks, Federal Home Loan Banks, Federal
Intermediate Credit Banks, Federal National Mortgage Association, Export-Import Bank of the
United States, Federal Home Loan Mortgage Corporation or Government National Mortgage
Association, or any other agency or corporation which has been or may hereafter be created by
or pursuant to an act of the Congress of the United States as an agency or instrumentality thereof;
(iii) certificates of deposit or time deposits with any banking or savings institution which is
insured by the Federal Deposit Insurance Corporation, provided that such certificates of deposit
or time deposits, if not insured by the Federal Deposit Insurance Corporation, are fully secured
by Government Obligations which are lodged with a bank or trust company as collateral security;
(iv) shares in an Investment Company registered under the Federal Investment Company Act of
1940 whose shares are registered under the Federal Securities Act of 1933 and whose only
investments are Qualified Investments described in clause (i) or (ii) of this Section;
(v) commercial paper of United States industrial corporations or United States direct issuers
rated at the time of investment in the two (2) highest rating categories by Moody’s Investors
Service or S&P Global Ratings; provided, however, such commercial paper may not be issued by
the Company or any “related person” as that term is defined by Section 147(a)(2) of the Code;
(vi) Treasury and Government Money Market Mutual funds, which may include repurchase
agreements that are collateralized solely with treasury or government securities respectively, and
are registered under Rule 2a-7 of the Investment Company Act of 1940 with a constant NAV and
AAA rating by at least two (2) nationally recognized statistical rating organizations (NRSRO); or
(vii) a guaranteed investment contract rated at the time of investment “A” or better by Moody’s
Investors Service or S&P Global Ratings.
Rebate Fund means the fund created in Section 5.08 hereof.
Record Date means the fifteenth day (whether or not a Business Day) of the calendar
month immediately preceding each Interest Payment Date.
Redemption Date, when used with respect to any Bond to be redeemed, means the date
on which it is to be redeemed pursuant hereto.
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Redemption Price, when used with respect to any Bond to be redeemed, means the price
at which it is to be redeemed pursuant hereto.
Repair and Replacement Reserve Fund means the fund created in Section 5.06 hereof.
Responsible Officer, when used with respect to the Trustee, means the chairman or
vice-chairman of the board of directors, the chairman or vice-chairman of the executive
committee of the board of directors, the president, any vice-president (whether or not designated
by a number or a word or words added before or after the title “vice-president”), the secretary,
any assistant secretary, the treasurer, any assistant treasurer, any trust officer (whether or not
designated by a word or words added before or after the title “trust officer”) or assistant trust
officer, the controller and any assistant controller or any other officer of the Trustee customarily
performing functions similar to those performed by any of the above designated officers, and
shall also mean, with respect to a particular corporate trust matter, any other officer to whom
such matter is referred because of his or her knowledge of and familiarity with the particular
subject and who shall have direct responsibility for the administration of this Indenture.
Seller Note means the note provided by the Company in the amount of $500,000 to CM
St. Joe, LLC in exchange for a loan, the proceeds of which were or will be used to
_______________________, as more fully described in Section 6.5 of the Loan Agreement.
Serial Bonds means Bonds which are not Term Bonds.
Series 2019A Bonds means the Senior Housing Facility Revenue Bonds (Woodcrest of
Country Manor Project), Series 2019A, issued by the Issuer in the original aggregate principal
amount of $22,125,000.
Series 2019A-T Bonds means the Taxable Senior Housing Facility Revenue Bonds
(Woodcrest of Country Manor Project), Series 2019A-T, issued by the Issuer in the original
aggregate principal amount of $300,000.
Series 2019 Bonds means, together, the Series 2019A Bonds and the Series 2019A-T
Bonds.
Short-Term Indebtedness means any Indebtedness incurred, assumed or guaranteed by
the Company maturing not more than three hundred sixty-five (365) days after such
Indebtedness is incurred.
Sinking Fund Payment Date means one of the dates set forth in Section 3.07 hereof (as to
the Series 2019 Bonds) or any applicable provision of a Supplemental Indenture (as to any series
of Additional Bonds) for the making of principal payments for Term Bonds.
Sole Member means The Foundation For Health Care Continuums, a Tennessee nonprofit
corporation, its successors and assigns.
Special Record Date has the meaning set forth in Section 2.08 hereof.
State means the State of Minnesota.
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Stated Maturity, when used with respect to any Bond, means the date specified in such
Bond as the fixed date on which the principal of such Bond is due and payable.
Supplemental Indenture means any indenture supplemental to this Indenture entered into
pursuant to Article XI hereof.
Taxable Bonds means Bonds the interest on which is not excluded from gross income for
federal and State income tax purposes.
Taxes and Insurance Escrow Fund means the fund created in Section 5.07 hereof.
Tax-Exempt Bonds means the Series 2019A Bonds and any Additional Bonds that are
not Taxable Bonds.
Tax-Exempt Organization means either (i) a nonprofit corporation organized under the
laws of one of the states of the United States of America or the District of Columbia that is an
organization described in Section 501(c)(3) of the Code and exempt from federal income taxes
under Section 501(a) of the Code or any predecessor or successor provisions of similar import
heretofore or hereafter enacted or an organization that is otherwise treated as an organization
described in Section 501(c)(3) of the Code and exempt from federal income taxes under Section
501(a) of the Code; or (ii) a government unit within the meaning of Section 103 of the Code.
Term Bonds means those Bonds of a single Stated Maturity in a principal amount which
the Indenture provides must be redeemed prior to their Stated Maturity from sinking fund
payments the Loan Agreement requires the Company to make for such purpose.
Trustee means U.S. Bank National Association, a national banking association, and any
successor Trustee under this Indenture.
Trust Estate has the meaning specified in the Granting Clauses hereof.
Trust Funds means all of the funds and accounts created pursuant to this Indenture,
except the Rebate Fund.
Trust Money has the meaning stated in Section 5.01 hereof.
Variable Rate Indebtedness means any portion of Indebtedness the interest rate on which
varies periodically such that the interest rate at a future date cannot accurately be calculated.
Working Capital Note means the Revolving Credit Note and Security Agreement dated
October 3, 2016 by the Company to the Sole Member in the amount of $500,000 in exchange for
a loan, the proceeds of which were or will be used for working capital, as more fully described in
Section 6.6 of the Loan Agreement.
Section 1.02. Compliance Certificates and Opinions. Upon any application or request
by the Issuer or the Company to the Trustee to take any action under any provision of this
Indenture or the Loan Agreement, the Issuer or such Company shall furnish the Trustee an Issuer
Certificate or a Company Certificate stating that all conditions precedent, if any, provided for in
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this Indenture or the Loan Agreement relating to the proposed action have been complied with
and an Opinion of Counsel stating that in the Opinion of Counsel all such conditions precedent,
if any, have been complied with, except that in the case of any such application or request as to
which the furnishing of a Company Certificate and an Opinion of Counsel is specifically
required by any provision of this Indenture or the Loan Agreement relating to such particular
application or request, no additional certificate or opinion need be furnished.
Every certificate or opinion with respect to compliance with a condition or covenant
provided for in this Indenture or the Loan Agreement shall include:
(A) a statement that each individual signing such certificate or opinion has
read such covenant or condition and the definitions herein relating thereto;
(B) a statement that, in the opinion of each such individual, he or she has made
such examination or investigation as is necessary to enable him or her to express an
informed opinion as to whether or not such covenant or condition has been complied
with; and
(C) a statement as to whether, in the opinion of each such individual, such
condition or covenant has been complied with.
Section 1.03. Form of Documents Delivered to Trustee. In any case where several
matters are required to be certified by, or covered by an opinion of, any specified Person, it is not
necessary that all such matters be certified by, or covered by the opinion of, only one such
Person, or that they be so certified or covered by only one document, but one such Person may
certify or give an opinion with respect to some matters and one or more other such Persons as to
other matters, and any such Person may certify or give an opinion as to such matters in one or
several documents.
Any certificate or opinion of an officer of the Issuer or the Company may be based,
insofar as it relates to legal matters, upon a certificate or opinion of, or representations by,
counsel, unless such officer knows, or in the exercise of reasonable care should know, that the
certificate or opinion or representations with respect to the matters upon which his certificate or
opinion is based are erroneous. Any Opinion of Counsel may be based, insofar as it relates to
factual matters, upon a certificate or opinion of, or representations by, an officer or officers of
the Issuer or the Company stating that the information with respect to such factual matters is in
the possession of the Issuer or the Company, unless such counsel knows, or in the exercise of
reasonable care should know, that the certificate or opinion or representations with respect to
such matters are erroneous.
Where any Person is required to make, give or execute two or more applications,
requests, consents, certificates, statements, opinions or other instruments under this Indenture,
they may, but need not, be consolidated and form one instrument.
An “application” for the authentication and delivery of Bonds, or the release of property,
or the withdrawal of cash, under any provision of this Indenture, shall consist of, and shall not be
deemed complete until the Trustee shall have been furnished with, all such documents, cash,
Bonds, securities and other instruments as are required by such provision to establish the right of
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the Issuer or the Company to the transaction applied for, and the date of such application shall be
deemed to be the date upon which such application shall be so completed.
Wherever in this Indenture, in connection with any application or certificate or report to
the Trustee, it is provided that the Issuer or the Company shall deliver any document as a
condition of the granting of such application, or as evidence of the Issuer’s or Company’s
compliance with any term hereof, it is intended that the truth and accuracy, at the time of the
granting of such application or at the effective date of such certificate or report (as the case may
be), of the facts and opinions stated in such document shall in such case be conditions precedent
to the right of the Issuer or Company to have such application granted or to the sufficiency of
such certificate or report.
Section 1.04. Acts of Holders.
(A) Any request, demand, authorization, direction, notice, consent, waiver or
other action provided by this Indenture to be given or taken by Holders may be embodied
in and evidenced by one or more instruments of substantially similar tenor signed by such
Holders in person or by agent duly appointed in writing; and, except as herein otherwise
expressly provided, such action shall become effective when such instrument or
instruments are delivered to the Trustee, and, where it is hereby expressly required, to the
Issuer and/or the Company. Such instrument or instruments (and the action embodied
therein and evidenced thereby) are herein sometimes referred to as the “act” of the
Holders signing such instrument or instruments. Proof of execution of any such
instrument or of a writing appointing any such agent shall be sufficient for any purpose of
this Indenture and (subject to Section 2.09 hereof) conclusive in favor of the Trustee, the
Issuer and the Company if made in the manner provided in this Section 1.04.
(B) The fact and date of the execution by any Person of any such instrument or
writing may be proved by the affidavit of a witness of such execution or by the certificate
of any notary public or other officer authorized by law to take acknowledgments of
deeds, certifying that the individual signing such instrument or writing acknowledged to
him or her the execution thereof. Where such execution is by an officer of a corporation
or a member of a partnership, on behalf of such corporation or partnership, such
certificate or affidavit shall also constitute sufficient proof of his authority. The fact and
date of the execution of any such instrument or writing, or the authority of the Persons
executing the same, may also be proved in any other manner which the Trustee deems
sufficient.
(C) The fact and date of execution of any such instrument or writing may also
be provided in any other manner which the Trustee deems sufficient; and the Trustee may
in any instance require further proof with respect to any of the matters referred to in this
Section 1.04.
(D) The ownership of Bonds shall be proved by the Bond Register.
(E) Any request, demand, authorization, direction, notice, consent, waiver or
other action by the Holder shall bind every future Holder of the same Bond and the
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Holder of every Bond issued upon the transfer thereof or in exchange therefor or in lieu
thereof, in respect of anything done or suffered to be done by the Trustee, the Issuer or
the Company in reliance thereon, whether or not notation of such action is made upon
such Bond.
Section 1.05. Notices, etc., to Trustee, Issuer and Company. Any request, demand,
authorization, direction, notice, consent, waiver or Act of Holders or other document provided or
permitted by this Indenture shall be sufficient for any purpose under this Indenture and shall be
deemed given when mailed first class mail, postage prepaid (except as otherwise provided in this
Indenture), with a copy to the other parties, at the following addresses (or such other address as
may be provided by any party by notice):
To the Issuer: City of St. Joseph
75 Callaway Street East
St. Joseph, MN 56374
Attention: City Administrator-Clerk
To the Company: Country Manor St. Joseph, LLC
c/o Country Manor
520 First Street NE
Sartell, MN 56377
Attention: Chief Financial Officer
To the Trustee: U.S. Bank National Association
60 Livingston Avenue, Third Floor
EP-MN-WS3C
St. Paul, MN 55107
Attention: Corporate Trust Department
To the Original Purchaser of the Dougherty & Company LLC
Series 2019 Bonds: 90 South Seventh Street, Suite 4300
Minneapolis, MN 55402
Attention: Public Finance
Section 1.06. Notices to Bondholders; Waiver. Where this Indenture provides for notice
to Bondholders of any event, such notice shall be sufficiently given (unless otherwise herein
expressly provided) if in writing and mailed, first-class postage prepaid, to each Bondholder
affected by such event, at his address as it appears on the Bond Register, not later than the latest
date, and not earlier than the earliest date, prescribed for the giving of such notice. In any case
where notice to Bondholders is given by mail, neither the failure to mail such notice, nor any
defect in any notice so mailed, to any particular Bondholder shall affect the sufficiency of such
notice with respect to other Bondholders. Where this Indenture provides for “notice in any
manner,” such notice may be waived in writing by the Person entitled to receive such notice,
either before or after the event, and such waiver shall be the equivalent of such notice. Waivers
of notice by Bondholders shall be filed with the Trustee, but such filing shall not be a condition
precedent to the validity of any action taken in reliance upon such waiver.
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Section 1.07. Effect of Headings and Table of Contents. The Article and Section
headings herein and the Table of Contents are for convenience only and shall not affect the
construction hereof.
Section 1.08. Successors and Assigns. All covenants and agreements in this Indenture
by the Issuer shall bind its successors, whether so expressed or not.
Section 1.09. Separability Clause. In case any provision in this Indenture or in the
Bonds shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the
remaining provisions shall not in any way be affected or impaired thereby.
Section 1.10. Execution and Counterparts. This Indenture may be executed in any
number of counterparts. All such counterparts shall be deemed to be originals and shall together
constitute one and the same instrument.
Section 1.11. Construction. This Indenture shall be construed in accordance with the
laws of the State.
Section 1.12. Benefit of Indenture. Nothing in this Indenture or in the Bonds, express or
implied, shall give to any Person, other than the parties hereto and their successors hereunder, the
Company and the Holders, any benefit or other legal or equitable right, remedy or claim under
this Indenture.
Section 1.13. Limitation of Liability. It is understood and agreed by the Company and
the Holders that no covenant, provision or agreement of the Issuer herein or in the Bonds or in
any other document executed by the Issuer in connection with the issuance, sale and delivery of
the Bonds, or any obligation herein or therein imposed upon the Issuer or breach thereof, shall
give rise to a pecuniary liability of the Issuer or a charge against its general credit or taxing
powers or shall obligate the Issuer financially in any way except with respect to the Loan
Agreement and the application of revenues therefrom and the proceeds of the Bonds. No failure
of the Issuer to comply with any term, condition, covenant or agreement therein shall subject the
Issuer to liability for any claim for damages, cost or other financial or pecuniary charges except
to the extent that the same can be paid or recovered from the Loan Agreement or revenues
therefrom or proceeds of the Bonds. No execution on any claim, demand, cause of action or
judgment shall be levied upon or collected from the general credit, general funds or taxing
powers of the Issuer. In making the agreements, provisions and covenants set forth herein, the
Issuer has not obligated itself except with respect to the Loan Agreement and the application of
revenues hereunder as hereinabove provided. The Bonds constitute special, limited obligations
of the Issuer, payable solely from the revenues pledged to the payment thereof pursuant to the
Loan Agreement and this Indenture, and do not now and shall never constitute an indebtedness
or a loan of the credit of the Issuer, the State or any political subdivision thereof or a charge
against the Issuer’s general taxing powers within the meaning of any constitutional or statutory
provision whatsoever. It is further understood and agreed by the Company and the Holders that
the Issuer shall incur no pecuniary liability hereunder and shall not be liable for any expenses
related hereto. If, notwithstanding the provisions of this Section, the Issuer incurs any expense,
or suffers any losses, claims or damages or incurs any liabilities, the Company will indemnify
and hold harmless the Issuer from the same and will reimburse the Issuer for any legal or other
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expenses incurred by the Issuer in relation thereto, and this covenant to indemnify, hold harmless
and reimburse the Issuer shall survive delivery of and payment of the Bonds.
Section 1.14. Respecting the Loan Agreement. With regard to any alleged default
concerning which notice is given to the Company under the provisions of Section 7.01(C) hereof,
the Issuer hereby appoints the Company as its attorney, in the name and stead of the Issuer, with
full power to do any and all things and acts to the same extent that the Issuer could do and
perform; provided that the Company shall first give the Issuer notice of its intention so to
perform on behalf of the Issuer.
Certain of the covenants of the Issuer hereunder will be assumed by the Company in the
Loan Agreement, and, while the Loan Agreement remains in full force and effect, the obligations
shall be the responsibility of the Company, or, if the Loan Agreement is terminated, then such
covenants are enforceable only to the extent of the revenues derived from the property subject to
the lien of the Mortgage or any Collateral Document, or from the Trust Moneys held by the
Trustee.
The rights and duties given under this Indenture to the Company shall be applicable only
while the Loan Agreement is in full force and effect.
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ARTICLE II
GENERAL PROVISIONS OF THE BONDS
Section 2.01. General Limitations. The Bonds may be issued in series as from time to
time authorized by Issuer Resolution. The Bonds are special, limited obligations of the Issuer.
Principal of, premium, if any, and interest on the Bonds are payable solely out of the revenues
derived from the Loan Agreement (other than to the extent payable out of proceeds of the Bonds,
amounts in the Trust Funds, insurance proceeds or condemnation awards, or from funds realized
from the sale or other disposition of the Mortgaged Property or under the terms of any Collateral
Document). The State shall not in any event be liable for the payment of the principal of,
premium, if any, or interest on the Bonds or for the performance of any pledge, mortgage,
obligation or agreement of any kind whatsoever that may be undertaken by the Issuer. Neither
the Bonds nor any of the agreements or obligations of the Issuer contained herein or in the Loan
Agreement shall be construed to constitute an indebtedness of the State or the Issuer within the
meaning of any constitutional or statutory provisions whatsoever.
If the Stated Maturity of any Bond or if any Interest Payment Date, Redemption Date or
Sinking Fund Payment Date shall not be a Business Day, then the payment of principal,
premium, or interest due on such date may be made on the next succeeding Business Day, with
the same force and effect as if made on the Stated Maturity, Interest Payment Date, Redemption
Date or Sinking Fund Payment Date, and without additional interest accruing thereon for the
period after such Stated Maturity, Interest Payment Date, Redemption Date or Sinking Fund
Payment Date (whether or not such next succeeding Business Day occurs in a succeeding
month).
Section 2.02. Terms of Particular Series. Each series of Bonds (except the Series 2019
Bonds, which are created by Article III hereof) shall be created by a Supplemental Indenture
authorized by an Issuer Resolution and with consent of the City of St. Joseph. The Bonds of
each series (other than the Series 2019 Bonds, as to which specific provision is made in this
instrument) shall bear such date or dates, shall be payable at such place or places, shall have such
Stated Maturities and Redemption Dates, shall bear interest at such rate or rates, from such date
or dates, payable in such installments and on such dates and at such place or places, and may be
redeemable at such price or prices and upon such terms (in addition to the prices and terms
herein specified for redemption of all Bonds) as shall be provided in the Supplemental Indenture
creating that series. The Issuer may, at the time of the creation of any series of Bonds or at any
time thereafter, make, and the Bonds of that series may contain, provision for:
(A) a sinking, amortization, improvement or other analogous fund;
(B) limiting the aggregate principal amount of the Bonds of that series; and/or
(C) exchanging Bonds of that series, at the option of the Holders thereof, for
other Bonds of the same series of the same aggregate principal amount of a different
authorized kind and/or authorized denomination or denominations;
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all upon such terms as the governing body of the Issuer may determine. All Bonds of the same
series shall be substantially identical except as to denomination, the differences specified herein
or in a Supplemental Indenture between interest rates, Stated Maturities and redemption
provisions.
Section 2.03. Form and Denominations. The form of the Bonds of each series (other
than the Series 2019 Bonds, as to which specific provisions are made in this instrument) shall be
established by the provisions of the Supplemental Indenture creating such series. The Bonds of
each series shall be distinguished from the Bonds of other series in such manner as the governing
body of the Issuer may determine.
The Bonds of each series shall be issuable in fully registered form in such denominations
as shall be provided in the provisions of the Supplemental Indenture creating such series (other
than the Series 2019 Bonds, as to which specific provisions are made in this instrument). In the
absence of any other provision with respect to the Bonds of any particular series, the Bonds of
such series shall be in the denomination of $5,000 or any integral multiple thereof.
Section 2.04. Execution, Authentication and Delivery. Each Bond shall be executed on
behalf of the Issuer by the officers of the Issuer specified in an Issuer Resolution. The signature
of any Issuer officer may be manual or facsimile, if permitted by applicable law.
Bonds bearing the signatures of individuals who were at any time the proper officers of
the Issuer shall bind the Issuer, notwithstanding that such individuals or any of them have ceased
to hold such offices prior to the authentication and delivery of such Bonds or did not hold such
offices at the date of such Bonds.
At any time and from time to time after the execution and delivery of this Indenture, the
Issuer may deliver Bonds executed by the proper officers of the Issuer to the Trustee for
authentication; and the Trustee shall authenticate and deliver such Bonds as in this Indenture
provided and not otherwise.
No Bond shall be secured by, or entitled to any lien, right or benefit under, this Indenture
or be valid or obligatory for any purpose, unless there appears on such Bond a certificate of
authentication substantially in the form provided for herein executed by a representative of the
Trustee by manual signature, and such certificate upon any Bond shall be conclusive evidence,
and the only evidence, that such Bond has been duly authenticated and delivered hereunder.
Section 2.05. \[Intentionally Omitted\].
Section 2.06. Registration, Transfer and Exchange. The Issuer shall cause to be kept at
the principal corporate trust office of the Trustee a register (the “Bond Register”) in which,
subject to such reasonable regulations as it may prescribe, the Issuer shall provide for the
registration of Bonds of all series and of transfers of Bonds of all series. The Trustee is hereby
appointed “Bond Registrar” for the purpose of registering Bonds and transfers of Bonds as herein
provided.
Upon surrender for transfer of any Bond at the office of the Bond Registrar, the Issuer
shall execute, and the Trustee shall authenticate and deliver, in the name of the designated
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transferee or transferees, one or more new Bonds of the same series, of any authorized
denomination or denominations, of like aggregate principal amount and having the same Stated
Maturity and interest rate.
At the option of the Holder, Bonds may be exchanged upon surrender thereof at the
principal corporate trust office of the Trustee, for other Bonds of the same series, Stated Maturity
and interest rate of a like aggregate principal amount, of any authorized denomination or
denominations, as requested by the Holder surrendering the same. The appropriate officials of
the Issuer will execute, and the Trustee shall authenticate and deliver, Bonds required for any
such exchange.
All Bonds surrendered upon any exchange or transfer provided for in this Indenture shall
be promptly canceled by the Trustee and thereafter disposed of pursuant to Section 2.10 hereof.
All Bonds issued upon any transfer or exchange of Bonds shall be the valid obligations of
the Issuer evidencing the same debt, and entitled to the same security and benefits under this
Indenture, the Loan Agreement, the Mortgage and any Collateral Document, as the Bonds
surrendered upon such transfer or exchange.
Every Bond presented or surrendered for transfer or exchange shall (unless the
requirement is waived by the Issuer and the Trustee) be duly endorsed, or be accompanied by a
written instrument of transfer in form satisfactory to the Issuer and the Bond Registrar duly
executed by, the Holder thereof or his attorney duly authorized in writing.
No service charge shall be made for any registration, transfer or exchange herein
provided for, but the Issuer may require payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in connection with any transfer or exchange of the
Bonds, other than exchanges under Article III hereof not involving any transfer.
The Trustee shall not be required (i) to issue, transfer or exchange any Bond during a
period beginning at the opening of business fifteen (15) days before the day of mailing a notice
of redemption of Bonds selected for redemption and ending at the close of business on the day of
such mailing, or (ii) to transfer or exchange any Bond selected for redemption in whole or in
part.
Neither the Trustee nor any agent shall have any responsibility or liability for any action
taken or not taken by DTC.
Section 2.07. Mutilated, Destroyed, Lost and Stolen Bonds. If (i) any mutilated Bond is
surrendered to the Trustee, or the Trustee receives evidence to its satisfaction of the destruction,
loss or theft of any Bond and (ii) there is delivered to the Trustee such security or indemnity as
may be required by the Trustee to save the Issuer, the Trustee and the Company harmless, then,
in the absence of notice to the Trustee that such Bond has been acquired by a bona fide
purchaser, the Issuer shall execute and upon its request the Trustee shall authenticate and deliver,
in exchange for or in lieu of such mutilated, destroyed, lost or stolen Bond, a new Bond of the
same series and of like tenor, principal amount, Stated Maturity and interest rate.
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In case any such mutilated, destroyed, lost or stolen Bond has become or is about to
become due and payable, the Issuer in its discretion may, instead of issuing a new Bond, pay
such Bond.
Upon the issuance of any new Bond under this Section 2.07, the Trustee may require the
payment of a sum sufficient to cover any tax or other governmental charge that may be imposed
in relation thereto and any other expenses (including the fees and expenses of the Trustee)
connected therewith.
Every new Bond issued pursuant to this Section 2.07 in lieu of any destroyed, lost or
stolen Bond shall constitute an original additional contractual obligation of the Issuer, whether or
not the destroyed, lost or stolen Bond shall be at any time enforceable by anyone, and shall be
entitled to all the benefits of this Indenture, the Loan Agreement, the Mortgage, and any
Collateral Document equally and proportionately with any and all other Bonds hereby secured.
The provisions of this Section 2.07 are exclusive and shall preclude (to the extent lawful)
all other rights and remedies with respect to the replacement or payment of mutilated, destroyed,
lost or stolen Bonds.
Section 2.08. Payment of Interest; Interest Rights Preserved. Interest on any Bond
which is payable, and is punctually paid or duly provided for, on any Interest Payment Date shall
be paid to the Person in whose name that Bond (or one or more predecessor Bonds) is registered
at the close of business on the Record Date for such interest.
Any Defaulted Interest shall forthwith cease to be payable to the registered Holder on the
relevant Record Date by virtue of having been such Holder; and such Defaulted Interest shall be
paid to the Persons in whose names the Bonds (or their respective predecessor Bonds) are
registered at the close of business on a Special Record Date for the payment of such Defaulted
Interest, which shall be fixed in the following manner. The Company shall notify the Trustee in
writing of the amount of Defaulted Interest proposed to be paid on each Bond and the date of the
proposed payment, and at the same time the Company shall deposit with the Trustee an amount
of money equal to the aggregate amount proposed to be paid in respect of such Defaulted Interest
or shall make arrangements satisfactory to the Trustee for such deposit prior to the date of the
proposed payment, such money when deposited to be held in trust for the benefit of the Persons
entitled to such Defaulted Interest as in this Section provided. Thereupon the Trustee shall fix a
Special Record Date for the payment of such Defaulted Interest which shall be not more than
fifteen (15) nor less than ten (10) days prior to the date of the proposed payment and not less
than ten (10) days after the receipt by the Trustee of the notice of the proposed payment. The
Trustee shall promptly notify the Company of such Special Record Date and, in the name and at
the expense of the Company, shall cause notice of the proposed payment of such Defaulted
Interest and the Special Record Date therefor to be mailed, first class postage prepaid, to each
Bondholder at his address as it appears in the Bond Register, not less than ten (10) days prior to
such Special Record Date. The Trustee may, in its discretion, in the name and at the expense of
the Company, cause a similar notice to be published in a newspaper, but such publication shall
not be a condition precedent to the establishment of such Special Record Date. Notice of the
proposed payment of such Defaulted Interest and the Special Record Date therefor having been
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mailed as aforesaid, such Defaulted Interest shall be paid to the Persons in whose names the
Bonds (or their respective predecessor Bonds) are registered on such Special Record Date.
Subject to the foregoing provisions of this Section, each Bond delivered under this
Indenture upon transfer of or in exchange for or in lieu of any other Bond shall carry the rights to
interest accrued and unpaid, and to accrue, which were carried by such other Bond.
Section 2.09. Persons Deemed Owners. The Issuer, the Trustee and any other agent of
the Issuer may treat the Person in whose name any Bond is registered as the owner of such Bond
for the purpose of receiving payment of principal of (and premium, if any), and interest on, such
Bond and for all other purposes whatsoever whether or not such Bond be overdue, and neither
the Issuer, the Trustee nor any other agent of the Issuer shall be affected by notice to the
contrary.
Section 2.10. Cancellation. All Bonds surrendered for payment, redemption, transfer or
exchange shall be promptly canceled. The Issuer or the Company may at any time deliver to the
Trustee for cancellation any Bonds previously authenticated and delivered hereunder which the
Issuer or the Company may have acquired in any manner whatsoever, and all Bonds so delivered
shall be promptly canceled by the Trustee. All canceled Bonds held by the Trustee shall be
disposed of as required by law.
Section 2.11. Book Entry Provisions. Notwithstanding any provision of this Indenture
to the contrary:
(A) Upon initial issuance of the Bonds the ownership of one fully registered
Series 2019 Bond for each maturity of the Bonds shall be registered in the name of Cede
& Co. (“Cede”), as nominee of The Depository Trust Company (“DTC”), New York,
New York. Payments of interest on, principal of and any premium on the Bonds shall be
made to the account of Cede on each payment date at the address indicated for Cede in
the Bond Register kept by the Trustee in accordance with arrangements acceptable to
DTC and the Trustee. DTC has represented to the Issuer that it will maintain a book-
entry system in recording ownership interests of its participants (the “Direct
Participants”), and the ownership interests of a purchaser of a beneficial interest in the
Bonds (a “Beneficial Holder”) will be recorded through book entries on the records of the
Direct Participants.
(B) With respect to Bonds registered in the name of Cede, the Issuer and the
Trustee shall have no responsibility or obligation to any Direct Participant or to any
Beneficial Holder of such Bonds. Without limiting the immediately preceding sentence,
the Issuer and the Trustee shall have no responsibility or obligation with respect to (i) the
accuracy of the records of DTC, Cede or any Direct Participant with respect to any
beneficial ownership interest in the Bonds, (ii) the delivery of any Direct Participant,
Beneficial Holder or other Person, other than DTC, of any notice with respect to the
Bonds, including any notice of redemption, (iii) the payment of any Direct Participant,
Beneficial Holder or other Person, other than DTC, of any amount with respect to the
principal or Redemption Price of, or any interest on, the Bonds or (iv) any consent given
or other action taken by DTC as Holder of the Bonds. With respect to the Bonds
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registered in the name of Cede, the Issuer and the Trustee may treat DTC as, and deem
DTC to be, the absolute owner of each Bond for all purposes whatsoever including (but
not limited to) (i) payment of the principal or Redemption Price of, and interest on, each
such Bond, (ii) giving notices of purchase or redemption and other matters with respect to
such Bonds and (iii) registering transfers with respect to such Bonds. The Trustee shall
pay the principal or Redemption Price of, and interest on, all such Bonds only to or upon
the order of DTC, and all such payments shall be valid and effective to fully satisfy and
discharge the Issuer’s obligations with respect to such principal or Redemption Price, and
interest, to the extent of the sum or sums so paid. Until and unless the services of DTC as
depository of the Bonds are terminated or discontinued, no Person other than DTC shall
receive a Bond evidencing the obligation of the Issuer to make payments of principal or
Redemption Price of, and interest on, the Bonds pursuant to this Indenture. Upon
delivery by DTC to the Trustee of written notice to the effect that DTC has determined to
substitute a new nominee in place of Cede, and subject to the transfer provisions hereof,
the word “Cede” in this Indenture shall refer to such new nominee of DTC.
(C) DTC may determine to discontinue providing its services with respect to
the Bonds at any time by giving reasonable written notice to the Issuer and the Trustee
and discharging its responsibilities with respect thereto under applicable law. The
Trustee shall terminate the services of DTC with respect to the Bonds if the Issuer
determines that the continuation of the system of book-entry-only transfers through DTC
(or a successor securities depository) is not in the best interests of the Beneficial Holders
of the Bonds or is burdensome to the Trustee, and shall terminate the Services of DTC
with respect to the Bonds upon receipt by the Trustee of written notice from DTC to the
effect that DTC has received written notice from Direct Participants having interests, as
shown in the records of DTC, in an aggregate principal amount of not less than fifty
percent (50%) of the aggregate principal amount of the Bonds then Outstanding to the
effect that; (1) DTC is unable to discharge its responsibilities with respect to the Bonds or
(2) a continuation of the requirement that all of the Bonds be registered in the Bond
Register in the name of Cede, as nominee of DTC, is not in the best interest of the
Beneficial Holders of such Bonds.
(D) Upon the termination of the services of DTC with respect to the Bonds
pursuant to subsection (c)(ii)(b) hereof, or upon the discontinuance of the services of
DTC with respect to the Bonds pursuant to subsection (C) above after which no substitute
securities depository willing to undertake the functions of DTC hereunder can be found
or which, in the opinion of the Trustee, is willing and able to undertake such functions
upon reasonable and customary terms, the Bonds shall no longer be restricted to being
registered in the registration books kept by the Trustee in the name of Cede as nominee of
DTC. In such event, the Trustee shall transfer and exchange Bond certificates as
requested by DTC or Direct Participants and confirmed by DTC of like principal amount,
series and maturity, in Authorized Denominations to the identifiable Beneficial Holders
in replacement of such Beneficial Holders’ beneficial interests in the Bonds.
(E) Notwithstanding any other provision of this Indenture to the contrary, so
long as any Bond is registered in the name of Cede, as nominee of DTC, all payments
with respect to the principal or Redemption Price of, and interest on, such Bond and all
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notices with respect to such Bond shall be made and given, respectively, to DTC as
provided in the representation letter addressed to DTC with respect to the Bonds.
(F) In connection with any notice or other communication to be provided to
Bondholders pursuant to this Indenture by the Trustee with respect to any consent or
other action to be taken by Bondholders, the Trustee shall establish a record date for such
consent or other action and give DTC notice of such record date not less than fifteen (15)
calendar days in advance of such record date to the extent the Trustee is reasonably able
to do so.
(G) Notwithstanding any provision herein to the contrary, the Trustee may
agree to allow DTC, or its nominee, Cede, to make a notation on any Bond redeemed in
part to reflect, for informational purposes only, the principal amount and date of any such
redemption.
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ARTICLE III
THE SERIES 2019 BONDS
Section 3.01. Specific Title and Terms of the Series 2019 Bonds. There is hereby
created and there shall be two series of Series 2019 Bonds entitled (i) “Senior Housing Facility
Revenue Bonds (Woodcrest of Country Manor Project), Series 2019A”; and (ii) “Taxable Senior
Housing Facility Revenue Bonds (Woodcrest of Country Manor Project), Series 2019A-T.” The
Series 2019A Bonds and the Series 2019A-T Bonds shall be in substantially the forms attached
hereto as EXHIBIT A and EXHIBIT B, respectively, with such variations as may be necessary
and appropriate for numbers, dates, redemption provisions, subordination disclosure and other
matters. The Series 2019 Bonds shall be issued in fully registered form in the denomination of
$5,000 or any integral multiple thereof.
The aggregate principal amount of the Series 2019A Bonds that may be authenticated and
delivered and Outstanding under this Indenture is limited to and shall not exceed $22,125,000.
The aggregate principal amount of the Series 2019A-T Bonds that may be authenticated and
delivered and Outstanding under this Indenture is limited to and shall not exceed $300,000.
The Stated Maturities of the Series 2019 Bonds shall be as set forth below. Series 2019
Bonds having such Stated Maturities shall be in the aggregate principal amounts and shall bear
interest payable on each Interest Payment Date, commencing January 1, 2020, at the respective
rates per annum set forth below opposite the respective Stated Maturities, and at the same rates
(to the extent that the payment of such interest shall be legally enforceable) on overdue
installments of interest.
The Series 2019A Bonds shall mature on July 1 in the years and principal amounts set
forth below and shall bear interest, from their date until paid, at the rates set forth opposite such
years and amounts as follows:
Stated Maturity Principal
(July 1) Amount Interest Rate
___________________
* Term Bonds.
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The Series 2019A-T Bonds shall mature on July 1 in the years and principal amounts set
forth below and shall bear interest, from their date until paid, at the rates set forth opposite such
years and amounts as follows:
Stated Maturity Principal
(July 1) Amount Interest Rate
Section 3.02. Interest Calculations; Payments of Principal and Interest. Interest on the
Series 2019 Bonds shall be calculated on the basis of a three hundred sixty (360) day year of
twelve (12) thirty (30) day months. The principal of and premium, if any, on the Series 2019
Bonds shall be paid upon the presentation and surrender thereof at the principal corporate trust
office of the Trustee. Interest on the Series 2019 Bonds which is payable, and is punctually paid
on any Interest Payment Date, shall be paid by check or draft drawn upon the Trustee and mailed
to the Persons in whose name the Series 2019 Bonds are registered as of the close of business on
the Record Date for such Interest Payment Date at the address of such Holders as they appear on
the Bond Register.
Section 3.03. Authentication and Delivery of Series 2019 Bonds. The Series 2019
Bonds may forthwith upon the execution and delivery of this Indenture, or from time to time
thereafter, be executed by the proper officials of the Issuer and delivered to the Trustee for
authentication, and shall thereupon be authenticated and delivered by the Trustee, but only upon
receipt by the Trustee of the following:
(A) an Issuer Resolution authorizing the execution and delivery of the Loan
Agreement, this Indenture, and the Bond Purchase Agreement and approving the issuance
and sale of the Series 2019 Bonds;
(B) a Company Resolution authorizing the execution and delivery of the Loan
Agreement, the Bond Purchase Agreement, the Continuing Disclosure Agreement, and
the Mortgage and approving this Indenture and the issuance and sale of the Series 2019
Bonds;
(C) an original executed counterpart of this Indenture, the Loan Agreement,
the Bond Purchase Agreement, the Mortgage, the Continuing Disclosure Agreement, and
the Limited Guaranty Agreement;
(D) an Issuer Request which requests the Trustee to authenticate the Series
2019 Bonds, requests and authorizes the Trustee to deliver the Series 2019 Bonds so
authenticated to the Original Purchaser therein identified upon payment to the Trustee,
but for the account of the Issuer, of a sum specified in such Issuer Request and directs the
Trustee as to the disposition of the proceeds of the Series 2019 Bonds to the various
funds and accounts established hereunder; and
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(E) an opinion of Bond Counsel with respect to the validity and legality of the
Series 2019 Bonds and the tax-exempt nature of the Series 2019A Bonds.
Section 3.04. Deposit of Series 2019 Bond Proceeds. The Issuer shall deposit with the
Trustee all of the net proceeds of the sale of the Series 2019 Bonds (including accrued interest
thereon from the date from which interest is to be paid thereon to the date of delivery to the
Original Purchaser thereof), and the Trustee shall transfer or credit such proceeds (together with
the funds contributed by or on behalf of the Company) to the funds specified in the Issuer
Request described in Section 3.03(D) hereof.
Section 3.05. Optional Redemption.
(A) The Series 2019A Bonds maturing on July 1, 2055, in the principal
amount of $____________, shall be subject to redemption at the option of the Company,
evidenced by Company Request, on July 1, 20___, and on any date thereafter, in whole
or in part, and if in part, \[by lot\], at the Redemption Price of par plus accrued interest on
the principal amount to be redeemed to the Redemption Date, plus a premium (expressed
as a percentage of the principal amount of the Bonds so redeemed) set forth below:
Redemption Date Redemption Premium
July 1, 20__through June 30, 20__ ___%
July 1, 20__through June 30, 20__ ___
July 1, 20__and thereafter 0
(B) The Series 2019A-T Bonds are not subject to optional redemption prior to
Maturity (except as permitted under Section 3.08 hereof).
Section 3.06. \[Special Optional Redemption. The Series 2019A Bonds maturing on
July 1, 2055, \[in the principal amount of $_________\], shall be subject to special optional
redemption in the principal amount of $___________ on any date upon provision of equity
from the Company to the Trustee in an amount sufficient to pay the principal amount of
such Series 2019A Bond to be redeemed and all accrued interest thereon.\]
Section 3.07. Sinking Fund Redemption of Series 2019 Term Bonds.
(A) The Series 2019A Bonds having a Stated Maturity of July 1, 2055 in the
principal amount of $____________ and of July 1, 2055 in the principal amount of
$____________ shall be redeemed on July 1 of the years shown below (each a “Sinking
Fund Payment Date”) and in the amounts (each a “Sinking Fund Payment”) set forth
below:
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$____________ Series 2019A Term Bonds Maturing July 1, 2055
Payment
Date Principal
(July 1) Amount
___________________
* Maturity.
$____________ Series 2019A Term Bonds Maturing July 1, 2055
Payment
Date Principal
(July 1) Amount
__________________
* Maturity.
or, if less than such amount of Series 2019A Term Bonds is Outstanding on any such
Sinking Fund Payment Date, an amount equal to the aggregate principal amount of all
Series 2019A Term Bonds then Outstanding.
(B) The Trustee shall select and call for redemption, in accordance with
Article XIII hereof, from the Series 2019A Term Bonds the amounts specified above, and
the Series 2019A Term Bonds selected by the Trustee shall become due and payable on
such date. The Company may, in accordance with the option set forth in Section 10.1 of
the Loan Agreement, reduce the amount of any Sinking Fund Payment payable on any
Sinking Fund Payment Date by an amount equal to the principal amount of Outstanding
Series 2019A Term Bonds then to be redeemed that shall be surrendered uncanceled by
the Company to the Trustee, provided that the Company shall have surrendered such
Series 2019A Term Bonds to the Trustee not less than forty-five (45) days prior to such
Sinking Fund Payment Date, together with a Company Certificate stating its election to
use such Series 2019A Term Bonds for such purpose. In such case, the Trustee shall
reduce the amount of Series 2019A Term Bonds to be redeemed on the Sinking Fund
Payment Date specified in such Company Certificate by the principal amount of
Series 2019A Term Bonds so surrendered by the Company.
If Series 2019A Term Bonds are redeemed at the option of the Company pursuant to
Section 3.05 or 3.06 hereof, the Series 2019A Term Bonds so optionally redeemed may, at the
option of the Company, be applied as a credit against any subsequent Sinking Fund Payment
with respect to Series 2019A Term Bonds otherwise to be redeemed thereby, such credit to be
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equal to the principal amount of such Series 2019A Term Bonds redeemed pursuant to said
Section 3.05 or 3.06 hereof, provided that the Company shall have delivered to the Trustee not
less than forty-five (45) days prior to such Sinking Fund Payment Date a Company Certificate
stating its election to apply such Series 2019A Term Bonds as such a credit. In such case, the
Trustee shall reduce the amount of Series 2019A Term Bonds to be redeemed on the Sinking
Fund Payment Date specified in such Company Certificate by the principal amount of Series
2019A Term Bonds so redeemed pursuant to said Section 3.05 or 3.06.
Any credit given to Sinking Fund Payments pursuant to this Section 3.07 shall not affect
any subsequent Sinking Fund Payments, which shall remain payable as otherwise provided in
this Section 3.07, unless and until another credit is given in accordance with the provisions
hereof.
\[Sinking Fund Schedule for Series A-T Bonds?\]
Section 3.08. Extraordinary Optional Redemption. In accordance with Section 10.2 of
the Loan Agreement, the Series 2019 Bonds are subject to extraordinary optional redemption by
the Issuer, at the option of the Company, evidenced by Company Request, in whole or in part at
a Redemption Price of par plus accrued interest on the principal amount to be redeemed to the
Redemption Date on any date within one hundred eighty (180) days of the occurrence of any of
the following events:
(A) The Facilities shall have been damaged or destroyed to such extent that, in
the opinion of the Company, (i) normal operations at the Facilities are prevented or are
likely to be prevented for a period of twelve (12) consecutive months, or (ii) the
restoration of the Facilities is not economically feasible; or
(B) Title to, or the temporary use of, all or substantially all of the Facilities
shall have been taken under the exercise of the power of eminent domain by any
governmental authority, or person, firm or corporation acting under governmental
authority which, in the opinion of the Company, is likely to result in normal operations at
the Facilities being prevented for a period of twelve (12) consecutive months.
Section 3.09. Mandatory Redemption of Series 2019 Bonds Upon Determination of
Taxability. Upon the occurrence of a Determination of Taxability with respect to the Series
2019A Bonds, all Outstanding Series 2019 Bonds shall be subject to mandatory redemption, and
shall be called for redemption by the Trustee, in whole, on the date that is one hundred eighty
(180) days after the date upon which the Trustee receives written notice of the Determination of
Taxability, at a Redemption Price of par plus accrued interest to the Redemption Date. The
Trustee shall provide written notice to the Issuer and Company of the date selected for
redemption.
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ARTICLE IV
AUTHENTICATION AND DELIVERY OF ADDITIONAL BONDS
Section 4.01. General Provisions. In addition to the Series 2019 Bonds, whose
authentication and delivery is provided for in Article III hereof, Additional Bonds secured on a
parity with the Series 2019 Bonds may at any time and from time to time be executed by the
Issuer and delivered to the Trustee for authentication, but only upon receipt by the Trustee of the
following:
(A) An Issuer Resolution authorizing the issuance of the Additional Bonds and
the sale thereof to the purchaser or purchasers named therein for the purchase price set
forth therein;
(B) An Issuer Order directing the authentication of such Additional Bonds and
the delivery thereof to or upon the order of the purchaser or purchasers named therein
upon payment of the purchase price set forth therein;
(C) A Company Certificate requesting the issuance of such Additional Bonds,
stating that no default has occurred under the Loan Agreement which has not been cured,
that the Additional Bonds to be authenticated have not theretofore been issued and that all
conditions precedent provided for in this Indenture and the Loan Agreement relating to
the authentication and delivery of such Additional Bonds have been complied with;
(D) An Opinion of Bond Counsel:
(1) stating that all conditions precedent provided in this Indenture
relating to the authentication and delivery of such Additional Bonds have been
complied with;
(2) stating that the Additional Bonds whose authentication and
delivery are then applied for, when issued and executed by the Issuer and
authenticated and delivered by the Trustee, will be the valid and binding
obligations of the Issuer in accordance with their terms and entitled to the benefits
of and secured by the lien of this Indenture, the Loan Agreement, the Mortgage
and any Collateral Document equally and ratably with all Outstanding Bonds; and
(3) stating that the issuance of such Additional Bonds will not affect
the tax-exempt nature for federal income tax purposes of any series of Tax-
Exempt Bonds then Outstanding;
(E) An executed counterpart of the Supplemental Indenture creating such
Additional Bonds, which Supplemental Indenture shall provide for an additional deposit
into the Bond Reserve Fund so that the balance therein equals the then applicable Bond
Reserve Requirement;
(F) An executed counterpart of an amendment to the Loan Agreement
providing for additional Loan Repayments sufficient to provide for the payment of
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principal, premium, if any, and interest on all Bonds to be Outstanding after the issuance
of such series of Additional Bonds, and providing for Additional Payments if deemed
necessary;
(G) The Issuer Resolution authorizing the execution and delivery of the
Supplemental Indenture, the amendment to the Loan Agreement, and such Additional
Bonds;
(H) A Company Resolution authorizing the execution and delivery of the
amendment to the Loan Agreement, and approving the Supplemental Indenture and the
issuance and sale of such Additional Bonds;
(I) A Company Certificate stating that the conditions precedent to incurring
additional Long-Term Indebtedness set forth in Section 6.3 of the Loan Agreement have
been satisfied, accompanied by the evidence or reports required by Section 6.3 of the
Loan Agreement; and
(J) An Opinion of Counsel to the Company that the documents executed by
the Company in connection with the issuance of the Additional Bonds are valid and
enforceable against the Company, subject to customary provisions.
Any Additional Bonds shall be dated, shall bear interest at a rate or rates not exceeding
the maximum rate, if any, permitted by law, shall have Stated Maturities, and may be subject to
redemption prior to their Stated Maturities at such times and prices and on such terms and
conditions (in addition to those specified in Article XIII hereof), all as may be provided by the
Supplemental Indenture authorizing their issuance. All Additional Bonds shall be payable and
secured equally and ratably and on a parity with the Outstanding Bonds, entitled to the same
benefits and security of this Indenture, the Loan Agreement, the Mortgage, and any Collateral
Documents.
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ARTICLE V
APPLICATION OF TRUST MONEY
Section 5.01. “Trust Money” Defined. All money received by the Trustee (all such
moneys being herein sometimes called the “Trust Money”):
(A) upon the release of property from the lien of the Loan Agreement, the
Mortgage, any Collateral Document, or this Indenture, or
(B) as compensation for, or proceeds of sale of, any part of the Facilities taken
by eminent domain or purchased by, or sold pursuant to an order of, a governmental
authority or otherwise disposed of, or
(C) as proceeds of insurance upon any part of the Facilities, or
(D) as elsewhere herein provided to be held and applied under this Article V,
or required to be paid to the Trustee and whose disposition is not elsewhere herein
otherwise specifically provided for, including, but not limited to the investment income
of all funds and accounts held by the Trustee under this Indenture, other than amounts
held in the Rebate Fund, or
(E) as proceeds from the sale of the Series 2019 Bonds and any Additional
Bonds, or
(F) as Loan Repayments, or (except as provided in Section 5.11 hereof) as
otherwise payable under the Loan Agreement, or
(G) as any payments received under the Limited Guaranty Agreement,
shall be held by the Trustee as a part of the Trust Estate, and, upon the exercise by the Trustee of
any remedy specified in Article VII hereof, such Trust Money shall be applied in accordance
with Section 7.05 hereof, except to the extent that the Trustee is holding in trust money and/or
Government Obligations for the payment of any specified Bonds which are no longer deemed to
be Outstanding under the provisions of Article VI hereof, which money and/or Government
Obligations shall be applied only as provided in said Article VI. Prior to the exercise of any such
remedy, all or any part of the Trust Money shall be held, invested, withdrawn, paid or applied by
the Trustee, from time to time, as provided in this Article V and in Article VI hereof.
Section 5.02. Acquisition Fund. A special trust fund is hereby established with the
Trustee and designated the “Acquisition Fund.” On the Issue Date of the Series 2019 Bonds, the
Trustee shall credit to the Acquisition Fund the amount set forth in the Issuer Request to be
delivered pursuant to Section 3.03(D) hereof. The amount on deposit in the Acquisition Fund
will be used by the Company on the Issue Date of the Series 2019 Bonds to acquire the buildings
and land currently constituting the Facilities.
Section 5.03. Costs of Issuance Fund. A special trust fund is hereby established with the
Trustee and designated as the “Costs of Issuance Fund.” The Trustee shall credit to the Costs of
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Issuance Fund the amounts set forth in the Issuer Request to be delivered pursuant to Section
3.03(D) hereof.
(A) The Trustee shall disburse money from the Costs of Issuance Fund to the
Company or its designee to pay the Bond Issuance Costs (or to reimburse the Company
for any expenditure in payment of the Bond Issuance Costs) and to pay certain other costs
with respect to the Facilities (including certain fees of counsel, the costs of third-party
reports with respect to the Facilities, the costs of an appraisal and survey, and title
insurance and recording costs) upon receipt by the Trustee of a Company Certificate,
which shall be in writing and shall contain the following: (1) a statement of the amount
and general nature of each item of Bond Issuance Costs certified to have been incurred or
paid by and requested to be reimbursed to the Company, or certified to be due and
payable and requested to be paid to a Person other than the Company; and (2) a statement
that each item for which payment or reimbursement is requested is or was necessary in
connection with the issuance of such Bonds and that none of such items has formed the
basis for any previous payment from the Costs of Issuance Fund. If the amount on hand
in the Costs of Issuance Fund is insufficient to pay all of the Bond Issuance Costs, the
Company shall provide for the payment of such Bond Issuance Costs out of its own funds
and such Bond Issuance Costs shall not be paid or reimbursed from any other Trust
Funds.
(B) Income derived from the investment of amounts on deposit in the Costs of
Issuance Fund shall be credited as received to the Bond Fund. On January 1, 2020, or an
earlier date on which the Trustee receives a Company Certificate stating that all Bond
Issuance Costs have been paid, the Trustee shall transfer any balance then on hand in the
Costs of Issuance Fund to the Bond Fund; and within thirty (30) days thereafter the
Trustee shall furnish the Company a written report as to the amounts disbursed from the
Costs of Issuance Fund, showing the date of each such disbursement and the Person to
whom it was made.
Section 5.04. Bond Fund. A special trust fund is hereby established with the Trustee
and designated as the “Bond Fund.” The Trustee shall deposit in the applicable accounts of the
Bond Fund, forthwith upon receipt of the proceeds of the Series 2019 Bonds, the amounts set
forth in the Issuer Request to be delivered pursuant to Section 3.03(D) hereof.
The Trustee shall deposit in the Bond Fund the Loan Repayments described in Section
2.2(A) and (B) of the Loan Agreement, the Loan Repayments under Section 2.2(C) of the Loan
Agreement to be used for the redemption of the Series 2019 Bonds, and any interest on such
Loan Repayments not paid when due and any other moneys paid to the Trustee under the Loan
Agreement or this Indenture for credit or transfer to the Bond Fund.
Except as otherwise provided herein, moneys in the Bond Fund shall be used and
withdrawn by the Trustee solely to pay the interest on the applicable series of Bonds as it
becomes due and payable, and, to the extent that payment of such interest is lawful, interest upon
overdue installments of interest at the rate borne by the applicable series of Bonds; to pay the
principal amount of the applicable series of Bonds at their respective Stated Maturities; and to
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redeem the applicable series of Bonds in accordance with Sections 3.05, 3.06, 3.07, 3.08, 3.09,
and 13.08 hereof.
If on any Interest Payment Date, Principal Payment Date or Redemption Date the balance
in the Bond Fund is not sufficient to pay the total amount of principal, premium, if any, and
interest due on all Series 2019 Bonds on such Interest Payment Date, Principal Payment Date or
Redemption Date, as the case may be, the Trustee shall transfer any money then on hand in the
Repair and Replacement Reserve Fund, and then proceeds derived from the Limited Guaranty
Agreement, and then any money then on hand in the Bond Reserve Fund, in that order, in an
amount equal to such deficiency, to the Bond Fund, and apply the amount so transferred to
payment of principal, premium, if any, and interest then due on the Series 2019 Bonds.
All income derived from the amounts on deposit in the Bond Fund shall remain in the
Bond Fund and be credited against Loan Repayments in the manner specified in Section 2.2 of
the Loan Agreement.
Section 5.05. Bond Reserve Fund. A special trust fund is hereby established with the
Trustee and designated as the “Bond Reserve Fund.” The Trustee shall deposit in the applicable
accounts of the Bond Reserve Fund, forthwith upon receipt of the proceeds of the Series 2019
Bonds, the amounts set forth in the Issuer Request to be delivered pursuant to Section 3.03(D)
hereof, which amount shall not be less than the Bond Reserve Requirement for the Series 2019
Bonds.
If on any Interest Payment Date, Principal Payment Date or Redemption Date there is a
deficiency in the Bond Fund, after any transfer from the Repair and Replacement Reserve Fund
and after a draw of proceeds derived from the Limited Guaranty Agreement, the Trustee shall
transfer from the Bond Reserve Fund to the Bond Fund an amount equal to such deficiency.
Investment of amounts on hand in the Bond Reserve Fund shall be made as directed by
the Company in any Qualified Investments which in the aggregate have a weighted average
remaining maturity of no more than five (5) years, unless invested pursuant to a guaranteed
investment contract described in clause (vii) of the definition of Qualified Investments and in
accordance with Section 5.11 hereof. Notwithstanding any other provision hereof, all Qualified
Investments acquired for the Bond Reserve Fund shall meet the definition of “plain par
investments” as set forth in Section 1.148-1(b) of the Treasury Regulations (i.e., shall be a fixed
rate investment which pays interest at least annually; if redeemable, shall have a lowest stated
redemption price not less than its outstanding stated principal amount; and shall be acquired with
original issue or market discount, or original issue or market premium, as applicable, not
exceeding two percent (2%) of the stated redemption price at maturity).
All income derived from the investment of amounts on hand in the Bond Reserve Fund,
after payment of any unpaid Trustee’s fees, shall remain in, and be credited as received to, the
accounts of the Bond Reserve Fund until such time as the balance in each account of the Bond
Reserve Fund (valued at the outstanding stated principal amount of Qualified Investments
therein) is equal to the Bond Reserve Requirement. When the Bond Reserve Fund is equal to the
Bond Reserve Requirement, investment income from such account shall be transferred as
received to the Bond Fund.
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If on any Interest Payment Date or Redemption Date, the balance in the Bond Reserve
Fund (valued at the outstanding stated principal amount of Qualified Investments therein)
exceeds the Bond Reserve Requirement, after payment of any unpaid Trustee’s fees, the Trustee
shall immediately transfer any excess in the Bond Reserve Fund to the Bond Fund.
If any amount is transferred from the Bond Reserve Fund to the Bond Fund pursuant to
this Section 5.04 as a result of the failure of the Company to make the Loan Repayments
required by Section 2.2(A) of the Loan Agreement, the Trustee shall thereafter credit to the Bond
Reserve Fund all payments received by the Trustee from the Company pursuant to Section
2.3(B) of the Loan Agreement.
Amounts in the Bond Reserve Fund, if not previously used as aforesaid, shall be applied
against the final installment of principal of and interest due on the Series 2019 Bonds.
Section 5.06. Repair and Replacement Reserve Fund. The Trustee shall establish and
maintain a fund designated as the “Repair and Replacement Reserve Fund.” Commencing
October, 2019 (the Fiscal Year ending September 30, 2020), there shall be credited to the Repair
and Replacement Reserve Fund the Monthly Repair and Replacement Deposit paid by the
Company directly to the Trustee in accordance with Section 2.7 of the Loan Agreement. There
shall also be credited to the Repair and Replacement Reserve Fund all Net Proceeds of
condemnation awards or insurance relating to condemnation, damage or destruction of the
Facilities if in excess of $250,000. The Trustee shall apply moneys on deposit in the Repair and
Replacement Reserve Fund, as directed by the Company as set forth in the paragraph below, no
more frequently than once a month, to pay to or to reimburse the Company for paying the cost of
repairs, improvements, and replacements to the Facilities that are deemed capital expenditures
under generally accepted accounting principles. Amounts in the Repair and Replacement
Reserve Fund may also be used to redeem Bonds pursuant to Section 13.08 hereof. The Trustee
shall also apply moneys on deposit in the Repair and Replacement Reserve Fund to pay debt
service on the Bonds in the event that moneys in the Bond Fund are insufficient therefor.
Upon presentation to the Trustee of a Company Request for disbursement in substantially
the form set forth in EXHIBIT C attached hereto, accompanied by a summary of the amount for
which payment or reimbursement is sought and, for requests for a particular line item of
disbursement in excess of $25,000, copies of bills or statements for the payment of the capital
expenditures (provided that the Trustee shall have no duty or obligation to review or approve
such bills or statements), the Trustee will pay to the Company the amount of such capital
expenditures on any day from moneys then on deposit in the Repair and Replacement Reserve
Fund, provided no Event of Default shall then exist hereunder. If the total amount on deposit in
the Repair and Replacement Reserve Fund shall not be sufficient to pay all of such capital
expenditures when they shall become due, then the Company shall pay the excess amount of
such capital expenditures directly.
Upon receipt of a Company Certificate that payment of all costs of capital expenditures
have been made, the Trustee shall transfer any amount remaining in the Repair and Replacement
Reserve Fund after payment of all costs of replacement, repair, reconstruction, or restoration
relating to the condemnation, damage or destruction to which such amount relates, to the Bond
Fund. All income realized from the investment of the Repair and Replacement Reserve Fund
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shall be credited as received to the Repair and Replacement Reserve Fund and used and applied
as additional Net Proceeds.
Section 5.07. Taxes and Insurance Escrow Fund. A special trust fund is hereby
established with the Trustee and designated as the “Taxes and Insurance Escrow Fund.” There
shall be credited to the Taxes and Insurance Escrow Fund the Monthly Taxes and Insurance
Deposit. The Trustee shall use such amounts to pay the insurance premiums and the real estate
taxes for the Facilities in the amounts and at the times required. If there are not sufficient
amounts in the Taxes and Insurance Escrow Fund, the Trustee shall immediately notify the
Company of the deficiency and demand payment of that amount. The Trustee shall not be
obligated to advance its own funds to cure any deficiency. All income derived from investment
of amounts on deposit in the Taxes and Insurance Escrow Fund shall remain in, and be credited
to, the Taxes and Insurance Escrow Fund.
Section 5.08. Rebate Fund. A special fund is hereby established with the Trustee and
designated as the “Rebate Fund.” The Trustee shall make information regarding the Tax-Exempt
Bonds and investments hereunder available to the Company, shall make deposits and
disbursements from the Rebate Fund in accordance with the instructions received from the
Company, shall invest the Rebate Fund in accordance with instructions received from the
Company and shall deposit income from such investments immediately upon receipt thereof in
the Rebate Fund. The Issuer shall have no liability with respect to arbitrage rebate.
The Trustee shall not be responsible for any determination or calculation concerning
arbitrage rebate with respect to the Tax-Exempt Bonds or for determining whether the yield on
any investments made in accordance with this Indenture would cause, or whether any other facts
exist which would cause, any of the Tax-Exempt Bonds to become arbitrage bonds under Section
148 of the Code.
Section 5.09. \[Intentionally Omitted\]
Section 5.10. Additional Payments. Pursuant to Section 2.3(A) of the Loan Agreement,
the Company has covenanted to pay directly to the Trustee when due Additional Payments in an
amount sufficient to pay the costs and expenses of the Trustee. Such Additional Payments shall
not be treated or considered as Trust Moneys for any purpose of this Indenture and the Trustee
may on its own behalf enforce such covenant against the Company.
Section 5.11. Investments. The Trustee shall invest all Trust Money on hand from time
to time as directed in a Company Request in any Qualified Investments. Moneys credited to any
account or fund maintained hereunder which are uninvested pending disbursement or receipt of
proper investment directions, shall be deposited to and held in an account established with the
Commercial Banking Department of the Trustee or with any bank affiliated with the Trustee,
without the pledge of bonds to or other collateralization of such deposit accounts. The Trustee
may purchase or sell securities herein authorized through itself or a related subsidiary as
principal or agent. The Trustee shall be fully protected in relying on any written investment
direction as to the suitability and legality of such directed investments. The Trustee has no
obligation to confirm that such directed investments constitute Qualified Investments.
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The Trustee shall have no liability whatsoever for any loss, fee, tax or other charge
incurred in connection with any investment, reinvestment, sale or liquidation of an investment
hereunder. In no event shall the Trustee be deemed an investment manager or advisor in respect
of any selection of investments hereunder. In the event of a loss on the sale of such investments,
the Trustee shall have no responsibility in respect of such loss except that the Trustee shall notify
the Company of the amount of such loss and the Company shall promptly pay such amount to
the Trustee to be credited as part of the monies originally invested.
The Trustee shall without further direction from the Issuer or the Company sell such
Qualified Investments as and when required to make any payment for the purpose for which such
investments are held. Each investment shall be credited to the fund for which it is held, after
payment of any unpaid Trustee’s fees, subject to any other provision of this Indenture directing
some other credit, but income on such Qualified Investments shall be held or transferred, as
received, in accordance with this Article V. The Trustee shall furnish the Company, not less
than annually, an accounting of all investments.
Section 5.12. Trust Money. All Trust Money shall be trust funds under the terms hereof
and shall not be subject to lien or attachment of any creditor of the Issuer, the Trustee or the
Company. Such Trust Money shall be held in trust and applied in accordance with the
provisions of this Indenture.
All Trust Money, for any legal, tax or other purpose, shall be considered funds of the
Company, although subject to the security interest of the Trustee imposed by this Indenture.
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ARTICLE VI
DEFEASANCE
Section 6.01. Payment of Indebtedness; Satisfaction and Discharge of Indenture. This
Indenture shall cease to be of further effect (except as to rights of transfer or exchange of Bonds
herein expressly provided for), and the Trustee, on demand of and at the expense of the
Company, shall execute proper instruments acknowledging satisfaction and discharge of this
Indenture, when
(A) either:
(1) all Bonds theretofore authenticated and delivered (other than (i)
Bonds which have been destroyed, lost or stolen and which have been replaced or
paid as provided in Section 2.07 hereof and (ii) Bonds for whose payment money
has theretofore been deposited in trust or segregated and held in trust by the
Company and thereafter repaid to the Company or discharged from such trust, as
provided in Section 12.02 hereof) have been delivered to the Trustee canceled or
for cancellation; or
(2) all such Bonds not theretofore delivered to the Trustee canceled or
for cancellation, have been defeased in accordance with Section 6.02 hereof; and
(B) the Company has paid or caused to be paid all other sums payable
hereunder by the Issuer and the Company; and
(C) the Company has delivered to the Trustee a Company Certificate and an
Opinion of Counsel each stating that all conditions precedent herein provided for relating
to the satisfaction and discharge of this Indenture have been complied with.
Section 6.02. Defeasance of Bonds. Bonds shall be defeased and shall no longer be
deemed Outstanding (except as to rights of transfer or exchange of Bonds herein expressly
provided for) when there are delivered to the Trustee:
(A) Defeasance Obligations, the principal of, premium, if any, and interest on
which when due will, without reinvestment, provide cash at times and in amounts which
together with the cash, if any, deposited with the Trustee at the same time as the
Defeasance Obligations are delivered to the Trustee, shall be sufficient to pay the full
amount of principal, premium, if any, and interest which will become due and payable
with respect to such Bonds, on and before their Stated Maturity or on and before a
specified Redemption Date, as the case may be, and if any of such Bonds are to be
redeemed arrangements satisfactory to the Trustee have been made for giving notice of
such redemption at the expense of the Company in the manner provided by Section 13.04
hereof; and
(B) an opinion of Bond Counsel to the effect that the deposit described in
subsection (A) above will not adversely affect the exemption from federal income
taxation of interest on any Outstanding Tax-Exempt Bond; and
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(C) a report of an Accountant verifying the mathematical sufficiency of the
proceeds of the Defeasance Obligations and any cash delivered to the Trustee as
described in subsection (A) above, to pay the entire amount of principal, premium, if any,
and interest on the Bonds to be defeased on and before their Stated Maturity or
Redemption Date, as the case may be, provided, however, when a defeasance escrow is
gross funded or when the Bonds mature or will be redeemed within ninety (90) days of
the deposit referred to in subsection (A) above, a report of an Accountant shall not be
required; and
(D) a Company Certificate and an Opinion of Counsel, each stating that,
assuming the accuracy of the report referred to in subsection (C) above, all conditions
precedent herein provided for relating to the defeasance of such Bonds have been
complied with.
Section 6.03. Application of Deposited Money. All money, obligations and income
thereon deposited with the Trustee pursuant to Section 6.01 shall not be a part of the Trust Estate
and shall not be deemed Trust Money but shall constitute a special trust fund for the benefit of
the Persons entitled thereto, and shall be applied by the Trustee to the payment (either directly or
through a paying agent), to the Persons entitled thereto, of the principal, premium, if any, and
interest for payment of which such money or obligation were deposited with the Trustee.
Section 6.04. Final Disposition of Moneys. Upon the satisfaction and discharge of this
Indenture and the satisfaction of any and all claims against the Issuer, any moneys remaining in
any fund created under this Indenture and not required for the payment of any Bonds shall be
paid to the Company.
(The remainder of this page is intentionally left blank.)
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ARTICLE VII
EVENTS OF DEFAULT; REMEDIES
Section 7.01. Events of Default. The term “Event of Default,” wherever used herein,
means any one of the following events (whatever the reason for such Event of Default and
whether it shall be voluntary or involuntary or be effected by operation of law or pursuant to any
judgment, decree or order of any court or any order, rule or regulation of any administrative or
governmental body):
(A) Default in the payment of any interest upon any Bonds when the same
becomes due and payable; or
(B) Default in the payment of the principal of (or premium, if any, on) any
Bonds when the same becomes due and payable; or
(C) Default in the performance, or breach, of any covenant or warranty of the
Issuer contained in this Indenture (other than a covenant or warranty a default in whose
performance or whose breach is elsewhere in this Section 7.01 specifically dealt with),
and continuance of such default or breach for a period of thirty (30) days after there has
been given, by registered or certified mail, to the Issuer and the Company by the Trustee,
or to the Issuer, the Company and the Trustee by the Holder or Holders of a majority in
aggregate principal amount of the Bonds then Outstanding, a written notice specifying
such default or breach and requiring it to be remedied and stating that such notice is a
“Notice of Default” hereunder; or
(D) The occurrence of an “Event of Default” under Section 11.1 of the Loan
Agreement.
Section 7.02. Acceleration of Maturity. If an Event of Default occurs and is continuing,
then and in every such case the Trustee may, and upon the written request by registered or
certified mail to the Trustee by the Holder or Holders of not less than a majority in aggregate
principal amount of Bonds then Outstanding shall, declare the principal of all the Outstanding
Bonds to be due and payable immediately by a notice in writing to the Issuer and the Company,
and upon any such declaration such principal shall become immediately due and payable;
provided, however, that no Bonds shall be accelerated under this Section 7.02 unless and until
the Trustee shall have exercised the remedy specified in Section 11.2(A) of the Loan Agreement.
At any time after such a declaration of acceleration has been made, but before the Trustee
has exercised any other remedy specified in the Loan Agreement, the Mortgage or any Collateral
Document, the Holders of a majority in aggregate principal amount of Bonds then Outstanding,
by written notice to the Issuer, Company and the Trustee, may rescind and annul such
declaration and its consequences if:
(A) there has been paid to or deposited with the Trustee a sum sufficient to
pay:
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(1) all sums paid or advanced by the Trustee hereunder and the
reasonable compensation, expenses, disbursements and advances of the Trustee,
its agents and counsel,
(2) all overdue installments of interest on all Bonds,
(3) the principal of (and premium, if any, on) any Bonds which have
become due otherwise than by such declaration of acceleration and interest
thereon at the rate borne by such Bonds, and
(4) to the extent that payment of such interest is lawful, interest upon
overdue installments of interest at the rate borne by the Bonds.
(B) All Events of Default, other than the non-payment of the principal of
Bonds which have become due solely by such acceleration, have been cured or waived as
provided in Section 7.17 hereof.
No such rescission shall affect any subsequent default or impair any right consequent thereon.
Section 7.03. Other Remedies. If an Event of Default occurs and is continuing, then in
every such case, upon written request and indemnity satisfactory to the Trustee, the Trustee may,
and upon the written request by registered or certified mail to the Trustee by the Holder or
Holders of a majority in aggregate principal amount of Bonds then Outstanding shall, exercise
one or more of the remedies specified in Section 11.2(B), (C), and/or (D) of the Loan
Agreement, in accordance with the provisions of Article XI of the Loan Agreement.
Section 7.04. \[Intentionally Omitted\].
Section 7.05. Application of Money. All moneys received by the Trustee or the Issuer
pursuant to any right given or action taken under the provisions of this Article VII shall, after
payment of the cost and expenses of the proceedings resulting in the collection of such moneys
and of the expenses, liabilities and advances incurred or made by the Trustee, including the fees
and expenses of its attorneys and agents, or the Issuer, and all moneys in the Trust Funds
maintained by the Trustee under Article V hereof, shall be applied as follows:
(A) Unless the principal of all the Bonds shall have become or shall have been
declared due and payable, all such moneys shall be applied to the payment of the
principal, redemption premium and interest then due on the Bonds in the following order
of payment:
FIRST: To the payment to the persons entitled thereto of all installments
of interest then due, 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
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SECOND: To the payment to the persons entitled thereto of the unpaid
principal which shall have become due (other than principal called for redemption
and for the payment of which moneys are held pursuant to the provisions of this
Indenture), in the order of their due dates, and, if the amount available shall not be
sufficient to pay in full the principal due on any particular date, 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.
(B) 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 first to the payment of the
principal and interest then due and unpaid upon the Bonds, without preference or priority
of principal over interest or of interest over principal, or of any installment of interest
over any other installment of interest, or of any Bonds over any other Bonds, ratably,
according to the amounts due respectively for principal and interest, to the persons
entitled thereto without any discrimination or privilege.
Whenever moneys are to be applied by the Trustee pursuant to the provisions of this
Section 7.05, such moneys shall be applied by it at such times, and from time to time, as the
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 Trustee shall apply such funds, 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 dates shall cease to accrue. The Trustee shall give such notice as it may deem appropriate
of the deposits with it of any such moneys and of the fixing of any such date, and shall not be
required to make payment to the Holder of any unpaid Bond until such Bond shall be presented
to the Trustee for appropriate endorsement or for cancellation if fully paid.
Whenever all Bonds and interest thereon have been paid under the provisions of this
Section 7.05 and all expenses and charges of the Trustee have been paid, any balance remaining
shall be paid to the person entitled to receive the same; if no other person shall be entitled
thereto, then the balance shall be paid to the Company.
Section 7.06. Bondholders or Trustee May Purchase; Purchaser May Apply Bonds
Toward Purchase Price. At any sale of the property secured by the Mortgage or any Collateral
Document, or any part thereof, under Article XI of the Loan Agreement, any Bondholder or
Bondholders or the Trustee may bid for and purchase the property offered for sale, may make
payment on account thereof as herein provided, and, upon compliance with the terms of such
sale, may hold, retain and dispose of such property without further accountability therefor. In
case of any sale of the property secured by the Mortgage or any Collateral Document, or any part
thereof, under Article XI of the Loan Agreement, any purchaser shall be entitled, for the purpose
of making payment for the property purchased, to use any Bonds then Outstanding and claims
for interest, in order that there may be credited thereon the sums payable out of the net proceeds
of such sale to the Holder of such Bonds and claims for interest as his ratable share of such net
proceeds; and thereupon such purchaser shall be credited on account of such purchase price with
the portion of such net proceeds that shall be applicable to the payment of, and shall have been
credited upon, the Bonds and claims for interest so used.
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Section 7.07. Receiver. Upon the occurrence of an Event of Default and
commencement of judicial proceedings by the Trustee to enforce any right under this Indenture,
the Loan Agreement, the Mortgage or any Collateral Document, the Trustee shall be entitled,
without notice or demand and without regard to the adequacy of the security for the Bonds or the
solvency of the Company, to the appointment of a receiver of any property and of the profits,
revenues and other income thereof, but, notwithstanding the appointment of any receiver, the
Trustee shall be entitled to retain possession and control of, and to collect and receive the income
from, cash, securities and other personal property held by, or required to be deposited or pledged
with, the Trustee hereunder and to retain control of, and to collect and receive the income from,
all property subject to the lien of the Mortgage and any Collateral Document.
Section 7.08. Collection of Indebtedness by the Trustee. If:
(A) default is made in the payment of any interest on any Bond when such
interest becomes due and payable; or
(B) default is made in the payment of the principal of (or premium, if any, on)
any Bond as the same becomes due and payable,
then the Trustee will cause the Company, on behalf of the Issuer, to pay to the Trustee for the
benefit of the Holders of such Bonds the whole amount then due and payable on such Bonds, for
principal, premium, if any, and interest, with interest at the respective rates prescribed in the
Bonds on overdue principal (and premium, if any) and (to the extent that payment of such
interest is legally enforceable) on overdue installments of interest; and, in addition thereto, such
further amount as shall be sufficient to cover the costs and expenses of collection, including the
reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and
counsel. If the Company fails to pay such amounts forthwith upon demand the Trustee, in its
own name and as trustee of an express trust, shall be entitled to sue for and recover judgment
against the Company for the whole amount so due and unpaid.
The Trustee shall be entitled to sue and recover judgment as aforesaid either before, after
or during the pendency of any proceedings for the enforcement of the lien of this Indenture, the
Mortgage or any Collateral Document and in case of a sale of the Trust Estate and the
application of the proceeds of sale as aforesaid, the Trustee, in its own name and as trustee of an
express trust, shall be entitled to enforce payment of, and to receive, all amounts then remaining
due and unpaid upon the Outstanding Bonds, for the benefit of the Holders thereof, and shall be
entitled to recover judgment for any portion of the same remaining unpaid, with interest as
aforesaid. No recovery of any such judgment upon any property of the Company shall affect or
impair the lien of this Indenture upon the Trust Estate or any rights, powers or remedies of the
Trustee hereunder, or any rights, powers or remedies of the Holders of the Bonds.
Section 7.09. Trustee May File Proofs of Claims. In case of the pendency of any
receivership, insolvency, liquidation, bankruptcy, reorganization, arrangement, adjustment,
composition or other judicial proceeding relative to the Issuer or the Company or any other
obligor upon the Bonds or the property of the Issuer or the Company or of such other obligor or
their creditors, the Trustee (irrespective of whether the principal of the Bonds shall then be due
and payable as therein expressed or by declaration or otherwise and irrespective of whether the
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Trustee shall have made any demand on the Issuer and/or the Company for the payment of
overdue principal or interest) shall be entitled and empowered, by intervention in such
proceeding or otherwise,
(A) to file and prove a claim for the whole amount of principal, premium, if
any, and interest owing and unpaid in respect of the Bonds then Outstanding and to file
such other papers or documents as may be necessary or advisable in order to have the
claims of the Trustee (including any claim for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel) and of the
Bondholders allowed in such judicial proceedings, and
(B) to collect and receive any money or other property payable or deliverable
on any such claims and to distribute the same;
and any receiver, assignee, trustee, liquidator, sequestrator or other similar official in any such
judicial proceeding is hereby authorized by each Bondholder to make such payments to the
Trustee, and, in the event that the Trustee shall consent to the making of such payments directly
to the Bondholders, to pay to the Trustee any amount due to it for the reasonable compensation,
expenses, disbursements, and advances of the Trustee, its agents and counsel.
Section 7.10. Trustee May Enforce Claims Without Possession of Bonds. All rights of
action and claims under this Indenture, the Bonds, the Loan Agreement, the Mortgage, or any
Collateral Document may be prosecuted and enforced by the Trustee without the possession of
any of the Bonds or the production thereof in any proceeding relating thereto, and any such suit
or proceeding instituted by the Trustee shall be brought in its own name as trustee of an express
trust, and any recovery of judgment shall, after provision for payment of the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, be
for the ratable benefit of Holders of the Bonds in respect of which such judgment has been
recovered, except as otherwise provided herein.
Section 7.11. Limitation on Suits. No Holder shall have any right to institute any
proceedings, judicial or otherwise, with respect to this Indenture, the Loan Agreement, the
Mortgage or any Collateral Document, or for the appointment of a receiver or trustee, or for any
remedy hereunder or thereunder, unless:
(A) such Holder shall previously have given written notice to the Trustee of a
continuing Event of Default;
(B) the Holders of a majority in aggregate principal amount of the Bonds then
Outstanding shall have made written request to the Trustee to institute proceedings in
respect of such Event of Default in its own name as Trustee hereunder;
(C) such Holder or Holders shall have offered the Trustee reasonable
indemnity against the costs, expenses and liabilities to be incurred in compliance with
such request;
(D) the Trustee for sixty (60) days after its receipt of such written request and
offer of indemnity has failed to institute any such proceeding; and
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(E) no direction inconsistent with such written request has been given to the
Trustee during such sixty (60) day period by the Holder or Holders of a majority in
principal amount of the Bonds then Outstanding;
it being understood and intended that no one or more Holders shall have any right, in any manner
whatever, by virtue of, or by availing of, any provision of this Indenture to affect, disturb or
prejudice the rights of any other Holders or to obtain or seek to obtain priority or preferences
over any other Holders or to enforce any right under this Indenture, the Loan Agreement, the
Mortgage or any Collateral Document, except in the manner herein provided and for the equal
and ratable benefit of all the Holders then Outstanding.
Section 7.12. Unconditional Right of Bondholders to Receive Principal, Premium and
Interest. Except as otherwise provided herein, the Holder of any Bond shall have the right,
which is absolute and unconditional, to receive payment of the principal of, premium, if any, and
interest on such Bond on the Stated Maturity expressed in such Bond (or, in the case of
redemption, on the Redemption Date or Sinking Fund Payment Date) and to institute suit for the
enforcement of any such payment, and such right shall not be impaired without the consent of
such Holder.
Section 7.13. Restoration of Positions. If the Trustee or any Holder has instituted any
proceeding to enforce any right or remedy under this Indenture, the Loan Agreement, the
Mortgage, or any Collateral Document, by foreclosure, entry or otherwise, and such proceeding
has been discontinued or abandoned for any reason, or has been determined adversely to the
Trustee or to such Holder, then and in every such case the Issuer, the Company, the Trustee and
the Holders shall, subject to any determination in such proceeding, be restored to their former
positions hereunder, and thereafter all rights and remedies of the Trustee and the Holders shall
continue as though no such proceeding had been instituted.
Section 7.14. Rights and Remedies Cumulative. No right or remedy herein conferred
upon or reserved to the Trustee or to the Holders is intended to be exclusive of any other right or
remedy, but every such right or remedy shall, to the extent permitted by law, be cumulative and
in addition to every other right and remedy given hereunder or under the Loan Agreement, the
Mortgage or any Collateral Document, or now or hereafter existing at law or in equity or
otherwise. The assertion or employment of any right or remedy hereunder, or under the Loan
Agreement, the Mortgage or any Collateral Document or otherwise, shall not prevent the
concurrent assertion or employment of any other appropriate right or remedy.
Section 7.15. Delay or Omission Not Waiver. No delay or omission of the Trustee or of
any Holder to exercise any right or remedy accruing upon any Event of Default shall impair any
such right or remedy or constitute a waiver of any such Event of Default or an acquiescence
therein. Every right and remedy given by this Article VII, or under the Loan Agreement, the
Mortgage or any Collateral Document, or by law, to the Trustee or to the Holders may be
exercised from time to time, and as often as may be deemed expedient, by the Trustee or by the
Holders, as the case may be.
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Section 7.16. Control by Holders. The Holders of a majority in aggregate principal
amount of the Bonds at the time Outstanding shall have the right, during the continuance of an
Event of Default,
(A) to require the Trustee to proceed to enforce this Indenture, the Loan
Agreement, the Mortgage or any Collateral Document, either by judicial proceedings for
the enforcement of the payment of the Bonds or the foreclosure of the Mortgage or the
enforcement of any other remedy; and
(B) to direct the time, method and place of conducting any proceeding for any
remedy available to the Trustee, or exercising any trust or power conferred upon the
Trustee hereunder, or under the Loan Agreement, the Mortgage or any Collateral
Document; provided that
(1) such direction shall not be in conflict with any rule of law or with
this Indenture;
(2) the Trustee shall not determine that the action so directed would be
unjustly prejudicial to the Holders not taking part in such direction; and
(3) the Trustee may take any other action deemed proper by the
Trustee which is not inconsistent with such direction.
Section 7.17. Waiver of Past Defaults. Any Event of Default under Section 7.01(D)
hereof shall be automatically waived, rescinded and annulled if the corresponding “Event of
Default” under the Loan Agreement shall be waived, rescinded and annulled pursuant to, and in
accordance with the provisions of, Section 11.1 of the Loan Agreement. Before any sale of any
of the Trust Estate has been made under this Article or any judgment or decree for payment of
money due has been obtained by the Trustee as provided in this Article, the Holders of a majority
in principal amount of the Bonds Outstanding may, by Act of such Holders delivered to the
Trustee and the Company, on behalf of all Holders waive any past default hereunder and its
consequences, except a default:
(A) in the payment of the principal of (or premium, if any) or interest on any
Bond, or
(B) in respect of a covenant or provision hereof which under Article XI cannot
be modified or amended without the consent of the Holder of each Outstanding Bond
affected.
Upon any such waiver, such default shall cease to exist, and any Event of Default arising
therefrom shall be deemed to have been cured, for every purpose of this Indenture; but no such
waiver shall extend to any subsequent or other default or impair any right consequent thereon.
Section 7.18. Undertaking for Costs. The Company and all parties to this Indenture
agree, and each Holder of any Bond 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 Indenture, or in any suit against the Trustee or Issuer for any action taken or
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omitted by it as Trustee or Issuer, 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 7.18 shall not apply to any suit instituted by the Trustee, to any suit
instituted by any Bondholder or group of Bondholders holding a majority in aggregate principal
amount of the Outstanding Bonds, or to any suit instituted by any Bondholder for the
enforcement of the payment of the principal of, premium, if any, or interest on any Bond on or
after the Stated Maturity expressed in such Bond solely from the revenues pledged therefor (or,
in the case of redemption, on or after the Redemption Date).
Section 7.19. Suits to Protect the Trust Estate and Other Property. The Trustee shall
have power to institute and to maintain such proceedings as it may deem expedient to prevent
any impairment of the Trust Estate or the property secured by the Mortgage or any Collateral
Document by any acts which may be unlawful or in violation of this Indenture, the Loan
Agreement, the Mortgage or any Collateral Document, and to protect its interests and the
interests of the Holders in the Trust Estate and in the issues, profits, revenues and other income
arising therefrom, including power to institute and maintain proceedings to restrain the
enforcement of or compliance with any governmental enactment, rule or order that may be
unconstitutional or otherwise invalid, if the enforcement of, or compliance with, such enactment,
rule or order would impair the security hereunder or thereunder or be prejudicial to the interest of
the Holders or the Trustee.
Section 7.20. Rights Under Loan Agreement. The Issuer, in the Granting Clauses, has
pledged and granted a security interest in all of its rights in the Loan Agreement (with certain
exceptions) to the Trustee, and the Trustee in its name or in the name of the Issuer may enforce
all rights and remedies of the Issuer under and pursuant to the Loan Agreement (except with
respect to the rights retained by the Issuer, which may be enforced directly by the Issuer).
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ARTICLE VIII
THE TRUSTEE
Section 8.01. Certain Duties and Responsibilities.
(A) Except during the continuance of an Event of Default,
(1) the Trustee undertakes to perform such duties and only such duties
as are specifically set forth in this Indenture, and no implied covenants or
obligations shall be read into this Indenture against the Trustee; and
(2) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness of the
opinions expressed therein, upon certificates or opinions furnished to the Trustee
and conforming to the requirements of this Indenture; but in the case of any such
certificates or opinions which by any provisions hereof, the Trustee shall be under
a duty to examine the same to determine whether or not they conform to the
requirements of this Indenture.
(B) In case an Event of Default has occurred and is continuing, the Trustee
shall exercise such of the rights and powers vested in it by this Indenture, the Loan
Agreement, the Mortgage and any Collateral Document, and use the same degree of care
and skill in their exercise, as a prudent person would exercise or use under the
circumstances in the conduct of his or her own affairs.
(C) No provision of this Indenture shall be construed to relieve the Trustee
from liability for its own negligent action, its own negligent failure to act, or its own
willful misconduct, except that
(1) this subsection shall not be construed to limit the effect of
subsection (A) above;
(2) the 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 Trustee was
negligent in ascertaining the pertinent facts;
(3) the 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
Holders of a majority in aggregate principal amount of the Bonds then
Outstanding relating to the time, method and place of conducting any proceeding
for any remedy available to the Trustee, or exercising any trust or power
conferred upon the Trustee, under this Indenture; and
(4) no provision of this Indenture, the Loan Agreement, the Mortgage
or any Collateral Document shall require the Trustee to expend or risk its own
funds or otherwise incur any financial liability in the performance of any of its
duties hereunder or thereunder, or in the exercise of any of its rights or powers, if
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it shall have reasonable grounds for believing that repayment of such funds or
adequate indemnity against such risk or liability is not reasonably assured to it.
(D) Whether or not therein expressly so provided, every provision of this
Indenture relating to the conduct or affecting the liability of or affording protection to the
Trustee shall be subject to the provisions of this Section 8.01.
Section 8.02. Notice of Event of Default. Within ninety (90) days after the occurrence
of any default hereunder, the Trustee shall transmit by mail to all Holders notice of such default
hereunder known to the Trustee, unless such default shall have been cured or waived; provided,
however, that, except in the case of a default in the payment of the principal of, premium, if any,
or interest on any Bond, the Trustee shall be protected in withholding such notice if and so long
as the board of directors, the executive committee or a trust committee of directors and/or
Responsible Officers of the Trustee in good faith determine that the withholding of such notice is
in the interest of the Holders; and provided, further, that in the case of any default of the
character specified in Section 7.01(C) hereof no such notice to Holders shall be given until at
least thirty (30) days after the occurrence thereof.
The Trustee shall not be required to take notice or be deemed to have notice of any
default, except an Event of Default under Section 7.01(A) and (B) hereof, unless the Responsible
Officer shall be notified of such default in writing by the Issuer, the Company or by the Holders
of a majority in aggregate principal amount of the Bonds then Outstanding and all notices
required to be delivered to the Trustee must, in order to be effective, be delivered at the
designated corporate trust office of the Trustee and, in the absence of such notice so delivered,
the Trustee may conclusively assume there is no default except as aforesaid.
Section 8.03. Certain Rights of Trustee. Except as otherwise provided in Section 8.01
hereof:
(A) the Trustee may rely and shall be protected in acting or refraining from
acting upon any resolution, certificate, statement, instrument, opinion, report, notice,
request, direction, consent, order, bond, or other paper or document believed by it to be
genuine and to have been signed or presented by the proper party or parties;
(B) any request or direction of the Issuer or the Company mentioned herein
shall be sufficiently evidenced by an Issuer Request, Issuer Order, Company Request or
Company Order and any resolution of the Issuer’s governing body or resolution of the
Board of Directors of the Company may be sufficiently evidenced by an Issuer
Resolution or Company Resolution;
(C) whenever in the administration of this Indenture the Trustee shall deem it
desirable that a matter be proved or established prior to taking, suffering or omitting any
action hereunder, the Trustee (unless other evidence be herein specifically prescribed)
may, in the absence of bad faith on its part, rely upon an Issuer Certificate or Company
Certificate;
(D) the Trustee may consult with counsel and the advice of such counsel or
any Opinion of Counsel shall be full and complete authorization and protection in respect
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of any action taken, suffered or omitted by it hereunder in good faith and in reliance
thereon;
(E) the Trustee shall be under no obligation to exercise any of the rights or
powers vested in it by this Indenture, the Loan Agreement, the Mortgage or any
Collateral Document, at the request or direction of any of the Holders pursuant to this
Indenture, unless such Holders shall have offered to the Trustee reasonable security or
indemnity against the costs, expenses and liabilities which might be incurred by it in
compliance with such request or direction;
(F) the Trustee shall not be bound to make any investigation into the facts or
matters stated in any resolution, certificate, statement, instrument, opinion, report, notice,
request, direction, consent, order, bond, debenture, coupon or other paper or document,
but the Trustee, in its discretion, may make such further inquiry or investigation into such
facts or matters as it may see fit, and, if the Trustee shall determine to make such further
inquiry or investigation, it shall be entitled to examine the books, records and premises of
the Company, personally or by agent or attorney;
(G) the Trustee may execute any of the trusts or powers hereunder or perform
any duties hereunder or under the Loan Agreement, the Mortgage or any Collateral
Document, either directly or by or through agents or attorneys, and the Trustee shall not
be responsible for any misconduct or negligence on the part of any agent or attorney
appointed with due care by it hereunder;
(H) the Trustee shall not be personally liable, in case of entry by it upon the
Facilities, for debts contracted or liabilities or damages incurred in the management or
operation of the Trust Estate;
(I) in no event shall the Trustee be liable for incidental, indirect, special,
consequential or punitive damages or penalties (including, but not limited to lost profits),
even if the Trustee has been advised of the likelihood of such damages or penalty and
regardless of the form of action; and
(J) the delivery of reports, information, and documents to the Trustee under
Sections 4.6, 4.8, and 7.9 of the Loan Agreement is for informational purposes only and
the Trustee’s receipt of the foregoing shall not imply a duty to review and shall not
constitute constructive notice of any information contained therein or determinable from
information contained therein, including the Company’s compliance with any of their
covenants hereunder.
Section 8.04. Not Responsible for Recitals or Issuance of Bonds. The recitals contained
herein and in the Bonds, except the Trustee’s certificate of authentication on the Bonds, shall not
be taken as the statements of the Trustee, and the Trustee assumes no responsibility for their
correctness. The Trustee makes no representations as to the value or condition of the Facilities
or any part thereof, or as to the title of the Company thereto or as to the security afforded thereby
or hereby or as to the validity or sufficiency of this Indenture, the Loan Agreement, the
Mortgage, any Collateral Document, or of the Bonds.
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Section 8.05. May Hold Bonds. The Trustee or any other agent of the Issuer, in its
individual or any other capacity, may become the owner or pledgee of Bonds and may otherwise
deal with the Issuer and/or the Company with the same rights it would have if it were not Trustee
or such other agent.
Section 8.06. Money Held in Trust. Money held by the Trustee in trust hereunder need
not be segregated from other funds except to the extent required by law. The Trustee shall be
under no liability for interest on any money received by it hereunder except as otherwise agreed
with the Issuer.
Section 8.07. Compensation and Reimbursement. As security for the performance of
the obligations of the Company to make Additional Payments to the Trustee under Section
2.3(A) of the Loan Agreement and to indemnify the Trustee under Section 7.4 of the Loan
Agreement, the Trustee shall, except as to money and/or Government Obligations held by the
Trustee for the payment of any specified Bonds which are no longer deemed to be Outstanding
under the provisions of Article VI hereof, be secured under this Indenture by a lien; and for the
payment of such compensation, expenses, reimbursements and indemnity the Trustee shall have
the right to use and apply any Trust Money, held by it except money and/or Government
Obligations held by the Trustee pursuant to Article VI hereof as aforesaid.
Section 8.08. Corporate Trustee Required; Eligibility. There shall at all times be a
Trustee hereunder which shall be a corporation organized and doing business under the laws of
the United States of America or of any State, authorized under such laws to exercise corporate
trust powers, having a combined capital and surplus of at least $50,000,000, subject to
supervision or examination by a federal or state authority. If such corporation publishes reports
of condition at least annually, pursuant to law or to the requirements of the aforesaid supervising
or examining authority, then for the purposes of this Section 8.08 the combined capital and
surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in
its most recent report of condition so published. If at any time the Trustee shall cease to be
eligible in accordance with the provisions of this Section 8.08, it shall resign immediately in the
manner and with the effect hereinafter specified in this Article VIII.
Section 8.09. Resignation and Removal; Appointment of Successor.
(A) No resignation or removal of the Trustee and no appointment of a
successor Trustee pursuant to this Article VIII shall become effective until the acceptance
of appointment by the successor Trustee under Section 8.10 hereof.
(B) The Trustee may resign at any time by giving written notice thereof to the
Issuer and the Company. If an instrument of acceptance by a successor Trustee shall not
have been delivered to the Trustee within thirty (30) days after the giving of such notice
of resignation, the resigning Trustee may petition any court of competent jurisdiction for
the appointment of a successor Trustee.
(C) The Trustee may be removed upon thirty (30) days’ notice at any time by
Company Order, provided that no Event of Default under the Loan Agreement has
occurred and is continuing, and that no act or omission of the Company has occurred
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which would be an Event of Default under the Loan Agreement but for the giving of
notice or the passage of time.
(D) If at any time:
(1) the Trustee shall cease to be eligible under Section 8.08 hereof and
shall fail to resign after written request therefor by the Issuer, the Company or by
any Holder, or
(2) the Trustee shall become incapable of acting or shall be adjudged a
bankrupt or insolvent or a receiver of the Trustee or of its property shall be
appointed or any public officer shall take charge or control of the Trustee or of its
property or affairs for the purpose of rehabilitation, conservation or liquidation,
then, in any such case, (i) the Issuer by an Issuer Resolution may remove the Trustee, or
(ii) any Holder who has been a bona fide Holder for at least six (6) months may, on
behalf of himself or herself and all others similarly situated, petition any court of
competent jurisdiction for the removal of the Trustee and the appointment of a successor
Trustee.
(E) If the Trustee shall resign, be removed or become incapable of acting, or if
a vacancy shall occur in the office of Trustee for any cause, the Issuer, by an Issuer
Resolution, shall promptly appoint a successor Trustee acceptable to the Company,
whose acceptance shall not be unreasonably withheld. In case all or substantially all of
the Trust Estate shall be in the possession of a receiver or trustee lawfully appointed, such
receiver or trustee, by written instrument, may similarly appoint a successor to fill a
vacancy until a new Trustee shall be so appointed by the Holders. If, within one (1) year
after such resignation, removal or incapability, or the occurrence of such vacancy, a
successor Trustee shall be appointed by Act of the Holders of a majority in aggregate
principal amount of the Bonds then Outstanding delivered to the Issuer, the retiring
Trustee and the Company, the successor Trustee so appointed shall, forthwith upon its
acceptance of such appointment, become the successor Trustee and supersede the
successor Trustee appointed by the Issuer. If no successor Trustee shall have been so
appointed by the Issuer or the Holders and accepted appointment in the manner
hereinafter provided, any Holder who has been a bona fide Holder for at least six (6)
months may, on behalf of himself or herself and all others similarly situated, petition any
court of competent jurisdiction for the appointment of a successor Trustee.
(F) The Company shall give notice of each resignation and each removal of
the Trustee and each appointment of a successor Trustee by mailing written notice of
such event by first-class mail, postage prepaid, to the Holders. Each notice shall include
the name of the successor Trustee and the address of its principal corporate trust office.
Section 8.10. Acceptance of Appointment by Successor Trustee. Every successor
Trustee appointed hereunder shall execute, acknowledge and deliver to the Issuer and to the
Company and to the retiring Trustee an instrument accepting such appointment, and thereupon
the resignation or removal of the retiring Trustee shall become effective and such successor
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Trustee, without any further act, deed or conveyance, shall become vested with all the rights,
powers, trusts and duties of the retiring Trustee; but, on request of the Issuer or the successor
Trustee, such retiring Trustee shall, upon payment of its charges, execute and deliver an
instrument or instruments transferring to such successor Trustee all the rights, powers, and trusts
of the retiring Trustee in and to all property and money held by such retiring Trustee hereunder
or under the Loan Agreement, Mortgage or any Collateral Document, subject nevertheless to its
lien, if any, provided for in Section 8.07 hereof. Upon request of any such successor Trustee, the
Issuer and the Company shall execute any and all instruments for more fully and certainly
vesting in and confirming to such successor Trustee all such rights, powers and trusts.
No successor Trustee shall accept its appointment unless at the time of such acceptance
such successor Trustee shall be qualified and eligible under this Article VIII, to the extent
operative.
Section 8.11. Merger, Conversion, Consolidation or Successor to Business. Any
corporation into which the Trustee may be merged or converted or with which it may be
consolidated or which it may sell or transfer, or any corporation resulting from any merger,
conversion or consolidation to which the Trustee shall be a party, or any corporation succeeding
to all or substantially all of the corporate trust business of the Trustee, shall be the successor of
the Trustee hereunder, provided such corporation shall be otherwise qualified and eligible under
this Article VIII, to the extent operative, without the execution or filing of any paper or any
further act on the part of any of the parties hereto. In case any Bonds shall have been
authenticated, but not delivered, by the Trustee then in office, any successor by merger,
conversion or consolidation to such authenticating Trustee may adopt such authentication and
deliver the Bonds so authenticated with the same effect as if such successor Trustee had itself
authenticated such Bonds.
Section 8.12. Trustee and Loan Agreement. Reference is hereby made to the Loan
Agreement, wherein it is provided that the Trustee will accept certain duties, perform or consent
to certain acts, receive certain documents and exercise certain rights and remedies under such
Loan Agreement, the Mortgage. The Trustee hereby consents to such terms and provisions
contained in the Loan Agreement and covenants and agrees to accept such duties, perform such
acts and receive such documents thereunder as is expressly set forth therein on the terms and
conditions therein specified. The Trustee hereby covenants and agrees to exercise all rights and
remedies set forth in the Loan Agreement relating to the Loan Agreement and the Mortgage as
the Trustee deems necessary and proper. Other than as specifically provided in the Loan
Agreement, the Trustee shall have no duty or obligation to monitor the Company’s compliance
with the provisions of the Loan Agreement.
Section 8.13. Financing Statements. The Trustee shall not be responsible for filing or
for the sufficiency or accuracy of any financing statements initially filed to perfect security
interests granted under this Indenture. The Trustee shall file continuation statements with respect
to each UCC financing statement relating to the Trust Estate filed at the time of the issuance of
the Bonds; provided that a copy of the filed initial financing statement is timely delivered to the
Trustee. In addition, unless the Trustee shall have been notified in writing by the Issuer or the
Company that any such initial filing or description of collateral was or has become defective, the
Trustee shall be fully protected in (A) relying on such initial filing and descriptions in filing any
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financing or continuation statements or modifications thereto pursuant to this Section 8.13; and
(B) filing any continuation statements in the same filing offices as the initial filings were made.
The Company shall be responsible for the customary fees charged by the Trustee for the
preparation and filing of continuation statements and for the reasonable costs incurred by the
Trustee in the preparation and filing of all continuation statements hereunder, including
attorneys’ fees and expenses. These fees shall be considered “extraordinary services” fees.
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ARTICLE IX
\[INTENTIONALLY OMITTED\]
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ARTICLE X
AMENDMENT OF LOAN AGREEMENT, MORTGAGE
AND COLLATERAL DOCUMENTS
Section 10.01. Amendment to Loan Agreement, Mortgage and Collateral Documents
Without Consent of Holders. Without the consent of the Holders, the Trustee, at any time and
from time to time, may consent to one or more amendments or supplements to the Loan
Agreement, the Mortgage or any Collateral Document, in form satisfactory to the Trustee, for
any of the following purposes:
(A) To correct or amplify the description of any property at any time subject to
the Loan Agreement, the Mortgage, or any Collateral Document, or better to assure,
convey and confirm unto the Trustee any property subject or required to be subject to the
Loan Agreement, the Mortgage, or any Collateral Document, or to subject to the Loan
Agreement, the Mortgage, or any Collateral Document, additional property;
(B) To add to the conditions, limitations and restrictions of the Company in
the Loan Agreement, the Mortgage, or any Collateral Documents other conditions,
limitations and restrictions thereafter to be observed;
(C) To provide for terms relating to the issuance of any series of Additional
Bonds;
(D) To evidence the succession of another entity to the Company in
accordance with the provisions of Section 7.1 of the Loan Agreement, and the
assumption by any such successor of the covenants of the Company contained in the
Loan Agreement, the Mortgage, and any Collateral Document, or to evidence the
succession of any successor Trustee under the provisions of Article VIII hereof;
(E) To add to the covenants of the Company or to surrender any right or
power conferred upon the Company;
(F) To add any property or other right to the lien of the Mortgage or any
Collateral Document, or to release any property (or undivided interest therein) or other
right from the Mortgage or any Collateral Document when made in accordance with, and
subject to the provisions of, the Loan Agreement, the Mortgage or any Collateral
Document;
(G) To eliminate, modify, or add any provision which in the opinion of Bond
Counsel is necessary or desirable in order to preserve the exemption of interest on the
Tax-Exempt Bonds from federal income taxation; or
(H) To cure any ambiguity, to correct or supplement any provision of the Loan
Agreement, the Mortgage, or any Collateral Document that may be inconsistent with any
other provision of the Loan Agreement, the Mortgage, or any Collateral Document, or to
make any other provisions with respect to matters or questions arising under the Loan
Agreement, the Mortgage, or any Collateral Document, which shall not be inconsistent
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with the provisions thereof or the Indenture, provided such action shall not adversely
affect the interests of the Holders of the Bonds.
Section 10.02. Amendment to Loan Agreement, Mortgage or Collateral Documents With
Consent of Holders. With the consent of the Holders of not less than a majority in aggregate
principal amount of the Bonds then Outstanding which are affected by such amendment to the
Loan Agreement, the Mortgage or any Collateral Document, by act of said Holders delivered to
the Issuer and the Trustee, the Issuer, when authorized by an Issuer Resolution, and the Trustee
may enter into an amendment or amendments to the Loan Agreement or an amendment or
amendments or a supplement or supplements to the Mortgage or any Collateral Document for the
purpose of adding any provisions to or changing in any manner or eliminating any of the
provisions of the Loan Agreement, the Mortgage or any Collateral Document; provided,
however, that no such amendment shall, without the consent of each Holder affected thereby,
(A) reduce the aggregate amount of Loan Repayments and Additional
Payments payable under the Loan Agreement, or allow any installment of Loan
Repayments or Additional Payments to be paid subsequent to the time needed for the
payment of principal of, premium, if any, and interest on the Bonds;
(B) modify any of the provisions of the Loan Agreement, the Mortgage or any
Collateral Document to eliminate the requirement that the Trustee consent to every
amendment thereto; or
(C) release from the lien of the Mortgage or any Collateral Document any of
the property secured thereby, or permit the creation of any lien ranking prior to or on a
parity with the lien of the Mortgage on the Mortgaged Property or the lien of this
Indenture on any part of the Trust Estate, except as expressly permitted by this Indenture,
the Loan Agreement, the Mortgage or any Collateral Document.
For all purposes of this Section 10.02, Bonds shall be deemed to be “affected” by an
amendment if such amendment adversely affects or diminishes the rights of Holders thereof to be
assured of the payment of principal of, premium, if any, and interest on the Bonds. The Trustee
may in its discretion determine whether or not any Bonds would be affected by any amendment
and any such determination shall be conclusive upon the Holders, whether theretofore or
thereafter authenticated and delivered hereunder. The Trustee shall not be liable for any such
determination made in good faith.
It shall not be necessary for any act of Holders under this Section 10.02 to approve the
particular form of any proposed amendment or supplement to the Loan Agreement, the Mortgage
or any Collateral Document, but it shall be sufficient if such act shall approve the substance
thereof.
Section 10.03. Consent to Amendments. In consenting to an amendment to the Loan
Agreement or the execution of an amendment or supplement to the Mortgage or any Collateral
Document permitted by this Article X, the Trustee and the Issuer shall receive, and (subject to
Section 8.01 hereof) shall be fully protected in relying upon, an Opinion of Counsel stating that
the execution of such consent or amendment or supplement is authorized or permitted by this
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Indenture. The Trustee and Issuer may, but shall not be obligated to, enter into any such
amendment or supplement that affects the Trustee’s or Issuer’s own rights, duties or immunities
under this Indenture or otherwise.
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ARTICLE XI
SUPPLEMENTAL INDENTURES
Section 11.01. Supplemental Indentures Without Consent of Holders. Without the
consent of the Holders, the Issuer, when authorized by an Issuer Resolution, and the Trustee, at
any time and from time to time, may enter into one or more indentures supplemental hereto, in
form satisfactory to the Trustee, for any one of the following purposes:
(A) To correct or amplify the description of the Trust Estate, or better to
assure, convey and confirm unto the Trustee any property subject or required to be
subjected to the lien of this Indenture, or to subject to the lien of this Indenture additional
property, or to subject to the lien and pledge of this Indenture additional revenues,
properties or collateral;
(B) To add to the conditions, limitations and restrictions on the authorized
amount, terms or purposes of issue, authentication and delivery of Bonds or of any series
of Bonds, as herein set forth, other conditions, limitations and restrictions thereafter to be
observed;
(C) To provide for the creation of any series of Additional Bonds, as provided
in, and subject to the conditions and requirements of, Article IV hereof;
(D) To add to the covenants of the Issuer, for the benefit of the Holders of the
Bonds or of any series of Bonds, or to surrender any right or power herein conferred upon
the Issuer;
(E) To add, modify or eliminate any provision which, in the opinion of Bond
Counsel, it is necessary or desirable to add, modify or eliminate in order to preserve the
exemption of interest on the Tax-Exempt Bonds from federal income taxation; or
(F) To cure any ambiguity, to correct or supplement any provision herein
which may be inconsistent with any other provision herein, or to make any other
provisions with respect to matters or questions arising under this Indenture which shall
not be inconsistent with the provisions of this Indenture, provided such action shall not
adversely affect the interests of the Holders.
Section 11.02. Supplemental Indentures With Consent of Holders. With the consent of
the Holders of not less than a majority in aggregate principal amount of the Bonds Outstanding
which are affected by such Supplemental Indenture, by act of said Holders delivered to the
Issuer, the Company and the Trustee, the Issuer, when authorized by an Issuer Resolution, and
the Trustee may enter into an indenture or indentures supplemental hereto for the purpose of
adding any provisions to or changing in any manner or eliminating any of the provisions of this
Indenture or of modifying in any manner the rights of the Holders under this Indenture other than
as set forth in this Section 11.02; provided, however, that no such Supplemental Indenture shall,
without the consent of each Holder affected thereby:
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(A) change the Stated Maturity of the principal of, or any Interest Payment
Date of, any Bond, or reduce the principal amount thereof or the interest thereon or any
premium payable upon the redemption thereof, or change the coin or currency in which
any Bond or the premium or interest thereon is payable, or impair the right to institute
suit for the enforcement of any such payment on or after the Stated Maturity thereof (or,
in the case of redemption, on or after the Redemption Date);
(B) reduce the percentage in principal amount of the Outstanding Bonds the
consent of whose Holders is required for any such Supplemental Indenture, or the consent
of whose Holders is required for any amendment or supplement to the Loan Agreement,
the Mortgage or any Collateral Document, or for any waiver (of compliance with certain
provisions of this Indenture or certain defaults hereunder and their consequences)
provided for in this Indenture;
(C) modify any of the provisions of this Section 11.02 or Section 7.17 hereof,
except to increase any such percentage or to provide that certain other provisions of this
Indenture cannot be modified or waived without the consent of each Holder affected
thereby; or
(D) permit the creation of any lien ranking prior to or on a parity with the lien
of this Indenture on any part of the Trust Estate or reduce the preferences herein
expressly provided for Bonds or terminate the lien of this Indenture on any property at
any time subject hereto, except as otherwise expressly provided herein.
For all purposes of this Section 11.02, Bonds shall be deemed to be “affected” by a
Supplemental Indenture if such Supplemental Indenture adversely affects or diminishes the
rights of Holders thereof against the Issuer or the Trust Estate. The Trustee may in its discretion
determine whether any Bonds would be affected by any Supplemental Indenture and any such
determination shall be conclusive upon the Holders, whether theretofore or thereafter
authenticated and delivered hereunder. The Trustee shall not be liable for any such
determination made in good faith.
It shall not be necessary for any act of Holders under this Section 11.02 to approve the
particular form of any proposed supplemental Indenture, but it shall be sufficient if such consent
shall approve the substance thereof.
Section 11.03. Execution of Supplemental Indentures. In executing or accepting the
additional trust created by any Supplemental Indenture permitted by this Article XI or the
modification thereby of the trusts created by this Indenture, the Trustee shall receive, and
(subject to Section 8.01 hereof) shall be fully protected in relying upon, an Opinion of Counsel
stating that the execution of such Supplemental Indenture is authorized or permitted by this
Indenture. The Trustee may, but shall not be obligated to, enter into any such Supplemental
Indenture which affects the Trustee’s own rights, duties or immunities under this Indenture or
otherwise.
Section 11.04. Effect of Supplemental Indentures. Upon the execution of any
Supplemental Indenture under this Article XI, this Indenture shall be modified in accordance
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therewith, and such Supplemental Indenture shall form a part of this Indenture for all purposes
and every Holder shall be bound thereby.
Section 11.05. Reference in Bonds to Supplemental Indentures. Bonds authenticated and
delivered after the execution of any Supplemental Indenture pursuant to the provisions of this
Article XI may, and shall, if required by the Trustee, bear a notation in form approved by the
Trustee as to any matter provided for in such Supplemental Indenture. If the Issuer shall so
determine, new Bonds so modified as to conform in the opinion of the Trustee and the Issuer to
any such Supplemental Indenture may be prepared and executed by the appropriate officials of
the Issuer and authenticated and delivered by the Trustee in exchange for Outstanding Bonds.
Section 11.06. Consent of Company. So long as there is not a subsisting Event of Default
under the Loan Agreement, no Supplemental Indenture shall become effective unless and until
delivery to the Trustee of a Company Consent to such Supplemental Indenture.
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ARTICLE XII
COVENANTS
Section 12.01. Payment of Principal, Premium and Interest. Solely from the money
derived from the Loan Agreement (other than to the extent payable out of proceeds of the Bonds,
amounts in the Trust Funds, the Net Proceeds of insurance or condemnation awards or proceeds
of the sale or other disposition of the Mortgaged Property under the Mortgage), the Issuer will
duly and punctually pay the principal of, premium, if any, and interest on the Bonds in
accordance with the terms of the Bonds and this Indenture. Money derived from the Loan
Agreement includes all money derived from the Granting Clauses set forth herein, including, but
not limited to, Loan Repayments under the Loan Agreement and Trust Moneys deposited under
this Indenture. Nothing in the Bonds or in this Indenture or the Loan Agreement shall be
considered as assigning or pledging funds or assets of the Issuer other than those covered by the
Granting Clauses set forth herein.
Section 12.02. Unclaimed Moneys. Any money deposited with the Trustee pursuant to
the terms of this Indenture for the payment or redemption of Bonds, or the payment of interest on
Bonds that remains unclaimed by the Holders of the Bonds on the date fixed for the payment or
redemption of such Bonds, shall be transferred to the appropriate governmental authorities of the
States upon the expiration of the escheat period in accordance with the escheat laws applicable to
each of the Holders of the Bonds.
Section 12.03. Tax-Free Nature of Tax-Exempt Bonds. The Issuer covenants and agrees
for the benefit of the Bondholders that it will take no affirmative action which would result in
loss of tax exemption of interest on the Tax-Exempt Bonds that are purported to be tax exempt
under the Code and the regulations promulgated thereunder, nor will either use any of the
proceeds received from the sale of such Tax-Exempt Bonds, directly or indirectly, in any manner
which would result in such Tax-Exempt Bonds being classified as arbitrage bonds within the
meaning of Section 148(a) of the Code and the regulations promulgated and in effect thereunder.
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ARTICLE XIII
REDEMPTION
Section 13.01. Right of Redemption. The Bonds are subject to redemption as provided in
this Article XIII and in Article III hereof.
Section 13.02. Election to Redeem; Notice to Trustee. The election of the Company to
redeem any Bonds shall be evidenced by a Company Order. In case of any redemption at the
election of the Company of less than all of the Outstanding Bonds of any series, the Company
shall, at least forty-five (45) days prior to the Redemption Date fixed by the Company (unless a
shorter notice shall be satisfactory to the Trustee), notify the Trustee of such Redemption Date
and of the principal amount of Bonds of such series to be redeemed. Any redemption of Term
Bonds made in accordance with Section 3.04 hereof or a similar provision of a Supplemental
Indenture shall not require any action by the Company.
Section 13.03. Selection by Trustee of Bonds to Be Redeemed. If less than all of the
Outstanding Bonds of any series are to be redeemed, the Company shall specify, by Company
Order, the Stated Maturities of the Bonds to be redeemed. If less than all Bonds of a single
Stated Maturity are to be redeemed, the particular Bonds to be redeemed shall be selected by the
Trustee from the Outstanding Bonds of that Stated Maturity not previously called for
redemption, by lot and which may provide for the selection for redemption of portions of the
principal of Bonds in a denomination larger than $5,000.
The Trustee shall promptly notify the Issuer and the Company in writing of the Bonds
selected for redemption and, in the case of any Bond selected for partial redemption, the
principal amount thereof to be redeemed.
For all purposes of this Indenture, unless the context otherwise requires, all provisions
relating to the redemption of Bonds shall relate, in the case of any Bond redeemed or to be
redeemed only in part, to the portion of the principal of such Bond which has been or is to be
redeemed.
Section 13.04. Notice of Redemption. Notice of redemption shall be mailed first-class,
postage prepaid, not less than thirty (30) days prior to the Redemption Date, to each Holder of
Bonds to be redeemed; but no defect in any notice so mailed shall affect the validity of the
proceedings for redemption as to any Bond not affected by such defect.
All notices of redemption shall state:
(A) the Redemption Date;
(B) the Redemption Price;
(C) the principal amount of Bonds of each series to be redeemed, and, if less
than all Outstanding Bonds of a series are to be redeemed, the identification (and, in the
case of partial redemption, the respective principal amounts) of the Bonds of such series
to be redeemed;
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(D) if the notice is conditioned upon moneys being on deposit with the Trustee
in an amount sufficient to pay the Redemption Price on the Redemption Date, the notice
shall state such condition and that such redemption shall not be effective unless such
condition is met;
(E) that on the Redemption Date, the Redemption Price will become due and
payable upon each such Bond, and that interest thereon shall cease to accrue on and after
such date;
(F) the place or places where such Bonds are to be surrendered for payment of
the Redemption Price; and
(G) if it be the case, that such Bonds are to be redeemed by the application of
certain specified Trust Moneys or for certain specified reasons.
Notwithstanding the foregoing, notice of any redemption pursuant to Section 3.03 hereof
may provide that the redemption is conditioned on the deposit of sufficient moneys for payment
of the Redemption Price on or prior to the Redemption Date.
Section 13.05. Deposit of Redemption Price. On or prior to each Redemption Date, the
Company shall deposit with the Trustee an amount of money and at a time sufficient to pay the
Redemption Price of all the Bonds to be redeemed on that date.
Section 13.06. Bonds Payable on Redemption Date. Notice of redemption having been
given as aforesaid, the Bonds so to be redeemed shall, on the Redemption Date, become due and
payable at the Redemption Price therein specified and on and after such date (unless the
Company shall default in the payment of the Redemption Price) such Bonds shall cease to bear
interest. Upon surrender of any such Bond for redemption in accordance with such notice, such
Bond shall be paid at the Redemption Price. Installments of interest whose Stated Maturity is on
or prior to the Redemption Date shall continue to be payable to the Holders of Bonds registered
as such on the relevant Record Dates according to the terms of such Bonds and Section 2.08
hereof.
If any Bond called for redemption shall not be so paid upon surrender thereof for
redemption, the principal (and premium, if any) shall, until paid, bear interest from the
Redemption Date or Sinking Fund Payment Date at the rate prescribed by the Bond.
Section 13.07. Bonds Redeemed in Part. Any Bond which is to be redeemed only in part
shall be surrendered to the Trustee (with, if the Trustee so requires, due endorsement by, or a
written instrument of transfer in form satisfactory to the Trustee duly executed by, the Holder
thereof or his attorney duly authorized in writing), and the appropriate officials of the Issuer shall
execute and the Trustee shall authenticate and deliver to the Holder of such Bond, without
service charge, a new Bond or Bonds of the same series, of any authorized denomination or
denominations, as requested by such Holder, having the same Stated Maturity and interest rate in
aggregate principal amount equal to and in exchange for the unredeemed portion of the principal
of the Bond so surrendered.
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Section 13.08. Redemption of All Bonds. Upon the occurrence of certain events and
upon certain terms and conditions described in Section 10.2 of the Loan Agreement, the
Company is permitted or obligated to prepay all of the Loan and other obligations of the
Company under the Loan Agreement. In any such event, upon compliance with the provisions
of Section 10.2 of the Loan Agreement, the Trustee shall forthwith fix a date of redemption for
all Outstanding Bonds, which date shall be the earliest practicable date for any series of
Outstanding Bonds which will occur after notice of such redemption shall have been given in
accordance with Section 13.04 hereof.
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ARTICLE XIV
SECONDARY MARKET DISCLOSURE
Section 14.01. Secondary Market Disclosure. Pursuant to Section 7.11 of the Loan
Agreement, the Company has undertaken all responsibility for compliance with continuing
disclosure requirements, and the Issuer shall have no liability to the Holders of the Bonds or any
other person with respect to S.E.C. Rule 15c2-12. The Dissemination Agent shall comply with
and carry out all of the provisions of the Continuing Disclosure Agreement. Notwithstanding
any other provision of this Indenture, failure of the Company or the Dissemination Agent to
comply with the Continuing Disclosure Agreement shall not be considered an Event of Default;
however, the Trustee may (and, at the request of the Holders of a majority in aggregate principal
amount of Outstanding Bonds, shall, subject to Section 8.03(E) hereof) or any Bondholder or
Beneficial Owner may take such actions as may be necessary and appropriate, including seeking
mandate or specific performance by court order, to cause the Company to comply with its
obligations under Section 7.11 of the Loan Agreement or to cause the Dissemination Agent to
comply with its obligations under this Article XIV.
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IN WITNESS WHEREOF, the Issuer and the Trustee have caused this Indenture of Trust
to be executed in their respective corporate names by their duly authorized officers, all as of the
date and year first written above.
CITY OF ST. JOSEPH, MINNESOTA
By ____________________________________
Its Mayor
By ____________________________________
Its City Administrator-Clerk
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Execution page of the Trustee to the Indenture of Trust, dated as of the date and year first written
above.
U.S. BANK NATIONAL ASSOCIATION
By ____________________________________
Its Vice President
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EXHIBIT A
FORM OF SERIES 2019A BOND
UNITED STATES OF AMERICA
STATE OF MINNESOTA
COUNTY OF STEARNS
CITY OF ST. JOSEPH
No. R-___ $____________
SENIOR HOUSING AND HEALTHCARE REVENUE BOND
(WOODCREST OF COUNTRY MANOR PROJECT)
Series 2019A
Date of
Interest Rate Maturity Date Original Issue CUSIP
____% July 1, 20__ July ___, 2019
Registered Owner: CEDE & CO.
Principal Amount: ________________________________ DOLLARS
The City of St. Joseph, Minnesota, a statutory city and political subdivision of the State
of Minnesota (the “Issuer”), for value received, hereby promises to pay to the registered Holder
named above, or registered assigns, upon surrender hereof at the principal corporate trust office
of the Trustee named below, solely from the source and in the manner hereinafter provided, on
the Maturity Date specified above, the principal amount specified above and to pay interest
thereon from the Date of Original Issue specified above, or from the most recent Interest
Payment Date to which interest has been paid or duly provided for, payable on January 1 and
July 1 in each year, commencing January 1, 2020, from the source and in the manner hereinafter
provided, until such principal amount is paid or duly provided for at the rate per annum specified
above, and at the same rate (to the extent that the payment of such interest shall be legally
enforceable) on any overdue installment of interest, all except as the provisions below with
respect to redemption of this Bond may become applicable hereto. Interest on this Bond shall be
calculated on the basis of a three hundred sixty (360) day year of twelve (12) thirty (30) day
months. Payment of the principal of, premium, if any, and interest on this Bond shall be made in
coin or currency of the United States of America which at the time of payment is legal tender for
payment of public and private debts. Interest so payable, and punctually paid or duly provided
for, on any Interest Payment Date, will be paid by check or draft to the person in whose name
this Bond is registered at the close of business on the fifteenth day (whether or not a business
day) of the calendar month immediately preceding such Interest Payment Date (the “Record
Date”), or upon the written request of any Holder of at least $500,000 in principal amount of the
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Series 2019A Bonds (hereinafter defined), submitted to the Trustee at least one Business Day
prior to the Record Date, by wire transfer in immediately available funds to an account within
the United States of America designated by such Bondholder. Any such interest not so
punctually paid or duly provided for shall be paid by check or draft, or by wire transfer upon the
written request of any Holder of at least $500,000 in principal amount of the Series 2019A
Bonds, to the person in whose name this Bond is registered at the close of business on a special
record date fixed by the Trustee pursuant to the Indenture hereafter referred to.
This Bond is one of a duly authorized issue of obligations of the Issuer designated as
“Senior Housing and Healthcare Revenue Bonds (Woodcrest of Country Manor Project), Series
2019A” (the “Series 2019A Bonds”), issued in the original aggregate principal amount of
$22,125,000 under, and all secured by, an Indenture of Trust, dated as of July 1, 2019 (the
“Indenture”), between the Issuer and U.S. Bank National Association, a national banking
association (the “Trustee,” which term includes any successor trustee under the Indenture).
Under the Indenture, the Issuer is also issuing on a parity its Taxable Senior Housing and
Healthcare Revenue Bonds (Woodcrest of Country Manor Project), Series 2019A-T (the “Series
2019A-T Bonds,” and together with the Series 2019A Bonds, the “Series 2019 Bonds”), in the
aggregate principal amount of $300,000. Reference is made to the Indenture and all indentures
supplemental thereto, copies of which are on file with the Trustee, for a description of the nature
and extent of the security, the respective rights thereunder of the Holders of the Series 2019A
Bonds, the Trustee and the Issuer, and the terms upon which the Series 2019A Bonds are issued
and are to be authenticated and delivered. As provided in the Indenture, the Series 2019A Bonds
are issuable in series which may vary as in the Indenture provided or permitted. Any capitalized
terms used herein that are otherwise not defined shall have the meanings provided in the
Indenture.
The Series 2019 Bonds are issued by the Issuer pursuant to Minnesota Statutes, Chapter
462C, as amended, for the purpose of making a loan (the “Loan”) of the proceeds thereof to
Country Manor St. Joseph, LLC, a Tennessee limited liability company (the “Company”), the
sole member of which is The Foundation For Health Care Continuums, a Tennessee nonprofit
corporation, under a Loan Agreement, dated as of July 1, 2019 (the “Loan Agreement”), between
the Issuer and the Company, to finance the acquisition of an approximately 84-unit assisted
living and memory care senior housing and health care facility located at 1200 Lanigan Way
SW, St. Joseph, Minnesota (such facilities, and any improvements thereto, are herein collectively
called the “Facilities”). By the Loan Agreement, the Company has agreed to repay the Loan,
together with interest thereon, in amounts and at times sufficient to pay the principal of,
premium, if any, and interest on the Bonds as the same shall become due and payable. By a
Combination Mortgage, Security Agreement, Fixture Financing Statement, and Assignment of
Leases and Rents, dated as of July 1, 2019 (the “Mortgage”), by the Company in favor of the
Trustee, the Company has granted to the Trustee a mortgage lien on and security interest in
substantially all of the real and personal property comprising the Facilities (the “Mortgaged
Property”). Reference is hereby made to the Loan Agreement and the Mortgage, copies of which
are on file with the Trustee, for a description of the agreements and covenants contained therein
and a description of the Mortgaged Property. By the Indenture the Issuer has pledged and
granted to the Trustee a security interest in the Issuer’s interest in the Loan Agreement (except
for certain rights to administrative and legal costs and indemnification).
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This Bond and the interest hereon and any penalty, charge, or premium, or any amounts
payable hereunder, however designated, due hereunder are payable by the Issuer solely from the
revenues and proceeds derived from the Loan Agreement, do not constitute a debt of the Issuer
within the meaning of any constitutional or statutory limitation, are not payable from or a charge
upon any funds of the Issuer other than the revenues and proceeds pledged by the Issuer to the
payment hereof, and do not give rise to a pecuniary liability of the Issuer nor of any of its
officers, agents, or employees. No holder of this Bond shall ever have the right to compel any
exercise of the taxing power of the Issuer or the state or any of its political subdivisions to pay
this Bond or the interest hereon or any penalty, charge, or premium or any amounts payable
hereunder, however designated, due hereunder, or to enforce payment thereof against any
property of the Issuer, and this Bond and the interest hereon and any penalty, charge, or
premium, or any amounts payable hereunder, however designated, do not constitute a charge,
lien, or encumbrance, legal or equitable, upon any property of the Issuer. The agreement of the
Issuer to perform or cause the performance of the covenants and other provisions herein referred
to shall be subject at all times to the availability of revenues or other funds furnished for such
purpose in accordance with the Loan Agreement, sufficient to pay all costs of such performance
or the enforcement thereof. The provisions of this paragraph shall, for purposes of this Bond, be
controlling and shall be given full force and effect, anything else to the contrary in this Bond
notwithstanding.
Optional Redemption. The Series 2019A Bonds maturing on July 1, 2055, in the
principal amount of $____________, shall be subject to redemption at the option of the
Company, evidenced by Company Request, on July 1, 20___, and on any date thereafter, in
whole or in part, and if in part, \[by random selection or in such manner as deemed fair by the
Trustee\], at the Redemption Price of par plus accrued interest on the principal amount to be
redeemed to the Redemption Date plus a premium (expressed as a percentage of the principal
amount of the Bonds so redeemed) set forth below:
Redemption Date Redemption Premium
July 1, 20__through June 30, 20__ ___%
July 1, 20__through June 30, 20__ ___
July 1, 20__and thereafter 0
\[Special Optional Redemption. The Series 2019A Bond maturing on __________ 1,
2055, in the principal amount of $__________, shall be subject to special optional
redemption \[in the principal amount of $__________\] on any date upon provision of equity
from the Company to the Trustee in an amount sufficient to pay the principal amount of
the Series 2019A Bond to be redeemed and all accrued interest thereon, as described in the
Indenture.\]
Extraordinary Redemption. The Series 2019A Bonds are subject to extraordinary
optional redemption in whole or in part, at the option of the Company, at a redemption price
equal to the principal amount to be redeemed plus accrued interest, upon certain damage to or
destruction or condemnation of the Facilities.
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Mandatory Sinking Fund Redemption. The Series 2019A Bonds are subject to
mandatory sinking fund redemption at a redemption price of par plus accrued interest in the
years and amounts set forth in the Indenture.
Redemption Upon Determination of Taxability. Upon a Determination of Taxability of
the Series 2019A Bonds, all outstanding Series 2019 Bonds are subject to mandatory
redemption, in whole but not in part, on the earliest practicable redemption date as established by
the Trustee, at their principal amount plus accrued interest to the date of redemption.
Notice of redemption shall be published, if required by applicable law, and mailed by
first class mail at least thirty (30) days before the redemption date to each Holder of the Series
2019A Bonds to be redeemed; but no defect in or failure to give such notice of redemption shall
affect the validity of proceedings for redemption of any Series 2019A Bond not affected thereby.
All Series 2019A Bonds so called for redemption will cease to bear interest on the specified
redemption date, provided funds for their redemption have been duly deposited, and, except for
the purpose of payment, shall no longer be protected by the Indenture and shall not be deemed
Outstanding under the provisions of the Indenture.
It is provided in the Indenture that Series 2019A Bonds of a denomination larger than
$5,000 may be redeemed in part ($5,000 or an integral multiple thereof) and that upon a partial
redemption of any such Series 2019A Bond the same shall be surrendered in exchange for one or
more new Series 2019A Bonds in authorized form for the unredeemed portion of principal.
If provision is made for the payment of principal of, premium, if any, and interest on this
Bond in accordance with the Indenture, this Bond shall no longer be deemed Outstanding under
the Indenture, shall cease to be entitled to the benefits of the Indenture, the Loan Agreement and
the Mortgage, and shall thereafter be payable solely from the funds provided for such payment.
If an Event of Default, as defined in the Indenture, shall occur, the principal of all the
Series 2019A Bonds may be declared due and payable in the manner and with the effect
provided in the Indenture.
The Holder of this Bond shall have no right to enforce the provisions of the Indenture, the
Loan Agreement or the Mortgage, to institute action to enforce the covenants therein, to take any
action with respect to a default under the Indenture or to institute, appear in or defend any suit or
other proceeding with respect thereto, except as provided in the Indenture.
As provided in the Indenture and subject to certain limitations therein set forth, this Bond
is transferable on the Bond Register upon surrender of this Bond for transfer to the Trustee duly
endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the
Trustee duly executed by, the Holder hereof or his attorney duly authorized in writing, and
thereupon one or more new Series 2019A Bonds of the same series, of authorized
denominations, for the same aggregate principal amount and of the same Stated Maturity and
interest rate will be issued to the designated transferee or transferees.
The Series 2019A Bonds are issuable only in registered form without coupons in the
denomination of $5,000 or any integral multiple thereof.
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No service charge shall be made for any transfer or exchange hereinbefore referred to,
but the Issuer may require payment of a sum sufficient to cover any tax or other governmental
charge payable in connection therewith.
The Issuer, the Trustee and any agent of the Issuer may treat the person in whose name
this Bond is registered as the absolute owner hereof for all purposes whether or not this Bond is
overdue, and neither the Issuer, the Trustee nor any such agent shall be affected by notice to the
contrary.
It is hereby certified and recited that all conditions, acts and things required to exist,
happen and be performed precedent to or in the issuance of this Bond and the issue of which it is
a part, do exist, have happened and have been performed in regular and due form as required by
law.
Unless the certificate of authentication hereon has been executed by the Trustee by
manual signature, this Bond shall not be entitled to any benefit under the Indenture or be valid or
obligatory for any purpose.
IN WITNESS WHEREOF, the Issuer has caused this Bond to be executed in its name by
the manual or facsimile signatures of its duly authorized officers, all as of the Date of Original
Issue specified above.
CITY OF ST. JOSEPH, MINNESOTA
By ______________________________________
Its Mayor
By ______________________________________
Its City Administrator-Clerk
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________________________________________________
CERTIFICATE OF AUTHENTICATION
This is one of the Series 2019A Bonds described in the within mentioned Indenture.
U.S. BANK NATIONAL ASSOCIATION
By ____________________________________
Authorized Signature
Date: _______________________
________________________________________________
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
the within Bond on the books kept for registration thereof, with full power of substitution in the
premises.
Dated: ____________________
PLEASE INSERT SOCIAL SECURITY _________________________________________
OR OTHER IDENTIFYING NUMBER NOTICE: The signature to this assignment must
OF ASSIGNEE ____________________ correspond with the name as it appears upon the
face of the within Bond in every particular, without
alteration or enlargement or any change
whatsoever. Signature(s) must be guaranteed by an
“eligible guarantor institution” meeting the
requirements of the Trustee, which requirements
include membership or participation in STAMP or
such other “signature guaranty program” as may be
determined by the Trustee in addition to or in
substitution for STAMP, all in accordance with the
Securities Exchange Act of 1934, as amended.
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EXHIBIT B
FORM OF SERIES 2019A-T BOND
UNITED STATES OF AMERICA
STATE OF MINNESOTA
COUNTY OF STEARNS
CITY OF ST. JOSEPH
No. R-___ $____________
TAXABLE SENIOR HOUSING AND HEALTHCARE REVENUE BOND
(WOODCREST OF COUNTRY MANOR PROJECT)
SERIES 2019A-T
Date of
Interest Rate Maturity Date Original Issue CUSIP
____% July 1, 20___ July ___, 2019
Registered Owner: CEDE & CO.
Principal Amount: ________________________________ DOLLARS
The City of St. Joseph, Minnesota, a statutory city and political subdivision of the State
of Minnesota (the “Issuer”), for value received, hereby promises to pay to the registered Holder
named above, or registered assigns, upon surrender hereof at the principal corporate trust office
of the Trustee named below, solely from the source and in the manner hereinafter provided, on
the Maturity Date specified above, the principal amount specified above and to pay interest
thereon from the Date of Original Issue specified above, or from the most recent Interest
Payment Date to which interest has been paid or duly provided for, payable on January 1 and
July 1 in each year, commencing January 1, 2020, from the source and in the manner hereinafter
provided, until such principal amount is paid or duly provided for at the rate per annum specified
above, and at the same rate (to the extent that the payment of such interest shall be legally
enforceable) on any overdue installment of interest, all except as the provisions below with
respect to redemption of this Bond may become applicable hereto. Interest on this Bond shall be
calculated on the basis of a three hundred sixty (360) day of twelve (12) thirty (30) day months.
Payment of the principal of, premium, if any, and interest on this Bond shall be made in coin or
currency of the United States of America which at the time of payment is legal tender for
payment of public and private debts. Interest so payable, and punctually paid or duly provided
for, on any Interest Payment Date, will be paid by check or draft to the person in whose name
this Bond is registered at the close of business on the fifteenth day (whether or not a business
day) of the calendar month immediately preceding such Interest Payment Date (the “Record
Date”), or upon the written request of any Holder of at least $500,000 in principal amount of the
Series 2019A-T Bonds (hereinafter defined), submitted to the Trustee at least one Business Day
prior to the Record Date, by wire transfer in immediately available funds to an account within
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the United States of America designated by such Bondholder. Any such interest not so
punctually paid or duly provided for shall be paid by check or draft, or by wire transfer upon the
written request of any Holder of at least $500,000 in principal amount of the Series 2019A-T
Bonds, to the person in whose name this Bond is registered at the close of business on a special
record date fixed by the Trustee pursuant to the Indenture hereafter referred to.
This Bond is one of a duly authorized issue of obligations of the Issuer designated as
“Taxable Senior Housing and Healthcare Revenue Bonds (Woodcrest of Country Manor
Project), Series 2019A-T” (the “Series 2019A-T Bonds”), issued in the original aggregate
principal amount of $300,000 under, and all secured by, an Indenture of Trust, dated as of July 1,
2019 (the “Indenture”), between the Issuer and U.S. Bank National Association, a national
banking association (the “Trustee,” which term includes any successor trustee under the
Indenture). Under the Indenture, the Issuer is also issuing on a parity its Senior Housing and
Healthcare Revenue Bonds (Woodcrest of Country Manor Project), Series 2019A (the
“Series 2019A Bonds,” and together with the Series 2019A Bonds, the “Series 2019 Bonds”), in
the aggregate principal amount of $22,125,000. Reference is made to the Indenture and all
indentures supplemental thereto, copies of which are on file with the Trustee, for a description of
the nature and extent of the security, the respective rights thereunder of the Holders of the Series
2019A-T Bonds, the Trustee and the Issuer, and the terms upon which the Series 2019A-T Bonds
are issued and are to be authenticated and delivered. As provided in the Indenture, the Series
2019A-T Bonds are issuable in series which may vary as in the Indenture provided or permitted.
Any capitalized terms used herein that are otherwise not defined shall have the meanings
provided in the Indenture.
The Series 2019 Bonds are issued by the Issuer pursuant to Minnesota Statutes, Chapter
462C, as amended, for the purpose of making a loan (the “Loan”) of the proceeds thereof to
Country Manor St. Joseph, LLC, a Tennessee limited liability company (the “Company”), the
sole member of which is The Foundation For Health Care Continuums, a Tennessee nonprofit
corporation, under a Loan Agreement, dated as of July 1, 2019 (the “Loan Agreement”), between
the Issuer and the Company, to finance the acquisition of an approximately 84-unit assisted
living and memory care senior housing and health care facility located at 1200 Lanigan Way
SW, St. Joseph, Minnesota (such facilities, and any improvements thereto, are herein collectively
called the “Facilities”). By the Loan Agreement, the Company has agreed to repay the Loan,
together with interest thereon, in amounts and at times sufficient to pay the principal of,
premium, if any, and interest on the Bonds as the same shall become due and payable. By a
Combination Mortgage, Security Agreement, Fixture Financing Statement, and Assignment of
Leases and Rents, dated as of July 1, 2019 (the “Mortgage”), by the Company in favor of the
Trustee, the Company has granted to the Trustee a mortgage lien on and security interest in
substantially all of the real and personal property comprising the Facilities (the “Mortgaged
Property”). Reference is hereby made to the Loan Agreement and the Mortgage, copies of which
are on file with the Trustee, for a description of the agreements and covenants contained therein
and a description of the Mortgaged Property. By the Indenture the Issuer has pledged and
granted to the Trustee a security interest in the Issuer’s interest in the Loan Agreement (except
for certain rights to administrative and legal costs and indemnification).
This Bond and the interest hereon and any penalty, charge, or premium, or any amounts
payable hereunder, however designated, due hereunder are payable by the Issuer solely from the
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revenues and proceeds derived from the Loan Agreement, do not constitute a debt of the Issuer
within the meaning of any constitutional or statutory limitation, are not payable from or a charge
upon any funds of the Issuer other than the revenues and proceeds pledged by the Issuer to the
payment hereof, and do not give rise to a pecuniary liability of the Issuer nor of any of its
officers, agents, or employees. No holder of this Bond shall ever have the right to compel any
exercise of the taxing power of the Issuer or the state or any of its political subdivisions to pay
this Bond or the interest hereon or any penalty, charge, or premium or any amounts payable
hereunder, however designated, due hereunder, or to enforce payment thereof against any
property of the Issuer, and this Bond and the interest hereon and any penalty, charge, or
premium, or any amounts payable hereunder, however designated, do not constitute a charge,
lien, or encumbrance, legal or equitable, upon any property of the Issuer. The agreement of the
Issuer to perform or cause the performance of the covenants and other provisions herein referred
to shall be subject at all times to the availability of revenues or other funds furnished for such
purpose in accordance with the Loan Agreement, sufficient to pay all costs of such performance
or the enforcement thereof. The provisions of this paragraph shall, for purposes of this Bond, be
controlling and shall be given full force and effect, anything else to the contrary in this Bond
notwithstanding.
Optional Redemption. The Series 2019A-T Bonds are not subject to optional redemption
prior to maturity (except as permitted with respect to extraordinary optional redemption).
Extraordinary Redemption. The Series 2019A-T Bonds are subject to extraordinary
optional redemption in whole or in part, at the option of the Company, at a redemption price
equal to the principal amount to be redeemed plus accrued interest, upon certain damage to or
destruction or condemnation of the Facilities.
\[Mandatory Sinking Fund Redemption?\]
Redemption Upon Determination of Taxability of Series 2019A Bonds. Upon a
Determination of Taxability of the Series 2019A Bonds, all outstanding Series 2019 Bonds are
subject to mandatory redemption, in whole but not in part, on the earliest practicable redemption
date as established by the Trustee, at their principal amount plus accrued interest to the date of
redemption.
Notice of redemption shall be published, if required by applicable law, and mailed by
first class mail at least thirty (30) days before the redemption date to each Holder of the Series
2019A-T Bonds to be redeemed; but no defect in or failure to give such notice of redemption
shall affect the validity of proceedings for redemption of any Series 2019A-T Bond not affected
thereby. All Series 2019A-T Bonds so called for redemption will cease to bear interest on the
specified redemption date, provided funds for their redemption have been duly deposited, and,
except for the purpose of payment, shall no longer be protected by the Indenture and shall not be
deemed Outstanding under the provisions of the Indenture.
It is provided in the Indenture that Series 2019A-T Bonds of a denomination larger than
$5,000 may be redeemed in part ($5,000 or an integral multiple thereof) and that upon a partial
redemption of any such Series 2019A-T Bond the same shall be surrendered in exchange for one
or more new Series 2019A-T Bonds in authorized form for the unredeemed portion of principal.
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If provision is made for the payment of principal of, premium, if any, and interest on this
Bond in accordance with the Indenture, this Bond shall no longer be deemed Outstanding under
the Indenture, shall cease to be entitled to the benefits of the Indenture, the Loan Agreement and
the Mortgage, and shall thereafter be payable solely from the funds provided for such payment.
If an Event of Default, as defined in the Indenture, shall occur, the principal of all the
Series 2019A-T Bonds may be declared due and payable in the manner and with the effect
provided in the Indenture.
The Holder of this Bond shall have no right to enforce the provisions of the Indenture, the
Loan Agreement or the Mortgage, to institute action to enforce the covenants therein, to take any
action with respect to a default under the Indenture or to institute, appear in or defend any suit or
other proceeding with respect thereto, except as provided in the Indenture.
As provided in the Indenture and subject to certain limitations therein set forth, this Bond
is transferable on the Bond Register upon surrender of this Bond for transfer to the Trustee duly
endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the
Trustee duly executed by, the Holder hereof or his attorney duly authorized in writing, and
thereupon one or more new Series 2019A-T Bonds of the same series, of authorized
denominations, for the same aggregate principal amount and of the same Stated Maturity and
interest rate will be issued to the designated transferee or transferees.
The Series 2019A-T Bonds are issuable only in registered form without coupons in the
denomination of $5,000 or any integral multiple thereof.
No service charge shall be made for any transfer or exchange hereinbefore referred to,
but the Issuer may require payment of a sum sufficient to cover any tax or other governmental
charge payable in connection therewith.
The Issuer, the Trustee and any agent of the Issuer may treat the person in whose name
this Bond is registered as the absolute owner hereof for all purposes whether or not this Bond is
overdue, and neither the Issuer, the Trustee nor any such agent shall be affected by notice to the
contrary.
It is hereby certified and recited that all conditions, acts and things required to exist,
happen and be performed precedent to or in the issuance of this Bond and the issue of which it is
a part, do exist, have happened and have been performed in regular and due form as required by
law.
Unless the certificate of authentication hereon has been executed by the Trustee by
manual signature, this Bond shall not be entitled to any benefit under the Indenture or be valid or
obligatory for any purpose.
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IN WITNESS WHEREOF, the Issuer has caused this Bond to be executed in its name by
the manual or facsimile signatures of its duly authorized officers, all as of the Date of Original
Issue specified above.
CITY OF ST. JOSEPH, MINNESOTA
By ______________________________________
Its Mayor
By ______________________________________
Its City Administrator-Clerk
CERTIFICATE OF AUTHENTICATION
This is one of the Series 2019A-T Bonds described in the within mentioned Indenture.
U.S. BANK NATIONAL ASSOCIATION
By ____________________________________
Authorized Signature
Date: _______________________
________________________________________________
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 the within Bond on the books kept for registration thereof, with full power of
substitution in the premises.
Dated: ____________________
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PLEASE INSERT SOCIAL SECURITY _________________________________________
OR OTHER IDENTIFYING NUMBER NOTICE: The signature to this assignment must
OF ASSIGNEE ____________________ correspond with the name as it appears upon the
face of the within Bond in every particular, without
alteration or enlargement or any change
whatsoever. Signature(s) must be guaranteed by an
“eligible guarantor institution” meeting the
requirements of the Trustee, which requirements
include membership or participation in STAMP or
such other “signature guaranty program” as may be
determined by the Trustee in addition to or in
substitution for STAMP, all in accordance with the
Securities Exchange Act of 1934, as amended.
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EXHIBIT C
FORM OF REPAIR AND REPLACEMENT RESERVE
FUND DRAW REQUEST
Requisition No. __________ Date: __________
To: U.S. Bank National Association, as Trustee
Re: Draw from Repair and Replacement Reserve Fund in accordance with the
Indenture of Trust, dated as of July 1, 2019 (the “Indenture”), between the
City of St. Joseph, Minnesota (the “Issuer”) and the Trustee, and the Loan
Agreement, dated as of July 1, 2019 (the “Loan Agreement”), between the
Issuer and Country Manor St. Joseph, LLC (the “Company”)
The undersigned representative of the Company hereby requests that there be paid from
the Repair and Replacement Reserve Fund the sum set forth below, and in that connection with
respect to the use of the monies thereunder, certifies, as follows:
1. An obligation in each of the amounts set forth below has been incurred in
connection with the improvement or equipping of the Facilities, and such obligation or amount
represents a capital cost of the Facilities.
2. Each requested payment is (a) a proper charge against the Repair and
Replacement Reserve Fund, pursuant to the Indenture, (b) is not duplicative of any previous
withdrawal from the Repair and Replacement Reserve Fund, (c) is fair and reasonable and (d) the
payee, purpose and amount of such obligation are described below:
Payee
Name and Address Purpose Amount
3. The undersigned has no notice of any vendors’, materialmen’s, mechanics’,
suppliers’ or other similar liens or rights to liens, chattel mortgages or conditional sales contracts,
or other contracts or obligations which should be satisfied or discharged before payment of the
above-described obligations is made.
COUNTRY MANOR ST. JOSEPH, LLC
By: ___________________________________
Name: _________________________________
Title: __________________________________
C-1
11680673v2
Second Draft
Wednesday, May 15, 2019
PURCHASE AGREEMENT
BY AND BETWEEN
CITY OF ST. JOSEPH MINNESOTA,
as Issuer
COUNTRY MANOR ST. JOSEPH, LLC,
as Company
THE FOUNDATION FOR HEALTH CARE CONTINUUMS,
as Limited Guarantor
AND
DOUGHERTY & COMPANY LLC,
as Underwriter
Dated June ____, 2019
$_____ $_____
City of St. Joseph, Minnesota City of St. Joseph, Minnesota
Senior Housing and Healthcare Revenue Bonds Taxable Senior Housing and Healthcare Revenue Bonds
(Woodcrest of Country Manor Project) (Woodcrest of Country Manor Project)
Series 2019A Series 2019A-T
This instrument drafted by:
Ballard Spahr LLP (BWJ)
2000 IDS Center
th
80 South 8 Street
Minneapolis, Minnesota 55402
$_____ $_____
City of St. Joseph, Minnesota City of St. Joseph, Minnesota
Senior Housing and Healthcare Revenue Bonds Taxable Senior Housing and Healthcare Revenue Bonds
(Woodcrest of Country Manor Project) (Woodcrest of Country Manor Project)
Series 2019A Series 2019A-T
PURCHASE AGREEMENT
June ___, 2019
Country Manor St. Joseph, LLC City of St. Joseph, Minnesota
c/o The Foundation For Health Care Continuums 75 Callaway Street East
520 First Street Northeast St. Joseph, MN 56374
Sartell, MN 56377
The Foundation For Health Care Continuums
520 First Street Northeast
Sartell, MN 56377
Ladies and Gentlemen:
The undersigned, Dougherty & Company LLC (the “Underwriter”), hereby offers to enter into
this Purchase Agreement (the “Purchase Agreement”) with the City of St. Joseph, Minnesota (the
“Issuer”), as approved and agreed to by Country Manor St. Joseph, LLC, a Tennessee nonprofit limited
liability company (the “Company”), the sole member of which is The Foundation For Health Care
Continuums, a Tennessee nonprofit corporation (“FHCC” or “Limited Guarantor”), and FHCC, for the
purchase by the Underwriter of the Issuer’s (i) Senior Housing and Healthcare Revenue Bonds
(Woodcrest of Country Manor Project), Series 2019A (the “Series 2019A Bonds”), and (ii) Taxable
Senior Housing and Healthcare Revenue Bonds (Woodcrest of Country Manor Project), Series 2019A-T
(the “Series 2019A-T Bonds,” and together with the Series 2019A Bonds, the “Series 2019 Bonds”). This
offer is made subject to acceptance by the Issuer and agreement by the Company and FHCC at or prior to
___:00 __.M. Central time on June ___, 2019, and upon such acceptance this Purchase Agreement shall
be in full force and effect in accordance with its terms and shall be binding upon the Issuer, the Company,
FHCC, and the Underwriter. If not so accepted, this Purchase Agreement will be subject to withdrawal by
the Underwriter upon notice delivered by the Underwriter to the Issuer, the Company and FHCC at any
time prior to the acceptance hereof by the Issuer, the Company and FHCC.
1. Purchase and Sale. Subject to the satisfaction by the Issuer, the Company, and FHCC of
the terms and conditions set forth in this Purchase Agreement, subject also to the conditions precedent set
forth in this Purchase Agreement, and in reliance upon the representations in this Purchase Agreement set
forth or incorporated by reference, the Underwriter hereby agrees to purchase from the Issuer, upon the
terms and conditions set forth in this Purchase Agreement, and the Issuer hereby agrees to sell the Series
2019 Bonds to the Underwriter. The Series 2019 Bonds shall be as described in the Official Statement (as
defined below) and Schedule I attached to this Purchase Agreement. The purchase price paid by the
Underwriter for the Series 2019A Bonds is $______ (representing a par amount of $_____), \[plus/less\]
the \[net\] original issue \[premium/discount\] of $______, less the Underwriter’s discount of $_____. The
purchase price paid by the Underwriter for the Series 2019A-T Bonds is $______ (representing a par
amount of $_____), \[plus/less\] the \[net\] original issue \[premium/discount\] of $______, less the
Underwriter’s discount of $_____.
The Issuer is authorized to issue the Series 2019 Bonds pursuant to: (i) Minnesota Statutes,
Chapter 462C (the “Act”), and (ii) resolutions of the City Council of the Issuer. The Issuer will loan
proceeds of the Series 2019 Bonds to the Company, along with funds of the Company, in order to: (i)
finance the acquisition of an 84-unit assisted living and memory care senior housing and healthcare
facility comprised of a 24-unit memory care facility, known as Woodcrest Memory Care Suites (the
“Memory Suites”), and a 60-unit assisted living facility known as Woodcrest Senior Apartments (the
“Senior Apartments,” and together with the Memory Suites, the “Project”), located at 1200 Lanigan Way
Southwest in St. Joseph, Minnesota; (ii) fund required reserves for the Series 2019 Bonds; and (iii) pay
the costs of issuance for the Series 2019 Bonds. Terms not defined in this Purchase Agreement shall have
the meaning given to them in the Indenture of Trust, dated as of July 1, 2019 (the “Indenture”), by and
between the Issuer and U.S. Bank National Association, as trustee (the “Trustee”), unless the context
clearly indicates otherwise.
The Series 2019 Bonds are payable from and secured by (i) a pledge of payments to be received
by the Issuer pursuant to a Loan Agreement, dated as of July 1, 2019 (the “Loan Agreement”), between
the Issuer and the Company; (ii) certain funds held under the Indenture; (iii) a Combination Mortgage,
Security Agreement and Fixture Financing Statement, and Assignment of Leases and Rents, dated as of
July 1, 2019 (the “Mortgage”), from the Company to the Trustee, and (iv) a Limited Guaranty Agreement,
dated as of July 1, 2019 (the “Limited Guaranty”), between the Sole Member and the Trustee. This
Purchase Agreement and the following documents: (i) the Loan Agreement; (ii) the Mortgage; (iii) the
Continuing Disclosure Agreement, dated as of July 1, 2019 (the “Disclosure Agreement”), between the
Company and U.S. Bank National Association, as dissemination agent; (iv) the Assignment and
Subordination of Management Agreement, dated as of July 1, 2019 (the “Assignment of Management
Agreement”), by the Company and consented to by Continuums Management Services LLC, as manager,
and the other documents to which the Company is a party are hereinafter referred to as the “Company
Documents”.
Under the terms of the Limited Guaranty, the Limited Guarantor has guaranteed up to $1,250,000
(exclusive of the costs of collection) of payments relating to the Series 2019 Bonds to be made by the
Company under the Loan Agreement, subject to certain termination provisions contained therein.
It is understood and agreed that the Series 2019 Bonds and the interest thereon are special, limited
obligations of the Issuer payable solely from (i) revenues provided by the Company or amounts paid
pursuant to the Indenture or Mortgage (including the Limited Guaranty), and (ii) amounts held in various
funds and accounts as provided in the Indenture. The Series 2019 Bonds shall never constitute a general
indebtedness of the Issuer within the meaning of any state constitutional or statutory provision and do not
give rise to a general or moral obligation of the Issuer, the State of Minnesota (the “State”), or any of its
political subdivisions, and do not constitute a charge against the Issuer’s property, general credit or taxing
powers.
The Issuer and the Company acknowledge and agree that (i) the purchase and sale of the Series
2019 Bonds pursuant to this Purchase Agreement is an arm’s-length commercial transaction between the
Issuer, the Company, FHCC, and the Underwriter, (ii) in connection with such transaction, the
Underwriter is acting solely as a principal and not as an agent or a fiduciary of the Issuer, the Company,
or FHCC, (iii) the Underwriter has not assumed (individually or collectively) a fiduciary responsibility in
favor of the Issuer, the Company, or FHCC with respect to (x) the offering of the Series 2019 Bonds or
the process leading thereto or (y) any other obligation to the Issuer, the Company, or FHCC except the
obligations expressly set forth in this Purchase Agreement, and (iv) the Issuer, the Company, and FHCC
2
have consulted with their own legal and other professional advisors to the extent they each deemed
appropriate in connection with the offering of the Series 2019 Bonds.
The Company, FHCC, and the Issuer acknowledge that the Underwriter, without regard to
priority, may allocate the Series 2019 Bonds between customer orders and orders that could be considered
to be from “related accounts” for purposes of MSRB Rule G-11. The Issuer and the Company hereby
agree to the Underwriter’s allocation of the Series 2019 Bonds to the orders that the Underwriter received
during the order period for the Series 2019 Bonds, regardless of priority between customer accounts and
those accounts that could be considered “related accounts.”
2. Official Statement.
(a) The Company shall deliver or cause to be delivered to us, promptly upon the completion
thereof, copies of the Official Statement of the Company relating to the Series 2019 Bonds, dated on or
about _______, 2019 (the “Official Statement”). In connection with the offering and sale of the Series
2019 Bonds, the Company and FHCC authorize the use by the Underwriter of copies of the Official
Statement with respect to the Series 2019 Bonds, together with copies of the Resolution (as hereinafter
defined), the Indenture, and the other documents described therein. The Company and FHCC hereby
ratify and consent to the use by the Underwriter of the Preliminary Official Statement, dated May 30,
2019 (the “Preliminary Official Statement”) and the Official Statement in connection with the offer and
sale of the Series 2019 Bonds.
(b) The Company, pursuant to Rule 15c2-12 of the Securities and Exchange Commission
(the “Rule”) under the Securities Exchange Act of 1934, as amended (the “1934 Act”), agrees to deliver
to the Underwriter, at such addresses as the Underwriter shall specify, as many copies of the Official
Statement as the Underwriter shall reasonably request as necessary to comply with paragraph (b)(4) of the
Rule and with Rule G-32 and all other applicable rules of the Municipal Securities Rulemaking Board
(the “MRSB”). The Company agrees to deliver such Official Statements within seven (7) business days
after the execution of this Purchase Agreement.
(c) The Underwriter shall give notice to the Issuer, the Company, FHCC, and any additional
“issuer” on the date after which no participating underwriter, as such term is defined in the Rule, remains
obligated to deliver Official Statements pursuant to paragraph (b)(4) of the Rule.
(d) The Underwriter agrees from the time the Official Statement becomes available until the
earlier of (i) ninety (90) days from the end of the underwriting period or (ii) the time when the Official
Statement is available to any person from a nationally recognized municipal securities information
repository, but in no case less than twenty-five (25) days following the end of the underwriting period, to
send or cause to be sent no later than the next business day, by first class mail or other equally prompt
means to any potential customer, on request, at least one copy of the Official Statement, as most recently
supplemented or amended.
3. Representations.
(a) The Issuer represents, warrants, and agrees with the Underwriter as follows:
(i) The statements and information contained in the Preliminary Official Statement
(to the extent not modified in the Official Statement) and the Official Statement with respect to
the Issuer under the captions “THE ISSUER” and “ABSENCE OF MATERIAL LITIGATION -
The Issuer” (together, the “Issuer Portion” of the Official Statement) are, and as of the date of
Closing (as defined below) will be, true and correct in all material respects, and the Issuer Portion
3
of the Official Statement does not and 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 light of the circumstances under which they were
made, not misleading.
(ii) The Issuer is a statutory city governed by the laws of State created and existing
under the Constitution and the laws of the State and, based solely upon an opinion of Bond
Counsel, the Issuer has full legal right, power and authority pursuant to the Constitution and laws
of the State, including the Act, to issue bonds for the purposes stated in the Indenture, to enter
into this Purchase Agreement, the Indenture and the Loan Agreement, to pledge the trust estate as
defined in the Indenture and as described in the Official Statement, and to loan the proceeds of
the Series 2019 Bonds to the Company to be applied to the purposes stated in the Indenture.
(iii) To the actual knowledge of the persons executing this Purchase Agreement on
behalf of the Issuer, execution and delivery of this Purchase Agreement does not, and the
adoption of the Resolution and the execution and delivery of the Series 2019 Bonds, the
Indenture, the Loan Agreement, and compliance with the provisions of each of them, under the
circumstances contemplated thereby, will not, in any material respect, conflict with or constitute
on the part of the Issuer a breach of or default under any other agreement or instrument to which
the Issuer is a party or any existing law, administrative regulation, court order or consent decree
to which the Issuer is subject.
(iv) With respect to such matters that are preconditions to the issuance of the Series
2019 Bonds that are identified in the Act and the Indenture, the Issuer has, to its knowledge, and
at the date of the Closing will have, in all respects complied therewith.
(v) To the actual knowledge of the persons executing this Purchase Agreement on
behalf of the Issuer, all approvals, consents and orders of any governmental authority, board,
agency, council, commission or other body in or of the Issuer or the State having jurisdiction
which would constitute a condition precedent to the performance by the Issuer of its obligations
hereunder and under the Indenture and the Series 2019 Bonds, have been obtained or, if not, will
be obtained at the time of or prior to the Closing (provided no representation or warranty is
expressed as to any action required under federal or state securities or Blue Sky laws in
connection with the purchase of the Series 2019 Bonds by the Underwriter).
(vi) The City Council of the Issuer, on May 20, 2019, duly adopted a resolution (the
“Resolution”) authorizing the issuance, execution, delivery and performance of the Series 2019
Bonds, the Indenture, the Loan Agreement, and this Purchase Agreement.
(vii) To the knowledge of the persons executing this Purchase Agreement on behalf of
the Issuer, no litigation is pending or, to the actual knowledge of the Issuer, threatened
(A) seeking to restrain or enjoin the issuance or delivery of any of the Series 2019 Bonds or the
application of proceeds of the Series 2019 Bonds as provided in the Indenture or the collection of
revenues of the Issuer pledged under the Indenture, (B) in any way contesting or affecting any
authority for the issuance of the Series 2019 Bonds or the validity of the Series 2019 Bonds, the
Resolution, the Indenture, the Loan Agreement, or this Purchase Agreement, or (C) in any way
contesting the existence or powers of the Issuer.
(viii) The Issuer Portion of the Preliminary Official Statement was, as of its date, and
is, as of this date, “final” within the meaning of paragraph (b)(1) of the Rule.
4
(b) The Company represents, warrants, and agrees with the Underwriter as follows:
(i) The Company approves the distribution and use of the Official Statement. The
statements and the information set forth in the Official Statement concerning the Company and its
operations, the Project (including estimated sources and uses of funds), and the Company’s
participation in the transactions contemplated by the Company Documents (the “Company
Portion”) is true and correct in all material respects, and the information set forth under the
heading “RISK FACTORS” is a fair description of the risk factors related to the Project and the
Series 2019 Bonds. With respect to the Company Portion and the information set forth under the
heading “RISK FACTORS”, the Preliminary Official Statement and the Official Statement do not
and will not contain any untrue or misleading 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 are made, not misleading.
(ii) If, at any time prior to the earlier of (A) receipt of notice from the Underwriter
pursuant to Section 2(c) hereof that Official Statements are no longer required to be delivered
under the Rule or (B) ninety (90) days after the Closing, any event occurs known to the Company
(or which should have been known to the Company upon diligent inquiry) as a result of which the
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 Company shall promptly
notify the Underwriter and the Issuer thereof in writing. Upon the request of the Underwriter, the
Company shall prepare and deliver to the Underwriter and the Issuer, at the expense of the
Company, as many copies of an amendment or supplement to the Official Statement which will
correct any untrue statement or omission therein as the Underwriter and the Issuer may
reasonably request.
(iii) The Company is duly organized and existing as a nonprofit limited liability
company under the laws of the State of Tennessee authorized to do business in the State of
Minnesota, whose sole member is the Sole Member, and the Company has full legal right, power
and authority to enter into the Company Documents, and to carry out and consummate all
transactions contemplated by such documents.
(iv) The execution and delivery of this Purchase Agreement does not, and the
execution and delivery of the other Company Documents and compliance with the provisions of
each of them, under the circumstances contemplated thereby, will not, in any material respect,
conflict with or constitute on the part of the Company a breach of or default under any other
agreement or instrument to which the Company is a party or, to the Company’s knowledge, any
existing law, administrative regulation, court order or consent decree to which the Company is
subject.
(v) All approvals, consents and orders of any governmental authority, board, agency,
council, commission or other body in or of any state and the federal government having
jurisdiction which would constitute a condition precedent to the performance by the Company of
its obligations hereunder and under the other Company Documents have been obtained or, if not,
are expected to be promptly obtained by the Company for operation of the Project as soon as
commercially possible after the Closing (provided no representation or warranty is expressed as
to any action required under federal or state securities or Blue Sky laws in connection with the
purchase and sale of the Series 2019 Bonds by the Underwriter).
5
(vi) This Purchase Agreement does, and the other Company Documents, when each
of them has been executed and delivered by the Company, will, assuming due authorization,
execution and delivery by the other parties thereto, each constitute a valid and binding obligation
of the Company, enforceable in accordance with its terms, subject to any applicable bankruptcy,
insolvency or other laws affecting creditors’ rights or remedies heretofore or hereafter enacted.
(vii) The Company will take no action that could cause the interest on the Series
2019A Bonds to be includable in federal or state income.
(viii) No litigation is pending or, to the actual knowledge of the Company, threatened
(A) seeking to restrain or enjoin the issuance or delivery of any of the Series 2019 Bonds or the
application of proceeds of the Series 2019 Bonds as provided in the Indenture or the collection of
revenues of the Company pledged under the Loan Agreement, (B) in any way contesting or
affecting any authority for the issuance of the Series 2019 Bonds or the validity of the Series
2019 Bonds or Company Documents, or (C) in any way contesting the existence or powers of the
Company.
(ix) The Company has not been, within the last five (5) years, in default as to
principal or interest with respect to any obligation issued or guaranteed by the Company or with
respect to which the Company is an obligor.
(x) So long as the Series 2019 Bonds are outstanding, the Company will (i) maintain
its status as an organization described in Section 501(c)(3) of the Code and will take no action
that would jeopardize such status.
(xi) The Company has not within the last five (5) years been subject to any
continuing disclosure undertaking.
(c) FHCC represents, warrants, and agrees with the Underwriter that, as the date hereof and
at the date of Closing:
(i) The statements and the information set forth in the Preliminary Official
Statement and the Official Statement (including the appendices thereto and to the extent not
modified from the information contained in the Preliminary Official Statement) concerning
FHCC (including its facilities and operations), FHCC’s financial information (as defined in the
Preliminary Official Statement and the Official Statement), and FHCC’s participation in the
transactions contemplated by the Limited Guaranty including the information in Appendix B to
the Official Statement (collectively, the “FHCC Portion”) are true and correct in all material
respects, and the statements and the information set forth under the heading “RISK FACTORS –
Risk Factors Relating to Sole Member/Guarantor” is a fair description of the risk factors related
to FHCC. As described in this paragraph, such information in the Preliminary Official Statement
does not contain any untrue or misleading 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 are made, not misleading.
(ii) FHCC is duly organized and existing as a nonprofit corporation under the laws of
the State of Tennessee authorized to do business in the State of Minnesota and FHCC has full
legal right, power and authority to enter into the Limited Guaranty, and to carry out and
consummate all transactions contemplated by such Limited Guaranty.
6
(iii) The execution and delivery of this Purchase Agreement and compliance with the
provisions hereof, under the circumstances contemplated hereby, do not, in any material respect,
conflict with or constitute on the part of FHCC a breach of or default under any other agreement
or instrument to which FHCC is a party or, to FHCC’s knowledge, any existing law,
administrative regulation, court order or consent decree to which FHCC is subject.
(iv) All approvals, consents and orders of any governmental authority, board, agency,
council, commission or other body in or of any state and the federal government having
jurisdiction which would constitute a condition precedent to the performance by FHCC of its
obligations hereunder and under the Limited Guaranty have been obtained or, if not, are expected
to be promptly obtained by FHCC as soon as commercially possible after the Closing (provided
no representation or warranty is expressed as to any action required under federal or state
securities or Blue Sky laws in connection with the purchase and sale of the Series 2019 Bonds by
the Underwriter).
(v) This Purchase Agreement assuming due authorization, execution and delivery by
the other parties hereto, constitutes a valid and binding obligation of FHCC, enforceable in
accordance with its terms, subject to any applicable bankruptcy, insolvency or other laws
affecting creditors’ rights or remedies heretofore or hereafter enacted.
(vi) No litigation to which FHCC is a party is pending or, to the knowledge of FHCC,
threatened (A) seeking to restrain or enjoin the issuance or delivery of the Series 2019 Bonds or
the application of proceeds of the Series 2019 Bonds as provided in the Indenture, (B) in any way
contesting or affecting any authority for the issuance of the Series 2019 Bonds or the validity of
the Series 2019 Bonds, or the Limited Guaranty, or (C) in any way affecting, in a material
adverse manner, the property of FHCC or contesting the existence or powers of FHCC.
(vii) FHCC will take no action that could cause the interest on the Series 2019A
Bonds to be subject to federal or state income taxation.
(viii) So long as the Series 2019 Bonds are outstanding, FHCC will maintain its status
as a nonprofit corporation described in Section 501(c)(3) of the Code and will take no action that
would jeopardize such status.
(d) The Underwriter represents and agrees as follows:
(i) The Underwriter is a member of the National Association of Securities Dealers,
is a registered broker/dealer in each state in which it proposes selling the Series 2019 Bonds, has
full power and authority to enter into this Purchase Agreement, and will comply with all federal
and applicable state securities laws in each state in which it proposes selling the Series 2019
Bonds.
(ii) The Underwriter hereby agrees that, in connection with the Underwriter’s use or
distribution of the Official Statement and its other activities related to the sale, other marketing of
the Series 2019 Bonds, the Underwriter will comply with all applicable requirements of federal
and state securities, Blue Sky, broker-dealer, antifraud, or other applicable laws, including all
regulations thereunder.
7
4. Closing. At 12:00 Noon, Central time, on _____, 2019 or such later date as we mutually
agree upon (the “Closing”), the Issuer will deliver or cause to be delivered to us, at the offices of the
Underwriter or at such other place as we may mutually agree upon, the Series 2019 Bonds in definitive
fully registered form, duly executed and authenticated. In addition, the other documents hereinafter
mentioned will be delivered at the offices of Briggs and Morgan, Professional Association (“Bond
Counsel”) in Minneapolis, Minnesota and the Underwriter will accept such delivery and pay the purchase
price thereof in federal funds payable to the order of the Issuer or the order of such person as the Issuer
shall direct and such funds shall be available to the Issuer on the date of Closing.
The Series 2019 Bonds will be delivered as fully registered bonds in such authorized
denominations and registered in the name of Cede & Co. and in such amounts as authorized in the
Indenture. The Issuer will deposit with the Trustee, as agent to The Depository Trust Company (or such
other acceptable depository institution), any or all of the Series 2019 Bonds. The Series 2019 Bonds will
be made available for checking and authentication not less than forty-eight (48) hours prior to the
Closing, at such place as the Issuer and the Underwriter shall agree.
It is anticipated that CUSIP identification numbers will be printed on the Series 2019 Bonds, but
neither the failure to print such numbers on any Series 2019 Bond nor any error in the printing of such
numbers on any Series 2019 Bond shall constitute cause for a failure or refusal by the Underwriter to
accept delivery of and pay for any Series 2019 Bonds. The Underwriter and the Issuer will cooperate to
obtain the CUSIP numbers.
5. Conditions Precedent. The Underwriter has entered into this Purchase Agreement in
reliance upon (i) the representations, warranties and agreements of the Issuer contained in this Purchase
Agreement, in the Indenture, in the Loan Agreement, and the Resolution; (ii) the representations,
warranties and agreements of the Company contained in this Purchase Agreement and in the other
Company Documents; and (iii) the performance by the Issuer, the Company, and FHCC of their
obligations hereunder, if any, and under the above-mentioned documents, both as of the date hereof and
as of the date of the Closing. The Underwriter’s obligations under this Purchase Agreement are and shall
be subject to the following further conditions:
(a) The representations and warranties of the Issuer, the Company, and FHCC contained in
this Purchase Agreement shall be true, complete and correct on the date of acceptance hereof and on and
as of the date of the Closing with the same effect as if made on the date of the Closing.
(b) At the time of the Closing, the Official Statement, the Resolution, the Act, the Indenture,
the Company Documents, and the Limited Guaranty shall be in full force and effect, shall each be in form
and substance acceptable to the Underwriter in all respects, and shall not have been amended, modified or
supplemented except as may have been agreed to in writing by us; and the Issuer, the Company, and
FHCC shall have duly adopted and there shall be in full force and effect such ordinances and resolutions,
and entered into such agreements, as, in the opinion of Bond Counsel, and in the opinion of Ballard Spahr
LLP, counsel to the Underwriter, shall be necessary in connection with the transactions contemplated
hereby or the documentation of security for the Series 2019 Bonds.
(c) The Underwriter may terminate this Purchase Agreement by notification in writing or by
facsimile or telegram to the Issuer, the Company, and FHCC if at any time subsequent to the date hereof
and at or prior to the Closing: (A) legislation shall be enacted by, or favorably reported out of a committee
of, either House of the Congress of the United States of America, or a decision by a court of the United
States of America shall be rendered, or a regulation or ruling shall be issued or proposed by or on behalf
of the Treasury Department, the Internal Revenue Service, or any other agency of the Federal
Government having jurisdiction, or a release or official statement shall be issued by the Treasury
8
Department, the Internal Revenue Service of the United States, or any other agency of the Federal
Government having jurisdiction, with respect to federal taxation upon interest received on obligations of
the character of the Series 2019 Bonds, which, in the reasonable judgment of the Underwriter, adversely
affects the market for the Series 2019 Bonds or the sale, at the contemplated offering prices, by the
Underwriter of the Series 2019 Bonds; or (B) a stop order, ruling, regulation, proposed regulation or
statement by or on behalf of the SEC is issued or made to the effect that the issuance, offering, sale or
distribution of obligations of the character of the Series 2019 Bonds is in violation of any provisions of
the Securities Act of 1933, as amended (the “1933 Act”), or of the Trust Indenture Act of 1939, as
amended (the “1939 Act”); or (C) the Congress of the United States of America shall enact a law, or a bill
is favorably reported out of a committee of either House, or a decision by a court of the United States of
America is rendered, or a ruling, regulation, proposed regulation or statement by or on behalf of the SEC
or any other agency of the Federal Government having jurisdiction of the subject matter is made, to the
effect that securities of the Issuer or of any similar public body are not exempt from the registration,
qualification or other requirements of the 1933 Act or the 1939 Act; or (D) the United States of America
becomes engaged in hostilities (other than those currently ongoing in Iraq and Afghanistan and otherwise
on the date hereof) that result in a declaration of war or a national emergency; or (E) there occurs a
general suspension of trading on the New York Stock Exchange; or (F) a general banking moratorium is
declared by authorities of the State, the State of New York, or the United States of America; or (G) an
event occurs which in the judgment of the Underwriter (i) makes untrue or incorrect in any material
respect, as of the time of such event, any statement or information contained in the Preliminary Official
Statement or the Official Statement or which is not reflected in the Preliminary Official Statement or the
Official Statement but should be reflected therein in order to make the statements and information
contained therein not misleading in any material respect and/or (ii) adversely affects the market for the
Series 2019 Bonds or the sale, at the contemplated offering prices, by the Underwriter, of the Series 2019
Bonds; or (H) all documentation in connection with the issuance of the Series 2019 Bonds is not
satisfactory in form and substance to the Underwriter or Ballard Spahr LLP (“Underwriter’s Counsel”); or
(I) economic, market or other conditions occur or exist which, in the judgment of the Underwriter, render
the Series 2019 Bonds incapable of being sold on terms acceptable to the Underwriter; or (J) any suit,
proceeding, litigation or other action are commenced, or, if commenced prior to the date hereof, are
continuing or have been adjudicated, which, in any event, in the reasonable judgment of the Underwriter,
may affect the marketing, sale or delivery of the Series 2019 Bonds; or (K) the Underwriter, the
Company, FHCC, and the Issuer have not reached agreement as to the terms of any of the agreements
referred to in this Purchase Agreement; or (L) a default has occurred with respect to the obligations of, or
proceedings have been instituted under the federal bankruptcy laws or any similar state laws by or
against, any state of the United States of America, which in the reasonable opinion of the Underwriter
adversely affects the market price or marketability of the Series 2019 Bonds; or (M) the sovereign debt
rating of the United States of America is downgraded by any major credit rating agency or a payment
default occurs on United States Treasury obligations, which in the reasonable opinion of the Underwriter
adversely affects the market price or marketability of the Series 2019 Bonds.
(d) At or prior to the Closing, the Underwriter shall have received the following documents
(in each case with such changes as the Underwriter shall approve):
(i) The unqualified approving opinion of Briggs and Morgan, Professional
Association, as Bond Counsel, dated the date of the Closing, in form acceptable in all respects to
the Underwriter and Underwriter’s counsel (substantially in the form attached as APPENDIX G
to the Official Statement, without material modifications or alterations);
(ii) A supplemental opinion of Briggs and Morgan, Professional Association, as
Bond Counsel, in form and substance acceptable to the Underwriter and counsel to the
Underwriter;
9
(iii) One or more opinions of Wornson Goggins Zard Neisen Morris & Brever, PC, as
counsel to the Company and FHCC, dated the date of Closing, and addressed to Bond Counsel
and the Underwriter, in form and substance acceptable to the Underwriter and counsel to the
Underwriter;
(iv) An opinion of Ballard Spahr LLP, counsel to the Underwriter, dated the date of
the Closing, and addressed to the Underwriter;
(v) A certificate of the Issuer, signed by an official of the Issuer, dated the date of the
Closing, to the effect that, to the knowledge of the Issuer (A) the representations of the Issuer
contained in this Purchase Agreement and in the Resolution, the Loan Agreement, and the
Indenture are true and correct in all material respects as of the date of the Closing; and (B) no
litigation is pending or threatened, against the Issuer (1) seeking to restrain or enjoin the issuance
or delivery of any of the Series 2019 Bonds or the collection of revenues or other security
pledged under the Indenture or the Resolution, (2) in any way contesting any authority for the
issuance of the Series 2019 Bonds or the validity of the Series 2019 Bonds, the Resolution, the
Loan Agreement, the Indenture or this Purchase Agreement, or (3) in any way contesting the
existence or powers of the Issuer;
(vi) A certificate of the Company, signed by an authorized representative of the
Company, dated the date of the Closing, to the effect that (A) the representations, warranties and
agreements of the Company contained in this Purchase Agreement and in the Company
Documents are true and correct in all material respects as of the date of the Closing; (B) no
litigation to which the Company is a party is pending or, to the knowledge of the Company,
threatened, (1) seeking to restrain or enjoin the issuance or delivery of any of the Series 2019
Bonds or the collection of revenues or other security pledged under the Indenture, (2) in any way
contesting or affecting any authority for the issuance of the Series 2019 Bonds or the validity of
the Series 2019 Bonds, the Resolution, or any of the Company Documents, or (3) in any way
contesting the existence or powers of the Company; (C) no event affecting the Company has
occurred since the date of the Official Statement that should be disclosed in the Official
Statement, for the purpose for which it is to be used or which should be disclosed therein in order
to make the statements and information therein not misleading in any material respect; (D) the
information in the Official Statement concerning the Company, the Project (including sources and
uses of funds), and the Company’s participation in the transactions contemplated by the Company
Documents is true and correct in all material respects, and the information under the heading
“RISK FACTORS” is a fair description of the risk factors related to the Project; (E) all
resolutions and other actions required to be approved or taken by or on behalf of the Company
authorizing and approving the transactions described or contemplated in this Purchase Agreement
or in the Official Statement, the execution of or approving of the respective forms of, as the case
may be, the Company Documents and the Series 2019 Bonds have been duly approved by the
Company, are in full force and effect and have not been modified, amended or repealed; (F) the
Company is a nonprofit limited liability company organized and validly existing under the laws
of the State of Tennessee with full power and authority to own its properties and conduct its
business in the State; and (G) the Company has all necessary licenses, approvals, accreditations
and permits presently required under federal, state and local laws to own and operate the Project
or, if the Company does not currently have such licenses, approvals, accreditations and permits,
they are expected to be promptly obtained by the Company as soon as commercially possible
after the Closing for the Project;
(vii) A certificate of FHCC, signed by an authorized representative of FHCC, dated
the date of the Closing, to the effect that (A) no litigation is pending or to its knowledge
10
threatened, (1) seeking to restrain or enjoin the issuance or delivery of any of the Series 2019
Bonds or the collection of revenues or other security pledged under the Indenture, (2) in any way
contesting or affecting any authority for the issuance of the Series 2019 Bonds or the validity of
the Series 2019 Bonds or the Limited Guaranty, or (3) in any way contesting the existence or
powers of FHCC; (B) no event affecting FHCC has occurred since the date of the Official
Statement that should be disclosed in the Official Statement, for the purpose for which it is to be
used or which should be disclosed therein in order to make the statements and information therein
not misleading in any material respect; (C) the FHCC Portion of the Preliminary Official
Statement and the Official Statement is true and correct in all material respects, and the
information under the heading relating to FHCC “RISK FACTORS” is a fair description of the
risk factors related to FHCC’s operations; (D) all resolutions and other actions required to be
approved or taken by or on behalf of FHCC authorizing and approving the transactions described
or contemplated in this Purchase Agreement, the Limited Guaranty, or in the Official Statement,
the execution of or approval of the respective forms of, as the case may be, this Purchase
Agreement, the Limited Guaranty, and the Official Statement have been duly approved by FHCC,
are in full force and effect and have not been modified, amended or repealed; (E) FHCC is a
nonprofit corporation organized and validly existing under the laws of the State of Tennessee
with full power and authority to own its properties and conduct its business in the State; (F)
FHCC has all necessary licenses, approvals, accreditations and permits presently required under
federal, state and local laws to operate and conduct its business as currently operated or, if FHCC
does not currently have such licenses, approvals, accreditations and permits, they are expected to
be promptly obtained by FHCC as soon as commercially possible; (G) the execution and delivery
of the Limited Guaranty and compliance with the provisions thereof, under the circumstances
contemplated thereby, will not, in any material respect, conflict with or constitute on the part of
FHCC a breach of or default under any other agreement or instrument to which FHCC is a party
or, to FHCC’s knowledge, any existing law, administrative regulation, court order or consent
decree to which FHCC is subject; and (H) this Purchase Agreement and the Limited Guaranty,
when each of them has been executed and delivered by FHCC, will, assuming due authorization,
execution and delivery by the other parties thereto, each constitute a valid and binding obligation
of FHCC, enforceable in accordance with its terms, subject to any applicable bankruptcy,
insolvency or other laws affecting creditors’ rights or remedies heretofore or hereafter enacted;
(viii) Certified copies of the Company’s resolutions or comparable actions of its Board
of Directors authorizing the execution and delivery of the Company Documents and approving
the Series 2019 Bonds;
(ix) Certified copies of the resolutions of FHCC or comparable actions of its Board of
Directors authorizing the execution and delivery of the Limited Guaranty;
(x) An execution copy or other copy, certified to the Underwriter’s satisfaction as
true and correct, of each of the following items: the Company Documents; the Company’s articles
of organization for the Company; certificate of good standing in the State of Tennessee and the
State; the Limited Guaranty; FHCC’s articles of incorporation for FHCC; and for FHCC
certificates of good standing in the State of Tennessee and the State;
(xi) Such additional legal opinions, certificates, proceedings, agreements, instruments
and other documents as counsel for the Underwriter or Bond Counsel, may reasonably request to
evidence compliance with any legal requirements, to provide such additional assurances as the
Underwriter may request, regarding the truth and accuracy, as of the time of Closing, of any
representations given and the due performance or satisfaction at or prior to such time of all
11
agreements then to be performed and all conditions then to be satisfied as conditions precedent to
the issuance of the Series 2019 Bonds.
If the Issuer, the Company, or FHCC shall be unable for any reason to satisfy the conditions of
the Underwriter’s obligation contained in this Purchase Agreement or if the Underwriter’s obligation shall
be terminated for any reason permitted by this Purchase Agreement, this Purchase Agreement shall
terminate and neither the Underwriter, the Issuer, the Company, nor FHCC shall have any further
obligations or liability hereunder, except that the respective obligations of the Issuer, the Company,
FHCC, and the Underwriter set forth in Section 7 hereof, shall continue in full force and effect.
6. Amendments to Official Statement. After the date of the Official Statement and so long
as the Underwriter, or dealers, if any, participating in the original distribution of the Series 2019 Bonds,
are offering Series 2019 Bonds which constitute the whole or a part of their unsold participations, the
Company will (a) not adopt any amendment of or supplement to the Official Statement without the prior
written consent of the Underwriter, and (b) during such period or for forty-five (45) days from the date of
the Closing, whichever is earlier, if any event relating to or affecting the Official Statement shall occur as
a result of which, in the reasonable judgment of the Underwriter, it is necessary to amend or supplement
the Official Statement in order to make the Official Statement not misleading in light of the circumstances
existing at the time it is delivered to a purchaser, forthwith prepare and furnish to the Underwriter, at the
expense of the Company, a reasonable number of copies of an amendment of or supplement to the
Official Statement (in form and substance satisfactory to counsel for the Underwriter) which will amend
or supplement the Official Statement so that it will not contain any untrue statement of a material fact or
omit to state a material fact necessary in order to make the statements therein, in light of the
circumstances existing at the time the Official Statement is delivered to a purchaser, not misleading. For
the purposes of, and during the period of time provided by this Section, the Company will furnish, or
cause to be furnished, such information with respect to itself as the Underwriter may from time to time
reasonably request.
7. Payment of Expenses.
(a) Upon and subject to the issuance, sale and delivery of the Series 2019 Bonds by the
Issuer, the Company agrees to pay either directly or, to the extent permitted under federal tax law as
determined by Bond Counsel, from the proceeds of the Series 2019 Bonds and funds of the Company, all
expenses and costs to effect the authorization, preparation, issuance, delivery and sale of the Series 2019
Bonds, including, without limitation: (i) the Underwriter’s discount of $____ for the Series 2019A Bonds
and $_____ for the Series 2019A-T Bonds, plus miscellaneous expenses; (ii) rating agency fees and
expenses, if any; (iii) the fees and disbursements of Bond Counsel, the fees and disbursements of the
Company’s and FHCC’s counsel, the fees and disbursements of the Issuer, and the fees and
disbursements of the Trustee, (iv) the fees and expenses of Underwriter’s counsel, including, if any, those
in connection with qualification of the Series 2019 Bonds for sale under any Blue Sky or other securities
laws and regulations of various jurisdictions and preparation of any Blue Sky survey, (v) the fees and
expenses of certified public accountants, (vi) the expenses and costs for the printing and distribution of
the Series 2019 Bonds (including but not limited to CUSIPs and other fees and expenses required for the
sale of the Series 2019 Bonds by the Underwriter), the Preliminary Official Statement and the Official
Statement, (vii) the expenses and costs for photocopying the Preliminary Official Statement, the Official
Statement, the Resolution, the Indenture, the Limited Guaranty and the Company Documents and all
other agreements and documents contemplated hereby, and (viii) the various other expenses and costs of
Closing.
(b) If the Series 2019 Bonds are not issued and delivered by the Issuer to the Underwriter as
a result of the failure by the Underwriter to perform any of the Underwriter’s obligations under this
12
Purchase Agreement (other than a failure of the Underwriter to comply with its obligation set forth in
Section 1 hereof, if such obligation is not otherwise excused or terminated as provided in this Purchase
Agreement) or as a result of the Company failing to reach agreement with the Underwriter as to the terms
and conditions of the transactions and documents contemplated hereby, the Company agrees that it shall
pay all expenses set forth in this Section 7, including all reasonable fees and expenses of counsel to the
Underwriter, but excluding the Underwriter’s underwriting fee.
8. Rule 15c2-12 and Related Matters. The Underwriter and the Company agree to
cooperate reasonably with each other in order to carry out and comply with certain requirements of the
Rule. The Issuer shall have no obligation of any kind under the Rule.
9. Indemnification. The Company and FHCC agree to indemnify and hold harmless the
Issuer and the Underwriter and each person, if any, who controls (as such term is defined in Section 15 of
the 1933 Act) the Issuer or the Underwriter against any and all losses, claims, damages and liability
(a) arising out of any statement or information in the Company Portion or FHCC Portion of the Official
Statement or the information therein under the heading “RISK FACTORS” that is untrue in any material
respect or the omission therefrom of any statement which should be contained therein as of the date of the
delivery of the Series 2019 Bonds for the purpose for which the Official Statement is to be used or which
is necessary to make the statements and information therein not misleading in any material respect; and
(b) to the extent of the aggregate amount paid in settlement of any litigation commenced or threatened
arising from a claim based upon any such untrue statement or omission if such settlement is effected with
the written consent of the Company. In case any claim shall be made or action brought against the
Underwriter or the Issuer or any controlling person (as aforesaid) based upon such information in the
Official Statement, in respect of which indemnity may be sought against the Company, the person or
persons seeking indemnity shall promptly notify the Company and FHCC in writing setting forth the
particulars of such claim or action and the Company and FHCC shall assume the defense thereof
including the retention of counsel and the payment of all expenses. The person or persons seeking
indemnity or any such controlling person shall have the right to retain separate counsel in any such action
and to participate in the defense thereof, but the fees and expenses of such counsel shall be at the expense
of such person seeking such indemnity unless (i) the retention of such counsel has been specifically
authorized by the Company or FHCC, or (ii) in the reasonable judgment of the person seeking such
indemnity, such separate counsel is advisable by reason of any actual or potential conflict of interest or by
reason of separate defenses.
To the same extent as the foregoing indemnity from the Company and FHCC to the Issuer and the
Underwriter, the Underwriter agrees to indemnify and hold harmless the Issuer, the Company, FHCC, and
each person, if any, who controls (as such term is defined in Section 15 of the 1933 Act) the Issuer, the
Company, or FHCC, but only with reference to (a) the price and yield of the Series 2019 Bonds stated on
the inside cover page of the Official Statement, (b) the optional redemption dates and prices for the Series
2019 Bonds, (c) the last paragraph of the cover of the Official Statement, (d) the information under the
heading “UNDERWRITING” in the Official Statement, which information has been furnished by the
Underwriter specifically for use in preparation thereof, and (e) allegations or determinations that the
Underwriter itself has violated the agreement set forth in Section 3(c) hereof or the 1933 Act, the 1934
Act, or any applicable state Blue Sky law in the offer or sale of the Series 2019 Bonds. In no case shall
the Underwriter be responsible for any amount in excess of the underwriting fee applicable to the Series
2019 Bonds purchased by it pursuant to this Purchase Agreement. In case any such claim shall be
presented in writing or any action shall be brought against the Issuer, the Company, or FHCC for which
indemnity may be sought from the Underwriter on account of its agreement contained in this Section, the
Underwriter shall have the rights and duties given to the Company in the above paragraph and the Issuer,
the Company, and FHCC shall have the rights and duties given by the above paragraph to the persons
therein referred to as controlling persons.
13
The indemnities contained in this Purchase Agreement shall survive the Closing under this
Purchase Agreement and any investigation made by or on behalf of the Underwriter or any person who
controls any of such parties of any matters described in or related to the transactions contemplated hereby
and by the Official Statement, the Resolution, the Indenture, the Limited Guaranty, and any Company
Documents.
The Company shall not be liable to indemnify any person in any settlement of any action effected
without sufficient notice. The Company shall not be liable for any judgment if, as a result of the failure of
the indemnified person to give notice of the commencement of a suit in respect of which indemnity shall
be sought, the Company is not provided sufficient notice to defend such suit. Notwithstanding the
provisions of this Section 9 or of any other provisions of this Purchase Agreement to the contrary, in the
sole and exclusive discretion of the Issuer or any such controlling person of the Issuer, it is deemed
desirable or necessary that the Issuer or such controlling person retain separate legal counsel in
connection with any such matter, the fees and expenses of such separate legal counsel shall be included
within the costs indemnified pursuant to this Section 9, and no prior approval to such separate
representation and no consent by the Company to settlement or other disposition of such matter shall be
required.
No recourse shall be had against the Underwriter for loss, damage, liability, cost or expense
(whether direct, indirect or consequential) of the Issuer, the Company, or FHCC arising out of or in
defending, prosecuting, negotiating or responding to any inquiry, questionnaire, audit, suit, action, or
other proceeding brought or received from the Internal Revenue Service in connection with the Series
2019 Bonds or otherwise relating to the tax treatment of interest on the Series 2019A Bonds.
10. Covenants and Indemnifications for the Benefit of the Issuer.
(a) The Issuer hereby states, and the Underwriter, the Company, and FHCC hereby
acknowledge and agree, that except for the Issuer Portion, the Issuer has not been requested to participate
in the preparation of or to review the Official Statement and the Issuer has not done so and will not do so
and that the Issuer has made no independent investigation of the facts and statements provided therein,
and the Issuer assumes (and the Underwriter, the Company, and FHCC covenant and agree that the Issuer
shall have) no liability with respect thereto, including without limitation matters relating to the accuracy,
fairness, completeness, or sufficiency of the Official Statement.
(b) The Company, FHCC, and the Underwriter hereby consent and agree that the Issuer’s
execution and delivery of this Purchase Agreement, and any action taken by the Issuer hereunder and any
failure or alleged failure on the part of the Issuer to abide by such terms hereof as may be applicable to
the Issuer, shall not give rise to any pecuniary liability of the Issuer.
(c) The issuance of the Series 2019 Bonds by the Issuer shall be subject to the condition that
the Issuer, in its sole and absolute discretion, shall have executed and delivered the Indenture and the
Loan Agreement, and nothing in this Purchase Agreement shall impose or imply an obligation on the
Issuer to do so.
(d) The Underwriter, the Company, and FHCC acknowledge and agree that under Rule 15c2-
12(b)(5) the Issuer is not an “obligated person” with respect to the Series 2019 Bonds, that neither the
Underwriter, the Company, nor FHCC has requested the Issuer to participate in the preparation or
delivery of the Disclosure Agreement respecting the Series 2019 Bonds, and that the Issuer shall have no
responsibility or liability, and is hereby held harmless and indemnified therefrom by the Underwriter, the
Company, and FHCC, from any continuing disclosure respecting the Series 2019 Bonds or from any
insufficiency of or default under the Disclosure Agreement.
14
(e) All indemnification of the Issuer and other agreements respecting payment of costs of the
Issuer provided in this Purchase Agreement shall not be subject to limitation and shall survive expiration
or termination of this Purchase Agreement, notwithstanding any provision in this Purchase Agreement to
the contrary.
11. Establishment of Issue Price for Series 2019A Bonds.
OPTION 1
\[(a) The Underwriter agrees to assist the Issuer in establishing the issue price of the Series
2019A Bonds and shall execute and deliver to the Issuer on the Closing Date an “issue price” or similar
certificate, together with the supporting pricing wires or equivalent communications, substantially in the
form attached hereto as Exhibit A, with such modifications as may be appropriate or necessary, in the
reasonable judgment of the Underwriter and Bond Counsel, to accurately reflect, as applicable, the sales
price or prices or the initial offering price or prices to the public of the Series 2019A Bonds.
(b) The Underwriter confirms that at least 10% of each maturity of the Series 2019A Bonds
has been sold to the public at a single price (the “10% test”) (if different interest rates apply within a
maturity, each separate CUSIP number within that maturity is evaluated separately). Schedule I attached
to this Purchase Agreement sets forth the first price at which the Underwriter has sold to the public 10%
of each such maturity of Series 2019A Bonds.
(c) The Underwriter confirms that the Underwriter has offered the Series 2019A Bonds to
the public on or before the date of this Purchase Agreement (the “Sale Date”) at the offering price or
prices (the “initial offering price”), or at the corresponding yield or yields, set forth in Schedule I attached
hereto.
(d) The Underwriter confirms that it does not have any selling group agreement and any
retail distribution agreement relating to the initial sale of the Series 2019A Bonds to the public.\]
OPTION 2
\[(a) The Underwriter agrees to assist the Issuer in establishing the issue price of the Series
2019A Bonds and shall execute and deliver to the Issuer on the Closing Date an “issue price” or similar
certificate, together with the supporting pricing wires or equivalent communications, substantially in the
form attached hereto as Exhibit A, with such modifications as may be appropriate or necessary, in the
reasonable judgment of the Underwriter and Bond Counsel, to accurately reflect, as applicable, the sales
price or prices or the initial offering price or prices to the public of the Series 2019A Bonds.
(b) Except as otherwise set forth in Schedule I attached hereto, the Issuer will treat the first
price at which 10% of each maturity of the Series 2019A Bonds (the “10% test”) is sold to the public as
the issue price of that maturity (if different interest rates apply within a maturity, each separate CUSIP
number within that maturity will be subject to the 10% test). At or promptly after the execution of this
Purchase Agreement, the Underwriter shall report to the Issuer and Bond Counsel the price or prices at
which it has sold to the public each maturity of Series 2019A Bonds. If at that time the 10% test has not
been satisfied as to any maturity of the Series 2019A Bonds, the Underwriter agrees to promptly report to
the Issuer the prices at which it sells the unsold Series 2019A Bonds of that maturity to the public. That
reporting obligation shall continue, whether or not the Closing Date has occurred, until the 10% test has
been satisfied as to the Series 2019A Bonds of that maturity or until all Series 2019A Bonds of that
maturity have been sold to the public.
15
(c) The Underwriter confirms that the Underwriter has offered the Series 2019A Bonds to
the public on or before the date of this Purchase Agreement (the “Sale Date”) at the offering price or
prices (the “initial offering price”), or at the corresponding yield or yields, set forth in Schedule I attached
hereto, except as otherwise set forth therein. Schedule I also sets forth, as of the date of this Purchase
Agreement, the maturities, if any, of the Series 2019A Bonds for which the 10% test has not been
satisfied and for which the Issuer and the Underwriter agree that the restrictions set forth in the next
sentence shall apply, which will allow the Issuer to treat the initial offering price to the public of each
such maturity as of the sale date as the issue price of that maturity (the “hold-the-offering-price rule”). So
long as the hold-the-offering-price rule remains applicable to any maturity of the Series 2019A Bonds, the
Underwriter will neither offer nor sell unsold Series 2019A Bonds of that maturity to any person at a price
that is higher than the initial offering price to the public during the period starting on the sale date and
ending on the earlier of the following:
th
(1) the close of the fifth (5) business day after the date of this Purchase Agreement
(the “Sale Date”); or
(2) the date on which the Underwriter has sold at least 10% of that maturity of the
Series 2019A Bonds to the public at a price that is no higher than the initial offering price to the
public.
The Underwriter shall promptly advise the Issuer when it has sold 10% of that maturity of the
Series 2019A Bonds to the public at a price that is no higher than the initial offering price to the public, if
that occurs prior to the close of the fifth (5th) business day after the sale date.
(d) The Underwriter confirms that it does not have any selling group agreement and any
retail distribution agreement relating to the initial sale of the Series 2019A Bonds to the public.\]
(e) The Underwriter acknowledges that sales of any Series 2019A Bonds to any person that
is a related party to the Underwriter shall not constitute sales to the public for purposes of this Section.
Further, for purposes of this Section:
(i) “public” means any person other than an underwriter or a related party,
(ii) “underwriter” means (A) any person that agrees pursuant to a written contract
with the Issuer (or with the lead underwriter to form an underwriting syndicate) to participate in
the initial sale of the Series 2019A Bonds to the public and (B) any person that agrees pursuant to
a written contract directly or indirectly with a person described in clause (A) to participate in the
initial sale of the Series 2019A Bonds to the public (including a member of a selling group or a
party to a retail distribution agreement participating in the initial sale of the Series 2019A Bonds
to the public), and
(iii) a purchaser of any of the Series 2019A Bonds is a “related party” to an
underwriter if the underwriter and the purchaser are subject, directly or indirectly, to (i) at least
50% common ownership of the voting power or the total value of their stock, if both entities are
corporations (including direct ownership by one corporation of another), (ii) more than 50%
common ownership of their capital interests or profits interests, if both entities are partnerships
(including direct ownership by one partnership of another), or (iii) more than 50% common
ownership of the value of the outstanding stock of the corporation or the capital interests or profit
interests of the partnership, as applicable, if one entity is a corporation and the other entity is a
partnership (including direct ownership of the applicable stock or interests by one entity of the
other).
16
12. Notices. Any notice or other communication to be given to the Issuer, the Company, or
FHCC under this Purchase Agreement may be given by delivering the same in writing and, except as
otherwise provided, shall be delivered at, or mailed by certified or registered mail, return receipt
requested, or telegraphed with such telegraph to be confirmed in writing, mailed in accordance with the
preceding provisions, to the following addresses:
(a) if to the Underwriter: Dougherty & Company LLC
90 South Seventh Street
Suite 4300
Minneapolis, Minnesota 55402
Attention: Craig D. Theis, Senior Vice President
with a copy to: Ballard Spahr LLP
2000 IDS Center
th
80 South 8 Street
Minneapolis, Minnesota 55402
Attention: Benjamin W. Johnson, Esq.
(b) if to the Company Country Manor St. Joseph, LLC
c/o The Foundation For Health Care Continuums
520 First Street Northeast
Sartell, MN 56377
Attn: Kevin Harguth, Chief Financial Officer
with a copy to: Wornson Goggins Zard Neisen Morris & Brever, PC
119 East Main Street
New Prague, MN 56071
Attn: Eric Brever, Esq.
(c) if to FHCC: The Foundation For Health Care Continuums
520 First Street Northeast
Sartell, MN 56377
Attn: Kevin Harguth, Chief Financial Officer
with a copy to: Wornson Goggins Zard Neisen Morris & Brever, PC
119 East Main Street
New Prague, MN 56071
Attn: Eric Brever, Esq.
(d) if to the Issuer: City of St. Joseph, Minnesota
75 Callaway Street East
St. Joseph, MN 56374
Attn: City Administrator-Clerk
13. Benefit. This Purchase Agreement is made solely for the benefit of the Issuer, the
Company, FHCC, and the Underwriter (including its successors or assigns), and no other person,
partnership, association or Company shall acquire or have any right hereunder or by virtue hereof.
14. Approval. The approval of the Underwriter when required hereunder or the
determination of its satisfaction as to any document referred to in this Purchase Agreement shall be in
writing signed by the undersigned and delivered to you.
17
15. Governing Law; Counterparts; Consent to Jurisdiction. This Purchase Agreement
shall be governed by the laws of the State of Minnesota and may be executed in several counterparts, each
of which shall be regarded as an original and all of which shall constitute one and the same document.
16. Electronic Signatures. The parties agree that the electronic signature of a party to this
Purchase Agreement shall be as valid as an original signature of such party and shall be effective to bind
such party to this Purchase Agreement. For purposes hereof: (i) “electronic signature” means a manually
signed original signature that is then transmitted by electronic means; and (ii) “transmitted by electronic
means” means sent in the form of a facsimile or sent via the internet as a portable document format
(“pdf’) or other replicating image attached to an electronic mail or internet message.
18
DOUGHERTY & COMPANY LLC,
as Underwriter
By:
Craig D. Theis
Its: Senior Vice President
Signature page for the Purchase Agreement between the City of St. Joseph, Minnesota,
Country Manor St. Joseph, LLC, The Foundation For Health Care Continuums,
and Dougherty & Company LLC
S-1
Approved and Agreed to:
CITY OF ST. JOSEPH, MINNESOTA, as Issuer
By:
Name: Richard Schultz
Its: Mayor
By:
Name: Judy Weyrens
Its: City Administrator-Clerk
Signature page for the Purchase Agreement between the City of St. Joseph, Minnesota,
Country Manor St. Joseph, LLC, The Foundation For Health Care Continuums,
and Dougherty & Company LLC
S-2
Approved and Agreed to:
COUNTRY MANOR ST. JOSEPH, LLC, as
Company
By:
Name: _______________________________________
Its: __________________________________________
Signature page for the Purchase Agreement between the City of St. Joseph, Minnesota,
Country Manor St. Joseph, LLC, The Foundation For Health Care Continuums,
and Dougherty & Company LLC
S-3
Approved and Agreed to:
THE FOUNDATION FOR HEALTH CARE
CONTINUUMS, as Limited Guarantor
By:
Name: _______________________________________
Its: __________________________________________
Signature page for the Purchase Agreement between the City of St. Joseph, Minnesota,
Country Manor St. Joseph, LLC, The Foundation For Health Care Continuums,
and Dougherty & Company LLC
S-4
SCHEDULE I
MATURITY SCHEDULE
$______
City of St. Joseph, Minnesota
Senior Housing and Healthcare Revenue Bonds
(Woodcrest of Country Manor Project)
Series 2019A
Dated: ________, 2019
Maturity Date and Schedule of Series 2019A Bonds
Serial Bonds
Maturity Date Principal Interest
(July 1) Amount Rate Yield Price
Term Bonds
$_____ ___% Term Bonds Due July 1, 20___
Price of ____% to Yield ____%
Redemption Date
(July 1) Principal Amount
_________
*Stated Maturity.
Maturity Date and Schedule of Series 2019A-T Bonds
$______
City of St. Joseph, Minnesota
Taxable Senior Housing and Healthcare Revenue Bonds
(Woodcrest of Country Manor Project)
Series 2019A-T
$_____ ___% Term Bonds Due July 1, 20___
Price of ____% to Yield ____%
Redemption Date
(July 1) Principal Amount
_________
*Stated Maturity.
Schedule I-1
Optional Redemption
Series 2019A Bonds. The Series 2019A Bonds are subject to redemption or prepayment prior to maturity,
together with payment of accrued interest, \[on July 1, 20___ on any date thereafter, in whole or in part, at a
Redemption Price equal to the principal amount thereof, plus accrued interest to the date of redemption.\] OR \[at a
redemption price equal to the principal amount of the Series 2019A Bonds to be redeemed, at the following
Redemption Prices, plus interest accrued thereon to the Redemption Date:
Optional Redemption Date Price*
July 1, 202_ through June 30, 202_
July 1, 202_ through June 30, 202_
July 1, 202_ and thereafter\]
Series 2019A-T Bonds. The Series 2019A-T Bonds are not subject to optional redemption prior to
maturity.
Other Redemptions
The Series 2019 Bonds are also subject to other redemption provisions as set forth in the Indenture.
Schedule I-2
EXHIBIT A
FORM OF ISSUE PRICE CERTIFICATE
\[To be provided by Bond Counsel\]
DMNORTH #6806329 v3
A-1
COMBINATION MORTGAGE, SECURITY AGREEMENT,
FIXTURE FINANCING STATEMENT, AND ASSIGNMENT OF LEASES AND RENTS
by
COUNTRY MANOR ST. JOSEPH, LLC,
as Company
in favor of
U.S. BANK NATIONAL ASSOCIATION,
as Trustee
Dated as of July 1, 2019
Relating to:
$22,125,000 $300,000
City of St. Joseph, Minnesota City of St. Joseph, Minnesota
Senior Housing and Healthcare Revenue Bonds Taxable Senior Housing and Healthcare
(Woodcrest of Country Manor Project) Revenue Bonds
Series 2019A (Woodcrest of Country Manor Project)
Series 2019A-T
This Combination Mortgage, Security Agreement, Fixture Financing Statement, and Assignment
of Leases and Rents contains after-acquired property provisions and constitutes a fixture
financing statement under Minnesota Statutes, Section 336.9-502. The maximum principal
indebtedness secured hereby is $22,425,000, and the debt secured hereby matures no later than
July 1, 2055.
This instrument was drafted by:
Briggs and Morgan, Professional Association (CJC)
2200 IDS Center
80 South Eighth Street
Minneapolis, Minnesota 55402
11680701v2
TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS ...................................................................................................3
Section 1.1 Definitions...............................................................................................3
ARTICLE II MORTGAGE AND SECURITY INTEREST .....................................................5
Section 2.1 Mortgage and Security Interest ................................................................5
Section 2.2 Amount and Maturity of Bonds; Loan Repayments .................................6
Section 2.3 Payments and Performances Secured .......................................................7
Section 2.4 Remedies Upon Event of Default .............................................................7
Section 2.5 Right of Entry ..........................................................................................9
Section 2.6 Assignment of Rents and Revenues; Receivership ...................................9
Section 2.7 Attorneys’ Fees ..................................................................................... 12
ARTICLE III REPRESENTATIONS, COVENANTS, PERMITTED
ENCUMBRANCES .......................................................................................... 13
Section 3.1 Warranty of Title ................................................................................... 13
Section 3.2 Permitted Encumbrances ....................................................................... 13
Section 3.3 Environmental Warranties ..................................................................... 14
Section 3.4 Compliance with Environmental Laws; Indemnity................................. 14
Section 3.5 Compliance with Other Laws and Restrictions ....................................... 15
Section 3.6 Waiver of Marshalling ........................................................................... 16
ARTICLE IV EASEMENTS, TIE-IN WALLS, ADDITION OF IMPROVEMENTS TO
LIEN OF MORTGAGE .................................................................................... 17
Section 4.1 Grant of Easements, Licenses, Etc ......................................................... 17
Section 4.2 Release of Mortgaged Property .............................................................. 17
Section 4.3 Tie-In Walls .......................................................................................... 17
Section 4.4 Removal of Facilities ............................................................................. 18
Section 4.5 Addition of Improvements and Land to Lien of Mortgage ..................... 18
Section 4.6 Removal of Pledged Equipment ............................................................. 18
Section 4.7 Further Assurances ................................................................................ 19
ARTICLE V MISCELLANEOUS ......................................................................................... 20
Section 5.1 Recording .............................................................................................. 20
Section 5.2 Opinion of Counsel to Recording ........................................................... 20
Section 5.3 Binding Effect ....................................................................................... 20
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11680701v2
TABLE OF CONTENTS
(continued)
Page
Section 5.4 Amendments ......................................................................................... 20
Section 5.5 Use of Mortgaged Property .................................................................... 20
Section 5.6 Fixture Filing ......................................................................................... 20
EXHIBIT A LEGAL DESCRIPTION ................................................................................ A-1
EXHIBIT B PERMITTED ENCUMBRANCES ................................................................. B-1
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11680701v2
COMBINATION MORTGAGE, SECURITY AGREEMENT,
FIXTURE FINANCING STATEMENT, AND ASSIGNMENT OF LEASES AND RENTS
THIS COMBINATION MORTGAGE, SECURITY AGREEMENT, FIXTURE
FINANCING STATEMENT, AND ASSIGNMENT OF LEASES AND RENTS, dated as of
July 1, 2019 (the “Mortgage”), is by COUNTRY MANOR ST. JOSEPH, LLC, a Tennessee
limited liability company (the “Company”), the sole member of which is The Foundation for
Health Care Continuums, a Tennessee nonprofit corporation, in favor of U.S. BANK
NATIONAL ASSOCIATION, a national banking association, its successors and assigns (the
“Trustee”).
WITNESSETH
WHEREAS, the City of St. Joseph, Minnesota (the “Issuer”) will issue and deliver its
(i) Senior Housing and Healthcare Revenue Bonds (Woodcrest of Country Manor Project),
Series 2019A (the “Series 2019A Bonds”), in the original aggregate principal amount of
$22,125,000; and (ii) Taxable Senior Housing and Healthcare Revenue Bonds (Woodcrest of
Country Manor Project), Series 2019A-T (the “Series 2019A-T Bonds,” and together with the
Series 2019A Bonds, the “Series 2019 Bonds”), in the original aggregate principal amount of
$300,000; and
WHEREAS, the Series 2019 Bonds are being issued pursuant to Minnesota Statutes,
Chapter 462C, as amended (the “Act”), and an Indenture of Trust, dated as of July 1, 2019 (the
“Indenture”), between the Issuer and the Trustee; and
WHEREAS, proceeds of the Series 2019 Bonds will be loaned to the Company pursuant
to a Loan Agreement, dated as of July 1, 2019 (the “Loan Agreement”), between the Issuer and
the Company, to (i) finance a portion of the costs of the acquisition of an approximately 84-unit
assisted living and memory care senior housing and memory care facility located at 1200
Lanigan Way SW, St. Joseph, Minnesota (the “Facilities”); (ii) fund required reserve funds; and
(iii) pay all or a portion of the costs of issuance of the Series 2019 Bonds; and
WHEREAS, the Series 2019 Bonds, together with any additional bonds issued under the
Indenture (the “Additional Bonds,” and together with the Series 2019 Bonds, the “Bonds”), shall
mature and be payable in full on or before July 1, 2055; and
WHEREAS, by the Loan Agreement, the Company has covenanted, among other things,
to make Loan Repayments (as defined in the Indenture), sufficient to pay the principal of,
premium, if any, and interest on the Bonds when due; and
WHEREAS, pursuant to the Act, the Issuer may assign the Loan Repayments to the
Trustee to secure the Bonds; and
WHEREAS, the Issuer accordingly has, by the Indenture, pledged and granted to the
Trustee a security interest in all of the Issuer’s right, title and interest in the Loan Agreement
(except for certain rights for payment of fees, legal expenses and indemnification), including, but
not limited to, such Loan Repayments, in order to secure the full and prompt payment of the
principal of, premium, if any, and interest on the Bonds; and
11680701v2
WHEREAS, this Mortgage is given to secure the obligations of the Company under the
Loan Agreement and grants a mortgage lien and security interest in the Mortgaged Property, as
defined herein and as further described in EXHIBIT A hereto
NOW, THEREFORE, THIS MORTGAGE FURTHER WITNESSETH:
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11680701v2
ARTICLE I
DEFINITIONS
Section 1.1 Definitions. Any terms used herein but not defined herein shall have the
meanings given such terms in the Indenture, unless the context hereof clearly requires otherwise.
The terms defined in this Article I shall for all purposes of this Mortgage have the meanings
herein specified, unless the context clearly otherwise requires:
Environmental Laws shall mean any federal, state or local law, statute, code, ordinance,
regulation, requirement or rule relating to or governing the generation, handling, labeling,
storage, transport or disposal of Hazardous Substances.
Event of Default shall mean any event defined as such in Section 7.01 of the Indenture
and Section 11.1 of the Loan Agreement.
Fixtures shall mean any and all items or fixtures now owned or hereafter acquired by the
Company and now or hereafter attached to or installed within or used in connection with the
Land or the Facilities including, but not limited to, any and all heating, plumbing and lighting
apparatus, elevators and motors, engines and machinery, electrical equipment, incinerator
apparatus, ventilating, air-conditioning and air cooling apparatus, water and gas apparatus, pipes,
water heaters, mirrors, mantels, partitions, cleaning, intercom and sprinkler systems, fire
extinguishing apparatus and equipment, water tanks, water softeners, carpets, carpeting, storm
windows and doors, window screens, screen doors, storm sash, window shades or blinds,
awnings, locks, fences, trees, shrubs and all other non-consumable personal property of every
kind and nature whatsoever permanently affixed to the Land or Facilities including all
extensions, additions, improvements, betterments, renewals and replacements of any of the
foregoing, all of which are hereby declared and shall be deemed to be fixtures and an accession
to the freehold and a part of the realty, as they may at any time exist.
Hazardous Substances shall mean any dangerous, toxic or hazardous pollutants,
contaminants, chemicals, wastes, materials or substances, as defined in or governed by the
provisions of the Federal Resource Conservation and Recovery Act of 1976, the Federal
Comprehensive Environmental Response Compensation and Liability Act of 1980, and/or the
Superfund Amendments and Reauthorization Act of 1986 (42 U.S.C. § 6901 et seq. and 42
U.S.C. § 9601 et seq.), as amended, or any other Environmental Laws, and also including urea-
formaldehyde, polychlorinated biphenyls, dioxin, radon, asbestos, asbestos containing materials,
nuclear or radioactive fuel or waste, infectious waste, and petroleum, including but not limited to
crude oil or any fraction thereof, natural gas, natural gas liquids, gasoline and synthetic gas, or
any other waste, substance, pollutant or contaminant which would subject the owner of the Land
to any damages, penalties or liabilities under any applicable law, statute, code, ordinance,
regulation, requirement or rule.
Indenture shall mean the Indenture of Trust, dated as of July 1, 2019, between the Issuer
and the Trustee, including any supplement thereto or amendment thereof.
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11680701v2
Land shall mean the real estate described in EXHIBIT A attached hereto on which the
property financed by the proceeds of the Bonds is located, and any additional real estate or
undivided interest therein which may be included within the lien of this Mortgage pursuant to
Article IV hereof, but excluding any property released from the lien of this Mortgage pursuant to
the terms hereof or of the Loan Agreement.
Loan Agreement shall mean the Loan Agreement, dated as of July 1, 2019, between the
Company and the Issuer, including any amendment thereof.
Mortgaged Property shall mean the property described in Section 2.1 hereof.
Obligations shall have meaning specified in Section 2.2 hereof.
Permitted Encumbrances shall mean those encumbrances set forth in Section 3.2 hereof.
Pledged Equipment shall mean any personalty owned by the Company and used in the
operation of the Facilities as defined herein.
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ARTICLE II
MORTGAGE AND SECURITY INTEREST
Section 2.1 Mortgage and Security Interest. The Company, in consideration of the
issuance of the Bonds and the making of the Loan and other good and lawful consideration, the
receipt of which is hereby acknowledged, and to secure, and as security for, the Obligations
described in Section 2.3 hereof, by these presents does hereby sell, mortgage, convey, grant,
assign, transfer, pledge, set over and confirm unto the Trustee, its successors and assigns forever,
with power of sale, and grant a lien and security interest in, the Mortgaged Property, consisting
of all and singular the following described premises and property and the proceeds thereof:
(a) The Land, as described in EXHIBIT A attached hereto and made a part
hereof as though set forth in full herein;
(b) All buildings, structures, improvements and appurtenances now standing
or at any time hereafter constructed or placed upon the Land, or any part thereof,
including all right, title and interest of the Company in and to all building materials,
plants and fixtures of every kind and nature whatsoever on the Land or in any building,
structure or improvement now or hereafter standing on the Land, or any part thereof, it
being the intention of the parties hereto that so far as may be permitted by law all tangible
property now owned or hereafter acquired by the Company and affixed or attached to the
Land shall be deemed to be, and shall be considered as, fixtures and appurtenances to the
Land (the “Facilities”);
(c) The reversion or reversions, remainder or remainders, in and to the Land
and each and every part thereof, together with the entire interest of the Company in and
to all and singular the tenements, hereditaments, easements, rights, privileges and
appurtenances to the Land belonging or in any wise appertaining thereto;
(d) All rights, title, and interest of the Company in and to any streets, ways or
alleys adjoining the Land or any part thereof, and all the estate, right, title, interest, claim
or demand whatsoever of the Company, either in law or in equity, in possession or
expectancy, of, in and to said real estate;
(e) All proceeds of any taking of or damage to, or any sale in lieu of a taking
of, any portion of the Facilities under or pursuant to the power of condemnation or
eminent domain, and all insurance proceeds from damage to the Facilities or Pledged
Equipment;
(f) All and singular the goods, equipment, machinery and any and all other
items constituting the Pledged Equipment subject to the operation of the Uniform
Commercial Code of whatever sort, real, personal or mixed;
(g) All leases of all or any portion of the Facilities, and all contracts,
franchises, permits, licenses, cash or security deposits, escrow accounts and advance
rentals; and
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(h) All rents, income, receipts, revenue and benefits arising from the use and
occupation of the Facilities, whether accruing before or after foreclosure of this Mortgage
or during the period of redemption thereof.
TO HAVE AND TO HOLD, all and singular, the Mortgaged Property and the rights and
privileges hereby granted, mortgaged, conveyed, assigned and pledged, by the Company, or
intended so to be, unto the Trustee and its successors and assigns forever, in trust, nevertheless,
with power of sale;
SUBJECT, NEVERTHELESS, to Permitted Encumbrances;
PROVIDED, NEVERTHELESS, and these presents are upon the express condition, that
if the Company or its successors or assigns, shall pay or cause to be paid the Obligations
according to the terms thereof (which are by reference incorporated herein and made a part
hereof with the same effect as if it were set forth in full herein), and shall also pay or cause to be
paid all other sums payable with respect to the Obligations and shall faithfully and punctually
perform all other conditions, covenants and agreements set forth in the Loan Agreement, then
these presents and the estate, lien, security interests and rights hereby granted shall cease,
determine and become void, and thereupon the Trustee, on payment of its lawful charges and
disbursements then unpaid, on demand of the Company and upon the payment of the cost and
expenses thereof, shall duly execute, acknowledge and deliver to the Company such instruments
of satisfaction or release in respect of the Mortgaged Property as may be necessary or proper to
discharge this Mortgage of record, and if necessary shall grant, reassign and deliver to the
Company, its successors or assigns all and singular the property and interest by it hereby granted,
conveyed, mortgaged and assigned, and all substitutes therefor, or any part thereof, not
previously disposed of or released as in the Loan Agreement provided, otherwise this Mortgage
shall be and remain in full force;
AND IT IS HEREBY COVENANTED, DECLARED AND AGREED by and between
the parties hereto that all of the Mortgaged Property is to be held and applied, subject to the
further covenants, agreements and conditions set forth in the Loan Agreement and herein.
Section 2.2 Amount and Maturity of Bonds; Loan Repayments. The Mortgagor
represents and agrees as follows:
(a) The Series 2019A Bonds shall be in the aggregate principal amount of
$22,125,000 and the final maturity thereof shall be July 1, 2055, subject to the optional or
mandatory redemption of the Series 2019 Bonds, all as further set forth in the Indenture.
(b) The Series 2019A-T Bonds shall be in the aggregate principal amount of
$300,000 and the final maturity thereof shall be July 1, 20___, subject to the optional or
mandatory redemption of the Series 2019A-T Bonds, all as further set forth in the
Indenture.
(c) Loan Repayments are required to be made monthly pursuant to the Loan
Agreement by the Mortgagor in order to pay principal, premium (if any) and interest of
the Bonds when and as the same shall become due, or when required to be redeemed, as
more fully provided in the Loan Agreement and Indenture.
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Section 2.3 Payments and Performances Secured. This Mortgage shall cover and
secure the following (collectively, the “Obligations”):
(A) payment of any and all amounts payable by the Company under the Loan
Agreement with respect to the Bonds, including the Loan and all Loan Repayments; and
(B) performance of each covenant, agreement or condition of the Company herein and
in the Loan Agreement.
Section 2.4 Remedies Upon Event of Default. If any Event of Default shall occur and
be continuing beyond any applicable cure period, the Trustee shall have authority (i) to
accelerate the Loan Repayments and to declare the Bonds immediately due and payable as
provided in the Loan Agreement and Indenture, and (ii) to pursue one (1) or more of the
remedies provided for in the Loan Agreement and Indenture respectively, and in lieu thereof or
addition thereto, one (1) or more of the following remedies and provisions for foreclosure or
enforcement of this Mortgage:
(a) The Trustee may proceed to protect and enforce its rights by a suit or suits
in equity or at law, either for the specific performance of any covenant or agreement
contained herein or in aid of the execution of any power herein granted, or for the
foreclosure of this Mortgage, or for the enforcement of any other appropriate legal or
equitable remedy.
(b) The Trustee shall have and may exercise with respect to all personal
property and fixtures which are part of the Mortgaged Property all the rights and
remedies accorded upon default to a secured party under the Uniform Commercial Code,
as in effect in the State of Minnesota. If notice to the Company of intended disposition of
such property is required by law in a particular instance, such notice shall be deemed
commercially reasonable if given (in the manner specified in the Loan Agreement and
Indenture) at least ten (10) calendar days prior to the date of intended disposition.
(c) The Trustee may (and is hereby authorized and empowered to) foreclose
this Mortgage by action or advertisement, pursuant to the statutes of the State of
Minnesota in such case made and provided, power being expressly granted to sell the
Mortgaged Property at public auction and convey the same to the purchaser (which may
be the Trustee) in fee simple and to apply the proceeds arising from such sale, first, as
provided in the Indenture, to the payment of the indebtedness secured thereby and
hereby, including all reasonable expenses, liabilities, and advances of the Trustee and the
Bonds and interest thereon and Loan Repayments relating thereto, and all legal costs and
charges of such foreclosure, which costs, charges, and fees the Company agrees to pay
and, second, to the payment of any obligations of the Company to the Issuer under the
Loan Agreement and, third, to return any surplus to the Company. Such sale shall be
made at public auction and at such place or places and at such time or times and upon
such notice as the Trustee may be advised by counsel to be consistent with the laws
applicable thereto, and upon such terms as the Trustee or the public officer conducting
such sale may fix. Any such sale made pursuant to judicial proceedings or advertisement
shall be made either as an entirety or in such parcels as may be directed by the court or as
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the Trustee in its sole discretion may determine. The Company, for it and all persons and
corporations hereafter claiming through or under it, does hereby expressly waive and
release all right to have the properties and rights comprised in the Mortgaged Property or
in the Trust Estate marshaled upon any foreclosure or other enforcement hereof. The
Trustee or public officer conducting such sale from time to time may adjourn any such
sale to be made by it by announcement at the time and place appointed for such sale or
for such adjourned sale or sales, and without further notice or publication it may make
such sale at the time to which the same shall be so adjourned, but in the event of such
adjournment or adjournments, sale shall be made within any limitation of time or number
of adjournments prescribed by law and, in any event, within six (6) months from the date
of sale fixed in the advertisement or court order, unless notice of sale on some later date
shall be given again in the manner provided by law.
(d) Upon any foreclosure sale, the owners of any Bonds Outstanding, or the
Trustee, may bid for and purchase the Trust Estate or any part thereof and upon
compliance with the terms of sale may hold, retain, and possess and dispose of such
property in their or its own absolute right without further accountability, and any
purchaser at any such sale may, in paying the purchase money, turn in any of such Bonds
or claims for interest in lieu of cash to the amount which shall, upon distribution of the
net proceeds of such sale, be payable thereon.
(e) Upon the completion of any sale or sales made under or by virtue of this
Mortgage and the Indenture, the Trustee shall execute and deliver, or cause to be
executed and delivered, to the accepted purchaser or purchasers the property sold with
good and sufficient transfers, assigning and transferring all its right, title and interest in
and to the properties sold. The Trustee and its successor or successors are hereby
appointed the true and lawful attorney or attorneys irrevocable of the Company in its
name and stead or in the name of the Trustee to make all necessary assignments,
transfers, and deliveries of the property thus sold, and for that purpose, the Trustee and its
successors may execute all necessary instruments of assignment and transfer, and may
substitute one (1) or more persons with like power, the Company hereby ratifying and
confirming all that said attorney or attorneys or such substitute or substitutes shall
lawfully do by virtue hereof. Nevertheless, the Company, if so requested in writing by
the Trustee, shall ratify and confirm any such sale or sales by executing and delivering to
the Trustee or to such purchaser or purchasers all such instruments as may be advisable,
in the judgment of the Trustee, for the purpose and as may be designated in such request.
(f) Upon any sale made under the power of sale hereby granted or under
judgment or decree in any judicial proceedings for the foreclosure or otherwise for the
enforcement of this Mortgage or the Indenture, the receipt of the Trustee or of the officer
making such sale shall be a sufficient discharge to the purchaser or purchasers at any sale
for the purchase money, and such purchaser or purchasers, their assigns or personal
representatives shall not, after paying such purchase money and receiving such receipt of
the Trustee or of such officer therefor, be obliged to see to the application of such
purchase money, or be in anyway answerable for any loss, misapplication, or
nonapplication thereof.
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(g) In case of any Event of Default as aforesaid, to the extent that such rights
may then lawfully be waived, neither the Company nor anyone claiming through or under
it shall or will set up, claim, or seek to take advantage of any appraisement, valuation,
stay, extension, or redemption laws now or hereafter in force in any locality where any of
the Mortgaged Property may be situated, in order to prevent or hinder the enforcement or
foreclosure of this Mortgage or the Indenture, or the absolute sale of the Mortgaged
Property, or the final and absolute putting into possession thereof, immediately after such
sale, of the purchaser or purchasers thereat.
(h) Any sale made under the power of sale granted hereby or under judgment
or decree in any judicial proceedings for foreclosure or otherwise for the enforcement of
this Mortgage or the Indenture shall, if and to the extent then permitted by law, operate to
divest all right, title, interest, claims, and demands whatsoever, either at law or in equity,
of the Company of, in and to the property so sold, and be a perpetual bar both at law and
in equity against the Company and against any and all persons, firms or corporations
claiming or who may claim the property sold, or any part thereof, from, through or under
the Company.
Section 2.5 Right of Entry. If the Trustee exercises one (1) of the remedies provided
in Section 2.4 hereof, pursuant to foreclosure of this Mortgage, the Trustee may then or at any
time thereafter take complete and peaceful possession of the Mortgaged Property or any portion
thereof, with or without process of law, and may remove all persons therefrom, and the Company
covenants in any such event peacefully and quietly to yield up and surrender the Mortgaged
Property or such portion thereof to the Trustee.
Section 2.6 Assignment of Rents and Revenues; Receivership. As additional security
for the debt secured by this Mortgage, the Company does unconditionally and absolutely hereby
bargain, sell, assign and set over unto the Trustee all leases, rents, profits and other income or
revenue of any kind which, whether before or after foreclosure or during the full statutory period
of redemption, if any, shall accrue and be owing for the use or occupation of the Mortgaged
Property or any part thereof; subject, however, to the rights of the Trustee to the possession and
disposition of the funds and accounts provided for in the Loan Agreement and Indenture.
The Company agrees that upon or any time after (i) the occurrence of an Event of
Default, or (ii) the first publication of notice of sale for the foreclosure of this Mortgage pursuant
to Minnesota Statutes, Chapter 580, as amended (“Chapter 580”), or (iii) the commencement of
an action to foreclose this Mortgage pursuant to Minnesota Statutes, Chapter 581, as amended
(“Chapter 581”), or (iv) the commencement of the period of redemption, if any, after foreclosure
of this Mortgage, then in any such event the Trustee shall, upon application to the District Court
in the county where the Mortgaged Property is located, by an action separate from the
foreclosure under Chapter 580, in the foreclosure action under Chapter 581 or by independent
action (it being understood and agreed that the existence of a foreclosure proceeding under
Chapter 580 or a foreclosure action under Chapter 581 is not a prerequisite to any action for a
receiver hereunder), be entitled to the appointment of a receiver for the rents, issues, profits and
all other income of every kind which shall accrue and be owing for the use or occupation of the
Mortgaged Property or any part thereof, whether before or after foreclosure and during the full
statutory period of redemption, if any, upon a showing that an Event of Default has occurred and
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is continuing, including, without limitation, any violation of a covenant relating to any of the
following:
(a) application of tenant security deposits as required by Minnesota Statutes,
Section 504B.178;
(b) payment when due of prior or current real estate taxes or special
assessments with respect to the Mortgaged Property or the periodic escrow for payment
of the taxes or special assessments;
(c) payment when due of premiums for insurance of the type required by this
Mortgage or the periodic escrow for the payment of the premiums; or
(d) keeping of the covenants required of a landlord or licensor pursuant to
Minnesota Statutes, Section 504B.161, subdivision 1, if applicable.
The Trustee shall be entitled to the appointment of a receiver without regard to waste,
adequacy of the security or solvency of the Company. The court shall determine the amount of
the bond to be posted by the receiver. The receiver, who shall be an experienced property
manager or shall appoint an experienced property manager, shall collect (until the indebtedness
secured hereby is paid in full and, in the case of a foreclosure sale, during the entire redemption
period, if any) the rents, profits and all other income of any kind from the Mortgaged Property.
The receiver, after providing for payment of its reasonable fees and expenses, shall, to the extent
possible and in the order determined by the receiver to preserve the value of the Mortgaged
Property, use the monies collected to:
(1) manage the Mortgaged Property so as to prevent waste;
(2) execute contracts and leases within the period of receivership, or if beyond
the period of receivership if approved by the court;
(3) pay the expenses listed in clauses (a) through (c) above (to the extent
applicable);
(4) pay all expenses for normal maintenance of the Mortgaged Property; and
(5) perform the terms of any assignment of rents that complies with
Minnesota Statutes, Section 559.17, subdivision 2;
provided, however, that nothing herein shall prohibit the right to reinstate pursuant to Minnesota
Statutes, Section 580.30, or the right to redeem granted pursuant to Minnesota Statutes, Sections
580.23 and 581.10. Any excess cash remaining after paying the expenses listed in clauses (1)
through (5) above shall be applied to the payment of the indebtedness secured by this Mortgage,
except as may be otherwise required by applicable law; provided that if the Mortgaged Property
shall be foreclosed by the Trustee and sold at a subsequent foreclosure sale, then: (i) if the
Mortgaged Property shall be purchased by the Trustee at the foreclosure sale, the rents, profits
and all other income of any kind from the Mortgaged Property shall first be applied to any
deficiency amount arising from such sale and any remaining balance shall be retained by the
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Trustee, provided further, that if the Mortgaged Property is redeemed by the Company or any
party that shall have the right to redeem, the portion of such rents, profits and other income
remaining after payment of the deficiency balance shall be applied as a credit against the amount
required to be paid to effect a redemption and any remaining excess rents, profits and other
income shall be paid to the Company, and if the Mortgaged Property is not redeemed, any
remaining excess rents, profits and other income at the end of such redemption shall belong to
the Trustee, whether or not a deficiency exists; and (ii) if the Mortgaged Property is not
purchased by the Trustee at the foreclosure sale, the rents, profits and income shall first be
applied to any deficiency amount arising from such foreclosure sale, and the balance shall be
retained by the purchaser, and if the Mortgaged Property shall be redeemed by the Company or
any other party entitled to redeem, any amount remaining after payment of the deficiency
balance shall be applied as a credit against the amount required to be paid to effect a redemption
with any remaining balance to be retained by the Company, provided that if the Mortgaged
Property is not redeemed, then at the end of such redemption any remaining excess rents, profits
and other income shall be paid first to the purchaser at the foreclosure sale in an amount equal to
the interest accrued upon the sale price pursuant to Minnesota Statutes, Sections 580.23 or
581.10, then to the Trustee to the extent of any deficiency remaining unpaid and the balance, if
any, to the purchaser.
The receiver shall file periodic accountings as the court determines are necessary and a
final accounting at the time of his discharge. The Trustee shall have the right, at any time and
without limitation, as provided in Minnesota Statutes, Section 582.03, as amended, to advance
money to the receiver to pay any part or all of the expenses which the receiver should otherwise
pay if cash were available from the Mortgaged Property, and sums so advanced, with interest at
the respective rates provided in the Bonds on overdue principal from the date advanced, shall be
a part of the sum required to be paid to redeem from any foreclosure sale. Said sums shall be
proved by the affidavit of the Trustee, its agent or attorney, describing the expenses for which the
same were advanced and describing the Mortgaged Property, which affidavit must be filed with
the sheriff of the county in which the sale was held at any time prior to expiration of any period
of redemption.
Upon the happening of any of the events set forth above, or during any period of
redemption after foreclosure sale and prior to the appointment of a receiver as hereinbefore
provided, the Trustee shall have the right to collect the rents, profits and other income of every
kind from the Mortgaged Property and apply the same in the manner hereinbefore provided with
respect to a receiver. The rights set forth in this paragraph shall be binding upon the occupants
of the Mortgaged Property from the date of filing by the Trustee in the office where this
Mortgage is recorded, in the county in which the Mortgaged Property is located, of a notice of
default in the terms and conditions of this Mortgage and service of a copy of the notice upon the
occupants of the Mortgaged Property. Enforcement hereof shall not cause the Trustee to be
deemed a mortgagee in possession, unless it elects in writing to be so deemed. For the purpose
aforesaid, Trustee may enter and take possession of the Mortgaged Property and manage and
operate the same and take any action which, in the Trustee’s judgment, is necessary or proper to
conserve the value of the Mortgaged Property.
The Company does hereby expressly consent to sale of the Mortgaged Property by
advertisement pursuant to Chapter 580, which provides for sale after service of notice thereof
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upon the occupant of the Mortgaged Property and publication of said notice for six (6)
successive weeks at least once a week, in a newspaper of general circulation in the county in
which the Mortgaged Property is located, and that no personal notice is required to be served
upon the Company. The Company understands and agrees that in the event of an Event of
Default, the Trustee may take possession of any personal property secured by this Mortgage and
dispose of the same by sale or otherwise in one (1) or more parcels provided that at least ten (10)
Business Days’ prior notice of such disposition must be given to the Company, all as provided
for by the Minnesota Uniform Commercial Code, as hereafter amended or by any similar or
replacement statute hereafter enacted. The Company further understands that under the
constitution of the United States it may have the right to notice and a hearing before the
Mortgaged Property may be sold and that the procedure for foreclosure by advertisement
described above does not ensure that notice will be given to the Company, and neither said
procedure for a foreclosure by advertisement nor the Uniform Commercial Code requires any
hearing or other judicial proceeding. The Company hereby relinquishes, waives, and gives up
any constitutional right to notice and a hearing before the sale of the Mortgaged Property. THE
COMPANY HEREBY EXPRESSLY CONSENTS AND AGREES THAT THE MORTGAGED
PROPERTY MAY BE FORECLOSED BY ADVERTISEMENT AND THAT THE
PERSONAL PROPERTY MAY BE DISPOSED OF PURSUANT TO THE UNIFORM
COMMERCIAL CODE, ALL AS DESCRIBED ABOVE. THE COMPANY
ACKNOWLEDGES THAT IT IS REPRESENTED BY LEGAL COUNSEL; THAT BEFORE
SIGNING THIS DOCUMENT THIS SECTION AND THE COMPANY’S
CONSTITUTIONAL RIGHTS WERE FULLY EXPLAINED BY SUCH COUNSEL AND
THAT THE COMPANY UNDERSTANDS THE NATURE AND EXTENT OF THE RIGHTS
WAIVED HEREBY AND THE EFFECT OF SUCH WAIVER.
The costs and expenses (including any receiver’s fees, attorneys’ fees, costs and agent’s
compensation) incurred by the Trustee pursuant to the powers herein contained shall be deemed
to be immediately due and payable by the Company to the Trustee, shall be secured hereby and
shall bear interest from the date paid at the respective rates provided in the Bonds on overdue
principal. The Trustee shall not be liable to account to the Company for any action taken
pursuant hereto other than to account for any rents, issues or profits actually received by the
Trustee.
Section 2.7 Attorneys’ Fees. If an Event of Default occurs and the Trustee employs
attorneys or incurs other expenses for the foreclosure of this Mortgage or the enforcement or
performance of any obligation of the Company hereunder, the Company will, on demand of the
Trustee and receipt of an accounting therefor, pay to the Trustee the reasonable fee of such
attorneys and such other expenses so incurred, to the extent then permitted by Minnesota law.
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ARTICLE III
REPRESENTATIONS, COVENANTS, PERMITTED ENCUMBRANCES
Section 3.1 Warranty of Title. The Company hereby covenants and warrants that it is
and will continue to be well and truly seized of good and merchantable title in fee simple to the
Mortgaged Property and that it has good right and lawful authority to convey and grant a lien and
security interest in the same to the Trustee and that the title, lien and security interest hereby
conveyed is and will during the term hereof be free, clear and unencumbered subject, however,
only to the Permitted Encumbrances. The Company covenants and agrees to warrant and defend
its good and merchantable title to the Mortgaged Property (subject to Permitted Encumbrances)
and its good right and lawful authority to grant a lien and security interest in the same to the
Trustee. The Company further warrants and represents that the Land is not agricultural property,
property in agricultural use, or the homestead of the Company.
Section 3.2 Permitted Encumbrances. The Permitted Encumbrances are as follows:
(a) liens for taxes and special assessments which are not then delinquent, or if
then delinquent are being contested in accordance with Section 4.5 of the Loan
Agreement;
(b) utility, access and other easements and rights-of-way, restrictions,
restrictive covenants and exceptions that the Company certifies to the Trustee will not
interfere with or impair the operation of the Mortgaged Property, or, if it is not being
operated, the operation for which it was designed or last modified;
(c) any mechanic’s, laborer’s, materialman’s, supplier’s, or vendor’s lien or
right in respect thereof if payment is not yet due under the contract in question or if such
lien is being contested in accordance with Section 4.5 of the Loan Agreement;
(d) such minor defects, irregularities, encumbrances, easements, rights-of-way
and clouds on title as normally exist with respect to properties similar in character to the
Land and which the Company certifies to the Trustee do not materially impair the
property affected thereby for the purpose for which it was intended;
(e) zoning laws;
(f) liens arising in connection with workers’ compensation, unemployment
insurance, taxes, assessments, statutory obligations or liens, social security legislation,
undetermined liens and charges incidental to construction, or other similar charges arising
in the ordinary course of operation and not overdue or, if overdue, being contested in
accordance with Section 4.5 of the Loan Agreement, and such other liens and charges at
the time required by law as a condition precedent to the transaction of the health care
activities of the Company or the exercise of any privileges or licenses necessary to the
Company;
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(g) inferior liens as provided in connection with the incurrence of
subordinated indebtedness as provided in the Loan Agreement;
(h) superior liens on personalty allowed under Section 5.2 of the Loan
Agreement; and
(i) exceptions, easements, restrictions and encumbrances shown as of the date
of this Mortgage on EXHIBIT B hereto.
Section 3.3 Environmental Warranties. The Company represents, warrants and
covenants as follows: to the best of its knowledge, the Facilities are in compliance with all
Environmental Laws except as disclosed in the Official Statement related to the Bonds. Except
as disclosed to the Original Purchaser prior to the date hereof, there are no conditions existing
currently or likely to exist during the term of the Loan Agreement which would subject the
Company to damages, penalties, injunctive relief or cleanup costs under any Environmental
Laws, or which require or are likely to require cleanup, removal, remedial action or other
response by the Company pursuant to Environmental Laws; the Company is not, to the best of its
knowledge, a party to any litigation or administrative proceeding, nor, so far as is known by the
Company, is any litigation or administrative proceeding threatened against it, which asserts or
alleges that the Company has violated or is violating Environmental Laws or that the Company is
required to cleanup, remove or take remedial or other responsive action due to the disposal,
depositing, discharge, leaking or release of any hazardous substances or materials; neither the
Facilities nor the Company is subject to any judgment, decree, order or citation related to or
arising out of any Environmental Laws nor has the Company been named or listed as a
potentially responsible party by any governmental body or agency in a matter arising under any
Environmental Laws; the Company has obtained all permits, licenses or approvals required
under Environmental Laws relating to the Facilities; and there are not now nor, to the Company’s
knowledge after reasonable investigation, have there ever been materials deposited, leaked,
spilled or discharged or disposed of on, under or at the Facilities or stored, treated or recycled at
or in tanks or other facilities thereon, which materials, if known to be present on or in the
Facilities or present in soils or ground water, would require cleanup, removal or some other
remedial action under any Environmental Laws. These representations and warranties shall be
deemed to be continuing and shall survive the termination or foreclosure of this Mortgage.
Section 3.4 Compliance with Environmental Laws; Indemnity. With the exception of
the storage, use and disposal of reasonable quantities of substances which are normally used in or
result from the operation of the businesses being lawfully conducted within the Facilities in
accordance with the provisions of the Loan Agreement (the “Permitted Substances”), all of
which shall be properly contained, stored, handled, used and disposed of in accordance with all
Environmental Laws, the Company shall not place, locate, produce, generate, create, store, treat,
handle, transport, incorporate, discharge, emit, spill, release, deposit or dispose of any Hazardous
Substance in, upon, under, over or from the Facilities and, with the exception of the storage, use
and disposal of reasonable quantities of Permitted Substances, which shall be properly contained,
stored, handled, used and disposed of in accordance with all applicable Environmental Laws,
shall not permit any Hazardous Substance to be placed, located, produced, generated, created,
stored, treated, handled, transported, incorporated, discharged, emitted, spilled, released,
deposited, disposed of or to escape therein, thereupon, thereunder, thereover or therefrom; and
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the Company shall comply with all Environmental Laws which are applicable to the Facilities.
With the exception of reasonable quantities of Permitted Substances which are being contained,
stored, handled, used and disposed of in accordance with all applicable Environmental Laws, the
Company agrees to promptly and properly remove and dispose of any Hazardous Substance
found on or in the Facilities and to clean up and detoxify the Facilities after any such removal, all
at the Company’s sole cost and expense and in compliance with all applicable Environmental
Laws. At any time, and from time to time, if the Trustee so requests after the Trustee has
received notice or information that the Trustee would cause to believe that there is environmental
liability with respect to the Facilities, the Company shall have any environmental assessment,
review, audit and/or report relating to the Facilities heretofore provided by the Company to the
Trustee updated and/or amplified, at the Company’s sole cost and expense, by an engineer or
scientist acceptable to the Trustee, or shall have such an assessment, review, audit and/or report
prepared for the Trustee, at the Company’s sole cost and expense, if none has previously been so
provided. The Company shall indemnify the Issuer, the Trustee, their directors, officers,
officials, employees, agents, contractors, licensees, invitees, successors and assigns, and the
Holders of the Bonds (hereinafter collectively referred to as “Indemnified Parties”) against, shall
hold the Indemnified Parties harmless from, and shall reimburse the Indemnified Parties for, any
and all claims, demands, judgments, penalties, liabilities, costs, damages and expenses incurred
by the Indemnified Parties, including court costs and attorneys’ fees (prior to trial, at trial and on
appeal), in any action, administrative proceeding or negotiations against or involving any of the
Indemnified Parties, resulting from any breach of the foregoing covenants, from the
incorrectness or untruthfulness of any warranty or representation set forth in Section 3.3 hereof,
from a failure by the Company to perform any of its obligations hereunder with respect to any
Hazardous Substance, or from the discovery of any Hazardous Substance in, upon, under or over,
or emanating from, the Mortgaged Property, it being the intent of the Company that the
Indemnified Parties shall have no liability for damage or injury to human health, the environment
or natural resources caused by, for abatement, clean-up, removal or disposal of, or otherwise
with respect to, Hazardous Substances by virtue of the interest of the Trustee in the Mortgaged
Property created hereby or as the result of the Trustee exercising any of its rights or remedies
with respect thereto hereunder, including but not limited to becoming the owner of the
Mortgaged Property by foreclosure or conveyance in lieu of foreclosure. The foregoing
covenants, representations and warranties of Section 3.3 hereof and of this Section shall be
deemed continuing covenants, representations and warranties for the benefit of the Indemnified
Parties, including but not limited to any purchaser at a foreclosure sale, any transferee of the title
of the Trustee or any other purchaser at a foreclosure sale, and any subsequent owner of the
Facilities claiming by, through or under the Trustee, and shall survive the satisfaction or release
of this Mortgage, any foreclosure of this Mortgage and/or any acquisition of title to the
Mortgaged Property or any portion thereof by the Trustee, or by anyone claiming by, through or
under the Trustee, by deed in lieu of foreclosure or otherwise. Any amounts covered by the
foregoing indemnification shall bear interest from the date paid at the respective rates provided
in the Bonds on overdue principal and shall be secured hereby.
Section 3.5 Compliance with Other Laws and Restrictions. The Company shall
comply with all present and future laws, statutes, ordinances, codes, rules, regulations and
requirements of any governmental authority having or claiming jurisdiction with reference to the
Facilities and the manner of leasing, using, operating or maintaining the same, and with all
private covenants and restrictions, if any, affecting the title to the Facilities, or any part thereof.
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Section 3.6 Waiver of Marshalling. The Company, for itself and on behalf of all
persons, parties and entities which may claim under the Company, hereby waives any and all
requirements of law relating to the marshalling of assets, if any, which would be applicable in
connection with the enforcement by the Trustee of its remedies for an Event of Default, absent
this waiver.
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ARTICLE IV
EASEMENTS, TIE-IN WALLS, ADDITION OF
IMPROVEMENTS TO LIEN OF MORTGAGE
Section 4.1 Grant of Easements, Licenses, Etc. The Company may at any time or
times grant to itself or others easements, licenses, rights of way and other rights or privileges in
the nature of easements with respect to the Land, free from the lien of this Mortgage, or the
Company may release existing easements, licenses, rights of way and other rights or privileges
with or without consideration, and the Trustee will execute and deliver any instrument necessary
or appropriate to confirm and grant or release any such easement, license, right of way or
privilege; provided, however, that prior to any such grant or release there shall have been
supplied to the Trustee a certificate of the Company and a certificate of an Independent
Management Consultant to the effect that:
(a) such grant or release is not detrimental to the proper operation of the
Facilities, and
(b) such grant or release will not impair the operating unity or the efficiency
of the Facilities on the Land or materially and adversely affect the character thereof.
Section 4.2 Release of Mortgaged Property. Portions of the Mortgaged Property may
be released from the lien of this Mortgage in accordance with the provisions of, and upon the
terms and conditions set forth in, Section 5.2 of the Loan Agreement and Sections 4.3, 4.6 and
4.7 hereof. In any such case, the Trustee and the Company will do, execute, acknowledge and
deliver all and every such act, conveyance and instrument necessary to accomplish the same in
accordance with the provisions of Section 5.4 of the Loan Agreement.
Section 4.3 Tie-In Walls. The Company may, at its own expense,
(a) connect or “tie-in” walls (including use of existing walls for the support of
future adjacent buildings) and utilities and other facilities located on the Land to other
structures erected on the Land or on real property adjacent to or near the Land or partly
on such adjacent real property and partly on the Land, or
(b) in connection with the expansion or improvement of any building on the
Land, tear down any wall of such building and build an addition to such building (either
on the Land or on real property adjacent thereto or partly on such adjacent real property
and partly on the Land); provided, however, that, prior to any such expansion, addition,
improvement, tearing down or connection with the “tie-in” walls, utilities and other
facilities, the Trustee shall have approved the same in writing based on a certification
and/or opinion of an Independent architect that the same will not impair the operating
unity or the efficiency of the Facilities on the Land or adversely affect the character
thereof, and based on an Opinion of Counsel stating that all party-wall agreements,
easements, cross-easements or other instruments relating to such expansion, addition,
improvement, tearing down or connection with the “tie-in” walls, utilities and other
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facilities, which are necessary or desirable to define the relative rights of the owners and
encumbrances of the same therein, and to fully preserve the security hereof, have been
duly executed, delivered and recorded, to which Opinion of Counsel copies of all such
instruments shall be attached. The Trustee shall release from the lien of this Mortgage
any interest in the Mortgaged Property, or join in any such party-wall agreements,
easements, cross-easements or other agreements, to the extent necessary to effect the
purpose of this Section 4.3.
Section 4.4 Removal of Facilities. The Company will not move any major portion of
the Facilities located on the Land or any major portion of its operations in connection therewith
to any site which is not a part of the Land unless this Mortgage is appropriately amended to
include such site within the lien hereof.
Section 4.5 Addition of Improvements and Land to Lien of Mortgage. All buildings,
structures or improvements which may be acquired or constructed by the Company subsequent
to the date hereof and which are located on the Land, and all property of every kind or nature
added to or installed in any building, structure or improvement located on the Land, and all
Pledged Equipment acquired by the Company after the date hereof, shall, immediately upon the
acquisition thereof by the Company, and without any further conveyance or assignment, become
subject to the mortgage, lien and security interest of this Mortgage, subject to Section 5.2 of the
Loan Agreement. Nevertheless, the Company, in accordance with the provisions of Section 5.4
of the Loan Agreement, will do, execute, acknowledge and deliver all and every such further
acts, conveyances and assurances as the Trustee shall require for accomplishing the purposes of
this Section 4.5.
In addition to the foregoing, additional Land may be added hereto in connection with the
issuance of Additional Bonds in accordance with the Indenture.
Section 4.6 Removal of Pledged Equipment. The Company will not remove or permit
the removal of any Pledged Equipment except in accordance with the provisions of this Section
4.6:
(a) In any instance where the Company in its sound discretion determines that
any item of Pledged Equipment has become inadequate, obsolete, worn out, unsuitable,
undesirable or unnecessary for the operation of the Facilities, the Company may, at its
expense, remove and dispose of it and substitute and install other items of furniture,
machinery, equipment or other personal property, not necessarily having the same
function, provided that such removal and substitution shall not impair the operating
utility of the Facilities. All substituted items shall be installed free of all liens and
encumbrances, other than Permitted Encumbrances, and shall become a part of the
Facilities as Pledged Equipment. The Company will cooperate with the Trustee, and the
Company and will pay all costs, including counsel’s fees, incurred in subjecting to the
lien of this Mortgage and the Indenture all items so substituted, and the Trustee will
cooperate with the Company in securing, if necessary, release of the property for which
the substitution is made and in providing such bills of sale or other documents as may be
required to facilitate the removal and substitution. In the event the market value of the
substituted items is less than the market value of the Pledged Equipment disposed of as
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reasonably determined by the Company, except as provided in subsection (c) below, the
Company shall pay to the Trustee an amount equal to the difference.
(b) Upon removal of items of Pledged Equipment of the type described in
subsection (a) above, and provided the operating utility and unity of the Facilities is not
impaired, the Company may decide not to make any substitution and installation of other
items of furniture, machinery, equipment or other personal property, provided, and
subject to the provisions of Subsection (3), (i) that in the case of the sale of any such
Pledged Equipment, the Company shall pay to the Trustee an amount equal to the entire
sale proceeds; (ii) that in the case of trade-in of any such Pledged Equipment for items
not to be utilized as a part of the Facilities, the Company shall pay to the Trustee an
amount equal to the credit received by it in the trade-in; and (iii) that in the case of any
other disposition of such Pledged Equipment, the Company shall pay to the Trustee an
amount equal to the market value of the property as reasonably determined by the
Company. The Trustee will cooperate with the Company in securing a release of the
property to be removed and in providing such bills of sale or other documents as may be
required to facilitate the removal and disposition.
(c) The Company shall promptly report to the Trustee by Company Certificate
the removal of any Pledged Equipment pursuant to subsections (a) and (b) above, and
amounts required to be accounted for by the Company, if any, shall promptly be paid to
the Trustee for deposit as provided in Section 7.05 of the Indenture after any substitution,
sale, trade-in or other disposition; provided that no certificate need be given or payment
made unless the aggregate book value of items of Pledged Equipment removed in such
Fiscal Year (other than in the ordinary course of business of the Company) shall be at
least $50,000, and in such event only the excess over $50,000 in the aggregate shall be
paid. The Company Certificate submitted shall specify the items of Pledged Equipment
removed, the items of property substituted therefor, if any, and the amount, if any,
required to be paid to the Trustee pursuant to the provisions of this Section 4.6. Where
such Company Certificate indicates that substitute items of property have been acquired
and installed, the Company Certificate shall be accompanied by an Opinion of Counsel
stating that all steps requisite to perfection of the security interest of the Trustee in and to
such substitute items of property have been duly taken. The Company and the Trustee
will execute all instruments advisable in the Opinion of Counsel for perfection of the
respective security interests as aforesaid.
Section 4.7 Further Assurances. The Company shall procure, do, execute,
acknowledge and deliver each and every further act, deed, conveyance, transfer, document and
assurance necessary or proper for the carrying out more effectively of the purposes of this
Mortgage and, without limiting the foregoing, for granting, bargaining, selling, conveying,
warranting, mortgaging, assigning, pledging and confirming unto the Trustee all of the
Mortgaged Property, including, without limitation, the preparation, execution and filing of any
documents, such as financing statements and continuation statements, for perfecting and
maintaining its lien on and security interest in the Mortgaged Property.
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ARTICLE V
MISCELLANEOUS
Section 5.1 Recording. The Company will at its own expense cause this Mortgage
and all supplements hereto, and any other instruments of further assurances, to be promptly
recorded, filed and registered, and at all times to be recorded, filed and registered, in such
manner and in such places as may be required by law fully to preserve and protect the rights of
the Trustee hereunder as to all of the Mortgaged Property. The Trustee shall not be responsible
for the initial filing of any UCC financing statements.
Section 5.2 Opinion of Counsel to Recording. The Company will furnish to the
Trustee promptly after the execution and delivery of each supplemental instrument of further
assurance, an Opinion of Counsel or endorsement to the mortgagee’s policy of title insurance
stating that such supplemental instrument of further assurance has been properly recorded, filed
and/or registered, or has been received for record, filing and/or registration, in each requisite
jurisdiction so as to make effective the lien intended to be created thereby, and reciting the
details of such actions, including the date or dates of such recordation, filing and/or registration
or receipt for record, filing and/or registration, or stating that no such action is necessary to make
such lien effective.
Section 5.3 Binding Effect. All terms, covenants, conditions and agreements of the
Company contained herein or set forth in the Loan Agreement shall be binding upon the
Company, its successors and assigns, and every covenant, condition and agreement herein
contained or set forth in the Loan Agreement shall apply to and inure to the benefit of the
Trustee, its successors or assigns. This Mortgage is expressly made subject to all terms,
conditions, covenants and agreements set forth in the Loan Agreement.
Section 5.4 Amendments. Except as provided in Article IV hereof and in the Loan
Agreement, this Mortgage may only be amended in accordance with the provisions of Article X
of the Indenture.
Section 5.5 Use of Mortgaged Property. It is recognized by the parties hereto that
unless and until an Event of Default shall have occurred and the Trustee shall have exercised one
(1) of its remedies under Section 2.4 hereof, the Company shall have the unencumbered right to
the use of the Mortgaged Property in the ordinary course of its business, subject only to the
covenants, conditions and agreements contained in the Loan Agreement.
Section 5.6 Fixture Filing. This instrument shall be deemed to be a Fixture Financing
Statement within the meaning of the Minnesota Uniform Commercial Code, Minnesota Statutes,
Section 336.9-502, and for such purposes the following information is set forth:
(1) Name and address of Debtor: Country Manor St. Joseph, LLC
c/o Country Manor
520 First Street NE
Sartell, MN 56377
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(2) Name and address of Secured U.S. Bank National Association
rd
Party: 60 Livingston Avenue, 3 Floor
EP-MN-WS3C
St. Paul, MN 55107
(3) Description of the types (or items) The Fixtures as defined herein.
of property covered by this
Financing Statement:
(4) Description of real estate to which See EXHIBIT A attached hereto.
collateral is attached or upon
which it is located:
The above-described collateral is or is to become fixtures upon the above-described real estate,
and this Financing Statement is to be filed for record in the real estate records of Stearns County,
Minnesota.
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IN WITNESS WHEREOF, the Company has caused this Combination Mortgage,
Security Agreement, Fixture Financing Statement, and Assignment of Leases and Rents to be
executed as of the date and year first written above.
COUNTRY MANOR ST. JOSEPH, LLC
By ____________________________________
Its ____________________________________
STATE OF )
) ss.
COUNTY OF )
The foregoing instrument was acknowledged before me this ____ day of ____________,
2019, by ______________________________, the ____________________________ of
Country Manor St. Joseph, LLC, a Tennessee limited liability company, on behalf of the
Company.
Notary Public
S-1
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EXHIBIT A
LEGAL DESCRIPTION
Lot 1, Block 2\[ and Outlots A, B, C, D, E, F and G\], all in Country Manor Senior Living
Campus, according to the recorded plat thereof, Stearns County, Minnesota.
(Abstract Property)
A-1
11680701v2
EXHIBIT B
PERMITTED ENCUMBRANCES
\[Insert Permitted Encumbrances\]
B-1
11680701v2
LOAN AGREEMENT
between
CITY OF ST. JOSEPH, MINNESOTA,
as Issuer
and
COUNTRY MANOR ST. JOSEPH, LLC,
as Company
Dated as of July 1, 2019
Relating to:
$22,125,000 $300,000
City of St. Joseph, Minnesota City of St. Joseph, Minnesota
Senior Housing and Healthcare Revenue Bonds Taxable Senior Housing and Healthcare
(Woodcrest of Country Manor Project) Revenue Bonds
Series 2019A (Woodcrest of Country Manor Project)
Series 2019A-T
The City of St. Joseph, Minnesota (the “Issuer”) has assigned, and granted a security
interest in its right, title and interest in this Loan Agreement, dated as of July 1, 2019, to U.S.
Bank National Association, as trustee (the “Trustee”) under an Indenture of Trust, dated as of
July 1, 2019, between the Issuer and said Trustee.
This instrument was drafted by:
Briggs and Morgan, Professional Association (CJC)
2200 IDS Center
80 South Eighth Street
Minneapolis, Minnesota 55402
11680684v1
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ARTICLE I DEFINITIONS AND OTHER PROVISIONS OF GENERAL
APPLICATION ................................................................................................2
Section 1.1. Definitions ............................................................................................2
Section 1.2. Compliance Certificates and Opinions ...................................................2
Section 1.3. Form of Documents Delivered to Issuer or Trustee ................................3
Section 1.4. Representations by the Company ...........................................................3
ARTICLE II THE LOAN AND REPAYMENT THEREOF ..................................................6
Section 2.1. Loan of Bond Proceeds .........................................................................6
Section 2.2. Loan Repayments ..................................................................................6
Section 2.3. Additional Payments .............................................................................7
Section 2.4. Certain of Company’s Obligations Unconditional .................................9
Section 2.5. Excess Funds ...................................................................................... 10
Section 2.6. Company’s Obligation to Prepay Loan and Direct Redemption of
Series 2019 Bonds ............................................................................... 10
Section 2.7. Repair and Replacement Reserve Fund................................................ 10
Section 2.8. Investment of Funds ............................................................................ 10
Section 2.9. Subordination of Management Fees..................................................... 10
ARTICLE III \[INTENTIONALLY OMITTED\] ................................................................... 12
ARTICLE IV OPERATION, MAINTENANCE, AND INSPECTION.................................. 13
Section 4.1. Maintenance of the Facilities ............................................................... 13
Section 4.2. Operation of the Facilities ................................................................... 13
Section 4.3. Taxes, Charges, and Assessments ........................................................ 14
Section 4.4. Liens and Encumbrances ..................................................................... 14
Section 4.5. Permitted Contests .............................................................................. 15
Section 4.6. Rates and Charges; Retention of Management Consultant ................... 15
Section 4.7. Days Cash on Hand ............................................................................. 16
Section 4.8. Inspections; Reports; Financial Statements .......................................... 17
Section 4.9. Reports to Issuer ................................................................................. 17
ARTICLE V ALTERATIONS; IMPROVEMENTS; REMOVALS ..................................... 18
Section 5.1. Additions, Alterations, and Changes to Facilities ................................. 18
Section 5.2. Installation and Removal of Equipment by the Company..................... 19
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Section 5.3. No Credit for Additions or Replacements ............................................ 19
Section 5.4. Execution of Other Documents ............................................................ 19
ARTICLE VI INDEBTEDNESS .......................................................................................... 20
Section 6.1. Indebtedness Generally ....................................................................... 20
Section 6.2. Short-Term Indebtedness..................................................................... 20
Section 6.3. Long-Term Indebtedness ..................................................................... 20
Section 6.4. Calculation of Debt Service ................................................................. 22
Section 6.5. Subordination of Seller Note ............................................................... 22
Section 6.6. Subordination of Working Capital Loan .............................................. 23
ARTICLE VII OTHER COVENANTS OF THE COMPANY................................................ 24
Section 7.1. Continuing Existence and Qualification............................................... 24
Section 7.2. \[Intentionally Omitted\] ........................................................................ 24
Section 7.3. Compliance and Notice of Default....................................................... 25
Section 7.4. Indemnity ............................................................................................ 25
Section 7.5. Insurance ............................................................................................. 26
Section 7.6. Insurers and Policies ........................................................................... 27
Section 7.7. Insurance Consultant ........................................................................... 28
Section 7.8. Federal Grants ..................................................................................... 28
Section 7.9. Tax Covenants of the Series 2019A Bonds .......................................... 28
Section 7.10. Transactions with Affiliates ................................................................. 31
Section 7.11. Continuing Disclosure ......................................................................... 32
ARTICLE VIII DAMAGE; DESTRUCTION; INSURANCE AND CONDEMNATION
PROCEEDS ................................................................................................... 33
Section 8.1. Company to Repair, Replace, Rebuild or Restore ................................ 33
Section 8.2. Cooperation of the Issuer and Trustee.................................................. 34
Section 8.3. Business Interruption Insurance Proceeds ............................................ 34
ARTICLE IX COVENANTS OF THE ISSUER ................................................................... 35
Section 9.1. Restrictions ......................................................................................... 35
Section 9.2. Redemption of Bonds .......................................................................... 35
Section 9.3. Nature of Issuer’s Covenants; Release ................................................. 35
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Section 9.4. Issuer to Cooperate .............................................................................. 35
ARTICLE X PREPAYMENT ............................................................................................. 36
Section 10.1. Prepayments and Credits ..................................................................... 36
Section 10.2. Company’s Option to Direct Redemption of Bonds ............................. 36
ARTICLE XI EVENTS OF DEFAULT; REMEDIES ........................................................... 38
Section 11.1. Events of Default ................................................................................ 38
Section 11.2. Remedies ............................................................................................ 39
Section 11.3. Manner of Exercise ............................................................................. 40
Section 11.4. Right of Entry ..................................................................................... 40
Section 11.5. Right to Lease ..................................................................................... 40
Section 11.6. Collection of Indebtedness by the Trustee; Deficiency Judgment......... 40
Section 11.7. Trustee May File Proofs of Claim........................................................ 41
Section 11.8. Restoration of Positions ....................................................................... 41
Section 11.9. Waiver of Appraisement, Etc., Laws ................................................... 41
Section 11.10. Suits to Protect the Security ................................................................. 42
Section 11.11. Agreement to Pay Attorneys’ Fees and Expenses ................................ 42
Section 11.12. Effect of Force Majeure ...................................................................... 42
ARTICLE XII ASSIGNMENTS, LEASES AND OPERATING ARRANGEMENTS
BY THE COMPANY ..................................................................................... 43
Section 12.1. No Assignments by Company Except as Permitted.............................. 43
Section 12.2. Leases and Operating Contracts........................................................... 43
ARTICLE XIII MISCELLANEOUS ....................................................................................... 44
Section 13.1. Notices ................................................................................................ 44
Section 13.2. Binding Effect ..................................................................................... 44
Section 13.3. Severability ......................................................................................... 44
Section 13.4. Effect of Headings and Table of Contents ........................................... 45
Section 13.5. Amendments, Changes and Modifications ........................................... 45
Section 13.6. Execution Counterparts ....................................................................... 45
Section 13.7. Construction ........................................................................................ 45
Section 13.8. Limitation on Issuer Liability .............................................................. 45
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EXHIBIT A DESCRIPTION OF THE FACILITIES ....................................................... A-1
EXHIBIT B DEBT SUBORDINATION AGREEMENT .................................................. B-1
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LOAN AGREEMENT
THIS LOAN AGREEMENT, dated as of July 1, 2019 (the “Loan Agreement”), is
between the CITY OF ST. JOSEPH, MINNESOTA, a statutory city and political subdivision
organized the laws of the State of Minnesota (the “Issuer”), and COUNTRY MANOR ST.
JOSEPH, LLC, a Tennessee limited liability company (the “Company”), the sole member of
which is The Foundation for Health Care Continuums, a Tennessee nonprofit corporation (the
“Sole Member”).
W I T N E S S E T H:
Reference is hereby made to the Indenture of Trust, dated as of July 1, 2019 (the
“Indenture”), between the Issuer and U.S. Bank National Association, a national banking
association, as trustee (the “Trustee”), for the recitals and the definitions of various terms used
herein.
In consideration of the premises, the respective representations and agreements contained
herein, and for other good and valuable consideration, the receipt whereof is hereby
acknowledged, and in order to secure the payments to be made by the Company pursuant to
Article II hereof and the performance of all the covenants of the Company contained herein, the
parties hereto agree as follows:
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ARTICLE I
DEFINITIONS AND OTHER PROVISIONS
OF GENERAL APPLICATION
Section 1.1. Definitions. For all purposes of this Loan Agreement except as otherwise
expressly provided or unless the context clearly otherwise requires:
(A) The terms defined in Section 1.01 of the Indenture, when used in this Loan
Agreement, shall have the meanings specified in that Section.
(B) All references in this instrument to designated “Articles,” “Sections” and
other subdivisions are to the designated Articles, Sections and other subdivisions of this
instrument as originally executed.
(C) The words “herein,” “hereof,” and “hereunder” and other words of similar
import, without reference to any particular Article, Section or subdivision, refer to this
Loan Agreement as a whole and not to any particular Article, Section or other
subdivision.
(D) The terms used in this Loan Agreement include the plural as well as the
singular.
(E) All accounting terms not otherwise defined herein have the meanings
assigned to them in accordance with generally accepted accounting principles.
(F) All computations herein provided for shall be made in accordance with
generally accepted accounting principles, except as might otherwise be stated herein.
Section 1.2. Compliance Certificates and Opinions. Upon any application or request
by the Company to the Issuer or the Trustee to take any action under any provision of this Loan
Agreement, the Mortgage or the Indenture, the Company shall furnish the Issuer or the Trustee,
as the case may be, a Company Certificate stating that all conditions precedent, if any, provided
for in this Loan Agreement, the Mortgage or the Indenture relating to the proposed action have
been complied with and an Opinion of Counsel stating that in the opinion of such counsel all
such conditions precedent, if any, have been complied with, except that in the case of any such
application or request as to which the furnishing of a Company Certificate and an Opinion of
Counsel is specifically required by any provision of this Loan Agreement, the Mortgage or the
Indenture relating to such particular application or request, no additional certificate or opinion
need be furnished.
Every certificate or opinion with respect to compliance with a condition or covenant
provided for in this Loan Agreement shall include:
(A) a statement that each individual signing such certificate or opinion has
read such covenant or condition and the definitions herein relating thereto;
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(B) a statement that, in the opinion of each such individual, he or she has made
such examination or investigation as is necessary to enable him or her to express an
informed opinion as to whether or not such covenant or condition has been complied
with; and
(C) a statement as to whether, in the opinion of each such individual, such
condition or covenant has been complied with.
Section 1.3. Form of Documents Delivered to Issuer or Trustee. In any case where
several matters are required to be certified by, or covered by an opinion of, any specified Person,
it is not necessary that all such matters be certified by, or covered by the opinion of, only one
such Person, or that they be so certified or covered by only one (1) document, but one such
Person may certify or give an opinion with respect to some matters and one or more other such
Persons as to other matters, and any such Person may certify or give an opinion as to such
matters in one or several documents.
Any certificate or opinion of an officer of the Company may be based, insofar as it relates
to legal matters, upon a certificate or opinion of, or representations by, counsel, unless such
officer knows, or in the exercise of reasonable care should know, that the certificate or opinion or
representations with respect to the matters upon which his or her certificate or opinion is based
are erroneous. Any Opinion of Counsel may be based, insofar as it relates to factual matters,
upon a certificate or opinion of, or representations by, an officer or officers of the Company
stating that the information with respect to such factual matters is in the possession of the
Company, unless such counsel knows, or in the exercise of reasonable care should know, that the
certificate or opinion or representations with respect to such matters are erroneous.
Where any Person is required to make, give or execute two (2) or more applications,
requests, consents, certificates, statements, opinions or other instruments under this Loan
Agreement, they may, but need not, be consolidated and form one instrument.
An “application” under any provision of this Loan Agreement or the Indenture shall
consist of, and shall not be deemed complete until the Issuer or the Trustee shall have been
furnished, all such documents, cash, securities and other instruments as are required by such
provision to establish the right of the Company to the transaction applied for, and the date of
such application shall be deemed to be the date upon which such application shall be so
completed.
Wherever in this Loan Agreement, in connection with any application or certificate or
report to the Issuer or the Trustee, it is provided that the Company shall deliver any document as
a condition of the granting of such application, or as evidence of the Company’s compliance with
any term hereof, it is intended that the truth and accuracy, at the time of the granting of such
application or at the effective date of such certificate or report (as the case may be), of the facts
and opinions stated in such document shall in each case be conditions precedent to the right of
the Company to have such application granted or to the sufficiency of such certificate or report.
Section 1.4. Representations by the Company. The Company makes the following
representations as the basis for its covenants herein:
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(A) The Company is a limited liability company duly organized and in good
standing under the laws of the State of Tennessee and authorized to do business in the
State, has power to enter into the Bond Purchase Agreement for the Series 2019 Bonds,
this Loan Agreement, the Continuing Disclosure Agreement, and the Mortgage, and by
proper action has authorized the execution and delivery of the Bond Purchase Agreement,
this Loan Agreement, the Continuing Disclosure Agreement, and the Mortgage.
(B) The execution and delivery of the Bond Purchase Agreement relating to
the Series 2019 Bonds, this Loan Agreement, the Continuing Disclosure Agreement, and
the Mortgage, the consummation of the transactions contemplated hereby and thereby,
and the fulfillment of the terms and conditions hereof and thereof do not and will not
conflict with or result in a breach of any of the terms or conditions of the Company’s
organizational and operating documents or of any restriction or of any agreement or
instrument to which the Company is now a party, and do not and will not constitute a
default under any of the foregoing, or result in the creation or imposition of any liens,
charges or encumbrances of any nature upon any of the property or assets of the
Company contrary to the terms of any instrument or agreement.
(C) The Facilities are, and will continue to be, in compliance with applicable
federal, State and local zoning and subdivision laws, regulations, codes and ordinances,
and, to the best of the Company’s knowledge, are, and will continue to be, in compliance
with applicable federal, State and local environmental, pollution control and building
laws, regulations, codes and ordinances.
(D) The Company has good and marketable fee simple title to the Land,
subject only to Permitted Encumbrances.
(E) The Sole Member is a Tax-Exempt Organization and is not a “private
foundation” as defined in Section 509(a) of the Code and is exempt from federal income
tax under Section 501(a) of the Code, and the trade or business to be carried on by the
Company in or with respect to the Facilities financed with the proceeds of the Series
2019 Bonds is not and will not be an unrelated trade or business, determined by applying
Section 513(a) of the Code, to any extent which will adversely affect the tax-exempt
status of the interest to be paid on any Tax-Exempt Bonds.
(F) The Company does not rely on any warranty of the Issuer, either express
or implied, that the Facilities will be suitable to the needs of the Company and recognizes
that under the Act the Issuer is not authorized to expend any funds on the Facilities other
than the revenues received by it therefrom or the proceeds of the Bonds or other funds
granted to it for the purposes contemplated in the Act.
(G) There is not pending any suit, action or proceeding against or affecting the
Company before or by any court, arbitrator, administrative agency or other governmental
authority which materially and adversely affects the validity, as to the Company, of any
of the transactions contemplated hereby or the ability of the Company to perform its
obligations hereunder or as contemplated hereby.
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(H) The Company has reviewed and approved the provisions of the Indenture.
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ARTICLE II
THE LOAN AND REPAYMENT THEREOF
Section 2.1. Loan of Bond Proceeds. The Issuer agrees to loan to the Company the
entire proceeds of all Bonds as received by or on behalf of the Issuer upon the original issuance
by the Issuer of such Bonds. For this purpose the proceeds of Bonds (and therefore the Loan)
shall be deemed to include the underwriting discount, if any, or other amount by which the
amount received by or on behalf of the Issuer on the original sale of any Bonds to the Original
Purchaser is less than the principal amount of such Bonds. The obligation of the Issuer to lend
such proceeds shall be discharged, and the obligation of the Company to repay the Loan shall
become effective, when such proceeds are received by the Trustee from the Issuer or the Original
Purchaser. The Company hereby accepts the Loan from the Issuer, on the terms and conditions
herein and in the Indenture specified, by having the proceeds of the Loan applied and disbursed
in accordance with the provisions of the Indenture. The Company also agrees that until the
proceeds of the Bonds are expended as provided in the Indenture the Trustee shall have a
security interest in such proceeds as additional security for the payment of the Bonds.
Section 2.2. Loan Repayments. The Company agrees to repay the Loan in
installments, referred to herein as Loan Repayments, which in the aggregate (payable as
provided below), shall be sufficient to pay in full and when due all the Bonds from time to time
Outstanding, including (A) the total interest becoming due and payable on the Bonds to the
respective dates of payment thereof whether at, before or after their Stated Maturity; (B) the total
principal amount of the Bonds; and (C) the premium, if any, that shall be payable on the
redemption of any Bonds.
In addition, the Company agrees to pay interest on overdue installments of principal,
premium, if any, and (to the extent lawful) interest on the Loan at the rate or rates borne by the
Bond or Bonds as to which such installments are overdue.
Specifically, the Company agrees to make Loan Repayments with respect to the Series
2019 Bonds as follows:
(A) Commencing July 20, 2019 and on or before the twentieth day of each
month thereafter, an amount not less than one-sixth of the total amount of interest
payable on the Series 2019 Bonds on the next succeeding Interest Payment Date, plus
one-twelfth of the total amount of principal payable on the Series 2019 Bonds on the next
succeeding Principal Payment Date;
(B) On any date (other than a Sinking Fund Payment Date) on which Series
2019 Bonds are to be redeemed from amounts in the Bond Fund, an amount equal to the
full amount required to pay the Redemption Price of the Series 2019 Bonds to be so
redeemed, less the amount, if any, then on hand in the Bond Fund and available for the
payment of such Redemption Price;
(C) The Company shall be entitled to a credit against the initial payments due
under subsection (A) above in an amount equal to the accrued interest, if any, with
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respect to the Series 2019 Bonds deposited into the Bond Fund upon issuance of the
Series 2019 Bonds; and
(D) Any amount on deposit in the Bond Fund as of the June 20 and
December 20 Loan Repayment Dates in excess of the amount otherwise required to be on
deposit therein pursuant to this Section 2.2 shall be credited against the amount otherwise
due on said Loan Repayment Dates.
Reference is hereby made to Section 4.01 of the Indenture, which states that prior to the
issuance of any series of Additional Bonds there shall be delivered to the Trustee, among other
things, an executed counterpart of an amendment to this Loan Agreement providing for
additional Loan Repayments sufficient to provide for the payment of the principal of, premium,
if any, and interest on all Bonds Outstanding after the issuance of such series of Additional
Bonds. Any such amendment may provide for the same or for different Loan Repayment Dates
with respect to such series of Additional Bonds, but no amendment shall reduce or authorize any
later payments of the Loan Repayments or postpone the dates thereof required to be made in
respect of the Series 2019 Bonds pursuant to this Section 2.2.
By the Indenture the Issuer will assign to the Trustee, and grant to the Trustee a security
interest in, all right, title and interest of the Issuer in and to this Loan Agreement and to all
payments hereunder (excepting only certain rights of the Issuer to indemnification, payment of
legal fees and payment of its portion of Additional Payments under Sections 2.3(A), 2.3(D),
2.3(E), 2.3(F), 2.3(G), 7.4, 9.3, 11.11, and 13.8 hereof). All Loan Repayments shall be made
directly to the Trustee at its principal corporate trust office and applied in the manner provided in
the Indenture.
The Loan Repayments herein provided for are subject to prepayment and to certain
credits, as provided above and in Section 10.1 hereof.
Section 2.3. Additional Payments. In addition to the Loan Repayments, the Company
agrees to pay to the Issuer and the Trustee when due, the following:
(A) The Company shall reimburse the Issuer, upon demand, for all costs and
expenses, including without limitation, attorneys’ fees, paid or incurred by the Issuer in
connection with (i) the discussion, negotiation, preparation, approval, execution and
delivery of the Bonds, the Indenture, this Loan Agreement, and the documents and
instruments related hereto or thereto; (ii) any amendments or modifications to any of the
foregoing documents, instruments or agreements and the discussion, negotiation,
preparation, approval, execution and delivery of any and all documents necessary or
desirable to effect such amendments or modifications; (iii) the servicing and
administration of the Loan during the term hereof or thereafter; and (iv) the enforcement
by the Issuer during the term hereof or thereafter of any of the rights or remedies of the
Issuer hereunder or under the foregoing documents, or any document, instrument or
agreement related hereto or thereto, including, without limitation, costs and expenses of
collection in the Event of Default, whether or not suit is filed with respect thereto. The
Company shall also pay the reasonable fees of the Trustee and all other costs and
expenses of and paying the Bonds and making, administering and collecting the Loan,
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including but not limited to (a) the fees and other costs incurred by the Issuer or the
Trustee under the Indenture for services of paying agents, (b) all costs incurred in
connection with the transfer, registration, exchange or redemption of the Bonds, (c) all
fees and other costs incurred for services of such engineers, architects, attorneys,
management consultants, accountants and other consultants as are employed by the Issuer
or the Trustee to make examinations and reports, provide services and render opinions
required under this Loan Agreement, the Mortgage or the Indenture; and (d) amounts
advanced by the Issuer or the Trustee under this Loan Agreement, the Mortgage or the
Indenture and which the Company is obligated to repay.
(B) If the Trustee transfers money from the Bond Reserve Fund to the Bond
Fund pursuant to Section 5.05 of the Indenture, on the twentieth day of each month
thereafter (until the balance in the Bond Reserve Fund is equal to the Bond Reserve
Requirement), the Company shall pay to the Trustee for credit to the Bond Reserve Fund
an amount equal to at least one-sixth of the amount so transferred.
(C) The Company shall deposit with the Trustee the Monthly Repair and
Replacement Deposit to the Repair and Replacement Reserve Fund, as required by
Section 2.7 hereof.
(D) The Company shall cause to be deposited in the Taxes and Insurance
Escrow Fund the Monthly Taxes and Insurance Deposit as required by the Indenture.
(E) On the Issue Date of the Series 2019 Bonds, the Company shall pay to the
Issuer a fee of $50,000.
(F) The Company agrees to pay any reasonable costs incurred by the Issuer as
a result of the Issuer’s compliance with an audit, random or otherwise, by the Internal
Revenue Service, the Minnesota Department of Revenue, or the Minnesota Office of the
State Auditor with respect to the Tax-Exempt Bonds or the Facilities financed with the
proceeds of the Tax-Exempt Bonds.
(G) The Company agrees to pay to the Issuer the amount required to reimburse
the Issuer for any loss of “bank qualification” for any Unqualified Bonds issued in 2019
or in any calendar year in which Additional Bonds are issued (referred to as the
“Reimbursement Amount”). The term “Unqualified Bonds” means bonds issued by the
Issuer (excluding “qualified 501(c)(3) bonds” as defined in Section 145 of the Code other
than the any Tax-Exempt Bonds issued pursuant to the Indenture, including the Series
2019A Bonds) which the Issuer would otherwise designate as “qualified tax-exempt
obligations” for purposes of Section 265(b)(3) of the Code but which are not eligible for
such designation as a result of the issuance of Tax-Exempt Bonds in such calendar year.
The Reimbursement Amount shall be the actual cost to the Issuer as a result of the sale of
such Unqualified Bonds at a rate that is higher than the rate that would have been
obtained had the Unqualified Bonds been designated as “qualified tax-exempt
obligations” as determined by the Issuer’s municipal advisor, Northland Securities, Inc.
or its successor, as the case may be. The Reimbursement Amount for any Unqualified
Bonds shall be payable within 15 days after the Company’s receipt from the Issuer of
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written notice as to the Reimbursement Amount. All fees incurred by the Issuer with
respect to such determination by Northland Securities, Inc. or its successor and the
collection of amounts due with respect thereto from the Company shall be the sole
obligation of the Company, payable with the Reimbursement Amount.
Section 2.4. Certain of Company’s Obligations Unconditional. The Company shall
bear all risk of damage or destruction in whole or in part to the Mortgaged Property or any part
thereof, including without limitation any loss, complete or partial, or interruption in the use,
occupancy or operation of the Mortgaged Property, or any thing which for any reason interferes
with, prevents or renders burdensome the use or occupancy of the Mortgaged Property or the
compliance by the Company with the terms of this Loan Agreement. In furtherance of the
foregoing, but without limiting any of the other provisions of this Loan Agreement, the
obligation of the Company to make Loan Repayments and Additional Payments shall be absolute
and unconditional and the Company shall not be entitled to any abatement, diminution, set-off,
abrogation, waiver or modification thereof nor to any termination of this Loan Agreement by any
reason whatsoever except as expressly provided herein, regardless of any right of set-off,
recoupment or counterclaim that the Company might otherwise have against the Issuer or the
Trustee or any other Person and regardless of any contingency, act of God, event or cause
whatsoever and notwithstanding any circumstance or occurrence that may arise or take place
including, without limiting the generality of the foregoing, the following:
(A) any damage to or destruction of any part or all of the Mortgaged Property
or any other properties owned or operated by the Company;
(B) the taking of any part or all of the Mortgaged Property or any other
properties owned or operated by the Company by the Issuer or any public authority or
agency in the exercise of the power of eminent domain or otherwise;
(C) any assignment, novation, merger, consolidation, transfer of assets, leasing
or other similar transaction of or affecting the Company, whether with or without the
approval of the Issuer or the Trustee, except as otherwise expressly provided in this Loan
Agreement;
(D) any failure of the Issuer to perform or observe any agreement or covenant,
whether express or implied, or any duty, liability or obligation, arising out of or in
connection with this Loan Agreement or the Indenture, or the failure by the Trustee to
perform or observe any agreement or covenant, whether express or implied, or any duty,
liability or obligation, arising out of or in connection with the Indenture, the Mortgage or
any Collateral Document;
(E) any change or delay in the time of availability of any Improvement, or
delays in the construction of any Improvement;
(F) the failure to complete or to maintain satisfactory progress in the
acquisition, construction, installation and equipping of any Improvement for any cause or
reason;
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(G) foreclosure by the Trustee of the Mortgage or the enforcement of any
other remedy available hereunder or thereunder or under applicable laws;
(H) failure of consideration, failure of title or commercial frustration;
(I) any change in the tax or other laws of the United States or of any state or
other governmental authority; or
(J) the appointment of a receiver of the Company or of all or any part of its
assets.
Pursuant to the Guaranty, the Sole Member has guaranteed the payments of the Company
required under Sections 2.2 and 2.3 hereof.
Section 2.5. Excess Funds. When all the Bonds and all other obligations incurred or to
be incurred by the Company under this Loan Agreement have been paid, or sufficient funds
(including investments in Government Obligations as provided in Article VI of the Indenture)
are held in trust for the payment of the Bonds and all such other obligations, any excess funds
remaining to the credit of any Trust Fund shall be paid to the Company.
Section 2.6. Company’s Obligation to Prepay Loan and Direct Redemption of Series
2019 Bonds. If the Company receives from any source a written notice of a Determination of
Taxability with respect to the Series 2019A Bonds, the Company shall immediately notify (in
writing) the Trustee and Issuer of such fact and on the date that is one hundred eighty (180) days
thereafter pay to the Trustee, for credit to the Bond Fund, an amount equal to the Redemption
Price of all Outstanding Series 2019 Bonds payable on the Redemption Date upon which all then
Outstanding Series 2019 Bonds are to be redeemed in accordance with Section 3.09 of the
Indenture. Such payment shall be used by the Trustee to pay the Redemption Price of all
Outstanding Series 2019 Bonds as provided in Section 3.09 of the Indenture.
Section 2.7. Repair and Replacement Reserve Fund. On October 20, 2019 and on the
twentieth day of each month thereafter, the Company shall pay to the Trustee for deposit in the
Repair and Replacement Reserve Fund the Monthly Repair and Replacement Deposit.
\[Additionally, if the Trustee transfers money from the Repair and Replacement Reserve
Fund to the Bond Fund pursuant to Section 5.06 of the Indenture, on the twentieth day of
each month thereafter (until a sum equal to the amount so transferred has been restored),
the Company shall pay to the Trustee for credit to the Repair and Replacement Reserve
Fund an amount equal to at least one-twelfth of the amount so transferred.\]
Section 2.8. Investment of Funds. The Company acknowledges that regulations of the
Comptroller of the Currency grant the Company the right to receive brokerage confirmations of
security transactions as they occur. The Company specifically waives such notification to the
extent permitted by law and acknowledges that the Company will receive periodic cash
transaction statements which will detail all investment transactions. The Company may receive
brokerage confirmations at no additional cost at its written request.
Section 2.9. Subordination of Management Fees. Pursuant to the Assignment and
Subordination of Management Agreement, dated as of July 1, 2019 (as amended or
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supplemented), between the Company and the Manager, any management fee payable by the
Company with respect to the Facilities is and shall at all times and in all respects be wholly
subordinate and junior in right of payment to all sums payable under this Loan Agreement in
respect of the Bonds and the satisfaction of the Days Cash on Hand covenants set forth in
Section 4.7 hereof. Without limiting the foregoing, during the continuance of any default in any
payment due under Section 2.2(A), 2.2(B), or 2.3(B) hereof, no payment of management fees
shall be made by the Company. The Company will not pay any management fee if such payment
will cause the Company to default in any payment due under Section 2.2(A), 2.2(B) or 2.3(B)
hereof. Further, if the Company is not in compliance with the Days Cash on Hand covenants set
forth in Section 4.7, no payment of the management fees shall be made by the Company until
such time as the Company the company certifies to the Trustee pursuant to a Company
Certificate, based upon unaudited interim quarterly financial statements or audited annual
financial statements, that the Company is in compliance with the Days Cash on Hand covenants
set forth in Section 4.7 for the period in question (which period shall not be less than a calendar
quarter).
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ARTICLE III
\[INTENTIONALLY OMITTED\]
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ARTICLE IV
OPERATION, MAINTENANCE, AND INSPECTION
Section 4.1. Maintenance of the Facilities. Until all the Bonds have been redeemed or
retired and all other obligations incurred or to be incurred by the Company under this Loan
Agreement have been paid, or sufficient funds (including investments in Government
Obligations in accordance with Article VI of the Indenture) are held in trust for the payment of
all such obligations, the Company shall, at its sole cost and expense, keep and maintain the
Facilities, both inside and outside, in a good state of repair and preservation, ordinary wear and
tear, obsolescence in spite of repair and acts of God excepted, and will make all necessary
repairs, renewals, replacements, betterments, and improvements thereof so that the business
carried on in connection therewith may be properly and advantageously conducted at all times.
The Company will not use or permit the use of the Facilities, or any part thereof, for any
unlawful purpose or permit any nuisance to exist thereon. The Company shall provide all
equipment, furnishings, supplies, and other personal property required or convenient for the
proper operation, repair, and maintenance of the Facilities in an economical and efficient
manner, consistent with then current standards of operation and administration generally
acceptable for facilities similar to the Facilities.
Section 4.2. Operation of the Facilities. The Company will faithfully and efficiently
administer, maintain and operate the Facilities, open to the general public, free of discrimination
based upon race, color, religion, creed, national origin, or sex. The Company further agrees that:
(A) it will use, maintain, and operate the Facilities on a revenue-producing
basis;
(B) it will use the Facilities only in furtherance of the lawful and exempt
purposes of the Company;
(C) it will not use the Facilities for sectarian instruction nor will it use the
Facilities primarily as a place of religious worship or as a facility used primarily as a part
of a program of a school or department of divinity for any religious denomination or the
religious training of ministers, priests, rabbis, or other similar persons in the field of
religion;
(D) it will not use the Facilities or suffer or permit the Facilities to be used by
any Person or in any manner which would result in the loss of tax exemption of interest
on any Tax-Exempt Bonds otherwise afforded under the Code and, further, it will not
permit any of the proceeds of any Tax-Exempt Bonds to be used, directly or indirectly, in
any manner which would result in such Tax-Exempt Bonds being classified as “arbitrage
bonds” within the meaning of Section 148(a) of the Code, as heretofore or hereafter
amended, and any regulations promulgated thereunder, or in any other manner which
would result in the loss of tax exemption of interest on the Tax-Exempt Bonds otherwise
afforded under the Code;
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(E) it will not, in any substantial way, engage in any business or activities
other than (i) that of maintaining and operating the Facilities or facilities comparable
thereto, and related activities incident thereto, or (ii) any other business or activity within
the exempt purposes of the Company; and
(F) it will continue to be duly qualified to do business in the State and, subject
to the provisions of Section 7.1 hereof, will maintain its existence as a limited liability
company.
Section 4.3. Taxes, Charges, and Assessments. Subject to the provisions of Section 4.5
hereof relating to permitted contests, the Company agrees to pay or cause to be paid:
(A) all taxes and charges on account of the use, occupancy, or operation of the
Mortgaged Property, including but not limited to all sales, use, occupation, real and
personal property taxes (including payments in lieu of property taxes), business and
occupation taxes, permit and inspection fees, occupation and license fees, and water, gas,
electric light, power, or other utility charges assessed or charged on or against the
Mortgaged Property or on account of the Company’s use or occupancy thereof or the
activities conducted thereon or therein; and
(B) all taxes (including payments in lieu of property taxes), assessments, and
impositions, general and special, ordinary and extraordinary, of every name and kind,
which shall be taxed, levied, imposed or assessed during the term of this Loan Agreement
upon all or any part of the Mortgaged Property, or the interest of the Company in and to
the Mortgaged Property, or upon the Issuer’s, Company’s or Trustee’s interest, or the
interest of any of them, in this Loan Agreement, the Mortgage, any Collateral Document,
or the Indenture or the Loan Repayments payable hereunder and all other lawful
governmental taxes, impositions and charges of every kind or nature, ordinary or
extraordinary, general or special, foreseen or unforeseen, whether similar or dissimilar to
any of the foregoing, and all applicable interest and penalties thereon, if any, which shall
be or become due and payable and which shall be lawfully levied, assessed or imposed.
If under applicable law any such tax, charge, fee, rate, imposition or assessment may at
the option of the taxpayer be paid in installments, the Company may exercise such option.
Nothing contained herein shall be deemed to constitute an admission by the Company to
any third party that the Company is liable for, or its properties are subject to, any tax, charge, fee,
rate, imposition or assessment.
Section 4.4. Liens and Encumbrances. The Company represents and warrants that, as
of the date of execution of this Loan Agreement, there exists no lien, charge or encumbrance,
other than Permitted Encumbrances, upon the Mortgaged Property, or any Loan Repayment or
Additional Payment, prior to this Loan Agreement or the Mortgage. Except as otherwise
permitted by the provisions of this Loan Agreement or the Mortgage or any Collateral
Document, the Company will not create or suffer to be created any lien, encumbrance or charge
upon the Mortgaged Property, other than Permitted Encumbrances, and, subject to the provisions
of Section 4.5 hereof relating to permitted contests, it will satisfy or cause to be discharged, or
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will make adequate provision to satisfy and discharge, within sixty (60) days after the same shall
occur, all lawful claims and demands for labor, materials, supplies or other items which, if not
satisfied, might by law become a lien upon the Mortgaged Property; provided that liens for labor
or materials arising by operation of statutory law shall not be within the purview of this Section
4.4 if, when such liens shall be perfected, the Company shall cause them to be promptly
discharged. If any such lien shall be filed or asserted against the Mortgaged Property, or any
installment of Loan Repayments or Additional Payments, by reason of work, labor, services or
materials supplied or claimed to have been supplied, the Company shall, subject to the provisions
of Section 4.5 hereof relating to permitted contests, within thirty (30) days after it receives notice
of the filing thereof or the assertion thereof, cause the same to be discharged of record, or
effectively prevent the enforcement or foreclosure thereof against the Facilities, or any
installment of Loan Repayments or Additional Payments, by contest, payment, deposit, bond,
order of court or otherwise.
Section 4.5. Permitted Contests. The Company shall not be required to pay any tax,
charge, assessment or imposition referred to in Section 4.3 hereof, nor to remove any lien, charge
or encumbrance required to be removed under Section 4.4 hereof, so long as the Company shall
contest, in good faith and at its own cost and expense, the amount or validity thereof, in an
appropriate manner or by appropriate proceedings which shall operate during the pendency
thereof to prevent the collection of or other realization upon the tax, assessment, levy, fee, rent,
charge, lien or encumbrance so contested, and the sale, forfeiture, or loss of the Mortgaged
Property or any part thereof, or of the Loan Repayment or any portion thereof, to satisfy the
same; provided that no such contest shall subject the Issuer or the Trustee to the risk of any
liability. Each such contest shall be promptly prosecuted to final conclusion (subject to the right
of the Company to settle any such contest), and in any event the Company will save the Issuer
and the Trustee harmless against all losses, judgments, decrees and costs (including attorneys’
fees and expenses in connection therewith) and will, promptly after the final determination of
such contest or settlement thereof, pay and discharge the amounts which shall be levied, assessed
or imposed or determined to be payable therein, together with all penalties, fines, interests, costs
and expenses thereon or in connection therewith. The Company shall give the Issuer and Trustee
prompt written notice of any such contest.
If the Trustee notifies the Company that, in the Opinion of Counsel, by nonpayment of
any of the foregoing items the lien of the Mortgage as to any substantial part of the Mortgaged
Property will be materially endangered or the Mortgaged Property, or any substantial part
thereof, will be subject to imminent loss or forfeiture or the obligations of the Company under
this Loan Agreement shall be materially impaired, then the Company shall promptly pay all such
unpaid items and cause them to be satisfied and discharged. If, however, the Company contests
such finding, the Company shall provide the Trustee prompt written notice of the contest and an
Opinion of Counsel to the effect that such contest will not have such effects as described in this
paragraph.
Section 4.6. Rates and Charges; Retention of Management Consultant.
(A) The Company will fix, charge and collect, or cause to be fixed, charged
and collected, subject to applicable requirements or restrictions imposed by law, such
rents, rates, fees and charges for the use of the Facilities and for the services furnished or
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11680684v2
to be furnished by the Company at the Facilities, such that the Company’s Net Revenues
Available for Debt Service for each Fiscal Year, commencing with the Fiscal Year
ending September 30, 2020, will be at least one hundred fifteen percent (115%) of the
Principal and Interest Requirements on Long-Term Indebtedness (excluding the Seller
Note \[and the Working Capital Note\] expressly subordinated to the Bonds pursuant to
Section 6.5 \[and Section 6.6, respectively,\] hereof) during such Fiscal Year.
(B) If the Company’s Net Revenues Available for Debt Service in any Fiscal
Year ending on or after September 30, 2020 are less than one hundred fifteen percent
(115%) of the Principal and Interest Requirements on Long-Term Indebtedness
(excluding the Seller Note \[and the Working Capital Note\] expressly subordinated to
the Bonds pursuant to Section 6.5 \[and Section 6.6, respectively,\] hereof) during such
Fiscal Year, then the Company will promptly employ a Management Consultant to
review and analyze the reports required by Section 4.8 hereof to be made by the
Company, inspect the Facilities, their operation ,and their administration, submit to the
Company and Trustee written reports, and make such recommendations as to the
operation and administration of the Facilities as such Management Consultant deems
appropriate, including any recommendation as to a revision of the rents, rates, fees and
charges of the Facilities or the methods of operation thereof. The Company agrees to
consider any recommendations by the Management Consultant and, to the fullest extent
possible and consistent with the mission of the Company, to adopt and carry out such
recommendations.
(C) So long as the Company is otherwise in full compliance with its
obligations under this Loan Agreement, including following, to the fullest extent possible
and consistent with the mission of the Company, the recommendations of the
Management Consultant, it shall not constitute an Event of Default that the Net Revenues
Available for Debt Service of the Company for any Fiscal Year ending on or after
September 30, 2020 are less than one hundred fifteen percent (115%) of the Principal and
Interest Requirements on Long-Term Indebtedness (excluding the Seller Note \[and the
Working Capital Note\] expressly subordinated to the Bonds pursuant to Section 6.5
\[and Section 6.6, respectively,\] hereof) during such Fiscal Year. If the Company’s Net
Revenues Available for Debt Service are less than one hundred percent (100%) of the
Principal and Interest Requirements on Long-Term Indebtedness (excluding the Seller
Note \[and the Working Capital Note\] expressly subordinated to the Bonds pursuant to
Section 6.5 \[and Section 6.6, respectively, hereof\]), such event will be an Event of
Default.
Section 4.7. Days Cash on Hand. The Company shall maintain Days Cash on Hand as
follows:
(A) Commencing with the Fiscal Year ending September 30, 2020, the
Company shall maintain at least thirty (30) Days Cash on Hand at the end of such Fiscal
Year.
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(B) Commencing with the Fiscal Year ending September 30, 2021 and
continuing with each Fiscal Year thereafter, the Company shall maintain at least forty-
five (45) Days Cash on Hand at the end of each Fiscal Year.
Section 4.8. Inspections; Reports; Financial Statements. The Trustee may, and upon
the direction of the Holders of a majority in aggregate principal amount of Outstanding Bonds
shall, through its officers, employees, consultants, attorneys and other authorized representatives,
have free and unobstructed access at all reasonable times to the Mortgaged Property and records
of the Company with respect thereto for purposes of inspection. The Company will at any and
all reasonable times, upon the written request of the Trustee or the Holders of a majority in
aggregate principal amount of Outstanding Bonds and with reasonable notice to the Company,
permit the Trustee or such Holders, by its or their officers, employees, consultants, attorneys and
other authorized representatives, to inspect the books of account, records, reports and other
papers of the Company, and to take copies and extracts therefrom, and will afford and procure a
reasonable opportunity to make any such inspection, and the Company will furnish to the Trustee
any and all such other information as the Trustee may reasonably request with respect to the
performance by the Company of its covenants in this Loan Agreement. The Company covenants
that it will keep proper books of record and account in which full, true and correct entries shall
be made of all dealings or transactions of or in relation to the business and affairs of the
Company, in accordance with generally accepted accounting principles consistently applied, and
will furnish to the Original Purchaser of each series of Bonds any Bonds of which are at the time
Outstanding, and to any Beneficial Owner of Outstanding Bonds requesting a copy:
(A) Those reports required under Section 3(a) and (b) of that certain
Continuing Disclosure Agreement dated as of July 1, 2019 between the Company and
U.S. Bank National Association, as dissemination agent, at the time due thereunder;
(B) Within forty-five (45) days after the last day of each fiscal quarter,
commencing with the fiscal quarter ending September 30, 2019, quarterly occupancy
reports for the Facilities;
(C) Prior to the end of each February, commencing February, 2020, a
Company Certificate stating that the Company has made a review of its activities during
the preceding Fiscal Year for the purpose of determining whether or not the Company has
complied with all of the terms, provisions and conditions of this Loan Agreement and
that the Company has kept, observed, performed and fulfilled each and every covenant,
provision and condition of this Loan Agreement on its part to be performed and is not in
default in the performance or observance of any of the terms, covenants, provisions or
conditions hereof, or if the Company shall be in default such certificate shall specify all
such defaults and the nature thereof; and
(D) Such additional information as the Original Purchaser or such Beneficial
Owner may reasonably request concerning the Company, the Facilities or the Mortgaged
Property, including utilization information, in order to enable the Original Purchaser or
such Beneficial Owner to determine whether the covenants, terms and provisions of this
Loan Agreement have been complied with by the Company.
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Section 4.9. Reports to Issuer. Annually, not later than March 1, in every year while
any maturity of the Bonds remains outstanding, the Company agrees to provide a report to the
Issuer documenting the then-outstanding principal amount of the Bonds. This provision cannot
be enforced by the Trustee.
ARTICLE V
ALTERATIONS; IMPROVEMENTS; REMOVALS
Section 5.1. Additions, Alterations, and Changes to Facilities. The Company shall
have the right from time to time at its sole cost and expense to make additions, modifications,
alterations, improvements, and changes (hereinafter collectively referred to as “alterations”) in or
to the Facilities as it, in its discretion, may deem to be desirable for its uses and purposes,
subject, however, in all cases to the following conditions:
(A) No alteration of any kind shall be made which would result in a violation
of the provisions of Section 4.2 hereof.
(B) No building or buildings constituting a part of the Facilities shall be
demolished or removed nor shall any material alteration to the Facilities be made which
would substantially impair the structural strength, operating efficiency or market value
thereof, or would significantly impair the revenue-producing capability of the Facilities
or would adversely affect the ability of the Company to comply with the terms of this
Loan Agreement. If the estimated cost of the alterations is in excess of $500,000, the
Company, prior to undertaking the alterations, shall deliver to the Trustee a certificate of
an Independent Architect or Management Consultant attesting to the foregoing provisions
of this subsection (B).
(C) All alterations to the Facilities shall be located wholly within the boundary
lines of the Land and shall become a part of the Mortgaged Property subject to the
Mortgage.
(D) No change shall be made in the location of any property subject to the
Mortgage or any Collateral Document which removes such property into a jurisdiction in
which such Mortgage or security interest thereby created has not been recorded or filed in
the manner required by law to preserve such Mortgage or security interest in such
property.
(E) No work in connection with any alteration shall be undertaken until the
Company shall have procured and paid for, so far as the same may be required, from time
to time, all municipal and other governmental permits and authorizations of the various
municipal departments and governmental subdivisions having jurisdiction.
(F) All work in connection with any alteration shall be done promptly and in
good workmanlike manner and in compliance with the applicable building and zoning
laws of the governmental subdivision wherein the Facilities are situated, and with all
laws, ordinances, orders, rules, regulations and requirements of all federal, state and
municipal governments and the appropriate departments, commissions, boards and
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officers thereof, and shall not violate the provisions of any policy of insurance covering
the Facilities, and the work shall be prosecuted with reasonable dispatch, unavoidable
delays excepted.
(G) Workers’ compensation insurance shall cover all persons employed in
connection with the work and with respect to whom death or bodily injury claims could
be asserted against the Company or the Mortgaged Property, and general liability
insurance (specifically covering this class of risk) in such amounts as is customarily
carried by like organizations engaged in like activities of comparable size and liability
exposure and as otherwise required or permitted by applicable law. The general liability
insurance provided for in this paragraph may be effected by an appropriate endorsement,
if obtainable, upon the insurance referred to in Section 7.5 hereof. All such insurance
shall be effected with financially sound and reputable insurance companies.
Section 5.2. Installation and Removal of Equipment by the Company. The Company
may from time to time in its sole discretion install or place within the Facilities or elsewhere on
the Land items of personalty. All such items so installed and owned by the Company shall
become part of the Facilities and be included under the terms of this Loan Agreement and subject
to the lien of the Mortgage, but may be subject to a lease or other purchase money security
interest, the lien of which is superior to the lien of the Mortgage. So long as it is not in default
hereunder, the Company may, without the consent of the Issuer or the Trustee, remove, alter or
modify any item of personalty, subject to the provisions of the Mortgage, but any damage
resulting to the Facilities therefrom shall be repaired and the Facilities restored to their previous
condition at the sole expense of the party effecting such removal or at the sole expense of the
Company.
Section 5.3. No Credit for Additions or Replacements. The Company shall not be
entitled to any credit upon Loan Repayments, Additional Payments, or other obligations under
this Loan Agreement on account of the addition or replacement of any portion of the Facilities.
Section 5.4. Execution of Other Documents. The Trustee and the Company shall
execute any documents reasonably requested by the other party in connection with any action
taken by either of them under Article IV of the Mortgage, including, but not limited to,
documents required to add any property to or remove any property from the lien of the
Mortgage.
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ARTICLE VI
INDEBTEDNESS
Section 6.1. Indebtedness Generally. The Company agrees that, until all of its
obligations under this Loan Agreement have been fully paid and discharged, the Company shall
not, directly or indirectly, incur any further Indebtedness except as provided in this Article VI.
Section 6.2. Short-Term Indebtedness. The Company may incur such Short-Term
Indebtedness as in the Company’s judgment may be deemed expedient, provided that Short-
Term Indebtedness when incurred shall not cause the total Short-Term Indebtedness to exceed in
the aggregate then outstanding five percent (5%) of the Gross Revenues of the Company for the
preceding Audited Fiscal Year, except as provided in the next sentence. Any Short-Term
Indebtedness in excess of such amount shall be treated as Long-Term Indebtedness for purposes
of this Loan Agreement. Short-Term Indebtedness may be secured only by a subordinate pledge
and assignment of all or any part of the Company’s accounts receivable.
Section 6.3. Long-Term Indebtedness. The Company may incur Long-Term
Indebtedness only as provided in this Section 6.3.
(A) Before incurring or otherwise becoming liable with respect to any such
Long-Term Indebtedness, the Company shall furnish to the Trustee (i) a Company
Certificate which states the general purpose for which such Long-Term Indebtedness is to
be incurred and states the principal amount of Long-Term Indebtedness to be incurred,
the maturity date or dates thereof and the interest rate or rates with respect thereto; and
(ii) an Opinion of Counsel for the Company to the effect that all conditions precedent
herein specified for incurring such Long-Term Indebtedness have been satisfied.
(B) The Company shall not incur any Long-Term Indebtedness to refund
Outstanding Bonds unless, in addition to the filing of the items described in subsection
(A) above: (i) except in the instance of a “gross” defeasance of the Bonds to be refunded
or when the Bonds mature or will be redeemed within ninety (90) days, there shall be
filed with the Trustee a report of an Accountant to the effect that the proceeds of the
Long-Term Indebtedness, together with any other funds deposited with the Trustee for
such purpose, will be not less than an amount sufficient to pay the principal of and the
redemption premium, if any, on the Outstanding Bonds to be refunded and the interest
which will become due and payable thereon on or prior to the redemption date or stated
maturity thereof, or that the principal of and interest on Government Obligations
purchased from such proceeds or from other funds provided by the Company and
deposited in trust with the Trustee, which Government Obligations do not permit
redemption thereof at the option of the issuer, when due and payable (or redeemable at
the option of the holder) will provide, together with any other moneys which shall have
been deposited irrevocably with the Trustee for such purpose, sufficient moneys to pay
such principal, redemption premium, if any, and interest; and (ii) there shall be filed with
the Trustee an opinion of Bond Counsel to the effect that the incurring of such Long-
Term Indebtedness and the refunding of Bonds with the proceeds thereof will not
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prejudice the exemption from federal income tax of the interest accruing on any of the
Tax-Exempt Bonds.
(C) Except as provided in subsections (B) and (D) of this Section 6.3, the
Company shall not incur any Long-Term Indebtedness unless it shall furnish the Trustee,
in addition to the items described in subsection (A) above, either:
(i) a written report or opinion of an Accountant stating that the Net
Revenues Available for Debt Service of the Company for each of the last two (2)
Audited Fiscal Years preceding the date on which the proposed Long-Term
Indebtedness is to be incurred were not less than one hundred thirty percent
(130%) of the maximum Principal and Interest Requirements on Long-Term
Indebtedness (including such requirements for the proposed Long-Term
Indebtedness as if it were outstanding at the beginning of such period but
excluding such requirements for any then outstanding Long-Term Indebtedness or
Bonds to be refunded by the proposed Long-Term Indebtedness but excluding any
Seller Note expressly subordinated hereunder) for each Fiscal Year beginning
after the Fiscal Year in which the proposed Long-Term Indebtedness is to be
incurred, but before the final Stated Maturity of all then Outstanding Bonds; or
(ii) a forecast accompanied by an Accountant’s examination report
stating that the estimated Net Revenues Available for Debt Service of the
Company for each of the three (3) consecutive Fiscal Years beginning the second
Fiscal Year after the Fiscal Year in which any Improvements or other facilities
being financed by such Long-Term Indebtedness are to be placed in service, or, if
no Improvements or other facilities are to be financed thereby, beginning the first
Fiscal Year after the Fiscal Year in which the proposed Long-Term Indebtedness
is to be incurred, will be not less than one hundred forty percent (140%) of the
maximum Principal and Interest Requirements on Long-Term Indebtedness
(including such requirements for the proposed Long-Term Indebtedness but
excluding such requirements for any then outstanding Long-Term Indebtedness or
Bonds to be refinanced by the proposed Long-Term Indebtedness but excluding
any Seller Note expressly subordinated hereunder) for each Fiscal Year beginning
the second Fiscal Year after the Fiscal Year in which any Improvements or other
facilities being financed by such Long-Term Indebtedness are to be placed in
service, or, if no Improvements or other facilities are to be financed thereby,
beginning the first Fiscal Year after the Fiscal Year in which the proposed Long-
Term Indebtedness is to be incurred, but before the final Stated Maturity of all
then Outstanding Bonds.
(D) Notwithstanding the provisions of subsection (C) above, the Company
may incur Long-Term Indebtedness (i) if and to the extent necessary to provide
additional funds for completing payment of the cost of the Facilities or any
Improvements or other facilities for which any Long-Term Indebtedness shall have been
incurred at one time or from time to time under this Section 6.3; or (ii) for refinancing the
principal amount of any outstanding Long-Term Indebtedness provided the Principal and
Interest Requirements on Long-Term Indebtedness (including such requirements for the
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proposed Long-Term Indebtedness but excluding such requirements for the Long-Term
Indebtedness to be refinanced thereby) for each Fiscal Year after the Fiscal Year in which
the proposed Long-Term Indebtedness is to be incurred but before the final Stated
Maturity of all then Outstanding Bonds will be no greater than the Principal and Interest
Requirements on Long-Term Indebtedness would have been for each such Fiscal Year
had such proposed Long-Term Indebtedness not been incurred nor the refinancing
accomplished.
Section 6.4. Calculation of Debt Service. The calculation of Principal and Interest
Requirements on Long-Term Indebtedness whether pursuant to this Loan Agreement or the
Indenture, shall be made in a manner consistent with that set forth in Section 6.3 hereof and the
following:
(A) With respect to any Balloon Indebtedness, such Balloon Indebtedness
shall be assumed to be amortized in substantially equal annual amounts to be paid for
principal and interest over an assumed amortization period of years equal to the number
of years from the date of issuance of such Balloon Indebtedness to its stated maturity and
at the stated interest rate applicable to such Balloon Indebtedness.
(B) With respect to any Indebtedness which is also Variable Rate
Indebtedness, in determining the amount of debt service payable on Variable Rate
Indebtedness for any future period, interest on such indebtedness for any period of
calculation (the “Determination Period”) shall be computed by assuming that the rate of
interest applicable to the Determination Period is equal to the average annual rate of
interest on similar securities (calculated in the manner in which the rate of interest for the
Determination Period is to be calculated) which was in effect for the twenty-four (24)
month period prior to a date selected by the Company, which selected date is within
forty-five (45) days immediately preceding the beginning of the Determination Period,
plus two percent (2%) per annum, as certified by a banking or investment banking
institution knowledgeable in matters of variable rate financing or, if it is not possible to
calculate such average annual rate of interest, by assuming that the rate of interest
applicable to the Determination Period is equal to the rate of interest then in effect on
such Variable Rate Indebtedness, plus two percent (2%) per annum. In addition, debt
service shall include any continuing credit enhancement, liquidity and/or remarketing
fees for the relevant period.
(C) Debt service payments made by the Company related to the Seller Note
described in Section 6.5 shall be included in the calculation of Principal and Interest
Requirements on Long-Term Indebtedness.
Section 6.5. Subordination of Seller Note. CM St. Joe, LLC (the “Seller”) has
provided the Company with a loan in the amount of $500,000, which \[accrues interest at the
rate of ________% per annum\] \[does not accrue interest\], for the purpose of
__________________________. The Company has provided the Seller Note to the Seller to
evidence its obligation to repay the Seller’s loan. The Company shall pay the principal of and
interest on the Seller Note periodically out of excess cash flow from the Facilities so long as the
Company is in compliance with all of its covenants hereunder and no Event of Default on the
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part of the Company has occurred and is continuing. Payments made by the Company to repay
the Seller Note are expressly subordinate to the Company’s obligations under this Loan
Agreement.
Section 6.6. Subordination of Working Capital Loan. The Sole Member has provided
the Company with a revolving loan in the amount of $500,000, which accrues interest at the rate
of 6.5% per annum for the purpose of funding working capital. The Company has provided the
Working Capital Note to the Sole Member to evidence its obligation to repay the Sole Member’s
loan. The Company shall pay the principal of and interest on the Working Capital Note
periodically out of excess cash flow from the Facilities as the Company is in compliance with all
of its covenants hereunder and no Event of Default on the part of the Company has occurred and
is continuing. Payments made by the Company to repay the Working Capital Note are expressly
subordinate to the Company’s obligations under this Loan Agreement.
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ARTICLE VII
OTHER COVENANTS OF THE COMPANY
Section 7.1. Continuing Existence and Qualification. The Company will maintain its
existence as a Tennessee limited liability company, the Sole Member will maintain its existence
as a Tennessee nonprofit corporation, and the Company and the Sole Member will take no action
nor suffer any action to be taken by others which will alter, change or destroy the status of the
Sole Member as a Tax-Exempt Organization. The Company and the Sole Member will remain
duly qualified to do business in the State, and the Company will not dispose of all or
substantially all of its assets by sale, lease (unless permitted by the provisions of Section 12.2
hereof) or otherwise or consolidate with or merge into another entity or permit any other entity to
consolidate with or merge into it unless:
(A) the surviving, resulting or transferee entity, as the case may be, if other
than the Company, is organized under the laws of the United States or one of the states
thereof is a Tax-Exempt Organization (or a limited liability company whose sole member
is a Tax-Exempt Organization), shall have total unrestricted net assets or net worth at
least equal to that of the Company as of the date of such consolidation, merger or transfer
after giving effect thereto, and shall be duly qualified to do business in the State;
(B) at least thirty (30) days before any merger, consolidation or transfer of
assets becomes effective, the Company shall give the Issuer and the Trustee written
notice of the proposed transaction;
(C) prior to any merger, consolidation or transfer of assets, an opinion of Bond
Counsel shall be delivered to the Trustee stating that such merger, consolidation or
transfer of assets will not cause interest on the Tax-Exempt Bonds to become includable
in the gross income for federal income tax purposes of recipients thereof subject to
federal income taxation;
(D) prior to any merger, consolidation or transfer of assets, the surviving,
resulting or transferee entity, as the case may be, if other than the Company, shall deliver
to the Trustee an instrument assuming all of the obligations of the Company under this
Loan Agreement, the Mortgage, the Continuing Disclosure Agreement and any Collateral
Document and an Opinion of Counsel for such successor entity stating that the instrument
is (subject to customary qualifications) a valid, binding and enforceable obligation of
such successor and that all of the conditions of this Section 7.1 have been satisfied; and
(E) the surviving, resulting or transferee entity, as the case may be, is able to
incur at least one dollar ($1.00) of Long-Term Indebtedness without violating the
provisions of Section 6.3(C) hereof;
and thereafter the Company may merge, consolidate or dispose of all or substantially all of its
assets and thereafter dissolve.
Section 7.2. \[Intentionally Omitted\].
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Section 7.3. Compliance and Notice of Default. The Company will not suffer or
permit any default to occur under this Loan Agreement, but will faithfully observe and perform
all of the conditions, covenants and agreements hereof. The Company will give to the Trustee
and the Issuer prompt notice of any condition or event that constitutes an Event of Default or,
with the passage of time and/or the giving of notice, would constitute an Event of Default under
Section 11.1(B) through (F) hereof.
Section 7.4. Indemnity.
(A) The Company will indemnify, defend, and hold harmless the Issuer, the
Trustee, and their respective officers, directors, members, employees and agents,
including the Trustee, from and against any and all claims by or on behalf of any person,
firm, corporation or other legal entity arising from the conduct, operation or management
of, or from, any work or thing done on the Facilities during the term of this Loan
Agreement, including, without limitation, (i) any condition of the Facilities; (ii) any
breach or default on the part of the Company in the performance of any of its obligations
under this Loan Agreement; (iii) any act of negligence of the Company or of any of its
agents, contractors, servants, employees or licensees; or (iv) any act of negligence of any
assignee or lessee of the Company, or of any agents, contractors, servants, employees or
licensees of any assignee or lessee of the Company. The Company shall indemnify and
save the Issuer and Trustee harmless from any such claim arising as aforesaid, or in
connection with any action or proceeding brought thereon, and upon notices from the
Issuer or Trustee, the Company shall defend them or either or them in any such action or
proceeding.
(B) The Company agrees to indemnify, defend and hold harmless the Issuer
and Trustee and their respective employees, members, officers and agents (the
“Indemnified Parties”) against any and all losses, claims, damages or liability to which
the Indemnified Parties may become subject under any law in connection with the
issuance and sale of the Bonds, the carrying out of the transactions contemplated by this
Loan Agreement or the Indenture, and the conduct of any activity in connection with the
Facilities, including claims for which the Indemnified Parties may be or may be claimed
to be liable, and to reimburse the Indemnified Parties for any out-of-pocket legal and
other expenses (including reasonable counsel fees) incurred by the Indemnified Parties in
connection with investigating any such losses, claims, damages or liabilities, or in
connection with defending any actions relating thereto. The Indemnified Parties agree, at
the request and expense of the Company, to cooperate in the making of any investigation
in defense of any such claim and promptly to assert any or all of the rights and privileges
and defenses identified in writing by the Company which may be available to the
Indemnified Parties.
Promptly upon written notice received by the Company from any Indemnified
Party or parties of any claim or the commencement of any action or proceeding specified
in the preceding paragraph, the Company will at the request of such Indemnified Party or
parties, assume the investigation and defense of such action or proceeding including the
employment of counsel reasonably satisfactory to such Indemnified Parties and the
payment of the fees and disbursements of such counsel. In the event that any
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Indemnified Party or parties shall determine, in the exercise of their reasonable judgment,
that there exists conflict of interest by reason of having a common counsel with the
Company or with any other Indemnified Party, or if an Indemnified Party believes in
good faith that there are defenses available to it which are adverse to the Company or
which cannot be effectively asserted by common counsel, or if the Company elects not to
defend the action with respect to any or all Indemnified Parties, then each such
Indemnified Party may employ separate counsel to represent or defend it in any such
action or proceeding in which it may become involved or is named as defendant and the
Company will pay as incurred the reasonable fees and disbursements of such counsel.
The Company also agrees to notify all Indemnified Parties promptly of the
commencement against it or any of its officers, directors, partners, employees or agents,
as the case may be, of any claim or the commencement of any action or proceeding
arising from any act or omission of the Company or any of its agents, servants or
employees in connection with this Loan Agreement, the Indenture or the Facilities.
(C) If the Issuer or the Trustee incurs any expense or suffers any losses, claims
or damages or incurs any liabilities in connection with the transaction contemplated by
this Loan Agreement, the Company will indemnify, defend, and hold harmless the Issuer
and the Trustee from the same and will reimburse the Issuer and the Trustee for any
reasonable legal or other expenses incurred by the Issuer in relation thereto. The
Company shall also reimburse the Issuer and the Trustee for all other costs and expenses,
including without limitation, attorneys’ fees paid or incurred by the Issuer and the Trustee
in connection with (i) the discussion, negotiation, preparation, approval, execution and
delivery of this Loan Agreement, and the documents and instruments related thereto; (ii)
any amendments or modifications thereto or the Indenture and any document, instrument
or agreement related thereto and the discussion, negotiation, preparation, approval,
execution and delivery of any and all documents necessary or desirable to effect such
amendments or modification; and (iii) the enforcement by the Issuer or the Trustee during
the term of this Loan Agreement or thereafter of any of the rights or remedies of the
Issuer and the Trustee under this Loan Agreement or under the Indenture or any
document, instrument or agreement related thereto, including, without limitation, costs
and expenses of collection in the event of default, whether or not suit is filed with respect
thereto.
Notwithstanding the foregoing provisions of this Section 7.4, the Company shall have no
obligation to indemnify, defend, or hold harmless the Trustee from or against any losses, claims,
damages, liability or expenses caused by or arising from the Trustee’s own negligent action, its
own negligent failure to act, or its own willful misconduct.
The provisions of this Section 7.4 shall survive the retirement and payment of the Bonds
and termination of this Loan Agreement and the Indenture.
Section 7.5. Insurance. The Company shall at all times keep and maintain the
Facilities insured against such risks and in such amounts, with such deductible provisions, as are
customary in connection with the operation of facilities of the type and size comparable to the
Facilities. Subject to the provisions of Section 7.7 hereof, the Company shall carry and maintain,
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or cause to be carried and maintained, and pay or cause to be paid timely the premiums for, at
least the following insurance with respect to the Facilities and the Company:
(A) insurance coverage for buildings and contents including steam boilers,
fired-pressure vessels and certain other machinery for fire, lightning, windstorm and hail,
explosion, aircraft and vehicles, sprinkler leakage, elevator, and all other risks of direct
physical loss, at all times in an amount equal to the full replacement value of the
Facilities. (“Full replacement value” shall include the actual replacement cost of the
Facilities (exclusive of foundations, footings, architectural, engineering, legal, and
administrative fees) without deduction for depreciation.) Coverage on any portion of the
Facilities during construction thereof shall be maintained on a completed value basis
during the course of construction. The policies required by this subsection (A) shall
either be subject to no co-insurance or contain an agreed amount clause and may contain
a deductible provision not exceeding $10,000;
(B) general liability (other than as set forth in subsection (C) below) in an
amount not less than $1,000,000 per occurrence and $3,000,000 in the aggregate;
provided that the requirements of this subsection (B) with respect to the amount of
insurance may be satisfied by an excess coverage policy;
(C) comprehensive automobile liability insurance and, to the extent relevant to
the operations of the Company, professional liability insurance;
(D) worker’s compensation insurance or self-insurance as required by the laws
of the State; and
(E) business or rental interruption insurance covering actual losses in gross
operating earnings of the Company for a period of up to twelve (12) months resulting
directly from necessary interruption of business caused by damage to or destruction from
the perils listed above in subsection (A) above to real or personal property constituting
part of the Facilities, less charges and expenses which do not necessarily continue during
the interruption of business.
Section 7.6. Insurers and Policies. Each insurance policy required by Section 7.5
hereof (A) shall be issued or written by such insurer (or insurers) as is financially responsible, or
by an insurance fund established by the United States or the State or an agency or instrumentality
thereof; (B) shall be in such form and with such provisions (including, without limitation and
where applicable, loss payable clauses payable to the Trustee, waiver of subrogation clauses, and
provisions relieving the insurer of liability to the extent of minor claims) as are generally
considered standard provisions for the type of insurance involved; and (C) shall prohibit
cancellation or substantial modification by the insurer without at least thirty (30) days prior
written notice to the Trustee and the Company. Without limiting the generality of the foregoing,
all insurance policies carried pursuant to Section 7.5(A) and (B) hereof shall name the Trustee,
the Issuer and the Company as parties insured thereunder as the respective interest of each of
such parties may appear, and loss thereunder shall be made payable and shall be applied as
provided in Article VIII or Section 10.2 hereof, as the case may be.
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Section 7.7. Insurance Consultant. The Company covenants to review each year the
insurance carried by the Company with respect to the Company and the Facilities and, to the
extent feasible, will carry insurance insuring against the risks and hazards specified in Section
7.5 hereof to the same extent that corporations or other organizations comparable to the
Company and owning or operating facilities of the size and type comparable to the Facilities
carry such insurance. The Company shall annually certify to the Trustee on each May 1 that the
insurance required under Section 7.5 hereof is in full force and effect. At least once every five
(5) years from and after the date of execution of this Loan Agreement, the Company shall retain
an Independent Insurance Consultant for the purpose of reviewing the insurance coverage of, and
the insurance required for, the Company and the Facilities and making recommendations
respecting the types, amounts and provisions of insurance that should be carried with respect to
the Company and the Facilities and their operation, maintenance and administration. A signed
copy of the report of the Independent Insurance Consultant shall be filed with the Trustee. The
Trustee has no duty to determine the sufficiency of the recommendations included in such report.
The insurance requirements specified in Section 7.5 hereof and this Section 7.7 shall be deemed
modified or superseded as necessary to conform with the recommendations contained in said
report.
Section 7.8. Federal Grants. The Company covenants that, so long as any Bonds are
Outstanding, if at any time or times the Company obtains federal grants in aid, it will at all times
comply with the terms of such grants and the laws and regulations under which they are made.
Section 7.9. Tax Covenants of the Series 2019A Bonds. In order to ensure that the
interest on the Series 2019A Bonds shall at all times be free from federal income taxation, the
Company specifically represents, warrants and covenants with the Issuer, the Trustee and all
Holders of the Series 2019A Bonds:
(A) The Company will fulfill all conditions specified in Section 145 of the
Code to qualify the Series 2019A Bonds as “qualified 501(c)(3) bonds” thereunder.
(B) No obligations other than the Series 2019A Bonds have been or are
expected to be issued under Section 103(a) of the Code for sale at substantially the same
time (within fifteen (15) days) as the Series 2019A Bonds are sold, pursuant to the same
plan of financing, including notes for the same facility or related facilities, and which are
reasonably expected to be paid from substantially the same source of funds, determined
without regard to guarantees from unrelated parties, or to otherwise become part of the
same “issue of obligations” of the Series 2019A Bonds as described in Section 1.150-
(1)(c)(1) of the Treasury Regulations, so as to impair the exclusion from gross income
under Section 103 of the Code of the interest on the Series 2019A Bonds. The Series
2019A-T Bonds are Taxable Bonds.
(C) No portion of the proceeds of the Series 2019A Bonds will be used to
provide any airplane, skybox 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, all within the meaning of Section 147 of the Code. No portion
of the proceeds of the Series 2019A Bonds will be used with respect to any church or
worship space located in the Facilities.
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(D) The Bond Issuance Costs financed by the Series 2019A Bonds shall not
exceed two percent (2%) of the proceeds thereof.
(E) The average weighted maturity of the Series 2019A Bonds does not
exceed one hundred twenty percent (120%) of the average reasonably expected economic
life of the property included in the Facilities to be financed by the Series 2019A Bonds.
(F) The Company shall provide the Issuer on or prior to the Issue Date of the
Series 2019A Bonds with all information required to satisfy the informational
requirements set forth in Section 149(e) of the Code, including the information necessary
to complete the Information Return for Tax-Exempt Private Activity Bond Issues, Form
8038 (Rev. September 2018).
(G) No portion of the proceeds of the Series 2019A Bonds will be used to
acquire property to be leased to the government of the United States of America or to any
department, agency or instrumentality of the government of the United States of America.
(H) Unless the Trustee shall have received an opinion of Bond Counsel to the
effect that the same will not cause the interest on the Series 2019A Bonds to be included
in gross income for federal income tax purposes, no more than five percent (5%) of the
proceeds of the Series 2019A Bonds (less any portion thereof used to pay or reimburse
Bond Issuance Costs) will in the aggregate be used to finance properties used or to be
used in an unrelated trade or business of the Company or the Sole Member within the
meaning of Section 513(a) of the Code or used directly or indirectly in any trade or
business carried on by a person who is not a Tax-Exempt Organization within the
meaning of Section 141 of the Code.
(I) The Company will not use the proceeds of the Series 2019A Bonds in
such a manner as to cause the Series 2019A Bonds to be “arbitrage bonds” within the
meaning of Section 148 of the Code and applicable Treasury Regulations; and to this end,
unless an exception applies, the Company on behalf of the Issuer shall pay to the United
States, as a rebate, an amount equal to the sum of (i) the excess of (I) the aggregate
amount earned on all nonpurpose obligations (other than investments attributable to an
excess described in this clause), over (II) the amount which would have been earned if all
nonpurpose obligations were invested at a rate equal to the yield on the Series 2019A
Bonds plus (ii) any income attributable to the excess described in clause (i), at the times
and in the amounts required by Section 148 of the Code, all within the meaning of
Section 148 of the Code. The Company shall maintain records of the interest rate borne
by the Series 2019A Bonds and the investments of proceeds thereof in adequate detail to
enable the Company to calculate the amount of any rebate required to be made to the
United States. The Company shall pay the rebate to the United States at times and in
installments which satisfy Section 148 of the Code and the Treasury Regulations, at least
once every five (5) years and within sixty (60) days after the day on which the Series
2019A Bonds are redeemed. All of the proceeds of the Series 2019A Bonds are expected
to be expended within six (6) months of the Issue Date of the Series 2019A Bonds. If
proceeds remain unexpended after six (6) months from the Issue Date of the Series
2019A Bonds, calculations of the amount to be rebated shall be made at least every five
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(5) years, by a qualified rebate specialist selected by the Company, and the Trustee shall
be furnished with such calculations within sixty (60) days of the time they are made. The
records for such calculations shall be retained until six (6) years after the retirement of
the Series 2019A Bonds. The rebate shall be calculated as provided in the applicable
Treasury Regulations, including taking into account the gain or loss on the disposition of
nonpurpose investments. The Company shall acquire nonpurpose obligations at their fair
market value.
(J) No proceeds of the Series 2019A Bonds shall be invested in investments
which cause the Series 2019A Bonds to be federally guaranteed within the meaning of
Section 149(b) of the Code. If at any time the moneys in such funds exceed, within the
meaning of Section 149(b)(3)(B) of the Code, (i) amounts invested for an initial
temporary period until the moneys are needed for the purpose for which the Series 2019A
Bonds were issued, (ii) investments of a bona fide debt service fund, and (iii) investments
of a reserve which meet the requirement of Section 148(d) of the Code, such excess
moneys shall be invested in only those investments, which are (a) obligations issued by
the United States Treasury, (b) other investments permitted under regulations, or (c)
obligations which are (1) not issued by, or guaranteed by, or insured by, the United States
or any agency or instrumentality thereof or (2) not federally insured deposits or accounts,
all within the meaning of Section 149(b) of the Code.
(K) The Company covenants that it shall not make any use of the Facilities to
be financed with the proceeds of the Series 2019A Bonds, including but not limited to
entering into any agreement for the management of such Facilities or any similar
agreement, the effect of which would cause the Series 2019A Bonds not to constitute
“qualified 501(c)(3) bonds,” within the meaning of Section 145 and related Sections of
the Code, and any service contract to be entered into with respect to the Facilities to be
financed with the proceeds of the Series 2019A Bonds (unless entered into with a Tax-
Exempt Organization) shall constitute a “qualified management agreement” within the
meaning of all pertinent provisions of law, including all relevant provisions of the Code
and regulations, rulings and revenue procedures thereunder, including Revenue
Procedure 97-13, 1997-1 C.B. 632, issued January 10, 1997, as amended by Revenue
Procedure 2001-39, 2001-2 C.B. 38, issued June 20, 2001, as amplified by Notice 2014-
67, 2014-46 I.R.B. 822, issued November 10, 2014, as amplified by Revenue Procedure
2016-44, 2016-36 I.R.B. 316, issued October 31, 2016, and as further modified and
amplified by Revenue Procedure 2017-13, 2017-6 I.R.B., issued March 21, 2017.
(L) In order to qualify the Series 2019A Bonds and this Loan Agreement
under the “governmental program” provisions of Section 1.148-2(d)(2)(iii) of the
Treasury Regulations, the Company (and any “related person” thereto) will take no action
the effect of which would be to disqualify this Loan Agreement as a “program
investment” under Section 1.148-1(b), including but not limited to entering into any
arrangement, formal or informal, for the Company to purchase bonds of the Issuer in an
amount related to the amount of the Series 2019A Bonds.
(M) At least eighty-five percent (85%) of the spendable proceeds of the Series
2019A Bonds will be used to carry out the governmental purpose for which the Series
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2019A Bonds are issued within the three (3) year period following the Issue Date of the
Series 2019A Bonds, and not more than fifty percent (50%) of the proceeds of the Series
2019A Bonds will be invested in nonpurpose investments (as defined in
Section 148(f)(6)(A) of the Code) having a substantially guaranteed yield for four (4)
years or more all as provided in Section 149(g)(3)(C) of the Code. Therefore, the Series
2019A Bonds are not “hedge bonds” within the meaning of Section 149(g) of the Code.
(N) The Company will not otherwise knowingly use proceeds of the Series
2019A Bonds, including earnings thereon, or take, or permit or cause to be taken, any
action that would adversely affect the exclusion from gross income for federal income tax
purposes of the interest on the Series 2019A Bonds, nor otherwise omit to take or cause
to be taken any action necessary to maintain such exclusion; and, if it should take or
permit, or omit to take or cause to be taken, as appropriate, any such action, the Company
shall take all lawful actions necessary to rescind or correct such actions or omissions
promptly upon having knowledge thereof.
(O) The Sole Member is a nonprofit corporation created and validly existing
under the laws of the State. The Sole Member is a Tax-Exempt Organization. Either (i)
the Sole Member has elected under Section 301.7701-3(a) of the Treasury Regulations to
disregard the Company as an entity separate from the Sole Member for federal tax
purposes, or (ii) no election has been made under Section 301.7701-3(b)(1)(i) of the
Treasury Regulations not to disregard the Company as an entity separate from Sole
Member for federal income tax purposes.
(P) If the Company sells or otherwise disposes of the Facilities so that such
property is no longer owned by a governmental unit or an organization described in
Section 501(c)(3) of the Code, the Company shall cause a redemption of the Outstanding
principal amount of the Series 2019A Bonds. The redemption shall be made subsequent
to the disposition at the earliest time allowed under the Series 2019A Bonds.
(Q) The Company shall maintain such written procedures as appropriate and
applicable to ensure the Company’s principal responsibility for compliance with the post-
issuance requirements necessary to maintain the tax-exempt status of the interest on the
Bonds, including requirements that must be continually monitored, including
(i) monitoring the investment (pending expenditure) of Series 2019A Bond proceeds (and
keep detailed records thereof) in order to assure compliance with the arbitrage
requirements applicable to the Series 2019A Bonds, (ii) monitoring the expenditures of
Series 2019A Bond proceeds (and keep detailed records thereof), (iii) monitoring the use
of the Facilities in order to ensure that the Series 2019A Bonds continue to qualify as a
qualified 501(c)(3) bond within the meaning of Section 145 of the Code, (iv) periodically
consulting with Bond Counsel with respect to arbitrage issues and compliance, and
(v) consulting with Bond Counsel as necessary to determine whether, and to what extent,
any change in the use or purpose of the financed facility will require any remedial action
under the relevant Treasury Regulations.
Section 7.10. Transactions with Affiliates. Fund or property transfers from the
Company to an Affiliate (including debt payments) are not restricted so long as (A) the covenant
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in Section 4.6(A) hereof was met in the prior Fiscal Year (this requirement shall not be reduced,
qualified or deemed satisfied by any of the provisions contained in Section 4.6 hereof, including
any reduction in the Net Revenues Available for Debt Service required to be maintained by
future State or federal laws or regulations, nor shall the covenant be deemed satisfied by the
retention of a Management Consultant); (B) the liquidity covenant in Section 4.7 hereof is
maintained; (C) no Event of Default has occurred and is continuing hereunder; and (D) the Bond
Reserve Fund contains an amount not less than the Bond Reserve Requirement. Otherwise, the
Company agrees that it will not make payments for property or services provided by an Affiliate
except to compensate such Affiliate for the fair market value of such services or property.
Section 7.11. Continuing Disclosure. The Company hereby covenants and agrees that it
will comply with and carry out all of the provisions of the Continuing Disclosure Agreement or
any other document requiring the Company to comply with continuing disclosure obligations.
Notwithstanding any other provisions of this Loan Agreement, failure of the Company to comply
with the Continuing Disclosure Agreement shall not be considered an event of default hereunder;
however, the Trustee may (and, at the request of the Holders of a majority in aggregate principal
amount in Outstanding Bonds, shall, subject to Section 8.03(E) of the Indenture) or any
Bondholder or Beneficial Owner may take such actions as may be necessary and appropriate,
including seeking specific performance by court order, to cause the Company to comply with its
obligations under this Section 7.11.
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ARTICLE VIII
DAMAGE; DESTRUCTION; INSURANCE AND CONDEMNATION PROCEEDS
Section 8.1. Company to Repair, Replace, Rebuild or Restore. If there are any
Outstanding Bonds when all or any part of the Facilities are taken by eminent domain, or
destroyed or damaged, unless the Company exercises its option to direct the Issuer to call all
Outstanding Bonds for redemption pursuant to Section 10.2 hereof:
(A) The Company shall proceed promptly, subject to the provisions of
subsections (B) and (C) below, to replace, repair, rebuild, and restore the Facilities to
substantially the same condition as existed before the taking or event causing the damage
or destruction, with such changes, alterations and modifications (including substitution or
addition of other property) as may be desired by the Company and will be suitable for
continued operation of the Facilities for the business purposes of the Company, and the
Company will pay all costs thereof and be entitled to retain all Net Proceeds of the
condemnation award or insurance claim.
(B) If the condemnation award or insurance claim exceeds $250,000, all Net
Proceeds of the condemnation award or insurance claim shall be paid directly to the
Trustee and deposited in the Repair and Replacement Reserve Fund as provided in the
Indenture. The Trustee shall apply the Net Proceeds to payment of the costs of repair,
replacement, rebuilding or restoration upon compliance with Section 5.06 of the
Indenture. If the Net Proceeds are not sufficient to pay such costs in full, the Company
will nonetheless complete the same and will pay that portion of the cost thereof in excess
of the amount of the Net Proceeds.
(C) The Company shall not, by reason of the payment of any costs of repair,
rebuilding, replacement or restoration, be entitled to any reimbursement from the Issuer
or any abatement or diminution of the Loan Repayments or the other sums payable by the
Company hereunder. Any balance of Net Proceeds remaining after payment of all costs
of any repair, rebuilding, replacement or restoration shall be paid into the Bond Reserve
Fund or the Bond Fund, as provided in Section 5.06 of the Indenture.
(D) All buildings, improvements and equipment acquired in the repair,
rebuilding, replacement or restoration of the Facilities, together with any interests in land
acquired by the Company as necessary for such restoration, shall be deemed a part of the
Facilities and available for use and occupancy by the Company without the payment of
any additional amounts other than those provided herein, to the same extent as if they had
been specifically described in this Loan Agreement; provided that no land, interest in
land, buildings, improvements or equipment shall be acquired subject to any lien or
encumbrance, other than Permitted Encumbrances.
(E) The Company shall proceed to replace, repair, rebuild and restore the
Facilities only if an Independent consultant/architect determines that the Facilities can be
restored within one (1) year after the receipt of the condemnation award or insurance
proceeds and the Company certifies that the Net Proceeds, together with other funds
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available to the Company (and deposited with the Trustee if the $250,000 threshold under
subsection (B) above is met), are sufficient therefor. The determination and certification
described herein shall be made within sixty (60) days after receipt of the condemnation
award or insurance proceeds. If these conditions are not met, the Company shall direct
redemption of the Bonds pursuant to Section 10.2 hereof and Section 3.08 of the
Indenture.
Section 8.2. Cooperation of the Issuer and Trustee. The Issuer and Trustee will
cooperate fully with the Company in filing any proof of loss with respect to any insurance policy
covering casualties referred to in Section 8.1 hereof, in the handling and conduct of any litigation
arising with respect thereto, and in the handling and conduct of any prospective or pending
condemnation proceedings affecting the Facilities or any part thereof, and will, to the extent they
may lawfully do so, permit the Company to litigate in any such litigation or proceeding in the
name and on behalf of the Issuer and Trustee.
Section 8.3. Business Interruption Insurance Proceeds. All proceeds of business
interruption insurance required to be maintained pursuant to Section 7.5(E) hereof shall be
deposited in the Bond Fund, but only to the extent necessary to satisfy the obligations of the
Company under Section 2.2 hereof.
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ARTICLE IX
COVENANTS OF THE ISSUER
Section 9.1. Restrictions. The Issuer and the Company acknowledge and agree that the
Loan Repayments and all other rights, title and interest of the Issuer in this Loan Agreement
(other than the right of the Issuer to a portion of Additional Payments under Section 2.3 hereof,
to indemnification under Section 7.4 hereof, to release under Section 9.3 hereof, and to payment
of legal expenses under Section 11.11 hereof) are being assigned and a security interest therein
granted to the Trustee as security for the Bonds issued under the Indenture and that the Issuer has
entered into certain covenants with the Trustee in the Indenture which may affect the Facilities
and this Loan Agreement in the Event of Default hereunder.
Section 9.2. Redemption of Bonds. If the Company is not in default hereunder, the
Issuer, at the request of the Company, shall forthwith take all steps, if any, that may be necessary
under the applicable provisions of the Indenture to effect redemption of all or part of the then
Outstanding Bonds, as may be specified by the Company, on the Redemption Date specified by
the Company.
Section 9.3. Nature of Issuer’s Covenants; Release. The Company acknowledges and
agrees that any obligation of the Issuer created by or arising out of this Loan Agreement shall be
payable solely out of the proceeds derived from this Loan Agreement or any Collateral
Document, the sale of the Bonds, any insurance and condemnation awards received pursuant
hereto or sale or other disposition of the property secured by the Mortgage upon a default by the
Company. The foregoing limitation shall not, however, preclude the Company from seeking
injunctive relief in any court to compel the Issuer to perform any such obligation.
The Company hereby acknowledges and agrees that the Issuer shall not be liable to the
Company, and hereby releases and discharges the Issuer from any liability, for any and all losses,
costs, expenses (including attorneys’ fees), damages, judgments, claims and causes of action,
paid, incurred or sustained by the Company as a result of or relating to any action, or failure or
refusal to act, on the part of the Trustee or any other party with respect to the Bonds, the
Indenture, this Loan Agreement, or the documents and transactions related hereto or thereto or
contemplated hereby or thereby, including, without limitation, the exercise by the Trustee or any
third party of any of its rights or remedies pursuant to any of such documents.
Section 9.4. Issuer to Cooperate. Whenever any provision of this Loan Agreement
gives the Company any rights, the full realization of which is or may be subject to further action
of the Trustee under the Indenture, the Issuer will cooperate with the Company and will, at the
expense of the Company, supply all necessary certificates and other things to the Trustee to
effect the intent of this Loan Agreement.
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ARTICLE X
PREPAYMENT
Section 10.1. Prepayments and Credits. There is hereby reserved to the Company the
right, and the Company is hereby authorized and permitted, at any time and as often as it may
choose, to prepay all or any part of the Loan Repayments, and the Issuer agrees that the Trustee
may accept such prepayments of Loan Repayments when tendered by the Company. The
Trustee shall credit such prepayments to the Bond Fund. In case the Company intends to effect
any redemption of Bonds of any series at the election of the Company, the Company shall,
within the time period specified in the Indenture, notify the Trustee of its intent to effect such
redemption and, if such redemption shall apply to less than all of the Outstanding Bonds, of the
principal amount of Outstanding Bonds of any series to be redeemed. All Loan Repayments and
other sums prepaid pursuant to this Section 10.1 shall, if requested by the Company, be applied
to the redemption of Outstanding Bonds in the manner and to the extent provided in Article XIII
and Section 3.03 of the Indenture.
The Company may, at its option, reduce the amount of any Loan Repayment required
with respect to the principal amount of Bonds of any series by an amount equal to the principal
amount of Outstanding Bonds of that series maturing or otherwise payable on the next
succeeding Principal Payment Date that shall be surrendered uncancelled by the Company to the
Trustee not less than forty-five (45) days before the appropriate Principal Payment Date,
provided that before or simultaneously with any such surrender a Company Certificate shall be
delivered to the Trustee stating the Company’s election to use such Bonds for such purpose.
If Term Bonds are redeemed at the option of the Company, the Term Bonds so optionally
redeemed may, at the option of the Company exercising such option, be applied as a credit
against any subsequent Loan Repayment required for payment of such Term Bonds, provided
that (A) the Company shall have delivered to the Trustee a Company Certificate stating its
election to apply such Term Bonds as such a credit and specifying the year in which such credit
shall apply; and (B) the Company may not take such credit less than forty-five (45) days before
the appropriate Sinking Fund Payment Date.
Section 10.2. Company’s Option to Direct Redemption of Bonds. The Company shall
have the option to direct the Issuer to call for redemption all of the then Outstanding Bonds if:
(A) the Facilities financed by the Bonds are damaged or destroyed to such
extent that, in the reasonable judgment of the Company, they cannot be restored in
accordance with the requirements of Section 8.1 hereof; or
(B) a governmental authority or person, firm or corporation acting under
governmental authority, by exercise of the power of eminent domain, takes title to all or
substantially all of the Facilities financed by the Bonds, or so much thereof that in the
reasonable judgment of the Company the Facilities financed by the Bonds cannot be
restored in accordance with the requirements of Section 8.1 hereof.
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If the conditions for restoration described in Section 8.1 hereof cannot be met, the Company
shall direct the Issuer to call for redemption all of the then Outstanding Bonds.
To direct the redemption of the Bonds under this Section 10.2, the Company must: (i) give the
Issuer and Trustee written notice within one hundred eighty (180) days following the event
causing the damage or destruction or the completion of the proceedings by which title is taken by
the power of eminent domain, describing the event, and (ii) not less than forty-five (45) days (or
such lesser time period as the Trustee shall agree to) prior to the Redemption Date determined in
accordance with Section 13.08 of the Indenture, deposit with the Trustee the sum (which may be
transferred from the Trust Funds established under the Indenture) necessary in order to redeem
the Outstanding Bonds at their principal amount plus accrued interest in accordance with Section
13.08 of the Indenture.
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ARTICLE XI
EVENTS OF DEFAULT; REMEDIES
Section 11.1. Events of Default. The following shall be “Events of Defaults” under this
Loan Agreement, and the term “Event of Default,” wherever used herein, means any one of the
following events, whatever the reason for such default and whether it shall be voluntary or
involuntary or be effected by operation of law or pursuant to any judgment, decree or order of
any court or any order, rule or regulation of any administrative or governmental body:
(A) The Company’s failure to pay the amounts required to be paid under
Section 2.2(A), 2.2(B) or 2.3(B) hereof when such amounts become due and payable and
continuance of such default for a period of ten (10) days;
(B) Subject to the provisions of Sections 4.6 and 11.12 hereof, default in the
performance or breach of any covenant, warranty or representation of the Company in
this Loan Agreement (other than a covenant or warranty a default in whose performance
or whose breach is elsewhere in this Section 11.1 specifically dealt with), the Mortgage,
or any Collateral Document, and continuance of such default or breach for a period of
thirty (30) days after there has been given, by registered or certified mail, to the Company
by the Issuer, the Trustee or the Holder or Holders of a majority in aggregate principal
amount of Bonds then Outstanding, a written notice, stating it is a “Notice of Default,”
specifying such default or breach and requiring it to be remedied; provided, however, that
if the Company shall fail to cure such default which, if begun and prosecuted with due
diligence, cannot be completed within a period of thirty (30) days, then such period shall
be extended to such date as is specified in a Company Certificate as necessary to enable
the Company to begin and complete such cure through the exercise of due diligence;
(C) The abandonment by the Company of the Facilities or any substantial part
thereof, or the operations thereof herein contemplated, continued for a period of five (5)
days after there has been given, by registered or certified mail, written notice to the
Company by the Issuer, the Trustee, or the Holder or Holders of a majority in aggregate
principal amount of Bonds then Outstanding;
(D) The entry of a decree or order by a court having jurisdiction in the
premises adjudging the Company bankrupt or insolvent, or approving as properly filed a
petition seeking reorganization, arrangement, adjustment or composition of or in respect
of the Company under the Federal Bankruptcy Act or any other applicable federal or state
law, or appointing a receiver, liquidator, assignee, trustee, sequestrator (or other similar
official) of the Company or of any substantial part of its property, or the making by it of
an assignment for the benefit of creditors, or the admission by it in writing of its inability
to pay its debts generally as they become due, or the taking of corporate action by the
Company in furtherance of any such action;
(E) Any final judgments, or writs or warrants of attachment or of any similar
processes in an aggregate amount in excess of the greater of $250,000 or two and one-
half percent (2.5%) of the insured value of the Facilities entered or filed against the
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Company or against any of its property and remaining unvacated, unpaid, unbonded,
uninsured or unstayed for a period of thirty (30) days; or
(F) If any representation by the Company herein is false or misleading in any
material respect;
provided, however, that if after any default shall have occurred which does not result in a
nonpayment of principal, premium, if any, or interest on the Bonds, and prior to the Trustee
exercising any of the remedies provided in Section 11.2 hereof, the Company shall have
completely cured such default by depositing with the Trustee sufficient moneys or by performing
such other acts or things in respect of which it may have been in default under this Loan
Agreement, as the Trustee shall determine, then in every such case such default shall be waived,
rescinded and annulled by the Trustee by written notice given to the Company; but no such
waiver, rescission and annulment shall extend to or affect any subsequent default or impair any
right or remedy consequent thereon.
In addition, if the acceleration of the maturity of the Bonds and its consequences shall
have been annulled and rescinded pursuant to, and in accordance with the provisions of, Section
7.02 of the Indenture, the acceleration of all Loan Repayments, Additional Payments and any
other amounts payable hereunder shall likewise be automatically annulled and rescinded, but no
such annulment or rescission shall affect any subsequent default or impair any right or remedy
consequent thereon.
Section 11.2. Remedies. If any Event of Default shall occur and be continuing, the
Trustee may, or if requested in writing by the Holders of a majority of the principal amount of
Bonds then Outstanding shall, exercise one or more of the following remedies:
(A) Declare all Loan Repayments, Additional Payments and any other
amounts payable hereunder to be immediately due and payable (being an amount equal to
that necessary to pay in full the principal of and interest accrued on all Bonds then
Outstanding, assuming acceleration of the Bonds under the Indenture, and to pay all other
amounts payable hereunder and thereunder), whereupon the same shall become
immediately due and payable by the Company;
(B) Exercise any one or more of the remedies specified in Section 2.3 of the
Mortgage or any Collateral Document;
(C) Petition a court of competent jurisdiction for the appointment of a receiver
to take possession of and manage and operate the Facilities for the benefit of the Holders;
or
(D) Take whatever action at law or in equity may appear necessary or
appropriate to collect the Loan Repayments and other amounts then due and thereafter to
become due, or to enforce performance and observance of any obligation, agreement or
covenant of the Company under this Loan Agreement.
In case of any foreclosure or deed in lieu of foreclosure of the property secured by the
Mortgage or any Collateral Document, all Loan Repayments, Additional Payments and any other
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amounts payable hereunder, if not already due pursuant to subsection (A) above, shall
automatically become due and payable.
In addition to the foregoing, the Issuer shall have the right to take whatever action at law
or in equity may appear necessary or appropriate to enforce performance and observance of any
obligation, agreement or covenant of the Company under this Loan Agreement that the Issuer
has not assigned to the Trustee pursuant to the Indenture.
Section 11.3. Manner of Exercise. No remedy herein conferred upon or reserved to the
Trustee or Issuer is intended to be exclusive of any 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, including, among
other remedies, injunctions to restrain violations or attempted violations of any provision of this
Loan Agreement by the Company. 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 and power may be exercised from time to time as often as may be
deemed expedient. In order to entitle the Trustee to exercise any remedy reserved to it in this
Article XI, it shall not be necessary to give any notice, other than such notice as may be herein
expressly required.
Section 11.4. Right of Entry. If the Trustee exercises one of the remedies provided for
in Section 11.2(B) hereof, pursuant to a foreclosure of the Mortgage, the Trustee may then or at
any time thereafter seek the appointment of a court appointed receiver to take possession of the
Mortgaged Property or any portion thereof, and the Company covenants in any such event
peacefully and quietly to yield up and surrender the Mortgaged Property or such portion thereof
to the court-appointed receiver.
Section 11.5. Right to Lease. If the Trustee elects to lease the Mortgaged Property or
any part thereof, it may collect the rents from such lease and apply the same, first, to the payment
of the expense of entry and leasing, and secondly, to the Loan Repayments payable hereunder.
In the event that the proceeds from such lease are not sufficient to pay in full the foregoing, the
Company shall remain and be liable therefor, and the Company promises and agrees to pay the
amount of any such deficiency from time to time and the Trustee may at any time and from time
to time sue and recover judgment for any such deficiency or deficiencies.
Section 11.6. Collection of Indebtedness by the Trustee; Deficiency Judgment. The
Company covenants that, if default is made in any payment, then, upon demand of the Trustee or
Issuer, the Company will pay to the Trustee the whole amount then due and payable with interest
at the respective rates prescribed in the Bonds on overdue principal, premium, if any, and, to the
extent that payment of such interest is legally enforceable, on overdue installments of interest;
and, in addition thereto, will pay to the Trustee or Issuer such further amount as shall be
sufficient to cover the costs and expenses of collection, including the reasonable compensation,
expenses, disbursements and advances of the Issuer and Trustee, its agent and counsel. If the
Company fails to pay such amounts forthwith upon such demand, the Issuer or the Trustee, in its
own name and as trustee of an express trust, shall be entitled to recover judgment against the
Company for the whole amount so due and unpaid.
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The Issuer or the Trustee shall be entitled, if permitted by law, to recover judgment as
aforesaid either before, after or during the pendency of any proceedings for the enforcement of
this Loan Agreement or the foreclosure of the Mortgage or any Collateral Document, and in case
of a sale of the Mortgaged Property, or a portion thereof, or any personal property secured under
any Collateral Document, the Trustee, in its own name and as trustee of an express trust, shall be
entitled to enforce payment of, and to receive, all amounts then remaining due and unpaid and
shall be entitled to recover judgment for any portion of the same remaining unpaid, with interest
as aforesaid.
Any money collected by the Trustee under this Article XI shall be applied as provided in
Section 7.05 of the Indenture.
Section 11.7. Trustee May File Proofs of Claim. In case of the pendency of any
receivership, insolvency, liquidation, bankruptcy, reorganization, arrangement, adjustment,
composition or other judicial proceeding relative to the Company or the property of the
Company, the Trustee shall be entitled and empowered, by intervention in such proceeding or
otherwise,
(A) to file and prove a claim and to file such other papers or documents as
may be necessary or advisable in order to have the claims of the Trustee (including any
claim for the reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel) allowed in such judicial proceeding, and
(B) to collect and receive any moneys or other property payable or deliverable
on any such claims and to distribute the same.
Section 11.8. Restoration of Positions. If the Trustee or any Bondholder has instituted
any proceeding to enforce any right or remedy under this Loan Agreement, the Indenture, the
Mortgage or any Collateral Document, by foreclosure, entry or otherwise, and such proceeding
has been discontinued or abandoned for any reason, or has been determined adversely to the
Trustee or such Bondholder, then and in every such case the Company, the Issuer, the
Bondholders, and the Trustee shall, subject to any determination in such proceeding, be restored
to their former positions hereunder, and thereafter all rights and remedies of the Issuer, the
Bondholders, and the Trustee shall continue as though no such proceeding had been instituted.
Section 11.9. Waiver of Appraisement, Etc., Laws. To the full extent that it may
lawfully so agree, the Company will not at any time insist upon, plead, claim or take the benefit
or advantage of, any appraisement, valuation, stay or extension law now or hereafter in force, in
order to prevent or hinder the enforcement of this Loan Agreement, the Mortgage or any
Collateral Document, or the leasing or sale of the Mortgaged Property, or any part thereof, or the
sale of the personal property secured under any Collateral Document, or the possession of the
Mortgaged Property or any part thereof by any purchaser at any sale; but the Company, for itself
and all who may claim under it, so far as it or they now or hereafter lawfully may, hereby waives
the benefit of all such laws. The Company, for itself and all who may claim under it, waives, to
the extent that it lawfully may, all right to have the property comprising the Mortgaged Property
and any real or personal property secured under any Collateral Document marshalled upon any
foreclosure thereof, and agrees that any court having jurisdiction to foreclose the Mortgage and
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any Collateral Document may order the sale of the Mortgaged Property, or any portion thereof,
and any real or personal property secured under any Collateral Document, as an entirety.
If any law in this Section 11.9 referred to and now in force, of which the Company or its
successor or successors might take advantage despite this Section 11.9, shall hereafter be
repealed or cease to be in force, such law shall not thereafter be deemed to constitute any part of
the contract herein contained or to preclude the application of this Section 11.9.
Section 11.10. Suits to Protect the Security. The Trustee shall have power to institute and
to maintain such proceedings as it may deem expedient to prevent any impairment of the
Mortgaged Property or any portion thereof by any acts which may be unlawful or in violation of
this Loan Agreement, and such suits and proceedings as the Trustee may deem expedient to
protect its interests in the Mortgaged Property or any portion thereof, including power to institute
and maintain proceedings to restrain the enforcement of or compliance with any governmental
enactment, rule or order that may be unconstitutional or otherwise invalid, if the enforcement of,
or compliance with, such enactment, rule or order would impair the security or be prejudicial to
the interests of the Bondholders or the Trustee.
Section 11.11. Agreement to Pay Attorneys’ Fees and Expenses. If the Company defaults
under any provision of this Loan Agreement and the Trustee or the Issuer employs attorneys or
incurs other expenses for the collection of Loan Repayments or the enforcement of performance
or observance of any obligation or agreement on the part of the Company herein contained, the
Company agrees that it will on demand therefor pay to the Trustee or the Issuer the reasonable
fees of such attorneys and such other expenses so incurred by the Trustee or the Issuer; and as
security for the performance of the obligations of the Company under this Section 11.11 the
Trustee shall have a lien prior to the Bonds upon all property and funds held or collected by the
Trustee as such, except funds or investments held in trust for the benefit of the Holders of
particular Bonds.
Section 11.12. Effect of Force Majeure. If by reason of force majeure the Company is
unable in whole or in part to carry out the agreements on its part contained in this Loan
Agreement, other than the obligations of the Company contained in Section 2.2, 2.3, 4.2(E), 7.1,
7.4, or 7.9 hereof, the Company shall not be deemed in breach or violation of any provision of
this Loan Agreement or in default during the continuance of such inability. The term “force
majeure” as used herein means acts of God; strikes or other similar disturbances; acts of public
enemies; rules and regulations promulgated by state or federal agencies; explosions, breakage or
accident to machinery, transmission pipes or canals; landslides, floods, earthquakes, windstorms,
fires and explosions; or partial or entire failure of utilities. The Company agrees, however, to
remedy with all reasonable dispatch the cause or causes preventing the Company from carrying
out its agreements; provided, however, that the settlement of strikes and other similar
disturbances shall be within the reasonable discretion of the Company, and the Company shall
not be required to make settlement of strikes and other similar disturbances by acceding to the
demands of the opposing party or parties when such course is in the reasonable judgment of the
Company not in the best interests of the Company.
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ARTICLE XII
ASSIGNMENTS, LEASES AND OPERATING
ARRANGEMENTS BY THE COMPANY
Section 12.1. No Assignments by Company Except as Permitted. Except as otherwise
provided in this Article XII, the Company shall not, without the prior written consent of the
Trustee, assign its rights or interests under this Loan Agreement.
Section 12.2. Leases and Operating Contracts. The Company may lease any part of the
Facilities, or contract for the performance by others of operations or services on or in connection
with the Facilities, or any part thereof, for any lawful purpose, provided that except for leases to
tenants of the residential units in the Facilities in the ordinary course of business (A) no such
lease or contract shall be inconsistent with the provisions of this Loan Agreement or the
Indenture; (B) the Company shall remain fully obligated and responsible under this Loan
Agreement to the same extent as if such lease or contract had not been executed; (C) no assignee
or lessee shall be allowed to utilize a substantial portion of the Facilities primarily for an activity
which would not itself qualify as furthering the Company’s exempt purposes; (D) in each case
the Company shall determine that the lessee or assignee has sufficient financial responsibility
and technical competence to render services necessary for the operation of independent living,
memory care, and assisted living facilities; and (E) no assignment shall be for security purposes.
In addition, each such lease or contract shall be expressly conditioned upon, and shall by its
terms not be effective until, an opinion of Bond Counsel shall be given to the Company and the
Trustee to the effect that the exemption from federal income tax of the interest on the Tax-
Exempt Bonds shall not be adversely affected by such lease or contract. The foregoing
provisions of this Section 12.2 shall not apply to any lease of the Facilities entered into on or
prior to the date hereof. Whenever any Event of Default shall have happened and for so long as
it shall be subsisting, the Trustee may, by writing addressed to the Company and to any assignee,
lessee or sublessee known to the Trustee, direct that future rents or other moneys due the
Company pursuant to any such lease or assignment be paid directly to the Trustee for deposit in
the Bond Fund, and any lease or assignment shall contain a provision recognizing the rights of
the Trustee in this regard. Any sums received by the Trustee pursuant hereto shall be credited
against the Loan Repayments otherwise due from the Company.
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ARTICLE XIII
MISCELLANEOUS
Section 13.1. Notices. All notices, certificates or other communications hereunder shall
be sufficiently given and shall be deemed given when mailed by first class mail, postage prepaid,
with proper address as indicated below. The Issuer, the Company, the Trustee and the Original
Purchaser may, by written notice given by each to the others, designate any address or addresses
to which notices, certificates or other communications to them shall be sent when required as
contemplated by this Loan Agreement. Until otherwise provided by the respective parties, all
notices, certificates and communications to each of them shall be addressed as follows:
To the Issuer: City of St. Joseph
75 Callaway Street East
St. Joseph, MN 56374
Attention: City Administrator-Clerk
To the Company: Country Manor St. Joseph, LLC
c/o Country Manor
520 First Street NE
Sartell, MN 56377
Attention: Chief Finance Officer
To the Trustee: U.S. Bank National Association
rd
60 Livingston Avenue, 3 Floor
EP-MN-WS3C
St. Paul, MN 55107
Attention: Corporate Trust Department
To the Original Purchaser of the Dougherty & Company LLC
Series 2019 Bonds: 90 South Seventh Street, Suite 4300
Minneapolis, MN 55402
Attention: Public Finance
Section 13.2. Binding Effect. This Loan Agreement shall inure to the benefit of and
shall be binding upon the Issuer and the Company and their respective successors and permitted
assigns. Nothing in this Loan Agreement, express or implied, shall give to any Person, other
than the parties hereto, and their respective successors and permitted assigns hereunder, the
Trustee and the Holders of Bonds, any benefit or other legal or equitable right, remedy or claim
under this Loan Agreement.
Section 13.3. Severability. If any provision of this Loan Agreement shall be held
invalid, illegal or unenforceable by any court of competent jurisdiction, such holding shall not
invalidate or render unenforceable any other provision hereof, and the remaining provisions shall
not in any way be affected or impaired thereby.
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Section 13.4. Effect of Headings and Table of Contents. The Article and Section
headings herein and the Table of Contents are for convenience only and shall not affect the
construction hereof.
Section 13.5. Amendments, Changes and Modifications. Except as otherwise provided
in the Indenture, subsequent to the issuance of the Series 2019 Bonds and before the Indenture is
satisfied and discharged in accordance with its terms, neither this Loan Agreement or the
Mortgage may be effectively amended, changed, modified, altered or terminated nor may any
provision be waived hereunder except in accordance with the provisions of Article X of the
Indenture.
Section 13.6. Execution Counterparts. This Loan Agreement may be simultaneously
executed in several counterparts, each of which shall be an original and all of which shall
constitute but one and the same instrument.
Section 13.7. Construction. This Loan Agreement shall be construed in accordance with
the laws of the State.
Section 13.8. Limitation on Issuer Liability. It is understood and agreed by the
Company and the Holders that no covenant, provision or agreement of the Issuer herein or in the
Bonds or in any other document executed by the Issuer in connection with the issuance, sale and
delivery of the Bonds, or any obligation herein or therein imposed upon the Issuer or breach
thereof, shall give rise to a pecuniary liability of the Issuer or a charge against its general credit
or taxing powers or shall obligate the Issuer financially in any way except with respect to this
Loan Agreement and the application of revenues therefrom and the proceeds of the Bonds. No
failure of the Issuer to comply with any term, condition, covenant or agreement therein shall
subject the Issuer to liability for any claim for damages, costs or other financial or pecuniary
charges except to the extent that the same can be paid or recovered from this Loan Agreement or
revenues therefrom or proceeds of the Bonds. No execution on any claim, demand, cause of
action or judgment shall be levied upon or collected from the general credit, general funds or
taxing powers of the Issuer. In making the agreements, provisions and covenants set forth
herein, the Issuer has not obligated itself except with respect to this Loan Agreement and the
application of revenues hereunder as hereinabove provided. The Bonds constitute special,
limited obligations of the Issuer, payable solely from the revenues pledge to the payment thereof
pursuant to this Loan Agreement and the Indenture, and do not now and shall never constitute an
indebtedness or a loan of the credit of the Issuer, the State or any political subdivision thereof or
a charge against the Issuer’s general taxing powers within the meaning of any constitutional or
statutory provision whatsoever. It is further understood and agreed by the Company and the
Holders that the Issuer shall incur no pecuniary liability hereunder and shall not be liable for any
expenses related hereto. If, notwithstanding the provisions of this Section, the Issuer incurs any
expense, or suffers any losses, claims or damages or incurs any liabilities, the Company will
indemnify and hold harmless the Issuer from the same and will reimburse the Issuer for any legal
or other expenses incurred by the Issuer in relation thereto, and this covenant to indemnify, hold
harmless and reimburse the Issuer shall survive delivery of and payment for the Bonds.
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IN WITNESS WHEREOF, the Issuer and the Company have caused this Loan
Agreement to be executed in their respective corporate names by their duly authorized officers,
all as of the date and year first written above.
CITY OF ST. JOSEPH, MINNESOTA
By ____________________________________
Its Mayor
By ____________________________________
Its City Administrator-Clerk
S-1
11680684v1
Execution page of the Company to the Loan Agreement, dated as of the date and year first
written above.
COUNTRY MANOR ST. JOSEPH, LLC
By ____________________________________
Its ____________________________________
S-2
11680684v1
EXHIBIT A
DESCRIPTION OF THE FACILITIES
The Facilities consist of an approximately 84-unit assisted living and memory care senior
housing and healthcare facility located at 1200 Lanigan Way SW, St. Joseph, Minnesota, to be
acquired by the Company with the proceeds of the Series 2019 Bonds.
A-1
11680684v1
EXHIBIT B
DEBT SUBORDINATION AGREEMENT
This Agreement, dated ___________, 20___, is made by
___________________________ (the “Creditor”), for the benefit of U.S. Bank National
Association, a national banking association (the “Trustee”), as trustee under an Indenture of
Trust, dated as of July 1, 2019, pursuant to which the City of St. Joseph, Minnesota (the “City”)
issued its Bonds (hereinafter defined).
The City loaned the proceeds of the Bonds to the Borrower, pursuant to a Loan
Agreement, dated as of July 1, 2019 (the “Loan Agreement”). The Loan Agreement will be
assigned and pledged to the Trustee by the City for the security of the Bonds.
The Creditor has made or may make loans or grant other financial accommodations to the
Borrower. The Borrower now requires that the Creditor subordinate the payment of the
Creditor’s loans and other financial accommodations to the payment of any and all indebtedness
of the Borrower to the Trustee as provided in the Loan Agreement. Loaning funds and making
other financial accommodations to the Borrower is in the Creditor’s best interest.
ACCORDINGLY, in consideration of the obligation of the Borrower to repay loans or
financial accommodations that may hereafter be made by the Creditor for the benefit of the
Borrower, and for other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the Creditor hereby agrees as follows:
1. Definitions. As used herein, the following terms have the meanings set forth
below:
“Bonds” means, collectively, the (i) Senior Housing and Healthcare Revenue Bonds
(Woodcrest of Country Manor Project), Series 2019A, issued by the City in the original
aggregate principal amount of $22,125,000; (ii) Taxable Senior Housing and Healthcare
Revenue Bonds (Woodcrest of Country Manor Project), Series 2019A-T, issued by the City in
the original aggregate principal amount of $300,000; and (iii) any other bonds issued pursuant to
the Indenture or any supplement thereto, and any bonds or other obligations issued to refund in
whole or part such bonds or issued as part of a series of refundings of such bonds.
“Borrower” means Country Manor St. Joseph, LLC, a Tennessee nonprofit limited
liability company, and any other entity obligated, from time to time, to make payments with
respect to the Bonds. The sole member of the Borrower is The Foundation For Health Care
Continuums, a Tennessee nonprofit corporation.
“Borrower Default” means a Default or Event of Default as defined in the Indenture,
Loan Agreement or any other agreement or instrument evidencing, governing, or issued in
connection with the Bonds, or any default under or breach of any such agreement or instrument.
“Indenture” means the Indenture of Trust, dated as of July 1, 2019, between the City and
the Trustee, as supplemented or amended from time to time and any other instrument pursuant to
which Bonds are issued.
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“Subordinated Indebtedness” means each and every debt, liability and obligation of every
type and description which the Borrower may now or at any time hereafter owe to the Creditor,
whether such debt, liability or obligation now exists or is hereafter created or incurred, and
whether it is or may be direct or indirect, due or to become due, absolute or contingent, primary
or secondary, liquidated or unliquidated, or joint, several or joint and several.
“Trustee Indebtedness” means the Bonds, the Loan Agreement and any other agreement
or instrument evidencing, governing, or issued in connection with the Bonds.
2. Subordination. The payment of all of the Subordinated Indebtedness is hereby
expressly subordinated to the extent and in the manner hereinafter set forth to the payment in full
of the Trustee Indebtedness; and regardless of any priority otherwise available to the Creditor by
law or by agreement, the Trustee shall hold a first security interest in all collateral securing
payment of the Trustee Indebtedness (the “Collateral”), and any security interest claimed therein
(including any proceeds thereof) by the Creditor shall be and remain fully subordinate for all
purposes to the security interest of the Trustee therein for all purposes whatsoever.
3. Payments. Until all of the Trustee Indebtedness has been paid in full, the Creditor
shall not without the Trustee’s prior written consent, demand, receive or accept any payment
(whether of principal, interest or otherwise) from the Borrower in respect of the Subordinated
Indebtedness, or exercise any right of or permit any setoff in respect of the Subordinated
Indebtedness, except that the Creditor may accept payments of principal and interest required to
be paid with respect to any Subordinated Indebtedness, so long as no Borrower Default has
occurred and is continuing or will occur as a result of or immediately following any such
payment to the extent that the payment thereof does not cause a Borrower Default to occur.
4. Receipt of Prohibited Payments. If the Creditor receives any payment on the
Subordinated Indebtedness that the Creditor is not entitled to receive under the provisions of this
Agreement, the Creditor will hold the amount so received in trust for the Trustee and will
forthwith turn over such payment to the Trustee in the form received (except for the endorsement
of the Creditor where necessary) for application to then existing Trustee Indebtedness (whether
or not due), in such manner of application as the Trustee may deem appropriate. If the Creditor
exercises any right of setoff which the Creditor is not permitted to exercise under the provisions
of this Agreement, the Creditor will promptly pay over to the Trustee, in immediately available
funds, an amount equal to the amount of the claims or obligations offset. If the Creditor fails to
make any endorsement required under this Agreement, the Trustee, or any of its officers or
employees or agents on behalf of the Trustee, is hereby irrevocably appointed as the attorney-in-
fact (which appointment is coupled with an interest) for the Creditor to make such endorsement
in the Creditor’s name.
5. Action on Subordinated Debt. The Creditor will not commence any action or
proceeding against the Borrower to recover all or any part of the Subordinated Indebtedness, or
join with any creditor (unless the Trustee shall so join) in bringing any proceeding against the
Borrower under any bankruptcy, reorganization, readjustment of debt, arrangement of debt
receivership, liquidation or insolvency law or statute of the federal or any state government, or
take possession of, sell, or dispose of any Collateral, or exercise or enforce any right or remedy
available to the Creditor with respect to any such Collateral. The Creditor hereby represents that
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it shall not release, at any time, directly or indirectly, any security (other than the Collateral) or
guarantee that secures payment of the Subordinated Indebtedness.
6. Foreclosure of Collateral by Trustee. Notwithstanding any security interest now
held or hereafter acquired by the Creditor, the Trustee may take possession of, sell, dispose of,
and otherwise deal with all or any part of the Collateral, and may enforce any right or remedy
available to it with respect to the Collateral, all without notice to or consent of the Creditor
except as specifically required by applicable law. The Trustee shall have no duty to preserve,
protect, care for, insure, take possession of, collect, dispose of, or otherwise realize upon any of
the Collateral, and in no event shall the Trustee be deemed the Creditor’s agent with respect to
the Collateral. All proceeds received by the Trustee with respect to any Collateral may be
applied, first, to pay or reimburse the Trustee for all costs and expenses (including reasonable
attorneys’ fees) incurred by the Trustee in connection with the collection of such proceeds, and,
second, to any indebtedness secured by the Trustee’s security interest in that Collateral in any
order that it may choose.
7. Bankruptcy and Insolvency. In the event of any receivership, insolvency,
bankruptcy, assignment for the benefit of creditors, reorganization or arrangement with creditors,
whether or not pursuant to bankruptcy law, the sale of all or substantially all of the assets of the
Borrower, dissolution, liquidation or any other marshaling of the assets or liabilities of the
Borrower, the Creditor will file all claims, proofs of claim or other instruments of similar
character necessary to enforce the obligations of the Borrower in respect of the Subordinated
Indebtedness and will hold in trust for the Trustee and promptly pay over to the Trustee in the
form received (except for the endorsement of the Creditor where necessary) for application to the
then existing Trustee Indebtedness, any and all moneys, dividends or other assets received in any
such proceedings on account of the Subordinated Indebtedness, unless and until the Trustee
Indebtedness has been paid in full. If the Creditor shall fail to take any such action, the Trustee,
as attorney-in-fact for the Creditor, may take such action on the Creditor’s behalf. The Creditor
hereby irrevocably appoints the Trustee, or any of its officers or employees on behalf of the
Trustee, as the attorney-in-fact for the Creditor (which appointment is coupled with an interest)
with the power but not the duty to demand, sue for, collect and receive any and all such moneys,
dividends or other assets and give acquittance therefor and to file any claim, proof of claim or
other instrument of similar character, to vote claims comprising Subordinated Indebtedness to
accept or reject any plan of partial or complete liquidation, reorganization, arrangement,
composition or extension and to take such other action in the Trustee’s own name or in the name
of the Creditor as the Trustee may deem necessary or advisable for the enforcement of the
agreements contained herein; and the Creditor will execute and deliver to the Trustee such other
and further powers-of-attorney or instruments as the Trustee may request in order to accomplish
the foregoing.
8. Restrictive Legend: Transfer of Subordinated Indebtedness. The Creditor will
cause all notes, bonds, debentures or other instruments evidencing the Subordinated
Indebtedness or any part thereof to contain a specific statement thereon to the effect that the
indebtedness thereby evidenced is subject to the provisions of this Agreement, and the Creditor
will mark its books conspicuously to evidence the subordination effected hereby. At the request
of the Trustee, the Creditor shall deposit with the Trustee all of the notes, bonds, debentures or
other instruments evidencing the Subordinated Indebtedness, which notes, bonds, debentures or
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other instruments may be held by the Trustee so long as any Trustee Indebtedness remains
outstanding. Without the prior written consent of the Trustee, the Creditor will not assign,
transfer or pledge to any other person any of the Subordinated Indebtedness or agree to a
discharge or forgiveness of the same so long as there remains outstanding any of the Trustee
Indebtedness.
9. Continuing Effect. This Agreement shall constitute a continuing agreement of
subordination, and the Trustee may, subject to the provisions of the Indenture and the Loan
Agreement and without notice to or consent by the Creditor, modify any term of the Trustee
Indebtedness in reliance upon this Agreement. Without limiting the generality of the foregoing,
the Trustee may, at any time and from time to time, either before or after receipt of any such
notice of revocation, without the consent of or notice to the Creditor and without incurring
responsibility to the Creditor or impairing or releasing any of the Trustee’s rights or any of the
Creditor’s obligations hereunder:
(a) change the interest rate or change the amount of payment or extend the
time for payment or renew or otherwise alter the terms of any Trustee Indebtedness or
any instrument evidencing the same in any manner;
(b) sell, exchange, release or otherwise deal with any property at any time
securing payment of the Trustee Indebtedness or any part thereof;
(c) release anyone liable in any manner for the payment or collection of the
Trustee Indebtedness or any part thereof;
(d) exercise or refrain from exercising any right against the Borrower or any
other person (including the Creditor); and
(e) apply any sums received by the Trustee, by whomsoever paid and
however realized, to the Trustee Indebtedness in such manner as the Trustee shall deem
appropriate.
10. Notice. All notices and other communications hereunder shall be in writing and
shall be (i) personally delivered, (ii) transmitted by registered mail, postage prepaid, or (iii)
transmitted by telecopy, in each case addressed to the party to whom notice is being given at its
address as set forth below:
If to the Creditor:
Telecopier:
Attention:
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11680684v1
If to the Trustee:
U.S. Bank National Association
rd
60 Livingston Avenue, 3 Floor
EP-MN-WS3C
St. Paul, MN 55107
Telecopier: (651) 495-8096
Attention: Corporate Trust Department
or at such other address as may hereafter be designated in writing by that party. All such notices
or other communications shall be deemed to have been given on (i) the date received if delivered
personally, (ii) the date of posting if delivered by mail, or (iii) the date of transmission if
delivered by telecopy.
11. Conflict in Agreements. If the subordination provisions of any instrument
evidencing Subordinated Indebtedness conflict with the terms of this Agreement the terms of this
Agreement shall govern the relationship between the Trustee and the Creditor.
12. No Waiver. No waiver shall be deemed to be made by the Trustee of any of its
rights hereunder unless the same shall be in writing signed on behalf of the Trustee, and each
such waiver, if any, shall be a waiver only with respect to the specific matter or matters to which
the waiver relates and shall in no way impair the rights of the Trustee or the obligations of the
Creditor to the Trustee in any other respect at any time.
13. Governing Law; Consent to Jurisdiction and Venue; Waiver of Jury Trial. This
Agreement shall be governed by and construed in accordance with the substantive laws (other
than conflict laws) of the State of Minnesota. Each party consents to the personal jurisdiction of
the state and federal courts located in the State of Minnesota in connection with any controversy
related to this Agreement, waives any argument that venue in any such forum is not convenient.
The parties waive any right to trial by jury in any action or proceeding based on or pertaining to
this Agreement.
14. Binding Effect; Acceptance. This Agreement shall be binding upon the Creditor
and the Creditor’s successors and assigns and shall inure to the benefit of the Trustee and its
participants, successor and assigns irrespective of whether this or any similar agreement is
executed by any other creditor of the Borrower. Notice of acceptance by the Trustee of this
Agreement or of reliance by the Trustee upon this Agreement is hereby waived by the Creditor.
15. Miscellaneous. The paragraph headings herein are included for convenience of
reference only and shall not constitute a part of this Agreement for any other purpose. This
Agreement may be executed in any number of counterparts, each of which shall be an original,
but all of which together shall constitute one instrument.
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IN WITNESS WHEREOF, the Creditor has executed this Agreement as of the date and
year first above-written.
, as Creditor
By
Its
Acknowledgment by Borrower
WITH RESPECT TO THE ABOVE SUBORDINATION AGREEMENT, THE BORROWER
HEREBY:
(1) acknowledges receipt of a copy thereof; (2) agrees to all of the terms and provisions thereof;
(3) agrees to and with the Trustee that it shall make no payment on the Subordinated
Indebtedness that the Creditor would not be entitled to receive under the provisions of the
Agreement; and (4) agrees that any such payment will constitute a default under the Trustee
Indebtedness.
Country Manor St. Joseph, LLC, as Borrower
By
Its
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Second Draft
Wednesday, May 15, 2019
LIMITED GUARANTY AGREEMENT
BY AND BETWEEN
THE FOUNDATION FOR HEALTH CARE CONTINUUMS,
as Guarantor
AND
U.S. BANK NATIONAL ASSOCIATION,
as Trustee
Dated as of July 1, 2019
Relating to:
$________ $________
City of St. Joseph, Minnesota City of St. Joseph, Minnesota
Senior Housing and Healthcare Revenue Bonds Taxable Senior Housing and Healthcare Revenue Bonds
(Woodcrest of Country Manor Project) (Woodcrest of Country Manor Project)
Series 2019A Series 2019A-T
This instrument drafted by:
Ballard Spahr LLP (BWJ)
2000 IDS Center
th
80 South 8 Street
Minneapolis, Minnesota 55402
LIMITED GUARANTY AGREEMENT
This Limited Guaranty Agreement (this “Limited Guaranty”) is made and entered into as of
July 1, 2019 by and between The Foundation For Health Care Continuums, a Tennessee nonprofit
corporation (the “Guarantor” or “FHCC”), and U.S. Bank National Association, in St. Paul, Minnesota, as
Trustee (the “Trustee”).
WHEREAS, the City of St. Joseph, Minnesota (the “Issuer”) is making a loan of the proceeds of
its (i) Senior Housing and Healthcare Revenue Bonds (Woodcrest of Country Manor Project), Series
2019A (the “Series 2019A Bonds”), in the original aggregate principal amount of $_________, and
(ii) Taxable Senior Housing and Healthcare Revenue Bonds (Woodcrest of Country Manor Project),
Series 2019A-T (the “Series 2019A-T Bonds,” and together with the Series 2019A Bonds, the “Series
2019 Bonds”), in the original aggregate principal amount of $_________, to Country Manor St. Joseph,
LLC, a Tennessee nonprofit limited liability company (the “Company”), whose sole member is FHCC;
and
WHEREAS, the Series 2019 Bonds are issued by the Issuer and the proceeds thereof loaned by
the Issuer to the Company under a Loan Agreement, dated as of July 1, 2019 (the “Loan Agreement”),
between the Issuer and the Company; and
WHEREAS, the proceeds of the Series 2019 Bonds, along with funds of the Company, will be
used in order to: (i) finance the acquisition of an approximately 84-unit assisted living and memory care
senior housing and healthcare facility comprised of a 24-unit memory care facility and a 60-unit assisted
living facility (the “Project”), located at 1200 Lanigan Way Southwest in St. Joseph, Minnesota; (ii) fund
required reserves for the Series 2019 Bonds; and (iii) pay the costs of issuance for the Series 2019 Bonds;
and
WHEREAS, pursuant to an Indenture of Trust, dated as of July 1, 2019 (the “Indenture”),
between the Issuer and the Trustee, the Issuer has issued the Series 2019 Bonds and assigned its rights
and interests in the Loan Agreement (except for the Issuer’s unassigned rights) to the Trustee, including
the right to receive Loan Repayments; and
WHEREAS, the Loan Agreement requires the Company to pay Loan Repayments in amounts and
at times sufficient to pay the principal of, purchase price of, and interest on the Series 2019 Bonds when
due; and
WHEREAS, Dougherty & Company LLC (the “Underwriter”), as the purchaser of the Series
2019 Bonds, has required that the Guarantor secure the obligation of the Company to repay the principal,
purchase price of and interest on the Series 2019 Bonds by entering into this Limited Guaranty; and
WHEREAS, the Guarantor desires that the Issuer issue its Series 2019 Bonds and apply the
proceeds thereof as outlined above.
NOW, THEREFORE, in consideration of the Issuer entering into the Loan Agreement, as an
inducement to the Issuer to issue, sell and deliver the Series 2019 Bonds, as an inducement to the
Underwriter to purchase the Series 2019 Bonds, as an inducement to the future purchasers and Holders of
any of the Series 2019 Bonds to buy the Series 2019 Bonds, and to permit and enhance the marketability
of the Series 2019 Bonds, and thereby achieve a reduction in the interest cost thereon, the Guarantor,
subject to the terms hereof, covenants and agrees with the Trustee, for the benefit of all who at any time
become Holders of the Series 2019 Bonds, as follows:
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ARTICLE 1
REPRESENTATIONS AND WARRANTIES OF GUARANTOR
Section 1.1 The Guarantor warrants and represents as follows:
(1) The Guarantor is a nonprofit corporation duly organized and in good standing
under the laws of the State of Tennessee, and by proper action has authorized the execution and
delivery of this Limited Guaranty;
(2) The Guarantor is an organization described in Section 501(c)(3) of the Internal
Revenue Code of 1986, as amended (the “Code”), exempt from federal income taxes under
Section 501(a) of the Code;
(3) The execution and delivery of this Limited Guaranty, the consummation of the
transactions contemplated hereby, and the fulfillment of the terms and conditions hereof, do not
conflict with or result in a breach of any of the terms and conditions of its articles of
incorporation, its bylaws or to its knowledge any restriction, agreement, instrument, indenture,
mortgage, deed of trust, indebtedness, judgment, decree, order, statute, rule or regulation to which
the Guarantor is a party or by which any of its property is bound or result in the creation or
imposition of any lien, charge or encumbrance of any nature upon the property or assets of the
Guarantor contrary to the terms of any instrument or agreement;
(4) The Guarantor will maintain its existence as an organization described in Section
501(c)(3) of the Code and will not consolidate with or merge into another corporation, association
or entity or permit any other corporation, association or entity to consolidate with or merge into it,
unless (i) the surviving, resulting or transferee corporation, association or other entity (the
“Transferee”), as the case may be, if other than the Guarantor, assumes in writing all of the
obligations of the Guarantor under this Limited Guaranty and is a nonprofit corporation and an
organization described in Section 501(c)(3) of the Code, (ii) the net worth of the Transferee is at
least 100% of that of the Guarantor immediately prior to such merger or consolidation as
evidenced by a certificate based on Guarantor’s audited financial statements delivered to the
Trustee, (iii) the Guarantor further certifies in writing to the Trustee that such action will not
result in a default under any indenture of trust, loan agreement or other instrument by which the
Guarantor is bound, and (iv) the Transferee certifies in writing to the Trustee that such action will
not result in a default under any indenture of trust, loan agreement, or other instrument or
agreement by which the Transferee is bound. In the event of such consolidation or merger as
permitted under this Section 1.1(4), the Guarantor may be relieved of its obligations under this
Limited Guaranty; and
(5) The Company and the Guarantor (i) make up a related organization of various
entities constituting a related economic and business enterprise so that the Company and the
Guarantor share an identity of interests such that any benefit received by any one of them benefits
the others; (ii) the Company and the Guarantor render services for the benefit of one another,
purchase or sell and supply goods to or from or for the benefit of one another, make loans,
advances and provide other financial accommodations to or for the benefit of one another; (iii) in
some cases, the Company and the Guarantor have centralized accounting and operational service
and common officers and directors; and (iv) while the Company and the Guarantor operate as a
related economic enterprise, nothing contained in this subsection shall be construed or imply that
the Company and the Guarantor are not separate legal entities.
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ARTICLE 2
COVENANTS AND AGREEMENTS OF GUARANTOR
Section 2.1 Subject to Article 4 hereof, the Guarantor guarantees to the Trustee for the
benefit of the Holders of the Series 2019 Bonds the following (collectively, the “Secured Obligations”):
(1) the full and prompt payment of the principal of the Series 2019 Bonds when and
as the same shall become due, whether at the stated maturity thereof by acceleration, call for
redemption or otherwise;
(2) the full and prompt payment of any interest on the Series 2019 Bonds when and
as the same shall become due; and
(3) the full and prompt payment of the Loan Repayments and the Additional
Payments required to be made by the Company under the terms of the Loan Agreement.
This Limited Guaranty runs for the sole and exclusive benefit of the Trustee on behalf of the
Holders of the Series 2019 Bonds and does not run to the benefit of the Trustee on behalf of the holders of
any other series of bonds issued under any other indenture.
Section 2.2 In the event payment is not made with respect to any of the Secured Obligations,
the Guarantor shall upon written demand of the Trustee forthwith pay all such sums in default and, to the
extent permitted by law, interest on any overdue payments, and, in addition thereto, such further amount
as shall be sufficient to cover the costs and expenses of collection, including the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents and counsel. All
payments by the Guarantor shall be paid in lawful money of the United States of America and shall be
made directly to the Trustee and applied in accordance with the terms of the Indenture. Each and every
default in payment of the Secured Obligations shall give rise to a separate cause of action hereunder, and
separate suits may be brought hereunder as each cause of action arises.
Section 2.3 If the Guarantor fails to perform or observe the terms and conditions of this
Limited Guaranty, the Guarantor agrees to pay the full amount of all costs, expenses and fees, including
all reasonable attorneys’ fees which may be incurred by the Trustee in enforcing or attempting to enforce
this Limited Guaranty against the Guarantor.
Section 2.4 Each obligation of the Guarantor under this Limited Guaranty to pay the Secured
Obligations, to pay all other sums due hereunder and to perform and observe all other covenants and
obligations herein (i) is a joint and several obligation, and (ii) shall arise absolutely and unconditionally
when the Series 2019 Bonds shall have been issued, sold, and delivered by the Issuer and the proceeds
thereof paid to the Trustee. Such obligations shall not be affected, modified or impaired upon the
happening from time to time of any event, including without limitation, any of the following:
(1) the compromise, settlement, release or termination of any or all of the
obligations, covenants or agreements of the Issuer or the Company under the Series 2019 Bonds,
the Loan Agreement or any collateral documents;
(2) the failure to give notice to the Guarantor of the occurrence of an Event of
Default under the terms and provisions of this Limited Guaranty, or any event of default under
the Series 2019 Bonds, the Loan Agreement or any collateral document;
3
(3) the waiver by the Trustee, or Issuer of the payment, performance or observance
by the Issuer, the Company or the Guarantor of any of the obligations, covenants or agreements
of any of them contained in the Series 2019 Bonds, this Limited Guaranty or any collateral
document;
(4) to the extent permitted and in accordance with the terms of the Indenture, any
extension by the Trustee of the time for payment of principal of, premium, if any, or interest on,
the Series 2019 Bonds, or of the time for performance of any other obligation, covenant or
agreement arising out of the Series 2019 Bonds, this Limited Guaranty or any collateral document
or any extension or renewal thereof;
(5) the modification or amendment (whether material or otherwise) of any
obligation, covenant or agreement set forth in the collateral documents or in the Series 2019
Bonds, or the securing of any other guarantee, collateral or security to further secure the Series
2019 Bonds or any other obligation secured by this Limited Guaranty;
(6) any failure, omission, delay or lack on the part of the Issuer or Trustee to enforce,
assert or exercise any right, power or remedy conferred on the Issuer or Trustee in this Limited
Guaranty, the Series 2019 Bonds, the Loan Agreement, or any other act on the part of the Issuer,
Trustee or any of the Holders from time to time of the Series 2019 Bonds;
(7) to the extent permitted by law, the voluntary or involuntary liquidation,
dissolution, sale or other disposition of all or substantially all the assets, marshalling of assets and
liabilities, receivership, insolvency, bankruptcy, assignment for the benefit of creditors,
reorganization, arrangement, composition with creditors or readjustment of, or other similar
proceedings affecting the Guarantor, the Company or the Issuer, or any of the assets of any of
them, or any allegation or contest of the validity of this Limited Guaranty in any such proceeding;
(8) to the extent permitted by law, the release or discharge, voluntarily or by
operation of law, of the Company or any other obligor or guarantor from the performance or
observance of any obligation, covenant or agreement contained in the Loan Agreement;
(9) the default or failure of the Guarantor to fully perform any of its obligations set
forth in this Limited Guaranty;
(10) except as contemplated by the Mortgage, the assignment or mortgaging or the
purported assignment or mortgaging of all or any part of the interest of the Company in the
Project or any failure of title with respect to the Company’s interest therein; or
(11) to the extent permitted by law, any determination of the illegality, invalidity or
unenforceability of the Series 2019 Bonds, any collateral document or this Limited Guaranty or
any of the provisions thereof and any prohibition by operation of law against enforcing the claim
against the Company or any other obligor.
Section 2.5 The Guarantor expressly waives: (1) notice of any of the matters referred to in
Section 2.4 of this Limited Guaranty; (2) except as specified in Section 2.2 herein, any demand, proof of
notice of nonpayment of any of the Secured Obligations or the occurrence of an Event of Default under
any of the collateral documents, and (3) notice from the Trustee or the Holders from time to time of any
of the Series 2019 Bonds of their acceptance of and reliance on this Limited Guaranty.
4
Section 2.6 No set-off, counterclaim, reduction or diminution of any obligation, or any
defense of any kind or nature which the Guarantor has or may have against the Trustee shall be available
hereunder to the Guarantor against the Trustee or Bondholders.
Section 2.7 It is expressly understood and agreed that the officers, directors, employees or
agents of the Guarantor shall not be personally liable under this Limited Guaranty. This limitation clause
shall not be deemed to release the obligations of the Guarantor hereunder nor to limit the right of the
Trustee to enforce this Limited Guaranty against the Guarantor.
Section 2.8 The Guarantor agrees that as soon as practicable, but in no event later than the
timing required under the Continuing Disclosure Agreement, dated as of July 1, 2019 (the “Disclosure
Agreement”), between the Company and U.S. Bank National Association, as dissemination agent, to
provide the Company with the financial reports of the Guarantor required under the Disclosure
Agreement.
ARTICLE 3
DEFAULT PROVISIONS AND REMEDIES
Section 3.1 Each of the following shall constitute an Event of Default hereunder:
(1) if the Guarantor fails to pay to the Trustee any sums required to be paid by it
under this Limited Guaranty, and such default has continued for a period of five (5) days; or
(2) if the Guarantor fails to observe and perform or breaches any other covenant,
condition or agreement of this Limited Guaranty for a period of thirty (30) days after receipt of a
written demand from the Trustee specifying such default or breach and requesting that it be
remedied, or in the case of any such default or breach which cannot with due diligence be cured
within such thirty (30) day period, failure of the Guarantor to proceed promptly to cure the same
and thereafter prosecute the curing of such default with due diligence;
(3) if Guarantor shall
(a) file a petition in bankruptcy or for any reorganization, arrangement,
composition, readjustment, liquidation, dissolution or similar relief under any present or
future federal bankruptcy act or under any similar federal or state law; or
(b) make an assignment for the benefit of the Guarantor’s creditors; or
(c) admit in writing the Guarantor’s inability to pay its debts generally as
they become due; or
(d) be adjudicated a bankrupt or insolvent; or if a petition or answer
proposing the adjudication of Guarantor, as bankrupt or its reorganization under any
present or future federal bankruptcy act or any similar federal or state law shall be filed in
any court and such petition or answer shall not be discharged or denied within ninety (90)
days after the filing thereof or a receiver, trustee or liquidator of Guarantor, shall be
appointed in any proceeding brought against Guarantor, and not discharged within ninety
(90) days after such appointment, or if Guarantor, shall consent to or acquiesce in such
appointment; or
5
(4) if any representation or warranty made by Guarantor herein or in any document
or certificate furnished the Trustee, the Issuer, or the Underwriter, in connection herewith or
therewith or pursuant hereto or thereto shall prove at any time to be, in any material respect,
incorrect or misleading as of the date made; or
(5) the articles of incorporation of Guarantor shall expire or be annulled; or if
Guarantor shall be dissolved or liquidated (other than when a new entity assumes the obligations
of Guarantor under the conditions permitting such action contained in Section 1.1).
Each and every default in payment of the Secured Obligations shall give rise to a separate Event
of Default hereunder, and the Trustee may exercise any of the remedies hereunder as each Event of
Default arises.
Section 3.2 If an Event of Default occurs, the Trustee may, and upon the election of the
Holders of the Series 2019 Bonds as required by Section 7.02 of the Indenture shall, accelerate the
repayment of the Series 2019 Bonds under the Indenture and (a) declare all amounts necessary to pay in
full all Outstanding Bonds and the interest thereon and any premium and all other indebtedness
thereunder to be due and payable, (b) institute a judicial proceeding for the collection of the sums so due
and unpaid, and prosecute such proceeding to judgment or final decree, (c) subject to Article 4 hereof
enforce the same against the Guarantor or any other obligor upon the Loan, and (d) collect the moneys
adjudged or decreed to be payable in the manner provided by law out of the property of the Guarantor or
any other obligor upon the Loan, wherever situated. The Trustee shall have the right to proceed first and
directly against the Guarantor under this Limited Guaranty without pursuing any other remedies which it
may have and without resorting to any other security held by the Issuer or the Trustee.
Section 3.3 In the event a right of action or claim has arisen under this Limited Guaranty, in
case of the pendency of any receivership, insolvency, liquidation, bankruptcy, reorganization,
arrangement, adjustment, composition or other judicial proceeding relative to the Guarantor or its
property, the Trustee shall be entitled and empowered, by intervention in such proceeding or otherwise,
(1) to file and prove a claim for the whole amount of the Secured Obligations and to
file such other papers or documents as may be necessary or advisable in order to have the claims
of the Trustee (including any claim for the reasonable compensation, expenses, disbursements
and advances of the Trustee, its agents, and counsel) allowed in such judicial proceeding, and
(2) to collect and receive any money or other property payable or deliverable on any
such claims and to distribute the same;
and any receiver, assignee, trustee, liquidator, sequestrator (or other similar official) in any such judicial
proceeding is authorized to make such payments to the Trustee for the reasonable compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel. Nothing contained herein
shall be deemed to permit the Trustee to authorize or consent to or accept or adopt on behalf of any
Bondholder any plan of reorganization, arrangement, adjustment or composition affecting the Series 2019
Bonds or the rights of any Holder thereof, or to authorize the Trustee to vote in respect of the claim of any
Bondholder in any such proceeding.
Section 3.4 No remedy herein conferred upon or reserved to the Trustee is intended to be
exclusive of any other available remedy, but each and every such remedy shall be cumulative and shall be
in addition to every other remedy given under this Limited Guaranty or now or hereafter existing at law or
in equity. No delay or omission to exercise any right or power accruing upon any default, omission or
failure of performance hereunder shall impair any such right or power or shall be construed to be a waiver
6
thereof, but any such right and power may be exercised from time to time and as often as may be deemed
expedient. In order to entitle the Trustee to exercise any remedy reserved to it in this Limited Guaranty, it
shall not be necessary to give any notice, other than such notice as may be herein expressly required,
provided that demand for payment hereunder has been made by the Trustee. In the event any provision
contained in this Limited Guaranty should be breached by the Guarantor and thereafter duly waived by
Trustee, such waiver shall not be deemed to waive any other breach hereunder. The Trustee is not
required to advance its own funds.
Section 3.5 The Guarantor agrees to pay all the costs, expenses and fees (including all
reasonable attorneys’ fees) which may be incurred by the Trustee in enforcing or attempting to enforce
this Limited Guaranty following any Event of Default hereunder, whether the same is enforced by suit or
otherwise.
Section 3.6 Performance by the Guarantor shall not entitle it to be subrogated to any of the
Secured Obligations or any security therefor unless the outstanding principal and premium, if any, and
interest on the Series 2019 Bonds has been paid in full. The Guarantor agrees that it will not exercise or
enforce any right of contribution, reimbursement, recourse or subrogation available to it as to any of the
Secured Obligations, or against any person liable therefor unless and until all the Secured Obligations
shall have been fully paid and discharged. Any payments by the Guarantor shall not entitle the Guarantor
to participate in any security for the Series 2019 Bonds, to any right to direct application of such funds or
to disposition of such security or enforcement of such security.
ARTICLE 4
TERMINATION
This Limited Guaranty terminates if: (i) there is delivered to the Trustee a certificate or report of
an Independent certified public accountant (or firm) to the effect that, based upon the audited financial
statements of the Company for the most recent Audited Fiscal Year, the Company’s Net Revenues
Available for Debt Service for such Fiscal Year (specifically including the Management Fees as an
operating expense) was not less than 1.25:1.00 of Principal and Interest Requirements on Long-Term
Indebtedness for the Fiscal Year; and (ii) the Company Representative certifies, on behalf of the
Company, that at the time of release of this Limited Guaranty that (a) no default has occurred and is
continuing under the terms of the Loan Agreement, (b) the Company previously had 45 days Cash on
Hand as of the end of the most recent Audited Fiscal Year, and (c) the occupancy rate of the Project (I) at
the end of the most recent Fiscal Year was equal to or greater than 90% and (II) as of the date of the
certificate is equal to or greater than 90%. Notwithstanding the foregoing, this Limited Guaranty will not
terminate unless the Debt Service Reserve Fund is fully funded and no Event of Default has occurred and
is continuing under the Indenture, the Loan Agreement, or the Mortgage. The Trustee shall execute a
written release of this Limited Guaranty if the foregoing conditions are met by the Company.
Notwithstanding the requirements of the immediately preceding paragraph, this Limited Guaranty
shall also terminate upon the payment in the aggregate of $1,250,000 by the Guarantor with respect to the
Series 2019 Bonds. The maximum aggregate amount payable by the Guarantor hereunder (other than
with respect to fees and the costs of collection by the Trustee for which there shall not be a cap) is
$1,250,000.
ARTICLE 5
RIGHTS AND RESPONSIBILITIES OF TRUSTEE
Section 5.1 The Trustee undertakes to perform such duties and only such duties as are
specifically set forth in this Limited Guaranty, and no implied covenants or obligations shall be read into
7
this Limited Guaranty against the Trustee. In case an Event of Default under Section 3.1 has occurred
and is continuing, the Trustee shall exercise the rights and powers vested in it by this Limited Guaranty
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 their affairs. No provision of this Limited Guaranty shall be
construed to relieve the Trustee from liability for its own negligent acts, its own negligent failure to act or
its own willful misconduct.
Section 5.2 The Trustee shall have the right to proceed directly against the Guarantor under
this Limited Guaranty whether or not the Trustee is first proceeding against any person, firm or
corporation or exhausting any other remedies which it may have under the Series 2019 Bonds or any
collateral document, and without resorting to any other security held by the Trustee or the Issuer, upon the
occurrence of any event of default under the Series 2019 Bonds, the Loan Agreement or any collateral
document.
Section 5.3 All remedies, actions and claims under this Limited Guaranty or the Series 2019
Bonds may be exercised, prosecuted and enforced by the Trustee without the possession of the Series
2019 Bonds or the production thereof in any proceeding relating thereto, and any such proceeding
instituted by the Trustee shall be brought in its own name as trustee of an express trust, and any recovery
of judgment, after provision for the payment of the reasonable compensation, expenses, disbursements
and advances of the Trustee, its agents and counsel, shall be for the benefit of the Holders of the Series
2019 Bonds in respect of which such judgment has been recovered. The Trustee is not required to
advance its own funds.
Section 5.4 No waiver, amendment, release or modification of this Limited Guaranty shall be
established by conduct, custom or course of dealing, but solely by an instrument in writing duly executed
by the parties hereto.
ARTICLE 6
MISCELLANEOUS
Section 6.1 This Limited Guaranty constitutes the entire agreement, and supersedes all prior
agreements and understandings, both written and oral, between the parties with respect to the subject
matter hereof and may be executed simultaneously in several counterparts, each of which shall be deemed
an original, and all of which together shall constitute one and the same instrument.
Section 6.2 If the Trustee has instituted any proceeding to enforce any right or remedy under
this Limited Guaranty and such proceeding has been discontinued or abandoned for any reason, or has
been determined adversely to the Trustee, then and in every such case the Guarantor and the Trustee shall,
subject to any determination in such proceeding, be restored to their former positions hereunder, and
thereafter all rights and remedies of the Trustee shall continue as though no such proceeding had been
instituted.
Section 6.3 The Guarantor irrevocably: (1) agrees that any suit, action or other legal
proceeding arising out of this Limited Guaranty may be brought in the courts of the State of Minnesota
(the “State”) or the courts of the United States for the State of Minnesota; (2) consents to the jurisdiction
of each such court in any suit, action or proceeding; and (3) waives any objection which it may have to
the laying of the venue of any suit, action or proceeding in any of such courts. For such time as the Series
2019 Bonds and interest thereon shall be unpaid in whole or in part, the Guarantor irrevocably agrees to
maintain an office or agent in Minnesota, where it will accept and acknowledge on its behalf service of
process in any such suit, action or proceeding brought in any such court; and for such purpose the
8
Guarantor designates as such agent the \[President, Chief Executive Officer, or Chief Financial Officer\] of
the Guarantor, provided that the Guarantor may hereafter select another or an alternative agent for such
purpose by giving written notice of such selection to the Trustee. The Guarantor further agrees and
consents that any such service of process upon it shall be taken and held to be valid personal service upon
it whether or not the Guarantor shall then be doing or at any time shall have done, business within the
State and that any such service of process shall be of the same force and validity as if service were made
upon it according to the laws governing the validity and requirements of such service in such state, and
waives all claim or error by reason of any such service, provided that a copy of such notice shall be
mailed by registered or certified mail to the Guarantor at its address on file with the Trustee.
Section 6.4 The invalidity or unenforceability of any one or more phrases, sentences, clauses
or sections in this Limited Guaranty shall not affect the validity or enforceability of the remaining portion
of this Limited Guaranty, or any part thereof.
Section 6.5 This Limited Guaranty is intended to be interpreted in accordance with and
governed by the laws of the State.
Section 6.6 Any capitalized words or phrases in this Limited Guaranty and not defined herein
shall have the meanings granted to them in the Indenture or the Loan Agreement.
Section 6.7 Any notice, demand or request by the Trustee to the Guarantor shall be in writing
and shall be deemed to have been duly given or made if either delivered personally to an officer of the
Guarantor or if mailed by registered or certified mail to the Guarantor at the address on file with the
Trustee in accordance with the notice provisions of the Indenture.
Section 6.8 This Limited Guaranty and the obligations herein contained shall survive the
payment in full of the Series 2019 Bonds to the extent that any continuing obligation remains thereafter,
including without limitation the agreement to pay any Holder of the Series 2019 Bonds additional interest
and other amounts as therein defined.
Section 6.9 The parties agree that the electronic signature of a party to this Limited Guaranty
shall be as valid as an original signature of such party and shall be effective to bind such party to this
Limited Guaranty. For purposes hereof: (i) “electronic signature” means a manually signed original
signature that is then transmitted by electronic means; and (ii) “transmitted by electronic means” means
sent in the form of a facsimile or sent via the internet as a portable document format (“pdf”) or other
replicating image attached to an electronic mail or internet message.
(The remainder of this page is intentionally left blank.)
9
IN WITNESS WHEREOF, the Guarantor and the Trustee have caused this Limited Guaranty to
be executed in their respective names as of the date first written above.
THE FOUNDATION FOR HEALTH CARE
CONTINUUMS,
as Guarantor
By:
Name:
Its:
\[Signature page to Series 2019 Bonds Limited Guaranty Agreement\]
S-1
U.S. BANK NATIONAL ASSOCIATION, as
Trustee
By:
Its: Vice President
\[Signature page to Series 2019 Bonds Limited Guaranty Agreement\]
DMNORTH #6805707 v3
S-2
Draft dated May 22, 2019
PRELIMINARY OFFICIAL STATEMENT DATED MAY 30 2019
NEW ISSUES UNRATED
BOOK-ENTRY ONLY NOT BANK QUALIFIED
In the opinion of Briggs and Morgan, Professional Association, Bond Counsel to the Issuer, under existing Minnesota and federal laws, regulations,
rulings, and decisions in effect on the date of delivery of the Series 2019 Bonds (which excludes pending legislation which may have a retroactive effect), and
assuming compliance by the Company with all requirements of the Internal Revenue Code of 1986, as amended, interest on the Series 2019A Bonds is not
included in gross income of the owners thereof for federal income tax purposes or in taxable net income of individuals, estates or trusts for Minnesota income
diction.
tax purposes, and is not an item of tax preference for purposes of the computation of federal alternative minimum tax imposed on individuals or Minnesota
alternative minimum tax imposed on individuals and corporations. Interest on the Series 2019A Bonds is subject to the Minnesota franchise tax measured by
income and imposed on corporations and financial institutions. No opinion will be expressed by Bond Counsel regarding other state or federal tax
consequences caused by the receipt or accrual of interest on the Series 2019A Bonds or arising with respect to the ownership of the Series 2019A Bonds.
Interest on the Series 2019A-T Bonds is taxable as ordinary income for federal and State of Minnesota income tax purposes. See “TAX MATTERS” in this
Official Statement.
City of St. Joseph, Minnesota
Senior Housing and Healthcare Revenue Bonds
(Woodcrest of Country Manor Project)
$21,775,000* Series 2019A
$500,000* Taxable Series 2019A-T
Dated: Date of Issuance Due Date: July 1, as shown on inside front cover
The City of St. Joseph, Minnesota (the “Issuer”) is issuing its (i) Senior Housing and Healthcare Revenue Bonds (Woodcrest of Country
Manor Project), Series 2019A (the “Series 2019A Bonds”), in the original aggregate principal amount of $21,775,000*, and (ii) Taxable
constitute an offer to sell or the solicitation of an offer to buy nor shall
Senior Housing and Healthcare Revenue Bonds (Woodcrest of Country Manor Project), Series 2019A-T (the “Series 2019A-T Bonds”), in
the original aggregate principal amount of $500,000*. The Series 2019A Bonds and the Series 2019A-T Bonds are referred to collectively
herein as the “Series 2019 Bonds.” Capitalized terms used on this cover page and not defined herein shall have the meanings granted to them
in APPENDIX F to this Official Statement. THE SERIES 2019 BONDS AND THE INTEREST THEREON ARE SPECIAL, LIMITED
OBLIGATIONS OF THE ISSUER AND ARE NOT A CHARGE AGAINST THE GENERAL CREDIT OR TAXING POWERS OF THE
ISSUER, THE STATE OF MINNESOTA, OR ANY POLITICAL SUBDIVISION THEREOF.
Official Statement
Proceeds derived from the sale of the Series 2019 Bonds will be used along with funds of County Manor St. Joseph, LLC, a Tennessee
nonprofit limited liability company (the “Company”), the sole member of which is The Foundation For Health Care Continuums, a
Tennessee nonprofit corporation (the “Sole Member”), in order to: (i) finance the acquisition of an approximately 84-unit assisted living and
memory care senior housing and health care facility comprised of a 24-unit memory care facility, known as Woodcrest Memory Care Suites
are subject to completion or amendment. These securities may not be sold nor may offers to buy be
(the “Memory Suites”), and a 60-unit assisted living facility known as Woodcrest Senior Apartments (the “Assisted Living Apartments,” and
together with the Memory Suites, the “Project”), located at 1200 Lanigan Way Southwest in St. Joseph, Minnesota; (ii) fund required
reserves for the Series 2019 Bonds; and (iii) pay the costs of issuance for the Series 2019 Bonds. See “THE PROJECT AND PLAN OF
FINANCE” in this Official Statement.
The Series 2019 Bonds will be issued by the Issuer pursuant to an Indenture of Trust, dated as of July 1, 2019 (the “Indenture”), between
the Issuer and U.S. Bank National Association (the “Trustee”) and a resolution of the City Council of the Issuer. The Series 2019 Bonds are
Official Statement
payable from the money held for the payment thereof by the Trustee under the Indenture and a pledge of payments to be received by the
Issuer pursuant to the terms of a Loan Agreement, dated as of July 1, 2019 (the “Loan Agreement”), between the Issuer and the Company.
The Series 2019 Bonds will be secured by a mortgage lien on and security interest in the Project and the leases, rents and revenues of the
Project. On the date of issuance of the Series 2019 Bonds, the Reserve Requirement for the Series 2019 Bonds under the terms of the
Indenture is to be satisfied by a deposit to the Bond Reserve Fund. Payment of debt service on the Series 2019 Bonds, will be guaranteed by
er, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such juris
Sole Member, as guarantor, pursuant to a Limited Guaranty Agreement, dated as of July 1, 2019 (the “Limited Guaranty”), from Sole
Member, as guarantor, to the Trustee, subject to a limit of $1,250,000 (plus any costs of collection). See “SECURITY FOR THE SERIES
2019 BONDS” in this Official Statement.
The Series 2019 Bonds will be issued as fully registered bonds initially registered in the name of Cede & Co. as nominee for The
Depository Trust Company, New York, New York (“DTC”). Purchases of interests in the Series 2019 Bonds will be made only in book-entry
form in minimum authorized denominations of $5,000 or any integral multiple of $5,000 in excess thereof. The Series 2019 Bonds are
payable as to interest on January 1 and July 1, commencing January 1, 2020*. The Series 2019 Bonds are subject to redemption and
is delivered in final form. Under no circumstances shall this Preliminary
prepayment upon the terms and conditions described under “THE SERIES 2019 BONDS” in this Official Statement. See “RISK FACTORS”
in this Official Statement for a discussion of certain risk factors relating to the Series 2019 Bonds.
SEE THE INSIDE FRONT COVER FOR THE MATURITY SCHEDULES FOR THE SERIES 2019 BONDS.
Statement
and the information contained in this Preliminary
The Series 2019 Bonds are offered by Dougherty & Company LLC (the “Underwriter”) when, as and if issued and subject to approval of the
legality of the Series 2019 Bonds and the tax-exempt status of the Series 2019A Bonds by Briggs and Morgan, Professional Association,
Official
Minneapolis, Minnesota, Bond Counsel to the Issuer. Certain legal matters will be passed upon Wornson Goggins Zard Neisen Morris & Brever, PC,
New Prague, Minnesota, counsel to the Company and Sole Member, the approval of certain matters by Ballard Spahr LLP, Minneapolis, Minnesota,
counsel to the Underwriter, and certain other conditions. It is currently expected that the delivery of the Series 2019 Bonds will be made through the
facilities of DTC on or about July __, 2019.
Official Statement
DOUGHERTY & COMPANY LLC
The date of this Official Statement is ___________, 2019.
This Preliminary accepted prior to the time the there be any sale of these securities in any jurisdiction in which such off
*Preliminary, subject to change.
MATURITY SCHEDULE
$21,775,000*
City of St. Joseph, Minnesota
Senior Housing and Healthcare Revenue Bonds
(Woodcrest of Country Manor Project)
Series 2019A
Maturity Date Principal
(July 1)* Amount* Interest Rate Yield Price CUSIP**
2022 $ 55,000
2023 290,000
2024 300,000
2025 310,000
2026 320,000
2027 330,000
2028 345,000
2029 360,000
2030 370,000
2031 385,000
2032 405,000
2033 420,000
2034 440,000
2035 460,000
$2,630,000* _____% Series 2019A Term Bond Due July 1, 2040*
Price of _________% to Yield ________%
CUSIP: ____________**
$3,340,000* _____% Series 2019A Term Bond Due July 1, 2045*
Price of _________% to Yield ________%
CUSIP: ____________**
$4,255,000* _____% Series 2019A Term Bond Due July 1, 2050*
Price of _________% to Yield ________%
CUSIP: ____________**
$6,760,000* _____% Series 2019A Term Bond Due July 1, 2055*
Price of _________% to Yield ________%
CUSIP: ____________**
* Preliminary, subject to change.
** CUSIP is a registered trademark of the American Bankers Association (“ABA”). CUSIP data is provided by CUSIP Global
Services, managed by S&P Global Market Intelligence on behalf of ABA. The CUSIP numbers listed above are being
provided solely for the convenience of Holders of the Series 2019 Bonds only at the time of issuance of the Series 2019
Bonds and neither the Issuer nor the Underwriter nor the Company nor Sole Member makes any representation with respect
to such numbers or undertake any responsibility for their accuracy now or at any time in the future.
$500,000*
City of St. Joseph, Minnesota
Taxable Senior Housing and Healthcare Revenue Bonds
(Woodcrest of Country Manor Project)
Series 2019A-T
Maturity Date Principal
(July 1)* Amount* Interest Rate Yield Price CUSIP**
2021 $275,000
2022 225,000
* Preliminary, subject to change.
** CUSIP is a registered trademark of the American Bankers Association (“ABA”). CUSIP data is provided by CUSIP Global
Services, managed by S&P Global Market Intelligence on behalf of ABA. The CUSIP numbers listed above are being
provided solely for the convenience of Holders of the Series 2019 Bonds only at the time of issuance of the Series 2019
Bonds and neither the Issuer nor the Underwriter nor the Company nor Sole Member makes any representation with respect
to such numbers or undertake any responsibility for their accuracy now or at any time in the future.
Issuer
City of St. Joseph, Minnesota
Bond Counsel to the Issuer
Briggs and Morgan, Professional Association
Minneapolis, Minnesota
Company
Country Manor St. Joseph, LLC
Sartell, Minnesota
Sole Member and Guarantor
The Foundation For Health Care Continuums
Sartell, Minnesota
Manager
Continuums Management Services LLC
Sartell, Minnesota
Counsel to the Company and Sole Member
Wornson Goggins Zard Neisen Morris & Brever, PC
New Prague, Minnesota
Underwriter
Dougherty & Company LLC
Minneapolis, Minnesota
Underwriter’s Counsel
Ballard Spahr LLP
Minneapolis, Minnesota
Trustee
U.S. Bank National Association
Saint Paul, Minnesota
Auditor and Financial Feasibility Study Provider
CliftonLarsonAllen, LLP
Minneapolis, Minnesota
PICTURES OF THE PROJECT
Assisted Living Apartments Building
\[Insert picture\]
Memory Suites Building
\[Insert picture\]
REGARDING USE OF THIS OFFICIAL STATEMENT
No person has been authorized by the Issuer, the Underwriter, the Company or Sole Member to
give any information regarding the Series 2019 Bonds, the Company, or Sole Member, the offering
contained herein and related matters or to make any representations other than those contained herein and
if given or made, such other information or representations must not be relied upon as having been
authorized by any of the foregoing. 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 implies
that there has been no change in the matters described herein since the date hereof. This Official
Statement does not constitute an offer to sell or the solicitation of any offer to buy, nor shall there be any
sale of the Series 2019 Bonds, by any person in any jurisdiction in which it is unlawful for such person to
make such offer, solicitation or sale. The information set forth herein has been provided by or on behalf
of the Company, Sole Member, the Issuer, The Depository Trust Company, and other sources that are
believed to be reliable.
The Underwriter has reviewed the information in this Official Statement in accordance with, and
as part of, the Underwriter’s responsibilities to investors under 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.
Neither the Issuer nor any of its officers, agents, employees or representatives have reviewed this
Official Statement or investigated the statements or representations contained herein, except for those
statements relating to the Issuer set forth under the captions “THE ISSUER” and “ABSENCE OF
MATERIAL LITIGATION – The Issuer.” Except with respect to the information contained under such
captions, neither the Issuer nor any of its officers, agents, employees, or representatives makes any
representation as to the completeness, sufficiency, and truthfulness of the statements set forth herein.
None of the officers of the Issuer executing the Series 2019 Bonds is subject to personal liability by
reason of the issuance or execution of the Series 2019 Bonds.
The Series 2019 Bonds have not been registered under the Securities Act of 1933, as amended, or
the securities laws of any state, and the Indenture has 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 Series 2019 Bonds in accordance with applicable provisions of securities laws of the states in
which the Series 2019 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 Series 2019 Bonds or the accuracy or completeness
of this Official Statement. Any representation to the contrary may be a criminal offense.
The Trustee has not participated in the preparation of this Official Statement or any other
disclosure documents relating to the Series 2019 Bonds. Except for information under the heading “THE
TRUSTEE,” the Trustee has or assumes no responsibility as to the accuracy or completeness of any
information contained in this Official Statement or any other such disclosure documents.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
THIS OFFICIAL STATEMENT, INCLUDING THE APPENDICES HERETO,
CONTAINS STATEMENTS WHICH SHOULD BE CONSIDERED “FORWARD-LOOKING
STATEMENTS,” MEANING THEY REFER TO POSSIBLE FUTURE EVENTS OR
CONDITIONS. SUCH STATEMENTS ARE GENERALLY IDENTIFIABLE BY THE WORDS
SUCH AS “PLAN,” “EXPECT,” “ESTIMATE,” “BUDGET,” OR SIMILAR WORDS. THE
ACHIEVEMENT OF CERTAIN RESULTS OR OTHER EXPECTATIONS CONTAINED IN
SUCH FORWARD-LOOKING STATEMENTS INVOLVES KNOWN AND UNKNOWN RISKS,
UNCERTAINTIES, AND OTHER FACTORS WHICH 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. POTENTIAL INVESTORS
SHOULD NOT PLACE UNDUE RELIANCE ON FORWARD-LOOKING STATEMENTS. ALL
FORWARD-LOOKING STATEMENTS ARE MADE AS OF THE DATE OF THIS OFFICIAL
STATEMENT. THE COMPANY AND SOLE MEMBER HAVE NOT ASSUMED ANY
OBLIGATION TO UPDATE ANY SUCH FORWARD-LOOKING STATEMENTS. WHILE THE
COMPANY AND SOLE MEMBER HAVE NO REASON TO BELIEVE THAT THE
ASSUMPTIONS THAT HAVE BEEN USED IN THESE FORWARD-LOOKING STATEMENTS
ARE NOT REASONABLE, THESE ASSUMPTIONS INVOLVE JUDGMENTS WITH RESPECT
TO, AMONG OTHER THINGS, FUTURE ECONOMIC, COMPETITIVE, AND MARKET
CONDITIONS, FUTURE BUSINESS DECISIONS, AND FUTURE LEGAL AND REGULATORY
CIRCUMSTANCES AND CONDITIONS, ALL OF WHICH ARE DIFFICULT OR IMPOSSIBLE
TO PREDICT ACCURATELY AND MANY OF WHICH ARE BEYOND THE CONTROL OF
THE COMPANY AND SOLE MEMBER. AS A RESULT, ACTUAL RESULTS WILL
UNDOUBTEDLY DIFFER, AND MAY DIFFER MATERIALLY, FROM THOSE DISCUSSED
IN SUCH FORWARD-LOOKING STATEMENTS. THE COMPANY AND SOLE MEMBER DO
NOT EXPECT OR INTEND TO ISSUE ANY UPDATES OR REVISIONS TO THOSE
FORWARD-LOOKING STATEMENTS IF OR WHEN THEIR RESPECTIVE EXPECTATIONS,
OR EVENTS, CONDITIONS, OR CIRCUMSTANCES ON WHICH SUCH STATEMENTS ARE
BASED, OCCUR. THE FINANCIAL FEASIBILITY STUDY OF THE COMPANY,
CONTAINED IN “APPENDIX C — FINANCIAL FEASIBILITY STUDY” ATTACHED TO
THIS OFFICIAL STATEMENT IS NOT A HISTORICAL STATEMENT OF FINANCIAL
PERFORMANCE OF THE COMPANY AND THE PROJECT, BUT IS A FORWARD-LOOKING
FORECAST OF FUTURE, FORECASTED FINANCIAL PERFORMANCE OF THE COMPANY
AND THE PROJECT.
TABLE OF CONTENTS
Page Page
SUMMARY STATEMENT ................................................... i Value of Mortgaged Property .......................................... 23
INTRODUCTORY STATEMENT ........................................ 1 Liquidation of Security May Not be Sufficient in the
Forward-Looking Statements Disclaimer ........................... 3 Event of a Default ....................................................... 24
THE ISSUER ....................................................................... 4 Tax-Exempt Status of Sole Member ................................. 24
THE COMPANY.................................................................. 4 Possible Limitations on the Mortgage .............................. 24
THE SOLE MEMBER .......................................................... 4 Property Taxes ................................................................ 25
THE PROJECT AND PLAN OF FINANCE .......................... 4 Risk of Early Redemption ............................................... 25
DEBT SERVICE SCHEDULES............................................ 7 Effect of Affiliates; Conflicts with Affiliates; Related
THE SERIES 2019 BONDS .................................................. 8 Party Transactions; No Restrictions .............................. 25
Special, Limited Obligations.............................................. 8 Matters Relating to Enforceability ................................... 25
Interest; Maturity; Payment ............................................... 8 Bankruptcy ..................................................................... 26
Exchange; Transfer .......................................................... 8 Compliance with the Code ............................................... 26
Replacement ..................................................................... 9 Environmental Matters .................................................... 27
Redemption or Prepayment ............................................... 9 Amendment to Documents .............................................. 27
Notice of Redemption; Payment ...................................... 11 Compliance with the Tax Abatement Agreements ............ 28
Ownership ...................................................................... 12 State Licensing Issues ..................................................... 28
SECURITY FOR THE SERIES 2019 BONDS .................... 13 State Regulatory Issues.................................................... 29
General ........................................................................... 13 Payments for Residents ................................................... 30
Assignment of Loan Agreement; Loan Repayments ........ 13 Risk Factors Relating to Sole Member/Guarantor ............. 31
The Indenture .................................................................. 13 Other Possible Risk Factors ............................................. 37
The Limited Guaranty of Sole Member ............................ 13 Summary ........................................................................ 37
Bond Reserve Fund ......................................................... 14 TAX MATTERS ................................................................ 37
The Mortgage ................................................................. 14 Tax Exemption................................................................ 37
Special Covenants ........................................................... 15 Bond Premium ................................................................ 38
Subordination of Management Fees ................................. 17 Original Issue Discount ................................................... 38
Repair and Replacement Fund ......................................... 17 The Series 2019A-T Bonds .............................................. 39
Taxes and Insurance Escrow Fund ................................... 17 Not Bank-Qualified Obligations ...................................... 39
Tax Abatement Agreements ............................................ 18 Legislative Proposals....................................................... 40
Defeasance ..................................................................... 18 THE FINANCIAL FEASIBILITY STUDY ......................... 40
RISK FACTORS ................................................................ 19 AUDITED CONSOLIDATED FINANCIAL
Limited Payment Sources ................................................ 19 STATEMENTS OF THE SOLE MEMBER ................. 40
Dependence on Revenues of the Project ........................... 19 UNAUDITED FINANCIAL STATEMENTS ..................... 41
Subordination of Management Fees ................................. 19 ENFORCEABILITY OF OBLIGATIONS ........................... 41
Limited Value of the Project upon Foreclosure ................. 20 APPROVAL OF LEGAL PROCEEDINGS ......................... 41
Nature of the Mortgage ................................................... 20 ABSENCE OF MATERIAL LITIGATION ......................... 42
Additional Debt .............................................................. 20 The Issuer ....................................................................... 42
Additional Guaranteed Debt; Dilution .............................. 20 The Company ................................................................. 42
Taxability of the Series 2019A Bonds .............................. 20 Sole Member .................................................................. 42
Financial Feasibility Study .............................................. 21 RELATIONSHIPS AMONG THE PARTIES ...................... 42
Competition and Reliance on Market Information in UNDERWRITING ............................................................. 42
the Financial Feasibility Study ..................................... 21 CONTINUING DISCLOSURE ........................................... 43
Occupancy Stabilization ................................................. 21 NO BOND RATING .......................................................... 43
Utilization Demand ......................................................... 22 THE TRUSTEE .................................................................. 43
Failure to Maintain Occupancy ........................................ 22 MISCELLANEOUS ........................................................... 44
Uncertainty of Revenues ................................................. 22 General ........................................................................... 44
No Credit Enhancement Facility ...................................... 22 Limited Issuer Involvement ............................................. 44
No Appraisal of the Project.............................................. 23 No Registration of Series 2019 Bonds .............................. 44
Resident’s Ability to Pay ................................................. 23 Interest of Certain Persons Named in this Official
Certain Tax Status Issues Related to Facilities for the Statement .................................................................... 44
Elderly ........................................................................ 23 Official Statement Certificate of the Company ................. 44
Absence of Rating ........................................................... 23
APPENDIX A – THE COMPANY, THE MANAGER AND THE PROJECT ............................................................................... A-1
APPENDIX B – THE FOUNDATION FOR HEALTH CARE CONTINUUMS ............................................................................B-1
APPENDIX C – FINANCIAL FEASIBILITY STUDY .................................................................................................................C-1
APPENDIX D – AUDITED CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION
OF THE SOLE MEMBER AND AFFILIATES (INCLUDING THE COMPANY) FOR THE FISCAL
YEARS ENDED SEPTEMBER 30, 2018 AND 2017 ......................................................................................... D-1
APPENDIX E – UNAUDITED FINANCIAL STATEMENTS OF THE COMPANY FOR THE SIX-MONTH PERIODS
ENDED MARCH 31, 2019 AND 2018 ............................................................................................................... E-1
APPENDIX F – DEFINITIONS AND SUMMARY OF CERTAIN PRINCIPAL DOCUMENTS .................................................. F-1
APPENDIX G – FORM OF BOND COUNSEL OPINION ........................................................................................................... G-1
APPENDIX H – FORM OF CONTINUING DISCLOSURE AGREEMENT ................................................................................ H-1
APPENDIX I – BOOK-ENTRY ONLY SYSTEM ........................................................................................................................ I-1
SUMMARY STATEMENT
This Summary Statement is subject to more complete information contained in this Official Statement. The
offering of the Series 2019 Bonds to prospective purchasers is made by means of the entire Official Statement, and
no person is authorized to detach this Summary Statement from the entire Official Statement or to otherwise use it
without the entire Official Statement. This Official Statement is deemed to be a final official statement within the
meaning of Rule 15c2-12 of the Securities and Exchange Commission. This Official Statement speaks only as of its
date, and the information herein is subject to change. Undefined capitalized terms used below are defined in
“APPENDIX F — DEFINITIONS AND SUMMARY OF CERTAIN PRINCIPAL DOCUMENTS” or elsewhere in
this Official Statement.
The Issuer ....................... The City of St. Joseph, Minnesota (the “Issuer”) is a municipal corporation organized and
existing under its charter and the laws of the State of Minnesota, and is authorized by
Minnesota Statutes, Chapter 462C, as amended (collectively, the “Act”), to issue the
Series 2019 Bonds (as defined below). See “THE ISSUER” in this Official Statement.
The Company ................. County Manor St. Joseph, LLC (the “Company”) is a Tennessee nonprofit limited
liability company formed in 2016 for the sole purpose of acquiring and owning the
Project. The sole member of the Company is The Foundation For Health Care
Continuums, a Tennessee nonprofit corporation (the “Sole Member”). See “THE
COMPANY” and “APPENDIX A — THE COMPANY, THE MANAGER AND THE
PROJECT” in this Official Statement.
Sole Member and
Guarantor ....................... The Sole Member is a Tennessee nonprofit corporation and an organization described in
Section 501(c)(3) of the Internal Revenue Code of 1986, as amended (the “Code”),
whose income is exempt from federal taxation under Section 501(a) of the Code (a “Tax-
Exempt Organization”). The Sole Member is also the guarantor pursuant to the terms of
the Limited Guaranty (as defined below). The Sole Member was formed in 1995. See
“THE SOLE MEMBER,” “SECURITY FOR THE SERIES 2019 BONDS,” and
“APPENDIX B — THE SOLE MEMBER” in this Official Statement.
The Manager .................. Continuums Management Services, LLC (the “Manager”) contracts with the Company
under the terms of a Management Services Agreement, dated October 1, 2016 (the
“Management Agreement”) to provide back office support as well as day-to-day
management. See “APPENDIX A — THE COMPANY, THE MANAGER AND THE
PROJECT – THE MANAGER” in this Official Statement.
Series 2019 Bonds ........... The Issuer will issue its (i) Senior Housing and Healthcare Revenue Bonds (Woodcrest of
Country Manor Project), Series 2019A (the “Series 2019A Bonds”), in the original
aggregate principal amount of $21,775,000*, and (ii) Taxable Senior Housing and
Healthcare Revenue Bonds (Woodcrest of Country Manor Project), Series 2019A-T (the
“Series 2019A-T Bonds”), in the original aggregate principal amount of $500,000*. The
Series 2019A Bonds and the Series 2019A-T Bonds are referred to collectively herein as
the “Series 2019 Bonds.” The Issuer is issuing the Series 2019 Bonds pursuant to an
Indenture of Trust, dated as of July 1, 2019 (the “Indenture”), between the Issuer and
U.S. Bank National Association, as trustee (the “Trustee”), and a resolution of the City
Council of the Issuer.
Plan of Finance and
Use of Proceeds ............... The Company will use the proceeds from the sale of the Series 2019 Bonds, along with
funds of the Company, in order to: (i) finance the acquisition of an approximately 84-
unit assisted living and memory care senior housing and healthcare facility comprised of
a 24-unit memory care facility, known as Woodcrest Memory Care Suites (the “Memory
Suites”), and a 60-unit assisted living facility known as Woodcrest Senior Apartments
(the “Assisted Living Apartments,” and together with the Memory Suites, the “Project”),
located at 1200 Lanigan Way Southwest in St. Joseph, Minnesota; (ii) fund required
reserves for the Series 2019 Bonds; and (iii) pay the costs of issuance for the Series 2019
Bonds. The Company currently leases the Project from CM St. Joe, LLC (the “Seller”)
*Preliminary, subject to change. i
pursuant to a Commercial Lease Agreement, dated August 30, 2016 and effective
November 1, 2017 (the “Lease Agreement”). Pursuant to a Real Property Purchase Sale
Agreement, dated ______, 2019 (the “Purchase Agreement”), the Company will purchase
the Project from the Seller for a price of $19,750,000 (subject to closing adjustments).
See “THE COMPANY” and “APPENDIX A — THE COMPANY, THE MANAGER
AND THE PROJECT” in this Official Statement
Form ............................... The Series 2019 Bonds will be registered under a book-entry system in the name of The
Depository Trust Company (“DTC”) or its nominees. The Series 2019 Bonds will be
issued in minimum denominations of $5,000 and any integral multiple of $5,000 in
excess thereof. See “THE SERIES 2019 BONDS” in this Official Statement.
Payment .......................... Interest accrues on the Series 2019 Bonds at the rates set forth on the inside front cover
page of this Official Statement and is scheduled to be paid on January 1 and July 1 of
each year, commencing January 1, 2020*. Principal of the 2018 Bonds will be payable
on July 1 as set forth on the inside front cover page hereof. Interest on the Series 2019
Bonds will be paid by check or draft of the Trustee mailed to the persons who were the
registered owners of Series 2019 Bonds as of the applicable Record Date; provided,
however, that upon written request of a Holder of $1,000,000 or more in aggregate
principal amount of Series 2019 Bonds, interest will be paid by wire transfer to an
account of the Holder specified in such written request. See “THE SERIES 2019
BONDS” in this Official Statement.
Redemption
or Prepayment ................ As more fully described herein, the Series 2019 Bonds are subject to redemption or
prepayment prior to maturity, together with payment of accrued interest, as follows:
(a) the $________ Series 2019 term bond maturing on July 1, 202_ is subject to optional
redemption, in whole or in part, at the option of the Company on any date, at a
redemption price equal to the principal amount of such Series 2019 Bond to be redeemed,
plus accrued interest, without premium; (b) the remaining Series 2019 Bonds maturing on
or after July 1, 202_ will be subject to redemption at the option of the Company, upon
request of the Company, on July __, 202_, and on any date thereafter, in whole or in part,
at a Redemption Price equal to the principal amount thereof, plus accrued interest to the
date of redemption; (c) mandatory redemption at par upon a Determination of Taxability;
(d) extraordinary redemption at par due to the occurrence of certain events of casualty or
condemnation; (e) for Series 2019 Bonds that are Term Bonds, mandatory redemption at
par due to sinking fund redemption; and (f) acceleration due to an Event of Default
occurring under the Indenture, the Loan Agreement or the Mortgage (as defined herein).
See “THE SERIES 2019 BONDS - Redemption or Prepayment” in this Official
Statement.
Security for the
Series 2019 Bonds ........... THE SERIES 2019 BONDS ARE NOT GENERAL OR MORAL OBLIGATIONS
OF THE ISSUER, THE STATE OF MINNESOTA (THE “STATE”), OR THE
COUNTY OF STEARNS (THE “COUNTY”), NOR IS THE TAXING POWER OF
THE ISSUER, THE STATE, OR THE COUNTY, PLEDGED TO THE PAYMENT
OF THE PRINCIPAL AMOUNT THEREOF OR THE INTEREST OR
PREMIUM, IF ANY, THEREON. THE SERIES 2019 BONDS SHALL
CONSTITUTE SPECIAL, LIMITED OBLIGATIONS OF THE ISSUER. THE
SERIES 2019 BONDS SHALL NOT CONSTITUTE OR GIVE RISE TO A
CHARGE AGAINST THE GENERAL CREDIT, ASSETS, TAXING POWERS OR
OTHER REVENUES OF THE ISSUER, THE STATE, OR THE COUNTY. THE
SERIES 2019 BONDS ARE NEITHER A DEBT NOR A LIABILITY WITHIN
THE MEANING OF ANY CONSTITUTIONAL OR STATUTORY DEBT
LIMITATION OF THE ISSUER, THE STATE OR THE COUNTY.
The Loan Agreement and the Mortgage. The Series 2019 Bonds are payable solely from
and secured by a pledge of (i) payments made by the Company pursuant to the Loan
*Preliminary, subject to change. ii
Agreement, dated as of July 1, 2019 (the “Loan Agreement”), between the Issuer and the
Company, sufficient in amount to pay when due all principal of and interest on the Series
2019 Bonds and all other payments required thereunder; (ii) amounts derived pursuant to
the Combination Mortgage, Security Agreement, Fixture Financing Statement, and
Assignment of Leases and Rents, dated as of July 1, 2019 (the “Mortgage”), by the
Company in favor of the Trustee, which grants the Trustee a mortgage lien on, a security
interest in, and an assignment of leases and rents of the Project, subject only to Permitted
Encumbrances; (iii) amounts held by the Trustee under the Indenture in the Bond Reserve
Fund; and (iv) certain proceeds of insurance and condemnation awards. Purchase of the
Series 2019 Bonds involves certain risks including, among others, those described under
“RISK FACTORS” in this Official Statement. See “SECURITY FOR THE SERIES
2019 BONDS,” and “APPENDIX F — DEFINITIONS AND SUMMARY OF
CERTAIN PRINCIPAL DOCUMENTS — THE LOAN AGREEMENT” and “— THE
MORTGAGE” in this Official Statement.
The Limited Guaranty. The Series 2019 Bonds are also secured by amounts payable
from Sole Member, as guarantor under the terms of the Limited Guaranty Agreement,
dated as of July 1, 2019 (the “Limited Guaranty”), from Sole Member to the Trustee.
Under the terms of the Limited Guaranty, the Sole Member agrees to provide a guaranty
for the payment of debt service on the Series 2019 Bonds, subject to a limit of $1,250,000
(plus any costs of collection). The Limited Guaranty is subject to release and termination
as set forth in the Limited Guaranty. Payments by Sole Member under the Limited
Guaranty are pledged solely to the Series 2019 Bonds. See “SECURITY FOR THE
SERIES 2019 BONDS — Various Guaranties of Sole Member — The Limited
Guaranty” and “APPENDIX F — DEFINITIONS AND SUMMARY OF CERTAIN
PRINCIPAL DOCUMENTS — THE LIMITED GUARANTY” in this Official
Statement.
Bond Reserve Fund. On the date of issuance of the Series 2019 Bonds, an initial deposit
will be made to the Bond Reserve Fund in the amount of $1,323,930* (the “Bond
Reserve Requirement”). Upon issuance of the Series 2019 Bonds, the Bond Reserve
Requirement will be equal to the maximum annual debt service on the Series 2019 Bonds
(excluding the final year of maturity) and such amount may be increased in the future
upon the issuance of Additional Bonds in accordance with the terms of the Indenture.
Amounts in the Bond Reserve Fund may be used by the Trustee to pay principal and
premium of and interest on the Series 2019 Bonds if the amounts in the Series 2019
Account of the Bond Fund are insufficient for such purpose. See “SECURITY FOR
THE SERIES 2019 BONDS — Bond Reserve Fund” in this Official Statement.
Subordination of Management Fees. Pursuant to the terms of the Loan Agreement and
an Assignment and Subordination of Management Agreement, dated as of July 1, 2019
(the “Management Subordination Agreement”), by the Company in favor of U.S. Bank
National Association (as Trustee), any Management Fees payable by the Company to
Continuums Management Services LLC (the “Manager”), with respect to the Project will
be wholly subordinate and junior in right of payment to debt service on the Series 2019
Bonds. The Company will not pay any Management Fees to the Manager if such
payment will cause the Company to default in the payment of debt service on the Series
2019 Bonds.
Although the payment of the Manager’s Management Fees is subordinated to the
payment of debt service on the Series 2019 Bonds, the Management Fees payable to the
Manager are included in the calculations as to whether (i) the Limited Guaranty may be
released, (ii) the calculation of the Company’s debt service coverage ratio and the
Liquidity Covenant (as defined herein), and (iii) the Company incurring additional Long-
Term Indebtedness. See “SECURITY FOR THE SERIES 2019 BONDS –
Subordination of Management Fees” in this Official Statement.
*Preliminary, subject to change. iii
Trustee ............................ U.S. Bank National Association, Saint Paul, Minnesota. See “THE TRUSTEE” in this
Official Statement.
Investment Risks ............ An investment in the Series 2019 Bonds involves risks, including, but not limited to,
those discussed under “RISK FACTORS” in this Official Statement.
No Rating: ....................... The Series 2019 Bonds are not rated by any national rating agency and no rating request
has been made to any rating agency. See “NO BOND RATING” in this Official
Statement.
Examined Financial
Forecast .......................... The Financial Feasibility Study (the “Forecast”) prepared by CliftonLarsonAllen LLP,
attached hereto in APPENDIX C is a forecast of the future financial performance of the
Company based upon certain assumptions made by the Company and contained therein.
No assurance can be given that the Company will attain the forecasted future financial
results set forth in the Forecast. The Forecast is for the \[three (3) Fiscal Years of the
Company ending September 30, 2019 through September 30, 2022\]. The Forecast relates
to the forecasted operations of the Company and does not include any forecasted
financial information regarding Sole Member. Based upon assumptions set forth in the
Forecast, set forth on the following page is selected forecasted data from the Forecast for
the stated Fiscal Years:
\[chart to come\]
iv
OFFICIAL STATEMENT
City of St. Joseph, Minnesota
Senior Housing and Healthcare Revenue Bonds
(Woodcrest of Country Manor Project)
$21,775,000* Series 2019A
$500,000* Taxable Series 2019A-T
INTRODUCTORY STATEMENT
The City of St. Joseph, Minnesota, a municipal corporation organized and existing under its charter and
the laws of the State of Minnesota (the “Issuer”), will issue its (i) Senior Housing and Healthcare Revenue Bonds
(Woodcrest of Country Manor Project), Series 2019A (the “Series 2019A Bonds”), in the original aggregate
principal amount of $21,775,000*, and (ii) Taxable Senior Housing and Healthcare Revenue Bonds (Woodcrest
of Country Manor Project), Series 2019A-T (the “Series 2019A-T Bonds”), in the original aggregate principal
amount of $500,000*. The Series 2019A Bonds and the Series 2019A-T Bonds are referred to collectively herein
as the “Series 2019 Bonds.” The Series 2019 Bonds are being issued by the Issuer pursuant to (i) the terms of an
1
Indenture of Trust, dated as of July 1, 2019 (the “Indenture”), between the Issuer and U.S. Bank National
Association, Saint Paul, Minnesota, as trustee (the “Trustee”), (ii) Minnesota Statutes, Chapter 462C, as amended
(the “Act”), and (iii) a resolution adopted by the City Council of the Issuer on May 20, 2019 (the “Bond
Resolution”). All capitalized terms used in this Official Statement, but not defined herein, shall have the
1
meanings provided in “APPENDIX F — DEFINITIONS AND SUMMARY OF CERTAIN PRINCIPAL
1
DOCUMENTS” unless the context clearly indicates otherwise.
Proceeds derived from the sale of the Series 2019 Bonds will be loaned by the Issuer to County Manor St.
Joseph, LLC, a Tennessee nonprofit limited liability company (the “Company”), pursuant to the terms of a Loan
Agreement, dated as of July 1, 2019 (the “Loan Agreement”), between the Issuer and the Company. The sole
member of the Company is The Foundation For Health Care Continuums, a Tennessee nonprofit corporation (the
“Sole Member”) and an organization described in Section 501(c)(3) of the Internal Revenue Code of 1986, as
amended (the “Code”), whose income is exempt from federal taxation under Section 501(a) of the Code (a “Tax-
Exempt Organization”).
The Company will use the proceeds from the sale of the Series 2019 Bonds, along with the proceeds of the
Company in order to: (i) finance the acquisition of an approximately 84-unit assisted living and memory care
senior housing and healthcare facility comprised of a 24-unit memory care facility, known as Woodcrest Memory
Care Suites (the “Memory Suites”), and a 60-unit assisted living facility known as Woodcrest Senior Apartments
(the “Assisted Living Apartments,” and together with the Memory Suites, the “Project”), located at 1200 Lanigan
Way Southwest in St. Joseph, Minnesota; (ii) fund required reserves for the Series 2019 Bonds; and (iii) pay the
costs of issuance for the Series 2019 Bonds. The Company currently leases the Project from CM St. Joe, LLC (the
“Seller”) pursuant to a Commercial Lease Agreement, dated August 30, 2016 and effective November 1, 2017 (the
“Lease Agreement”). Pursuant to a Purchase Sale Agreement, dated ______, 20___ (the “Purchase Agreement”),
the Company will purchase the Project from the Seller. Purchase of the Series 2019 Bonds involves certain risks
including, among others, those described under “RISK FACTORS.” Prospective purchasers of the Series 2019
Bonds are urged to carefully review the risks set forth herein. See “THE COMPANY” and “APPENDIX A —
THE COMPANY, THE MANAGER AND THE PROJECT” in this Official Statement.
Pursuant to the Loan Agreement, the Company will covenant to make Loan Repayments at times and in
amounts sufficient to pay the principal and purchase price of, premium, if any, and interest on the Series 2019
Bonds when due. The obligations of the Company to make the Loan Repayments will be secured by (i) the
Company’s promise to pay such Loan Repayments pursuant to the terms of the Loan Agreement; (ii) amounts
held by the Trustee under the Indenture; (iii) a Combination Mortgage, Security Agreement, Fixture Financing
*Preliminary, subject to change. 1
Statement, and Assignment of Leases and Rents, dated as of July 1, 2019 (the “Mortgage”), by the Company in
favor of the Trustee; and (iv) certain proceeds of insurance and condemnation awards. Pursuant to the Mortgage,
the Company has granted to the Trustee a mortgage lien, subject to Permitted Encumbrances, on and an
assignment of rents and leases with respect to all of the Company’s interests in the Project and a security interest
to the Trustee in all of the Company’s furniture, fixtures and equipment related to the Project.
The Limited Guaranty. The Series 2019 Bonds are also secured by amounts payable from Sole Member,
as guarantor under the terms of the Limited Guaranty Agreement, dated as of July 1, 2019 (the “Limited
Guaranty”), from Sole Member to the Trustee. Under the terms of the Limited Guaranty, Sole Member agrees to
provide a guaranty for the payment of debt service on the Series 2019 Bonds, subject to a limit of $1,250,000
(plus any costs of collection). The Limited Guaranty is subject to release and termination as set forth in the
Limited Guaranty. Payments by Sole Member under the Limited Guaranty are pledged solely to the Series 2019
Bonds. See “SECURITY FOR THE SERIES 2019 BONDS – The Various Guaranties of Sole Member – The
Limited Guaranty” and “APPENDIX F — DEFINITIONS AND SUMMARY OF CERTAIN PRINCIPAL
DOCUMENTS — THE LIMITED GUARANTY” in this Official Statement.
Bond Reserve Fund. On the date of issuance of the Series 2019 Bonds, an initial deposit will be made to
the Bond Reserve Fund in the amount of $1,323,930* (the initial “Bond Reserve Requirement”). Upon issuance
of the Series 2019 Bonds, the Bond Reserve Requirement will be equal to the maximum annual debt service on
the Series 2019 Bonds (excluding the final year of maturity) and such amount may be increased upon the issuance
of Additional Bonds in accordance with the terms of the Indenture. Amounts in the Bond Reserve Fund may be
used by the Trustee to pay principal and premium of and interest on the Series 2019 Bonds if the amounts in the
Series 2019 Account of the Bond Fund are insufficient for such purpose. See “SECURITY FOR THE SERIES
2019 BONDS — Bond Reserve Fund” in this Official Statement.
Management Agreement. The Project is currently and will continue to be managed by Continuums
Management Services LLC, a Tennessee nonprofit limited liability company (the “Manager”), an affiliate of the
Company and the Sole Member. The Manager will manage the Project pursuant to a Management Agreement
(the “Management Agreement”), between the Company and Manager. See “APPENDIX A — THE COMPANY,
THE MANAGER AND THE PROJECT” and “APPENDIX B — THE FOUNDATION FOR HEALTH CARE
CONTINUUMS” in this Official Statement.
Subordination of Management Fees. Pursuant to the terms of the Loan Agreement and an Assignment
and Subordination of Management Agreement, dated as of July 1, 2019 (the “Management Subordination
Agreement”), by the Company in favor of U.S. Bank National Association (as Trustee), any Management Fees
payable by the Company to Continuums Management Services LLC (the “Manager”), with respect to the Project
will be wholly subordinate and junior in right of payment to debt service on the Series 2019 Bonds. The
Company will not pay any Management Fees to Manager if such payment will cause the Company to default in
the payment of debt service on the Series 2019 Bonds. Although the payment of the Manager’s Management
Fees is subordinated to the payment of debt service on the Series 2019 Bonds, the Management Fees payable to
the Manager are included in the calculations as to whether (i) the Limited Guaranty may be released, (ii) the
calculation of the Company’s debt service coverage ratio and the Liquidity Covenant (as defined herein), and (iii)
the Company incurring additional Long-Term Indebtedness.
THE SERIES 2019 BONDS ARE NOT GENERAL OR MORAL OBLIGATIONS OF THE
ISSUER, THE STATE OF MINNESOTA (THE “STATE”), OR THE COUNTY OF STEARNS (THE
“COUNTY”), BUT ARE SPECIAL, LIMITED OBLIGATIONS OF THE ISSUER. EXCEPT FOR THE
REVENUES TO BE RECEIVED BY THE ISSUER UNDER THE LOAN AGREEMENT, THE ISSUER
HAS NO OBLIGATION TO MAKE ANY OF THE PAYMENTS REQUIRED BY THE PROVISIONS OF
THE SERIES 2019 BONDS, AND THERE IS NO RIGHT TO RESORT TO THE TAX REVENUES OF
*Preliminary, subject to change. 2
THE STATE, THE COUNTY, THE ISSUER OR ANY OF THEIR RESPECTIVE PROPERTIES OR
ASSETS, FOR PAYMENT.
THE LOAN REPAYMENTS AND ADDITIONAL PAYMENTS TO BE MADE BY THE
COMPANY UNDER THE LOAN AGREEMENT ARE SOLELY THE OBLIGATION OF THE
COMPANY. THE SOLE MEMBER IS NOT OBLIGATED TO MAKE ANY PAYMENTS UNDER THE
LOAN AGREEMENT EXCEPT TO THE EXTENT OBLIGATED UNDER THE LIMITED GUARANTY
IN THE EVENT THAT MONEY HELD BY THE TRUSTEE UNDER THE INDENTURE IS
INSUFFICIENT TO PAY DEBT SERVICE ON THE SERIES 2019 BONDS.
The Company and U.S. Bank National Association, as dissemination agent (the “Dissemination Agent”),
will enter into a Continuing Disclosure Agreement, dated as of July 1, 2019 (the “Continuing Disclosure
Agreement”), for the benefit of the Holders of the Series 2019 Bonds under which the Company is required to
deliver certain information to the Municipal Securities Rulemaking Board (the “MSRB”) to comply with the
provisions of Rule 15c2-12 (the “Rule”) promulgated by the Securities and Exchange Commission (the “SEC”).
See “CONTINUING DISCLOSURE” and “APPENDIX H — FORM OF CONTINUING DISCLOSURE
AGREEMENT” in this Official Statement.
The Indenture, the Loan Agreement, the Mortgage, the Limited Guaranty, and the Continuing Disclosure
Agreement will be executed and delivered by the parties thereto on or prior to the date of issuance of the Series
2019 Bonds.
This Official Statement contains brief descriptions of the Series 2019 Bonds under the heading “THE
SERIES 2019 BONDS.” “APPENDIX F — DEFINITIONS AND SUMMARY OF CERTAIN PRINCIPAL
DOCUMENTS” contains brief descriptions of the Loan Agreement, the Indenture, the Limited Guaranty, and the
Mortgage. Such descriptions do not purport to be comprehensive or definitive and are qualified in their entirety
by reference to each specific document. Copies of such documents are available from Dougherty & Company
LLC (the “Underwriter”) and the Trustee during the period of the offering of the Series 2019 Bonds.
The information contained in this Official Statement and the appendices hereto has been provided by the
Company, Sole Member, and other sources which are believed to be reliable. The Underwriter has reviewed the
information in this Official Statement in compliance with its responsibilities under the Federal Securities Laws as
applied to the facts and circumstances of the transactions referred to in this Official Statement, but the
Underwriter does not make any guarantee as to the accuracy or completeness of such information. The
Appendices are an integral part of this Official Statement and each potential investor should review all
Appendices in their entirety.
Forward-Looking Statements Disclaimer
The statements contained in this Official Statement that are not purely historical, are forward-looking
statements, including statements regarding the expectations, intentions, or strategies of the Company regarding
the future. Also, forward-looking statements include statements in which words such as “believe,” “expect,”
“anticipate,” “intend,” “will,” or similar expressions are used. Potential investors should not place undue reliance
on forward-looking statements. All forward-looking statements are made as of the date of this Official Statement,
but are necessarily based on assumptions of future events, which have been provided by the Authority. The
Company, Sole Member, the Issuer and the Underwriter have not assumed any obligation to update any such
forward-looking statements. The FINANCIAL FEASIBILITY STUDY (as defined herein) in APPENDIX C is a
forwarding-looking statement. While the Company has no reason to believe that the assumptions that have been
used in these forward-looking statements are not reasonable, these assumptions involve judgments with respect to,
among other things, future economic, competitive, and market conditions, future business decisions, and future
legal and regulatory circumstances and conditions, all of which are difficult or impossible to predict accurately
*Preliminary, subject to change. 3
and many of which are beyond the control of the Company. As a result, actual results will undoubtedly differ,
and may differ materially, from those discussed in such forward-looking statements.
THE ISSUER
The Issuer is a municipal corporation of the State. Under the terms of the Act, the Issuer is authorized to
issue the Series 2019 Bonds and lend the proceeds of the issue and sale of the Series 2019 Bonds to the Company
to finance the finance the acquisition of the Project, fund a deposit to the debt service reserve for the Series 2019
Bonds; and pay the costs of issuance for the Series 2019 Bonds.
THE COMPANY
The Company is a Tennessee nonprofit limited liability company, organized on March 30, 2016, and is
registered to do business in the State of Minnesota (the “State”). The Company was formed in 2016 for the
purposes of owning and operating the senior living facilities. See “THE PROJECT AND PLAN OF FINANCE”
and “APPENDIX A — THE COMPANY, THE MANAGER AND THE PROJECT” in this Official Statement.
THE SOLE MEMBER
The Sole Member is a Tennessee nonprofit corporation registered to do business in the State and a Tax-
Exempt Organization and is the sole member of the Company. See “APPENDIX B — THE SOLE MEMBER” in
this Official Statement.
THE LOAN REPAYMENTS AND ADDITIONAL PAYMENTS TO BE MADE BY THE
COMPANY UNDER THE LOAN AGREEMENT ARE SOLELY THE OBLIGATION OF THE
COMPANY. THE SOLE MEMBER IS NOT OBLIGATED TO MAKE ANY PAYMENTS UNDER THE
LOAN AGREEMENT EXCEPT TO THE EXTENT OBLIGATED UNDER THE LIMITED GUARANTY
IN THE EVENT THAT MONEY HELD BY THE TRUSTEE UNDER THE INDENTURE IS
INSUFFICIENT TO PAY DEBT SERVICE ON THE SERIES 2019 BONDS.
THE PROJECT AND PLAN OF FINANCE
Plan of Finance. The Company will use the proceeds from the sale of the Series 2019 Bonds and funds of
the Company in order to: (i) finance Project; (ii) fund required reserves for the Series 2019 Bonds; and (iii) pay
the costs of issuance for the Series 2019 Bonds. The Series 2019 Bonds will be issued by the Issuer under the
terms of the Indenture and the proceeds of the Series 2019 Bonds will be loaned to the Company under the terms
of the Loan Agreement.
The Company currently leases the Project from CM St. Joe, LLC (the “Seller”) pursuant to a Commercial
Lease Agreement, dated August 30, 2016 and effective November 1, 2017 (the “Lease Agreement”). Pursuant to
a Real Property Purchase Sale Agreement, dated ______, 2019 (the “Purchase Agreement”), the Company will
purchase the Project from the Seller for a purchase price of $19,750,000 (subject to closing adjustments) on the
terms set forth in the Purchase Agreement. The Purchase Agreement provides that the Company will purchase
the Project and approximately 132.5 acres of land from the Seller. The Project is located on approximately 125
acres of land which will be subject to the Mortgage and approximately 7.5 acres of land to be purchased with
proceeds of the Series 2019A-T Bonds will not be subject to the Mortgage. See the heading “Outlot Property
Adjacent to the Project” below. The acquisition of the Project is an arm’s length transaction and the Seller and
*Preliminary, subject to change. 4
the Company are not affiliated parties. In connection with the Company’s acquisition of the Project, the Seller is
taking back an unsecured promissory note in the principal amount of $500,000 (the “Seller Note”) as a portion of
the purchase price. The Seller Note does not bear interest and has a maturity date of July 1, 2024 with annual
payments of principal in the amount of $100,000 due each July 1, commencing July 1, 2020. By its terms, the
repayment of the Seller Note is subordinated to the payment of debt service on the Series 2019 Bonds.
The Project. The Project consists of an approximately 84-unit assisted living and memory care senior
housing and healthcare facility comprised of 24-unit Memory Suites and 60-unit Assisted Living Apartments
located at 1200 Lanigan Way Southwest, in the City of St. Joseph, Minnesota The land upon which the Project is
constructed is near the College of St. Benedict. 24-hour nursing services are available to all residents at the
Project. The Project was constructed by _______________ and ____________ acted as architect.
The Assisted Living Apartments and the Memory Suites are connected by a one-story building. The
Project offer various amenities available to all residents, including the General Store with a coffee shop, The
Country Store and Pharmacy, a salon and spa, a chapel, wellness programs, gathering and community rooms,
restaurant-style dining, scheduled activities and socials, outdoor gathering areas, walking trails, prescription
delivery, and specialized transportation through Country Care-A-Van.
The Assisted Living Apartments. The Assisted Living Apartments is a _____ square-foot two-story
building containing 60 assisted living units. The individual units in the Assisted Living Apartments range in size
from 664 square feet for a one-bedroom/one bath to 1,253 square feet for a two-bedroom/two bath unit. Each unit
contains a washer and dryer, a kitchen including dishwasher and microwave, and a deck or patio. Each unit is
equipped with a forced air heating a cooling system. The Assisted Living Apartments building also includes
underground heated parking. The Assisted Living Apartments are known as the “Woodcrest Senior Apartments”.
The Assisted Living Apartments structure and roof are \[wood frame over concrete block foundation and
concrete floor structure with a brick and stucco\] exterior. The building is equipped with a sprinkler system
throughout.
The Memory Suites. The Memory Suites are located in a ____ square-foot one-story building containing
24 memory care units. The units in the Memory Suites range in size from 402 square feet for a studio to 848
square feet for a two-bedroom/one and three-quarter bath unit. Each unit contains a living room, bedroom,
kitchenette, and private bath. The common areas of the Memory Suites include \[private, secure courtyard with
walking trails, outdoor porch areas, private lounge for gatherings, sensory room, dining lounge, activity kitchen,
whirlpool bath, and fireplace lounge\]. Residents of the Memory Suites receive multiple home-cooked meals
daily. Each unit is equipped with a forced air heating a cooling system. The Memory Suites are known as the
“Woodcrest Memory Care Suites”.
The Memory Suites structure and roof are \[wood frame over concrete block foundation and concrete floor
structure with a brick and stucco\] exterior. The building is equipped with a sprinkler system throughout.
For more information about the Project see “APPENDIX A — THE COMPANY, THE MANAGER
AND THE PROJECT” in this Official Statement.
Outlot Property Adjacent to the Project. In March 2017, the Sole Member formed a for-profit Tennessee
limited liability company, Continuums Development Services, LLC (“CDS”) to develop age-restricted, single
family homes located on 12 outlots on approximately 7.5 acres of land adjacent to the 125 acres upon which the
Project is located. To date __ patio homes have been constructed by CDS and __ outlots are currently for sale.
The timing of future sales of any remaining outlots cannot be determined at this time. The acquisition of the
outlots will be financed with the proceeds of the Series 2019A-T Bonds. The outlots are not subject to the lien of
the Mortgage and do not secure repayment of the Series 2019 Bonds. The activities of CDS will be outside the
*Preliminary, subject to change. 5
tax-exempt mission of the Sole Member, and will be treated accordingly for income, property and sales tax
purposes.
Working Capital Funding. In connection with the Company occupying the Project, the Company and the
Sole Member entered into a Revolving Credit Note and Security Agreement, dated October 3, 2016 (the
“Working Capital Agreement”), whereby the Sole Member agreed to provide a revolving line of working capital
credit to the Company in the amount not to exceed $500,000 at any one time. As of the date of this Official
Statement, the Company had ___ extended under the Working Capital Agreement. The Working Capital
Agreement provides for an unsecured loan from the Sole Member to the Company for working capital purposes.
In connection with the issuance of the Series 2019 Bonds, the Company and the Sole Member will enter into a
Subordination Agreement, dated as of July 1, 2019 (the “Subordination Agreement”), whereby the Sole Member
will acknowledge that the Sole Member’s rights to repayment under the Working Capital Agreement are
subordinate and junior to the repayment of the Series 2019 Bonds. The Company’s repayment obligation to the
Sole Member under the Working Capital Agreement are not secured by a mortgage.
Estimated Sources and Uses of Funds. The estimated sources and uses of funds to finance the acquisition
of the Project are set forth below:
SOURCES OF FUNDS*
Proceeds of the Series 2019A Bonds $21,775,000
Series 2019A Bonds Original Issue Discount (252,458)
Proceeds of the Series 2019A-T Bonds 500,000
Subordinate Seller Note 500,000
Sole Member Subordinate Equipment Loan 289,000
Equity Contribution by Company 200,000
$23,011,542
TOTAL SOURCES
USES OF FUNDS*
Acquisition of the Project $19,750,000
Equipment Acquisition 289,000
Minnwest Loan Payoff 500,000
Initiative Foundation Repayment to Sole Member 350,000
Bond Reserve Fund Deposit 1,323,930
(1)
Costs of Issuance and Real Estate Costs 798,612
$23,011,542
TOTAL USES OF FUNDS
(1) Includes Underwriter’s discount; fees and expenses of Bond Counsel, counsel for the Issuer, counsel for the
Company and Sole Member, and counsel for the Underwriter; accountant’s fees; printing costs; recording and
filing fees; and miscellaneous costs and related expenses.
(The remainder of this page is intentionally left blank.)
*Preliminary, subject to change. 6
DEBT SERVICE SCHEDULES
The table below sets forth the amounts required to be paid with respect to the Series 2019 Bonds,
assuming no prepayments. All amounts shown in the table on the next page are gross debt service prior to the
application of any earnings on amounts deposited in funds and accounts established under the Indenture. Interest
on the Series 2019 Bonds will be paid on January 1 and July 1 of each year, commencing January 1, 2020*.
Principal of the Series 2019 Bonds will be paid on July 1 of each year commencing July 1, 2022* for the Series
2019A Bonds and July 1, 2021* for the Series 2019A-T Bonds.
Combined Annual Debt Service Table**
Series 2019A Bonds Series 2019A-T Bonds
Maturity Date Principal Interest Principal Interest Total Debt
(July 1) Amount* Amount** Amount* Amount** Service**
2020
2021 $275,000
2022 $ 55,000 225,000
2023 290,000
2024 300,000
2025 310,000
2026 320,000
2027 330,000
2028 345,000
2029 360,000
2030 370,000
2031 385,000
2032 405,000
2033 420,000
2034 440,000
2035 460,000
2036 480,000
2037 500,000
2038 525,000
2039 550,000
2040 575,000
2041 605,000
2042 635,000
2043 665,000
2044 700,000
2045 735,000
2046 770,000
2047 810,000
2048 850,000
2049 890,000
2050 935,000
2051 985,000
2052 1,030,000
2053 1,085,000
2054 1,140,000
(1)
2055 2,520,000
Totals $21,775,000 $500,000
* Preliminary, subject to change.
** May not foot due to rounding.
(1)
Includes application of the amount in the Bond Reserve Funds held by the Trustee under the Indenture to the final payment of the
.
Series 2019A Bonds.
7
THE SERIES 2019 BONDS
Special, Limited Obligations
THE SERIES 2019 BONDS ARE NOT GENERAL OR MORAL OBLIGATIONS OF THE
ISSUER, THE STATE, OR THE COUNTY, NOR IS THE TAXING POWER OF THE ISSUER, THE
STATE, OR THE COUNTY, PLEDGED TO THE PAYMENT OF THE PRINCIPAL AMOUNT
THEREOF OR THE INTEREST OR PREMIUM, IF ANY, THEREON. THE SERIES 2019 BONDS
SHALL CONSTITUTE SPECIAL, LIMITED OBLIGATIONS OF THE ISSUER. THE SERIES 2019
BONDS SHALL NOT CONSTITUTE OR GIVE RISE TO A CHARGE AGAINST THE GENERAL
CREDIT, ASSETS, TAXING POWERS OR OTHER REVENUES OF THE ISSUER, THE STATE, OR
THE COUNTY. THE SERIES 2019 BONDS ARE NEITHER A DEBT NOR A LIABILITY WITHIN
THE MEANING OF ANY CONSTITUTIONAL OR STATUTORY DEBT LIMITATION OF THE
ISSUER, THE STATE OR THE COUNTY. THE SERIES 2019 BONDS ARE PAYABLE SOLELY
FROM THE FUNDS PLEDGED FOR THEIR PAYMENT IN ACCORDANCE WITH THE
INDENTURE AND THE LOAN AGREEMENT.
Interest; Maturity; Payment
The Series 2019 Bonds will be issued in the aggregate principal amounts and will bear interest as
set forth on the inside front cover hereof payable semiannually on January 1 and July 1 (each an “Interest
Payment Date”) of each year, commencing on January 1, 2020*. Interest on the Series 2019 Bonds will
be calculated on the basis of a 360 day year with twelve months of thirty days.
So long as Cede & Co. is the registered owner, the Trustee will pay such principal of, premium, if
any, and interest on the Series 2019 Bonds to DTC, which will remit such principal, premium, if any, and
interest to the Direct Participants. The Direct Participants will remit such payments to the Indirect
Participants and the Direct Participants and the Indirect Participants will remit such payments to the
Beneficial Holders of the Series 2019 Bonds. The owners of the Series 2019 Bonds will not receive
physical certificates. See “APPENDIX I –– BOOK-ENTRY ONLY SYSTEM” in this Official
Statement.
In the event the book-entry system is discontinued, the following provisions will apply. The
principal or redemption price of the Series 2019 Bonds will be payable in lawful money of the United
States of America at the Corporate Trust Office of the Trustee upon surrender of the Series 2019 Bonds to
the Trustee for cancellation. Payment of the interest on any Series 2019 Bond will be made on each
Interest Payment Date to the Holder thereof as of the Record Date for each Interest Payment Date by
check mailed by first-class mail on each Interest Payment Date to such Holder at the address of such
Holder as it appears on the registration books maintained by the Trustee or, upon the written request of
any Holder of at least $1,000,000 in principal amount of the Series 2019 Bonds, submitted to the Trustee
at least one Business Day prior to the Record Date, by wire transfer in immediately available funds to an
account within the United States of America designated by such Bondholder.
Exchange; Transfer
The Series 2019 Bonds are transferable and exchangeable for other denominations only upon the
books of the Trustee as bond registrar and upon presentation and surrender of such Series 2019 Bonds,
together with an executed assignment or other acceptable transfer instrument, subject to the payment of
any tax, fee or other governmental charge that may be imposed in connection therewith. The Trustee is
not required to transfer, register, replace or exchange any Series 2019 Bond (i) during the 15-day period
next preceding the date of the first publication or the mailing of notice of redemption in the case of a
*Preliminary, subject to change. 8
proposed redemption of Series 2019 Bonds, or (ii) after a Series 2019 Bond has been called for
redemption. So long as the Series 2019 Bonds are in Book-Entry Form, only beneficial interests in such
Series 2019 Bonds will be transferred, and then only as described under “BOOK-ENTRY-ONLY
SYSTEM” herein.
Replacement
If (i) any mutilated Series 2019 Bond is surrendered to the Trustee, or the Trustee receives
evidence to its satisfaction of the destruction, loss or theft of any Series 2019 Bond, and (ii) there is
delivered to the Trustee such security or indemnity as may be required by it to save the Issuer, the Trustee
and the Company harmless, then in the absence of notice to the Trustee that such Series 2019 Bond has
been acquired by a bona fide purchaser, the Issuer shall execute, and upon its request the Trustee shall
authenticate and deliver, in exchange for or in lieu of such mutilated, destroyed, lost or stolen Series 2019
Bond, a new Series 2019 Bond of the same series and of like tenor, principal amount, Stated Maturity and
interest rate. In case any such mutilated, destroyed, lost or stolen Series 2019 Bond has matured, the
Issuer in its discretion may, instead of issuing a new Series 2019 Bond, pay such Series 2019 Bond.
Upon such issuance of any new Series 2019 Bond, the Issuer may require the payment of a sum sufficient
to cover any expenses (including the fees and expenses of the Trustee) connected therewith.
Redemption or Prepayment
Optional Redemption – Series 2019A Bonds. The Series 2019A Bonds maturing on or after
_________ 1, 20___ shall be subject to redemption at the option of the Company, evidenced by a
Company Request, on _________ 1, 20___, and on any date thereafter, in whole or in part, and if in part
from Stated Maturities specified in such Company Request, and as to Series 2019A Bonds of the same
Stated Maturity by lot, at the Redemption Price of par plus accrued interest on the principal amount to be
redeemed to the Redemption Date \[, plus a premium (expressed as a percentage of the principal amount of
the Bonds so redeemed) set forth below:\]
Redemption
Redemption Date Premium
_________ 1, 20__through _________, 20__ ___%
_________ 1, 20__through _________, 20__
_________ 1, 20__and thereafter
Optional Redemption – Series 2019A-T Bonds. The Series 2019A-T Bonds are not subject to
optional redemption prior to Maturity.
Mandatory Sinking Fund Redemption – Series 2019A Bonds. Series 2019A Bonds maturing July
1, 20__, 20__ and 20__, will be subject to mandatory redemption prior to maturity in part and by lot in
such manner as the Trustee may determine through the operation of mandatory sinking fund payments as
provided in the Indenture, at the principal amount so to be redeemed plus accrued interest to the
redemption date, in accordance with the following schedules:
*Preliminary, subject to change. 9
$________ Series 2019A Bonds Maturing on July 1, 20__*
Redemption Date Principal
(July 1) Amount
**Stated Maturity.
$________ Series 2019A Bonds Maturing on July 1, 20__*
Redemption Date Principal
(July 1) Amount
**Stated Maturity.
$________ Series 2019A Bonds Maturing on July 1, 20__*
Redemption Date Principal
(July 1) Amount
**Stated Maturity.
$________ Series 2019A Bonds Maturing on July 1, 20__*
Redemption Date Principal
(July 1) Amount
**Stated Maturity.
*Preliminary, subject to change. 10
\[Mandatory Sinking Fund Redemption – Series 2019A-T Bonds. Series 2019A-T Bonds will be
subject to mandatory redemption prior to maturity in part and by lot in such manner as the Trustee may
determine through the operation of mandatory sinking fund payments as provided in the Indenture, at the
principal amount so to be redeemed plus accrued interest to the redemption date, in accordance with the
following schedules:
$________ Series 2019A-T Bonds Maturing on July 1, 20__*
Redemption Date Principal
(July 1) Amount
**Stated Maturity. \]
At the option of the Company exercised not less than 45 days prior to any sinking fund
redemption date, the Company may (i) deliver to the Trustee for cancellation Term Bonds of the
applicable series in any aggregate principal amount desired, or (ii) receive a credit in respect of such
sinking fund obligation for any Term Bonds which prior to such date have been purchased or redeemed
(otherwise than through the operation of the sinking fund) and not otherwise previously applied as a credit
against sinking fund payments.
Extraordinary Redemption Upon Certain Events of Casualty or Condemnation. All of the
outstanding Series 2019 Bonds are subject to redemption as soon as practicable but no later than 180 days
after event occurrence, in whole but not in part, at the option of the Company, at their principal amount
plus accrued interest to the date of redemption, if the Project is taken by condemnation, damaged or
destroyed to such extent that in the reasonable judgment of the Company the Project cannot be restored
within twelve months to a condition permitting conduct of normal operations of the Company and at a
cost not exceeding the net proceeds of the condemnation award or insurance and other funds of the
Company available therefor.
Mandatory Redemption Upon Determination of Taxability. All Series 2019 Bonds are subject to
mandatory redemption in whole prior to maturity, at their principal amount plus accrued interest, upon the
occurrence of a Determination of Taxability.
Acceleration. Upon an Event of Default under the Indenture, all Series 2019 Bonds are subject to
acceleration and prepayment on any date selected by the Trustee at their principal amount, plus accrued
interest, without premium.
Notice of Redemption; Payment
The Trustee is required to cause notice of the call for any redemption to be mailed to the then
owner of each Series 2019 Bond to be redeemed, by first class mail, not less than 30 days prior to the
redemption date. If required by law, the Trustee shall publish any notice of redemption in the
publications identified in the Indenture at least once not less than 30 days before the redemption date.
Failure to mail or any defect in any such notice shall not affect the validity of any proceedings for the
redemption of any Series 2019 Bond. Interest on any Series 2019 Bonds or portions thereof called for
redemption ceases to accrue on the date established for redemption pursuant to such notice if notice of
redemption has been given and money sufficient for payment is on deposit with the Trustee on such
redemption date. Any notice of redemption may be a “conditional” notice that is qualified upon sufficient
funds being on deposit with the Trustee on the date of redemption.
*Preliminary, subject to change. 11
Ownership
The person in whose name a Series 2019 Bond is registered may be treated for all purposes as the
owner thereof.
12
SECURITY FOR THE SERIES 2019 BONDS
General
The Series 2019 Bonds are special, limited obligations of the Issuer and are payable solely from
payments or prepayments pledged under the Indenture; Loan Repayments to be made under the Loan
Agreement; money and investments held by the Trustee under, and to the extent provided in, the
Indenture, payments that may be made by Sole Member under the terms of the Limited Guaranty, or
proceeds from the foreclosure of the Mortgage or the exercise of the security interest therein; and
proceeds from certain insurance and condemnation awards or proceeds from sales consummated under
threat of condemnation. See “APPENDIX F — DEFINITIONS AND SUMMARY OF CERTAIN
PRINCIPAL DOCUMENTS” in this Official Statement.
THE LOAN REPAYMENTS AND ADDITIONAL PAYMENTS TO BE MADE BY THE
COMPANY UNDER THE LOAN AGREEMENT ARE SOLELY THE OBLIGATION OF THE
COMPANY. SOLE MEMBER IS NOT OBLIGATED TO MAKE ANY PAYMENTS UNDER
THE LOAN AGREEMENT EXCEPT TO THE EXTENT OBLIGATED UNDER THE LIMITED
GUARANTY IN THE EVENT THAT MONEY HELD BY THE TRUSTEE UNDER THE
INDENTURE IS INSUFFICIENT TO PAY DEBT SERVICE ON THE SERIES 2019 BONDS.
Assignment of Loan Agreement; Loan Repayments
Under the Indenture, the Issuer has pledged its interest in the Loan Agreement (including Loan
Repayments by the Company, but excluding certain rights of the Issuer to payment of fees, expenses and
indemnification) to the Trustee to secure the Series 2019 Bonds. Monthly Loan Repayments under the
Loan Agreement are required to be paid which will be sufficient, if paid promptly and in full, to pay when
due all principal of and interest on the Series 2019 Bonds. The Trustee is authorized to exercise the rights
of the Issuer and enforce the obligations of the Company under the Loan Agreement.
The Indenture
Under the Indenture, the Issuer is pledging its interest in the Loan Agreement, including its right
to receive and its interest in the Company’s Loan Repayments but excluding certain rights of the Issuer to
payment of fees, expenses, and indemnification (defined further in the Indenture as the “Issuer’s
Unassigned Rights”), to the Trustee to secure repayment of the Series 2019 Bonds. The Series 2019
Bonds are special, limited obligations of the Issuer payable solely from (i) payments or prepayments to be
made under the Loan Agreement; (ii) money held by the Trustee in certain funds and accounts; (iii) in
certain circumstances, proceeds of certain insurance and condemnation awards; (iv) proceeds from the
foreclosure of the Mortgage or the exercise of the security interest therein; and (v) income from the
temporary investment of any of the foregoing. Amounts held in the Rebate Fund are not part of the Trust
Estate pledged to secure the Series 2019 Bonds and consequently will not be available to make payments
on the Series 2019 Bonds. See “APPENDIX F — DEFINITIONS AND SUMMARY OF CERTAIN
PRINCIPAL DOCUMENTS — THE INDENTURE” in this Official Statement.
The Limited Guaranty of Sole Member
The Sole Member’s obligations under the Limited Guaranty is an unsecured general promise to
pay by Sole Member and there is no priority of payment between the Limited Guaranty or any other
unrelated guaranty agreements to which Sole Member is a party. The obligations of Sole Member under
the Limited Guaranty associated with the Series 2019 Bonds is a separate and distinct contractual
13
obligation of the Sole Member and a payment by Sole Member under the Limited Guaranty does not
lessen Sole Member’s obligations under any future guaranty agreements.
The Limited Guaranty. The Series 2019 Bonds are also secured by amounts payable from Sole
Member, as guarantor under the terms of the Limited Guaranty. Under the terms of the Limited
Guaranty, Sole Member agrees to provide a guaranty for the payment of debt service on the Series 2019
Bonds, subject to a limit of $1,250,000 (plus any costs of collection). The Limited Guaranty is subject to
release and termination if: (i) there is delivered to the Trustee a certificate or report of an Independent
certified public accountant (or firm) to the effect that, based upon the audited financial statements of the
Company for the most recent Audited Fiscal Year, the Company’s Net Revenues Available for Debt
Service for each such Fiscal Year (specifically including Management Fees paid to the Manager as in
Project Operating Expense) was not less than 1.25:1.00 of Principal and Interest Requirements on Long-
Term Indebtedness for the applicable Fiscal Year (excluding debt service on any Subordinate
Indebtedness); and (ii) the Company Representative certifies, on behalf of the Company, that at the time
of release of the Limited Guaranty that (a) no default has occurred and is continuing under the terms of
the Loan Agreement, (b) the Company complied with the Liquidity Covenant (as defined below under the
heading “Special Covenants - Days Cash on Hand/Liquidity Covenant”) as of the end of the most recent
Audited Fiscal Year, and (c) the occupancy rate of the Project (I) at the end of the most recent Fiscal Year
was equal to or greater than 90% and (II) as of the date of the Company’s termination certificate the
occupancy is equal to or greater than 90%. Payments by Sole Member under the Limited Guaranty are
pledged solely to the Series 2019 Bonds. See “APPENDIX F — DEFINITIONS AND SUMMARY OF
CERTAIN PRINCIPAL DOCUMENTS – THE LIMITED GUARANTY” in this Official Statement.
Bond Reserve Fund
On the date of issuance of the Series 2019 Bonds, an amount equal to the initial Bond Reserve
Requirement will be deposited in the Bond Reserve Fund. Upon issuance of the Series 2019 Bonds, the
Bond Reserve Requirement will be equal to the maximum annual debt service on the Series 2019 Bonds
(excluding the final year of maturity) and such amount may be increased upon the issuance of Additional
Bonds in accordance with the terms of the Indenture. Amounts in the Bond Reserve Fund may be used
by the Trustee to pay principal of, premium, if any, and interest on the Series 2019 Bonds if amounts
available in the account of the Bond Fund applicable to the Series 2019 Bonds are insufficient for such
purpose. If amounts in the Bond Reserve Fund are in excess of the required amount such excess amounts
shall be transferred to the account of the Bond Fund applicable to the Series 2019 Bonds. In accordance
with the Loan Agreement, the Company must restore amounts transferred out of the Bond Reserve Fund
by depositing funds with the Trustee on a monthly basis for up to up to six months to cure the deficiency.
Amounts in the Bond Reserve Fund may be invested in Qualified Investments, but with an aggregate
average weighted maturity of no longer than five years. See “APPENDIX A — THE COMPANY, THE
MANAGER AND THE PROJECT” in this Official Statement.
The Mortgage
The Series 2019 Bonds will be secured by a mortgage lien on, an assignment of leases and rents
from, and a security interest in the same property (the “Mortgaged Property”), subject to Permitted
Encumbrances. The mortgage lien on the Project consists generally of the Company’s interest in the land
upon which the Project is constructed. The lien of the Mortgage encumbers the approximately 125 acres
upon which the Project is located and the Mortgage does not encumber the outlots and the outlots are not
security for the repayment of the Series 2019 Bonds. See “APPENDIX F — DEFINITIONS AND
SUMMARY OF CERTAIN PRINCIPAL DOCUMENTS – THE MORTGAGE” in this Official
Statement.
14
Special Covenants
Rates and Charges. In the Loan Agreement, subject to legal requirements, the Company agrees
to fix, charge and collect such rates, fees and charges for the use of facilities of and for the services
furnished by the Company such that Net Revenues Available for Debt Service in each Fiscal Year,
commencing with the Fiscal Year ending September 30, 2020, will be at least 115% of the Principal and
Interest Requirements on Long Term Indebtedness during such Fiscal Year excluding the Seller Note.
Notwithstanding the foregoing, if the Company cannot charge and collect as required above, no Event of
Default will occur so long as (i) the Company promptly employs an independent Management Consultant
to make recommendations and (ii) to the fullest extent possible and consistent with the mission of the
Company, the Company follows the recommendations of the independent Management Consultant.
Notwithstanding the foregoing, it shall be an Event of Default if the Company’s Net Revenues Available
for Debt Service are less than 100% of the Maximum Annual Debt Service for any Fiscal Year. See
“APPENDIX D – DEFINITIONS OF CERTAIN TERMS AND SUMMARIES OF PRINCIPAL
DOCUMENTS - THE LOAN AGREEMENT - Rate Covenant” in this Official Statement.
“Gross Revenues” means total revenues of the Company for a specified period including
contributions from members of the Company or Affiliates and any amounts received under the
Abatement Agreements but excluding unrealized gains on investments, as determined in
accordance with generally accepted accounting principles.
“Net Revenues Available for Debt Service” means Gross Revenues for a specified
period, whether historic or projected, less total Operating Expenses for the same specified period,
as determined in accordance with generally accepted accounting principles, to which shall be
added the amount of all depreciation, amortization and interest expense which has been included
in total Operating Expenses and other non-operating income and contributions available for debt
service, and less deposits into the Repair and Replacement Reserve Fund required under the Loan
Agreement all for the same specified period.
“Operating Expenses” means for any period all non-capitalized expenses incurred in the
operation of the Project, including, for any period of calculation, the aggregate of all operating
expenses of the Company, including management fees but excluding extraordinary losses and
expenses, write-offs related to debt extinguishment and unrealized losses on investments,
calculated in accordance with generally accepted accounting principles consistently applied.
Days Cash on Hand. In the Loan Agreement, the Company agrees that it will maintain Days
Cash on Hand as follows:
(a) Commencing with the Fiscal Year ending September 30, 2020, the Company shall
maintain at least 30 Days Cash on Hand.
(b) Commencing with the Fiscal Year ending September 30, 2021 and continuing with each
Fiscal year thereafter, the Company shall maintain at least 45 Days of Cash on Hand.
“Days Cash on Hand” is defined in the Indenture as follows: as of the date of calculation,
the quotient determined by dividing (a) the Company’s Cash and Marketable Securities, the dollar
amount of which is derived from amounts shown on the most recent audited financial statements
\[plus money held by the Trustee in the Working Capital Reserve Fund\], by (b) the quotient
obtained by dividing the sum of the Operating Expenses (the dollar amount of which is derived
from amounts shown on said audited financial statements, but including interest expense and
15
excluding amortization and depreciation expense), by the actual number of days in the twelve-
month period for which such calculation is being made.
“Cash and Marketable Securities” is defined in the Indenture means all cash and
marketable securities of the Company, whether or not classified as current assets, as determined
under generally accepted accounting principles, excluding amounts in any funds or accounts held
by the Trustee under the Indenture, excluding the proceeds of any Short-Term Indebtedness
incurred by the Company, and excluding any restricted assets as defined under generally accepted
accounting principles.
\[To be further revised\] Limitations on Company Debt. The Loan Agreement restricts the
incurrence of debt by the Company.
Short-Term Indebtedness. The Company may incur Short-Term Indebtedness (Indebtedness
maturing within 365 days), provided such Indebtedness shall not exceed five percent (5%) of the Gross
Revenues of the Company for the preceding Audited Fiscal Year. Short-Term Indebtedness may only be
secured by the Company’s accounts receivable.
Long-Term Indebtedness. Indebtedness other than Short-Term Indebtedness (“Long-Term
Indebtedness”) may be incurred for any purpose related to the Project; provided that, with certain
exceptions related to completing facilities or refinancing, such Long-Term Indebtedness may be incurred
only if there is furnished to the Trustee, among other things, either (a) a written opinion, report, or
procedures of an Independent Accountant stating that Net Revenues Available for Debt Service of the
Company for each of the last two Audited Fiscal Years were not less than 130% of the maximum
Principal and Interest Requirements on Long-Term Indebtedness (including such requirements for the
proposed Long-Term Indebtedness as if it were outstanding at the beginning of such period but excluding
requirements for Indebtedness to be refinanced thereby and any Seller Note) for any Fiscal Year
beginning after the Fiscal Year in which such Long-Term Indebtedness is to be incurred but before the
final maturity of all outstanding Bonds, or (b) a forecast accompanied by an Independent Accountant’s
examination report stating that the estimated Net Revenues Available for Debt Service of the Company
for each of the three consecutive Fiscal Years beginning the second Fiscal Year after the Fiscal Year in
which any Improvements, or other facilities being financed thereby are to be placed in service (or, if no
Improvements, or other facilities are to be financed thereby, beginning the first Fiscal Year after the
Fiscal Year in which the proposed Long-Term Indebtedness is to be incurred), will not be less than 140%
of the maximum Principal and Interest Requirements on Long-Term Indebtedness (including such
requirements for the proposed Long-Term Indebtedness, but excluding such requirements for
Indebtedness to be refinanced thereby and any Seller Note) for each Fiscal Year beginning the second
Fiscal Year after the Fiscal Year in which any Improvements, or other facilities being financed thereby
are to be placed in service (or if no Improvements, or other facilities are to be financed thereby, beginning
the first Fiscal Year after the Fiscal Year in which the proposed Long-Term Indebtedness is to be
incurred, but before final maturity of the Outstanding Bonds). For further conditions and qualifications as
to when Indebtedness may be incurred by the Company, see “APPENDIX D - DEFINITIONS OF
CERTAIN TERMS AND SUMMARIES OF PRINCIPAL DOCUMENTS - THE LOAN
AGREEMENT - Permitted Indebtedness.”
Transactions with Affiliates. Fund or property transfers from the Company to an Affiliate
(including debt payments) are not restricted so long as (i) the rates and charges covenant described above
under the heading “Rates and Charges” was met in the prior Fiscal Year, (ii) the transfer does not cause
the Company to violate the liquidity covenant under the heading “Days Cash on Hand” above, (iii) no
Event of Default has occurred under the Loan Agreement, and (iv) the Bond Reserve Fund contains an
amount not less than the Bond Reserve Requirement. Otherwise, the Company agrees that it will not
16
make payments for property or services provided by an Affiliate except to compensate such Affiliate for
the fair market value of such services or property. The Company is current on its scheduled deposits to
the Repair and Replacement Fund.
Subordination of Management Fees
The Company has contracted with Continuums Management Services LLC, a Tennessee limited
liability company (the “Manager”) under the terms of a Management Agreement, dated ___________,
20__ (the “Management Agreement”) to receive certain administrative and oversight services necessary
for the operation of the Project. The Manager currently manages the Project for the Company and the
Manager is to continue to manage the Project for the Company during the term of the Series 2019 Bonds.
Pursuant to the terms of the Loan Agreement and an Assignment and Subordination of Management
Agreement, dated as of July 1, 2019 (the “Subordination Agreement”), any Management Fee payable by
the Company to the Manager with respect to the Project will be wholly subordinate and junior in right of
payment to all sums payable under the Loan Agreement with respect to the Series 2019 Bonds. Without
limiting the foregoing, during the continuance of any Loan Agreement payment default with respect to the
Series 2019 Bonds, no payment of Management Fees to such Manager shall be made by the Company.
The Company’s obligation to pay management fees and the Manager’s right to receive management fees
under the Management Agreement are at all times during the term of the Management Agreement
subordinate to the Company’s obligation under the Loan Agreement to (i) pay debt service on the Series
2019 Bonds, and (ii) maintain the Days Cash on Hand requirement of the Loan Agreement. If the
Company is not in compliance with the Days Cash on Hand requirement based upon audited financial
statements of Company, then the Company shall not pay the management fee to the Manager until such
time as the Company is able to certify, based upon unaudited interim quarterly financial statements or
audited annual financial statements, the Company was in compliance with the Days Cash on Hand
requirement for the stated period (which period shall not be less than a calendar quarter). Because of the
foregoing subordination, it is unlikely that the Company could retain a non-affiliated third party to
perform such services upon the same terms as the Manager. Therefore, if the Manager should, for any
reason, including concern for its own financial condition, terminate its services under the Management
Agreement, the Company can be expected to have increased costs to replace such services. See
“APPENDIX D - DEFINITIONS OF CERTAIN TERMS AND SUMMARIES OF PRINCIPAL
DOCUMENTS – THE LOAN AGREEMENT – Subordination of Management Fees” in this Official
Statement.
Repair and Replacement Fund
Commencing in October, 2019, the Company will make deposits in an amount equal to the
th
greater of one-twelfth (1/12) of $300 per unit per year, based on the actual number of units in the Project
th
at the commencement of each Fiscal Year, or (ii) one-twelfth (1/12) of the amount outlined in the most
recent capital budget subject to a maximum fund balance of the greater of $\[84,000\] or $1,000 per unit
per year based upon the actual number of units in the Project at the end of each Fiscal Year. Money in the
Repair and Replacement Reserve Fund will be disbursed by the Trustee at the written request of the
Company as provided in the Indenture to pay for capitalizable expenses attributable to the cost of
renewals, replacements or improvements to the Project and is also available for, but not anticipated to be
used to pay, debt service on the Series 2019 Bonds if necessary. Earnings on amounts in the Repair and
Replacement Reserve Fund will remain in the Repair and Replacement Reserve Fund.
Taxes and Insurance Escrow Fund
Commencing in \[October,\] 2019, the Company will make deposits in an amount equal to one-
twelfth of one hundred percent (100%) of the amount set forth from time to time in the Company’s budget
17
for the current calendar year for (i) annual premiums on all insurance required to be maintained by the
Indenture and (ii) real estate taxes (or payments in lieu of such taxes), assessments or other charges for
governmental services with respect to the Project for the current year (exclusive of utility charges) (the
“Monthly Taxes and Insurance Deposit”). The Trustee will use such amounts to pay the insurance
premiums and the real estate taxes for the Project in the amounts and at the times required. If there are
not sufficient amounts in the Taxes and Insurance Escrow Fund, the Trustee will immediately notify the
Company of the deficiency and demand payment of that amount. The Trustee will not be obligated to
advance its own funds to cure any deficiency. All income derived from investment of amounts on deposit
in the Taxes and Insurance Escrow Fund will remain in, and be credited to, the Taxes and Insurance
Escrow Fund.
Tax Abatement Agreements
The Issuer and the St. Cloud Area School District #742, Minnesota (the “School District”) have
each entered into a separate Tax Abatement Agreement, dated August 10, 2016 (collectively, the “Tax
Abatement Agreements”), with the Seller. Under the terms of the Issuer’s Tax Abatement Agreement
with the Seller, the Issuer agreed to abate 75% of the Issuer’s share of the real estate taxes which relate to
the Series Project until the earlier of (i) such time as the Seller receives $505,000 (the “Issuer
Reimbursement Amount”), or (ii) February 1, 2038. Under the terms of the Issuer’s Tax Abatement
Agreement with the Seller, the School District has agreed to abate 50% of the School District’s share of
the real estate taxes which relate to the Series Project until the earlier of (i) such time as the Seller
receives $145,000 (the “School District Reimbursement Amount”), or (ii) February 1, 2038. The Tax
Abatement Agreements provide that the Seller may assign (with the consent of the Issuer and the School
District) such agreements to the Company. The Company anticipates that the Seller will assign the Tax
Abatement Agreements (and the Issuer and the School District will consent to such assignments) on or
before the date of issuance of the Series 2019 Bonds.
In the event of a default by the Company with respect to its obligations under the Tax Abatement
Agreements, the Issuer and the School District, respectively, may, among other remedies, terminate their
respective payments to the Company under the Tax Abatement Agreements, which would adversely
affect the Company’s cashflow. Under the terms of the Loan Agreement and the terms of an Assignment
and Pledge Agreement, dated as of July 1, 2019 (the “Pledge Agreement”), between the Company, the
Trustee, the City and the District, the Company will pledge to the Trustee (and the Trustee’s successors
and assigns) the payments to be received by the Company under the Tax Abatement Agreements. The
Forecast (as defined below) shows the Company’s anticipated receipts under the Tax Abatement
Agreements for the next three fiscal years. In addition, the Pledge Agreement will subordinate the Tax
Abatement Agreement to the lien of the Mortgage for the Project.
Defeasance
Upon certain terms and conditions specified in the Indenture, the Series 2019 Bonds or portions
thereof will be deemed to be paid and the security provided in the Indenture and the Mortgage may be
discharged prior to maturity or redemption of the Series 2019 Bonds upon the provision for the payment
of such Series 2019 Bonds. In that case, the Series 2019 Bonds will be secured solely by the cash and
securities deposited with the Trustee for such purpose. See “APPENDIX D - DEFINITIONS OF
CERTAIN TERMS AND SUMMARIES OF PRINCIPAL DOCUMENTS - THE INDENTURE” in this
Official Statement
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RISK FACTORS
Limited Payment Sources
THE SERIES 2019 BONDS ARE NOT GENERAL OR MORAL OBLIGATIONS OF THE
ISSUER, THE STATE, OR THE COUNTY, BUT ARE SPECIAL, LIMITED OBLIGATIONS OF
THE ISSUER. EXCEPT FOR THE REVENUES TO BE RECEIVED BY THE ISSUER UNDER
THE LOAN AGREEMENT, THE ISSUER HAS NO OBLIGATION TO MAKE ANY OF THE
PAYMENTS REQUIRED BY THE PROVISIONS OF THE SERIES 2019 BONDS, AND THERE
IS NO RIGHT TO RESORT TO THE TAX REVENUES OF THE STATE, THE COUNTY, THE
ISSUER OR ANY OF THEIR RESPECTIVE PROPERTIES OR ASSETS, FOR PAYMENT.
THE LOAN REPAYMENTS AND ADDITIONAL PAYMENTS TO BE MADE BY THE
COMPANY UNDER THE LOAN AGREEMENT ARE SOLELY THE OBLIGATION OF THE
COMPANY. THE SOLE MEMBER IS NOT OBLIGATED TO MAKE ANY PAYMENTS
UNDER THE LOAN AGREEMENT EXCEPT TO THE EXTENT OBLIGATED UNDER THE
LIMITED GUARANTY IN THE EVENT THAT MONEY HELD BY THE TRUSTEE UNDER
THE INDENTURE IS INSUFFICIENT TO PAY DEBT SERVICE ON THE SERIES 2019
BONDS.
Dependence on Revenues of the Project
The obligations of the Company under the Loan Agreement are those of the Company alone.
Other than under the terms of the Limited Guaranty, the Sole Member and its affiliates (other than the
Company) do not have any liability for such obligations. The Company is not expected to have any
significant assets other than the Project. If the Project does not generate sufficient revenues, the Company
will not have significant other resources pledged directly to make payments under the Loan Agreement
necessary to pay in full the principal of, premium, if any, and interest due on the Series 2019 Bonds. The
ability of the Company to make such payments will therefore depend on the ability of the Company to
maintain sufficient unit occupancy in the Project and to charge and collect sufficient rates, fees and other
charges.
The future revenues of the Project will be subject to various events or conditions which cannot be
predicted, and which may be beyond the control of the Company, including, but not limited to, the risks
of inadequate occupancy; increased real estate taxes; increased operating, maintenance or repair costs;
and an inability to maintain or raise unit rates or other charges because of (i) restrictions on the unit rates
that can be charged to certain residents, (ii) insufficient resident demand, (iii) new or existing competition
from other senior housing and healthcare facilities, (iv) a decline in the attractiveness of the Project, its
amenities, or location, (v) changes to management or inferior management or maintenance, (vi) general or
local economic conditions in the State, (vii) an inability to obtain or procure administrative or oversight
services, and (viii) other factors which are not known to the Company at this time.
Subordination of Management Fees
Pursuant to the terms of the Loan Agreement and the Management Subordination Agreement,
fees payable to the Manager for management of the Project are not permitted to be paid if certain
payments required to be made on the Series 2019 Bonds have not been made or an Event of Default exists
or would occur as a result of such payment. The Manager is an affiliate of the Sole Member. In the event
of a foreclosure or other event requiring or making it desirable that an unaffiliated manager manage the
Project, it is unlikely that similar subordination provisions could be permanently negotiated with an
19
independent third party manager. See “SECURITY FOR THE SERIES 2019 BONDS - Subordination of
Management Fees” in this Official Statement.
Limited Value of the Project upon Foreclosure
The Project is not comprised of general purpose buildings and generally would not be suitable for
industrial or commercial use. As a result of the foregoing, in the event of a default by the Company, the
Trustee’s remedies and the number of entities which could operate such facilities may be limited, and the
revenues therefrom might thus be adversely affected.
Accordingly, in the event of foreclosure, the proceeds of a sale of the Project under such
circumstances may be less than that obtainable if the sale were not forced and, in any event, may not be
sufficient to pay the Series 2019 Bonds in full. In such event the Issuer will not have any general or
moral obligation to pay any deficiency.
Nature of the Mortgage
The Mortgage will be initially filed against the Company’s interest in the land upon which the
Project is located, subject to the terms of the Mortgage. The lien of the Mortgage encumbers the
approximately 125 acres upon which the Project is located and the Mortgage does not encumber the
outlots and the outlots are not security for the repayment of the Series 2019 Bonds. See “APPENDIX F
— DEFINITIONS AND SUMMARY OF CERTAIN PRINCIPAL DOCUMENTS” in this Official
Statement.
Additional Debt
Subject to limitations contained therein, the Indenture permits the issuance of Additional Bonds
with the same security as the Series 2019 Bonds and the Loan Agreement also permits the incurrence of
other Indebtedness and guaranties of Indebtedness by the Company, subject to limitations discussed
above and in APPENDIX F. The incurrence of additional Indebtedness and guaranties would increase
debt service requirements and could materially and adversely affect debt service coverage on the Series
2019 Bonds. See the discussion of additional Indebtedness under “SECURITY FOR THE SERIES 2019
BONDS – Special Covenants” and See “APPENDIX F — DEFINITIONS AND SUMMARY OF
CERTAIN PRINCIPAL DOCUMENTS” in this Official Statement.
Additional Guaranteed Debt; Dilution
The Indenture and the Loan Agreement limit, but do not prohibit the incurrence of other
Indebtedness and guaranties of Indebtedness by the Company. The incurrence of additional Indebtedness
and guaranties would increase debt service requirements and could materially and adversely affect debt
service coverage on the Series 2019 Bonds. Certain amendments to the Indenture and the Loan
Agreement may be made with the consent of the Holders of a majority in principal amount of the
Outstanding Bonds. See “APPENDIX F — DEFINITIONS AND SUMMARY OF CERTAIN
PRINCIPAL DOCUMENTS” in this Official Statement.
Taxability of the Series 2019A Bonds
A Determination of Taxability with respect to the Series 2019A Bonds could occur if the
Company and Sole Member do not comply with the provisions of the Loan Agreement which require the
Company to satisfy the continuing compliance requirements of the Code, including the maintenance of
the Company’s status as a Tennessee nonprofit limited liability company and the Sole Member’s status as
20
an organization treated as a Tax-Exempt Organization. A Determination of Taxability will not occur as a
result of a change in federal tax law.
Financial Feasibility Study
The Financial Feasibility Study (the “Forecast”) attached hereto in “APPENDIX C —
FINANCIAL FEASIBILITY STUDY” prepared by the Company and examined by CliftonLarsonAllen
LLP, Minneapolis, Minnesota, for the \[three (3) years ending September 30, 2019 through September 30,
2022\], is based upon assumptions made by the Company. No assurance can be given that the results
described in the Forecast will be achieved. The Company does not intend to issue an updated Forecast
and, accordingly, there are risks inherent in using the Forecast in the future as it becomes outdated. The
Forecast is only for Fiscal Years ending September 30, 2019 through \[September 30, 2022\] and does not
cover the entire period during which the Series 2019 Bonds may be outstanding. See “THE FINANCIAL
FEASIBILITY STUDY” and “APPENDIX C — FINANCIAL FEASIBILITY STUDY” in this Official
Statement.
No guaranty can be made that the Forecast will correspond with the results actually achieved in
the future by the Company because there is no assurance that actual events will correspond with the
assumptions made by the Company. Actual operating results of the Company may be affected by many
factors, including, but not limited to, increased costs, changes in demographic trends, and local and
general economic conditions. The Forecast relates to the forecasted operations of the Company and does
not include any information regarding Sole Member. The Forecast, which appears in “APPENDIX C —
FINANCIAL FEASIBILITY STUDY” in this Official Statement, should be read in its entirety.
Competition and Reliance on Market Information in the Financial Feasibility Study
The ultimate success of the Project and the ability of the Company to meet all of its obligations
with respect to the Project, including the timely payment of principal of and interest on the Series 2019
Bonds, depends on the existence of adequate demand for units in the Project. There is market study
information included in the Forecast with respect to the Project and its market area. There are no
guarantees that actual demand exists or will continue to exist which support the assumptions in the
Forecast regarding the market area for the Project. The Company is not aware of any material changes to
the information included in the Forecast. The Company faces competition from other existing facilities of
a similar nature to the Project and may face additional competition in the future if new facilities are
constructed in the market area of the Project that are of a similar nature to the Project. The Forecast has
identified _____ (__) competing assisted living facility and ___ (___) competing memory care facilities in
the primary market area for the Project. Actual occupancy of the Project in the future may vary from
conclusions in the Forecast, which variance may be material and adverse. If, among other things, actual
occupancy of the Project is materially lower or rental rates for the Project are materially less than
assumed by the Company, actual revenues for the Project will be less than projected, and perhaps
materially less. Any shortfall in such revenues could adversely affect the ability of the Company to
provide for payment in full of the Series 2019 Bonds. See “APPENDIX C — FINANCIAL
FEASIBILITY STUDY” in this Official Statement for more information with respect to competition in
the primary market area for the Project.
Occupancy Stabilization
The Project is still in a stabilization phase and lease-up and that as well as long-term occupancy
levels of the Project, will be critical for the Project’s success. The Forecast has certain assumptions with
respect to stabilization and occupancy for the Project during the time period covered by the Forecast.
Future occupancy of the Project could be affected by numerous conditions, including overall demand,
21
competition, the affordability or competitiveness of rates and charges and the desirability of the physical
facilities and available services, in addition to general or local economic conditions. The viability of the
Project will require sufficient revenues to meet both debt service requirements and the costs of operating
and maintaining the Project, many of which costs may be beyond the control of the Company or may be
as yet unknown or not precisely determinable. If the Project fails to maintain occupancy levels as
management forecasted in the Forecast, there may be insufficient funds to pay the debt service on the
Series 2019 Bonds. The Forecast should be read in its entirety, including management’s notes and
assumptions set forth therein. See “APPENDIX C — FINANCIAL FEASIBILITY STUDY” in this
Official Statement.
Utilization Demand
Several factors could, if implemented, affect demand for services of the Company, and
consequently the Project, including (i) efforts by insurers and governmental agencies to reduce utilization
of senior facilities such as the Project by such means as preventive medicine and home health care
programs; (ii) advances in scientific and medical technology; and (iii) increased or more effective
competition from facilities now or hereafter located in the service area of the Project.
Failure to Maintain Occupancy
The economic feasibility of the Project depends in large part upon the ability of the Company and
the Manager to maintain substantial occupancy throughout the term of the Series 2019 Bonds. If the
Company fails to obtain or maintain substantial occupancy in the Project, there may be insufficient funds
available to pay the debt service on the Series 2019 Bonds.
Uncertainty of Revenues
The Company does not anticipate having any other assets other than the Project and is not
expected to have any revenues except those derived from the Project. As noted elsewhere, except to the
extent that the Holders of the Series 2019 Bonds receive under certain circumstances, proceeds of
insurance, sale or condemnation awards, the Series 2019 Bonds will be payable from Loan Repayments
or prepayments to be made by the Company under the Loan Agreement. In the event that the Project does
not generate sufficient revenues to pay debt service on the Series 2019 Bonds; then, provided that Sole
Member has not been previously released from their obligations under the Limited Guaranty, the Sole
Member will be required to make payments under the terms of the Limited Guaranty. The ability of the
Company to make payments under the Loan Agreement is dependent upon the generation by the Project
of revenues in the amounts necessary for the Company to pay the principal, premium, if any, and interest
on the Series 2019 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
Company, 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 Series 2019 Bonds. No
representation or assurance can be made that revenues will be realized by the Company or Sole Member
in amounts sufficient to make the required payments with respect to debt service on the Series 2019
Bonds.
No Credit Enhancement Facility
There is no credit enhancement facility (letter of credit or bond insurance) securing the Series
2019 Bonds.
22
No Appraisal of the Project
Neither the Company nor the Underwriter has engaged an appraiser in connection with the
issuance of the Series 2019 Bonds. In the event of a foreclosure of the Mortgage, the value of the Project
(and the associated 125 acres of land) in such event cannot be determined and may be substantially less
than the construction costs of the Project and no assurance that the value received for the Project will be
sufficient to pay the principal of and interest due on the Series 2019 Bonds.
Resident’s Ability to Pay
A large percentage of the monthly income of the residents of the Assisted Living Apartments will
be fixed income derived from pensions, Social Security, and personal savings. Furthermore, investment
income of the residents may be adversely affected by declines in market interest rates and stock prices,
which may also result in payment difficulties.
Certain Tax Status Issues Related to Facilities for the Elderly
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) of the Code. 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) of the Code if the
organization (i) 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, (ii) to the extent of its financial ability, renders services to all or a reasonable proportion of its
residents at substantially below actual cost, and (iii) 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 residents, even if they become unable to pay the monthly charges after being admitted to the
facility.
Absence of Rating
The Series 2019 Bonds have not been rated by any national rating agency and no application has
been made for a credit rating for the Series 2019 Bonds. The absence of a rating could adversely affect
the market for and the price of the Series 2019 Bonds. The Series 2019 Bonds are believed to bear higher
rates of interest than would prevail if the Series 2019 Bonds were rated investment grade in order to
compensate investors for a level of risk that is higher than the risk generally associated with investment
grade bonds. In addition, unrated bonds typically are less liquid in the secondary market than rated
bonds. See “NO BOND RATING” in this Official Statement.
Value of Mortgaged Property
The security for the Series 2019 Bonds includes a mortgage lien on the Project evidenced by the
Mortgage. Attempts to foreclose under the Mortgage may be met with protracted litigation and/or
bankruptcy proceedings. Litigation and bankruptcy proceedings can cause delays in the liquidation of the
assets secured by the Mortgage. See “ENFORCEABILITY OF OBLIGATIONS” in this Official
Statement. Therefore, there can be no assurance that, upon the occurrence of an Event of Default, the
Trustee will be able to obtain possession of the Project and generate substantial revenues from the sale or
operation of the Project to ensure timely payment of the principal of and interest on the Series 2019
23
Bonds. If revenues from the Project are not sufficient to pay the principal of and interest on the Series
2019 Bonds, after the payment of operating costs of the Project, the market value of the Project may be
less than the amounts due in respect of the Series 2019 Bonds. For these and other reasons, there can be
no assurance that proceeds derived from the sale of the Project upon any default and foreclosure would be
sufficient to pay the Series 2019 Bonds and accrued interest thereon.
Liquidation of Security May Not be Sufficient in the Event of a Default
Except payments made by Sole Member under the Limited Guaranty, the Trustee must look
solely to the revenues of the Company, the Project and any funds held under the Indenture to pay and
satisfy the Series 2019 Bonds in accordance with their terms. The Bondholders are dependent upon the
success of the Project and the value of the assets of the Company for the payment of the principal of,
premium, if any, and interest on, the Series 2019 Bonds. The Company has not made any representations
to Bondholders regarding the market value of the Project upon completion. In the event of a default, the
value of the Project may be less than the amount of the outstanding Series 2019 Bonds, since the
Company’s community exists for the narrow use as a senior living community. In addition, even without
consideration of the special purpose nature of the Project, the sale of property at a foreclosure sale may
not result in the full value of such property being obtained. The special design features of the Project may
make it difficult to convert the Project to other uses in the event of a foreclosure, which may have the
effect of reducing its attractiveness to potential purchasers. In the event of a default and subsequent
foreclosure and sale of the Project, 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
Series 2019 Bonds. Accordingly, in the event of foreclosure and sale of the Project, Bondholders may not
receive all principal and interest due under the terms of the Series 2019 Bonds.
Tax-Exempt Status of Sole Member
Sole Member is currently exempt from federal income taxation. The Company is a Tennessee a
nonprofit limited liability company whose sole member, is an organization described in Section 501(c)(3)
of the Code and as such is an organization treated as exempt from federal income taxation. Under present
federal law, regulations and rulings, the income and revenue of nonprofit, 501(c)(3) qualified exempt
organizations are exempt from federal income tax, except for any unrelated business income as defined in
the Code, and their revenues are exempt from the State sales tax except for certain services. If the Sole
Member fails to continue to meet the requirements necessary to preserve its status as a tax-exempt
charitable organization under Section 501(c)(3) of the Code, the Company could experience expenses
which are greater than those forecasted in “APPENDIX C — FINANCIAL FEASIBILITY STUDY” and
revenues which are lower than those forecasted, in APPENDIX C, which would adversely affect the
Company’s ability in the future to pay the amount due under the Loan Agreement with respect to the
Series 2019 Bonds. In addition, if Sole Member were to lose its status as a tax-exempt organization, the
tax-exempt status of the Series 2019A Bonds would also be adversely affected. The Company has
covenanted in the Loan Agreement that it will not take any actions or fail to take any actions, the result of
which would adversely affect the Company’s status as a tax-exempt charitable organization under
Section 501(c)(3) of the Code.
Possible Limitations on the Mortgage
The lien on the Company’s interest in the Project and security interest in the equipment, fixtures
and personal property, may be limited by the following: (i) statutory liens; (ii) rights arising in favor of
the United States of America or any agency thereof; (iii) present or future prohibitions against assignment
contained in any federal statutes or regulations; (iv) constructive trusts, equitable liens or other rights
impressed or conferred by any state or federal court in the exercise of its equitable jurisdiction; (v) federal
24
bankruptcy or state insolvency laws affecting assignments of revenues earned after any effective
institution of bankruptcy or insolvency proceedings by or against the Company; (vi) rights of third parties
in any revenues, including revenues converted to cash, not in possession of the Trustee; and (vii) the
requirement that appropriate continuation statements be filed in accordance with the Minnesota Uniform
Commercial Code.
Property Taxes
It is anticipated that the Project will pay property taxes. The system of real property taxation in
Minnesota is complex and involves the City of St. Joseph, Minnesota, Stearns County, the school district,
and other local taxing jurisdictions. There have been many revisions to the property tax system over the
years by the Minnesota legislature and no assurance can be made that property taxes payable by the
Company will not increase in the future. Increases in the rate of property taxes on the Project could have
an adverse impact on the operating costs of the Company. The Company’s assumptions for the
anticipated initial amount of property taxes to be paid with respect to the Project are set forth in
“APPENDIX C — FINANCIAL FEASIBILITY STUDY” in this Official Statement. In addition, the Tax
Abatement Agreements provide that a portion of the property taxes for the site of the Project will be
abated by both the City and the District as set forth in the Tax Abatement Agreements. See “SECURITY
FOR THE SERIES 2019 BONDS – Tax Abatement Agreements” in this Official Statement.
Risk of Early Redemption
There are a number of circumstances under which all or a portion of the Series 2019 Bonds may
be redeemed prior to their stated maturity. See “THE SERIES 2019 BONDS – Redemption of the Series
2019 Bonds Prior to Maturity” and “SECURITY FOR THE SERIES 2019 BONDS” in this Official
Statement.
Effect of Affiliates; Conflicts with Affiliates; Related Party Transactions; No Restrictions
Manager currently provides administrative and oversight services, such as accounting services,
employee benefits and human resources, marketing support, management information systems, and the
services of the Manager’s key administrative staff to affiliates of the Company and plans to continue to do
so in the future for such affiliate’s facilities and future facilities to be developed by the Sole Member and
future affiliates. The Company expects that the Manager will provide such administrative and oversight
services to the Project and the Company on a long-term basis. Conflicts in the allocation of time and
resources may arise with respect to the Company as between the Project and the other facilities of the
affiliates, to the detriment of operations of the Project and the Company. Neither the Indenture nor the
Loan Agreement directly restricts the business activities of the Company, or any affiliate. Accordingly,
the Company and any affiliate may become engaged in other full-time business activities and only devote
such time and attention to the operation of the Project as they, in their discretion, determine necessary in
the circumstances. The Company, together with any of its affiliates, may develop, own, buy, sell, finance,
refinance, construct or manage any senior residential facility, other health care facility or other business
opportunity of any kind or nature, whether or not within the vicinity of the Project, and whether or not
such facility or opportunity shall be in competition with the Company or any affiliate.
Matters Relating to Enforceability
The practical realization of any rights of the Bondholders upon any default will depend upon the
exercise of various remedies specified in the Mortgage, the Loan Agreement and the Indenture. These
remedies, in certain respects, may require judicial action, which is often subject to discretion and delay.
Under existing law, certain of the remedies specified in the Mortgage, the Loan Agreement and the
25
Indenture may not be readily available or may be limited. A court may decide not to order the specific
performance of the covenants contained in these documents. There is no assurance that in the Event of
Default the Trustee will be able to obtain possession of the Project under the Mortgage after an Event of
Default, and there is no assurance that it will be able to generate revenue therefrom that will be sufficient
to pay the Series 2019 Bonds. The Trustee is not in the business of operating facilities such as the
Project, and any amount that might be realized from such operation is uncertain. The uninterrupted
payment of the principal and interest on the Series 2019 Bonds in accordance with their terms is largely
dependent upon payments received from the Company pursuant to the Loan Agreement, which payments
are dependent upon the Company’s ability to generate sufficient revenues from the operation of the
Project.
Bankruptcy
Bankruptcy proceedings with respect to the Company or Sole Member and other equitable
principles could delay, modify, limit or otherwise adversely affect the enforcement of Bondholders’ rights
or collection of principal of, premium, if any, or interest on the Series 2019 Bonds. These risks include,
without limitation, the risk that the interest rate on and repayment and other terms of the Series 2019
Bonds could be modified in bankruptcy proceedings, and, if the value of the collateral for the Series 2019
Bonds, as determined by a court of competent jurisdiction, is less than the full amount due on the Series
2019 Bonds, the Series 2019 Bonds may not be repaid in full. See “ENFORCEABILITY OF
OBLIGATIONS” in this Official Statement.
Federal bankruptcy law permits adoption of a reorganization plan, even though it has not been
accepted by the Holders of a majority in aggregate principal amount of the Series 2019 Bonds, if the
Bondholders are provided with the benefit of their original lien or the “indubitable equivalent.” In
addition, if a bankruptcy court concludes that the Bondholders have “adequate protection,” it may under
certain circumstances (a) substitute other security for the security provided by the Indenture for the
benefit of the Bondholders and (b) the lien and security interest of the Trustee to (1) claims by persons
supplying goods and services to the bankrupt after the bankruptcy and (2) the administrative expenses of
the bankruptcy proceeding.
The Company or Sole Member could become subject to bankruptcy proceedings even though the
Company or Sole Member is not insolvent because of the financial condition of an affiliate, or for other
reasons. Under Section 303(a) of the United States Bankruptcy Code (the “Bankruptcy Code”) a
corporation that is not a “moneyed, business, or commercial corporation” cannot be the debtor in an
involuntary bankruptcy proceeding. The legislative history of the Bankruptcy Code explains that this
language is intended to prevent the involuntary bankruptcy of a corporation created for charitable and
benevolent purposes.
The Sole Member is an Tax-Exempt Organization, meaning it is organized and operated
exclusively for charitable or certain other purposes.
Compliance with the Code
The Series 2019A Bonds could lose their tax-exempt status as a result of, among other things, the
loss by the Sole Member of its status as a Tax-Exempt Organization. Following a Determination of
Taxability, the Series 2019A Bonds will be subject to mandatory redemption as described herein, at the
outstanding principal amount thereof, plus accrued interest.
The opinion of Bond Counsel will be obtained as described in “TAX MATTERS” and as set forth
in “APPENDIX G — FORM OF BOND COUNSEL OPINION” in this Official Statement. However, a
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ruling or determination from the Internal Revenue Service regarding the tax-exempt status of the Series
2019A Bonds has not and will not be made, and an opinion of counsel is not binding upon the Internal
Revenue Service. The laws, regulations, court decisions and administrative interpretations upon which
the conclusions stated in the opinion of Bond Counsel are based on and subject to change by the United
States Congress, the United States Treasury Department and later judicial and administrative decisions.
Moreover, such opinion of Bond Counsel will be based in part upon the accuracy of the opinion of
Wornson Goggins Zard Neisen Morris & Brever, PC that the Sole Member is a Tax-Exempt Organization
and assumes continuing compliance by the Company and Sole Member with covenants and agreements
contained in the Loan Agreement, and the accuracy of representations, covenants and requirements made
by the Company in the Loan Agreement. If the Company or Sole Member fail to comply with these
representations, covenants or agreements, or these representations are incorrect, interest on the Series
2019A Bonds could become subject to federal income taxation. There is no assurance that interest on the
Series 2019A Bonds will not become includable in gross income for purposes of federal income tax as a
result of such future changes or actions on behalf of the Company or Sole Member. See “TAX
MATTERS” in this Official Statement.
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 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 Company by requiring it to pay the income taxes.
Interest on the Series 2019A Bonds may become subject to inclusion in gross income for
purposes of federal income taxes retroactively to the date of issuance or the date of the breach of certain
tax covenants in the Loan Agreement. In either case, the Bondholders may be liable for the payment of
federal income taxes for prior years during which interest on the Series 2019A Bonds was paid.
Environmental Matters
The Project, like other types of commercial real estate, may be subject to such environmental
risks which can result in substantial costs to the Company from any mandatory clean-up, damages, fines
or penalties that might be ordered with respect thereto. Any environmental problems discovered with
respect to the Project could have an adverse effect on the collateral value thereof.
At the request of the Company, a Phase One Environmental Site Assessment (the “Phase I
Report”) with respect to the Project was conducted by _____________ (“__________”). The Phase I
Report is dated ____________, 2019. According to the Phase I Report, __________ concluded that there
was no evidence or indication of “recognized environmental conditions” and no other issues of
environmental concern were identified in connection with the property. Management of the Company
believes that the Project is in material compliance with applicable Environmental Laws for the site.
\[Revise Per Actual Report\]
Amendments to Documents
Certain amendments to the Loan Agreement, the Mortgage, and the Indenture may be made
without notice to or the consent of the registered owners of the Series 2019 Bonds, and other amendments
may be made with the consent of the registered owners of not less than a majority in aggregate principal
amount of all Bonds outstanding under the Indenture. Such amendments may affect the security for the
Series 2019 Bonds and are binding on all Bondholders, whether or not they have consented to the
amendment. See “APPENDIX F — DEFINITIONS AND SUMMARY OF CERTAIN PRINCIPAL
DOCUMENTS” in this Official Statement.
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Compliance with the Tax Abatement Agreements
Although the Company intends to comply with the provisions of the Tax Abatement Agreements
(and the possibility of non-compliance is limited), no assurance can be given that the Company will
comply with the requirements of the Tax Abatement Agreement in the future and be able to receive the
full amount of the Issuer Reimbursement Amount or the School District Reimbursement Amount.
State Licensing Issues
Legislation may be introduced from time to time in the Minnesota Legislature relating to the
operations of senior living and memory care providers, including the Project. No precise determination
can be made at this time whether the bills that may be introduced or the regulations which may be
proposed for the purpose of containing costs, providing access to care, or otherwise affecting senior living
and memory care provider revenues, or increasing competition among senior living and memory care
providers, will be enacted, or, if enacted, whether and to what degree such legislation will impact the
financial conditions and results of operations of the Project.
Minnesota Licensing Issues. The Project will consist of assisted living and memory care units.
Certain of the services provided and advertised by the Project will be subject to licensure and regulation
under Minnesota law by the Minnesota Department of Health (“MDH” or the “Department”). The
Project, through the Manager will provide home care services that require licensure, regulation, and
inspection by MDH as comprehensive home care providers in accordance with Chapter 144A of the
Minnesota Statutes (the “Home Care Laws”). The Home Care Laws establish a number of minimum
requirements applicable to the business operations and services provided by home care providers. Among
other things, with respect to comprehensive home care providers such as the Project, the Home Care Laws
establish minimum standards with respect to: quality management; abuse prevention plans and reporting;
initial and recurring individualized assessment of clients; service plan development and implementation;
client complaint procedures; staff qualifications and training requirements; availability of staff;
medication, treatment, and therapy management; and client record requirements, including privacy and
security requirements. In addition, all licensed home care providers in Minnesota must implement and
comply with a statutorily prescribed home care bill of rights and provide notice of the bill of rights to
their clients. Licensees are also subject to periodic inspections, both announced and unannounced, by
MDH. These licenses must also be renewed annually.
In order to maintain its Minnesota home care provider licenses, the Project will be surveyed by
MDH at least once every three years, but surveys may be conducted more frequently based on the license
level, the provider’s compliance history, the number of clients served, or other factors in the Department’s
discretion. If the Department finds deficiencies at the Project, MDH may issue a correction order citing
specific areas of noncompliance, impose certain fines (depending on the level and scope of the violation),
and in particularly egregious cases may revoke such home care providers license.
The Project will also provide services that require annual registration as a housing with services
establishment in accordance with Chapter 144D of the Minnesota Statutes, which the Project is required
to comply with. Furthermore, because the Project will use a designation “assisted living” in the context
of advertising, marketing, describing, offering, or promoting itself, it must also comply with Chapter
144G of the Minnesota Statutes, which includes disclosing and certifying certain information on its
housing with services establishment registration and annual renewals in addition to complying with
additional operational requirements. The Project’s registration will require annual renewal and
compliance with additional regulatory requirements. As an example, housing with services
establishments are required to enter into housing with service contracts with each of their residents
providing certain statutorily prescribed information to the residents in the contracts and must provide
28
residents with a Uniform Consumer Information Guide describing the services they provide. MDH has
authority to bring actions for injunctive relief or refer to appropriate public or private agencies upon
receipt of information which may indicate failure of a housing with services establishment to meet legal
requirements. Furthermore, housing with services establishments holding out to be assisted living
establishments are required to meet additional requirements for the minimum level of services provided,
including but not limited to 24-hour access to an on-call registered nurse, and the home care bill of rights
for assisted living clients must contain additional protection regarding changes in services or charges.
MDH also retains similar authority with respect to assisted living establishments as it does with respect to
housing with services establishments.
The Company’s inability to maintain any of the licenses or registrations with respect to the
Project, enforcement actions by MDH as a result of failure to comply with applicable legal requirements,
or client lawsuits alleging a breach of statutorily prescribed rights at the Project may have a material
negative financial impact on the Company.
Other State Laws Impacting the Project. The Project is subject to various other laws and
regulations administered by MDH and other state government agencies, including landlord-tenant laws,
laws requiring registration of sex offenders or violent crime offenders seeking placement at the Project,
laws requiring criminal arrest checks on certain persons offered employment, laws relating to the
employment of nurse’s aides, and laws related to compensation of caregivers.
State Regulatory Issues
Minnesota Prohibition on Self-Referral. Under Section 144.6521 of Minnesota Statutes, health
care providers with financial or economic interests in, or employment or contractual arrangements that
limit referral options with, certain types of health care facilities are prohibited from making referrals to
such facilities without disclosing their relevant interests and posting a notice of such interest in a public
area of the provider’s facility. In addition, Section 62J.23, Subdivision 5 of the Minnesota Statutes
directs the Commissioner of MDH to access provider records for the purpose of auditing the referral
patterns of providers that qualify for exceptions under the federal Stark Law. The Commissioner is
required to report to MDH any audit results that reveal a pattern of referrals by a provider for the
furnishing of health services to an entity with which the provider has a direct or indirect financial
relationship. The Company does not believe that it will be involved in activities that pose an audit risk
under Section 144.6521 or Section 62J.23, Subdivision 5 of the Minnesota Statutes. However, there can
be no assurance that such audit will not occur in the future.
Minnesota Provider Conflict of Interest Law. Minnesota’s Provider Conflict of Interest Law,
which is outlined in Section 62J.23, Subdivision 1 of the Minnesota Statutes, provides that the
Commissioner of MDH must adopt rules restricting financial relationships or payment arrangements
involving health care providers under which a person benefits financially by referring a patient to another
person, recommending another person, or furnishing or recommending an item or service, and that the
rules must be no less restrictive than the federal Medicare anti-kickback statute and regulations
promulgated thereunder. However, to date, the only rules adopted by the Commissioner of MDH under
the Provider Conflict of Interest Law are rules related to the workers’ compensation program.
Nevertheless, the Provider Conflict of Interest Law further states that, until rules are adopted by the
Commissioner of the Department, the restrictions in the federal Medicare anti-kickback statute and
regulations apply to all persons in the State of Minnesota, regardless of whether the person participates in
any state health care program. As a result, the Provider Conflict of Interest Law currently has the effect
of making federal Medicare anti-kickback rules applicable even if a government program is not a source
of payment. While the Company does not believe that it will be involved in any activities that pose a risk
29
of sanctions under the Provider Conflict of Interest Law, there can be no assurance that such challenge or
investigation will not occur in the future.
Food and Lodging Licenses. The Project will be required to obtain food and lodging licenses
from MDH. By regulatory definition, the Project is a lodging establishment and a food and beverage
establishment. Architectural plans and kitchen design plans must be submitted for regulatory comment
and approval prior to commencement of construction. Prior to operations, a license application is
submitted to MDH and the completed facility is inspected as a condition for issuance of the food and
lodging license. The license is renewed annually. The food license requires that the kitchen be staffed by
a qualified food manager.
Payments for Residents
The Company will receive revenues derived from Medicaid and other governmental program
payments pursuant to the Company’s participation in the Minnesota Elderly Waiver program (the “EW”
program), Alternative Care, and Group Residential Housing program (the “GRH” program) (collectively,
the “Governmental Programs”) offered through various governmental entities and administered by the
county in which the Project is located and the State of Minnesota. Medicaid payment rates are established
under the Minnesota Medical Assistance Program (“MA”). Each state currently funds a substantial
portion of Medicaid payments and exercises considerable discretion in determining payments allowed to
care providers. The State has undergone budget difficulties during recent times. The current levels of
payment of such Government Program-based reimbursements could be reduced due to, among other
items, a reduction in State payments due to State budget reductions. It is not possible to predict the size
of any such reductions or how such reductions might be apportioned as between Medicaid and other
Governmental Programs. See “APPENDIX A — THE COMPANY, THE MANAGER AND THE
PROJECT” in this Official Statement In the Forecast, the Company anticipates that ___ of the assisted
living apartments and ___ of the studio memory care apartments will be occupied by residents who are in
Government Programs. See “APPENDIX A - THE COMPANY, THE MANAGER AND THE
PROJECT” and “APPENDIX C — FINANCIAL FEASIBILITY STUDY” in this Official Statement.
GRH Program. The Company will participate in the GRH program and apply for and receive a
GRH provider designation. The GRH is a rent subsidy available to very low income persons, more fully
described below. The GRH program is administered at the county level. Housing with Services entities
such as the Company are eligible to participate in the GRH program.
The GRH rate is automatically adjusted each year based on changes made in the federal benefit
rate of the Supplemental Social Security Income program and changes in the value of food support for an
individual. In 2011, the GRH approved rate was $846; currently, it is $904.
EW Residents. The following is a general description of the Minnesota EW program under
which the Project will operate and a discussion of the anticipated sources of payment by residents of the
Project. The State operates the EW program under the authority of the national Medicaid Program
created under Title XIX of the Social Security Act.
Revenues for the Company through its operation of the Project will be obtained from a
combination of apartment rent and service revenues. Expenses will be typical housing related costs plus
expenses associated with provision of health and support services. The residents pay for their rent and
services either privately or by means of the EW program and a Minnesota rental subsidy program entitled
the GRH program. As described above, the Project will be enrolled with the State for the EW program.
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The EW program has asset and income restrictions. The EW program has a countable asset limit
of $3,000 for a single person and $6,000 for a couple, and a monthly income limit of $2,199 for a single
person and $3,300 for a couple (FY 2016). There is an income contribution requirement for EW
participants. The EW program limits the amount of income a participant may pay towards room and
board (raw food). That amount is $904, plus a $95 personal allowance. If an EW participant has income
greater than $904, plus $95 personal needs allowance, then the excess income must be spent toward
services - the income contribution. The EW program pays any service costs over the participant’s income
contribution. If a resident makes less than $904 per month, the state GRH program makes up the
difference between Social Security Supplemental Income ($773) and $904. Social Security Supplemental
Income is a minimum income benefit available to low income persons.
The current levels of payment of the Government Programs could be reduced by the State in the
future due to, among other items, a reduction in State payments due to State budget restrictions. Certain
of the residents of the Project will be private pay residents, the remainder are anticipated to receive
financial assistance through the Government Programs. The EW program funds home and community-
based services for individuals aged 65 and older who are eligible for Medical Assistance (“MA”) and
require the level of care provided in a nursing home but who choose to live in the community. The
Minnesota Department of Human Services (“DHS”) operates the program under a Section 1915(c)
waiver. Services are typically provided through a managed care organization. The EW Program operates
with joint funding from the federal government and state general fund.
Risk Factors Relating to Sole Member/Guarantor
Health Care Law and Reform. The enactment of the Patient Protection and Affordable Care Act
and the Health Care and Education Reconciliation Act of 2010 (collectively, “ACA” or the “Affordable
Care Act”) represented a significant reform of federal health care legislation. Additionally, Congress
continues to consider the adoption of additional laws to modify several aspects of such legislation. The
ACA has brought about substantial changes to the delivery of health care services, the financing of health
care costs, reimbursement to health care providers, and the legal obligations of health insurers, providers,
and employers. Portions of the ACA have already been limited, delayed or nullified as a result of
executive action, legislative amendments and judicial interpretations and future actions may further
change its impact. The uncertainties regarding the implementation of the ACA create unpredictability for
the strategic and business planning efforts of health care providers, which in itself constitutes a risk.
Many ACA provisions could have a significant impact on health care providers, including their
operations and revenues, and such impact could be negative. For example, expanded health insurance
coverage, in particular, could affect the composition of the population enrolled in various public and
private health plans, potentially resulting in a capacity strain on provider networks or unanticipated
service costs. The ACA attempts to increase competition among private health insurers by providing for
transparent state insurance exchanges in which individuals and small employers can purchase health care
insurance for themselves and their families or their employees and dependents. The ACA also prevents
private insurers from adjusting insurance premiums based on health status, gender, or other specified
factors. Further, to offset the cost of expanded health care coverage and implementation of reform, the
ACA includes cuts in Medicare reimbursement and increased taxes.
The ACA reduces payments for services to federally-insured patients because Congress expects
that the base of consumers for health care services will expand (in tandem with a reduction in the
uninsured health care consumer base), and as a result, providers will realize savings in bad debt and
charity care expenses. While an increase in utilization of health care services by those who are currently
avoiding or rationing their health care can be expected, the net impact of such an increase in utilization of
health care services is difficult to predict due to the rates of reimbursement under the Medicaid and
31
Medicare programs, which could be further reduced. Also associated with increased utilization will be
increased variable and fixed costs of providing health care services, especially in the specialties necessary
to provide critical intervention or chronic disease management (e.g., primary care).
The constitutionality of certain ACA provisions designed to expand health insurance coverage
was recently challenged in National Federation of Independent Business v. Sebelius. While the private
insurance mandate has been upheld by the Supreme Court, certain other provisions were found to be
unconstitutional. The constitutionality of the ACA continues to be challenged in courts around the
country and has been the subject of Congressional sessions and various proposed amendments. The
ultimate outcomes of any legislative attempts to repeal, amend or eliminate or reduce funding for the
ACA are unknown.
The ACA also contains more than 32 sections related to health care fraud and abuse and program
integrity as well as significant amendments to existing criminal, civil, and administrative anti-fraud
statutes. Increased compliance and regulatory requirements, disclosure and transparency obligations,
quality of care expectations, and extraordinary enforcement provisions that could greatly increase
potential legal exposure are all aspects of the ACA that could increase Company’s operating expenses.
President Trump has publicly stated, along with leaders of both the United States Senate and the
United States House of Representatives, that he intends to repeal the ACA. Any possible repeal or
substantive changes to the ACA cannot be known at this time. Any substantive changes to the ACA
could have the result of increasing the number of uninsured persons, imposing maximum benefits for
certain residents, removing coverage for certain conditions under health plans, repealing Disproportionate
Share Medicare payments, or otherwise change the eligibility of certain residents.
Funding of the Limited Guaranty and Limited Nature of Sole Member’s Obligations. The Sole
Member’s obligations under the Limited Guaranty is an unsecured general promises to pay by Sole
Member and there is no priority of payment between the Limited Guaranty or any other unrelated
guaranty agreements to which Sole Member is a party.
No assurances can be given that, at any particular time, Sole Member, as guarantor, will have
sufficient liquid resources to meet any payment obligations that may arise pursuant to the Limited
Guaranty. Under the various guaranty agreements, Sole Member is not required to maintain any
minimum net worth or otherwise comply with any substantive financial covenants. Accordingly, the
ability of Sole Member to make payments required under the various guaranty agreements entered into in
connection with the issuance of the Series 2019 Bonds may be materially different in the future. Sole
Member’s audited financial statements for its Fiscal Years ended September 30, 2018 and 2017 are
included in APPENDIX D to this Official Statement. Sole Member is engaged in a number of activities
unrelated to the Project and has incurred liabilities, including guaranties, in connection with other
operations. See “APPENDIX B — THE FOUNDATION FOR HEALTH CARE CONTINUUMS” in
this Official Statement for a more complete discussion of the operations of Sole Member. There can be
no assurance that such other operations will continue to be successful and that Sole Member will have the
resources to meet its obligations under the Limited Guaranty. In addition, the total payments payable by
Sole Member under the Limited Guaranty are limited to $1,250,000 (exclusive of any costs of collection
of such amounts). The Limited Guaranty will terminate as described above under the heading
“SECURITY FOR THE SERIES 2019 BONDS — The Various Guaranties of Sole Member” in this
Official Statement.
Unaudited interim financial statements of Sole Member as of and for the six-month period ended
March 31, 2019 and 2018, which have been prepared by Sole Member and have not been reviewed or
audited by CliftonLarsonAllen LLP are incorporated in the Official Statement in APPENDIX E.
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Future Guaranties and Indebtedness of Sole Member. The Sole Member may act as borrower or
guarantor with respect to future debt issuances to finance or refinance the Sartell Campus (as defined in
Appendix B) or future communities of Sole Member and its affiliates. No assurance can be given that
Sole Member will be able to generate sufficient revenues to fulfill outstanding guaranties in the future. In
addition, the Limited Guaranty allows Sole Member to incur additional indebtedness and other guaranties.
See “APPENDIX B — THE SOLE MEMBER” in this Official Statement.
Additional Guaranteed Debt by Sole Member; Dilution. The Limited Guaranty does not prohibit
the incurrence of other indebtedness and guaranties of indebtedness by Sole Member. The incurrence of
additional indebtedness and guaranties could materially and adversely affect the ability of Sole Member,
as guarantor, to satisfy the obligations under the Limited Guaranty. If an Event of Default occurs, there
can be no assurance that such Limited Guaranty would be sufficient to pay the principal of and interest on
the Series 2019 Bonds.
Government Regulation and Reimbursement – Generally. Communities such as many of those
operated by Sole Member or their affiliates are subject to extensive governmental regulation through state
licensing requirements and complex laws and regulations imposed at the federal and state level for
communities to remain licensed and certified to receive payments under the Medicare and Medicaid
programs. The various state licensing agencies in which affiliates of Sole Member operate facilities such
as the Minnesota Department of Health (“MDH”) renew licenses annually and makes periodic inspections
to determine compliance with licensure and certification requirements. Continuing licensure to provide
health care is essential to the operation of certain communities affiliates with Sole Member. Further,
revenues of Sole Member are somewhat dependent on payments under the Medicare and Medicaid
programs, such that a loss of licensure for participation in the Medicare and Medicaid programs or an
elimination of or a material reduction in the availability of Medicare and Medicaid payments might
materially adversely affect the operations and financial condition of Sole Member. See “APPENDIX B
— THE SOLE MEMBER” in this Official Statement.
Medicare Program. Sole Member and certain of their affiliates are licensed to receive payments
under Medicare. For Fiscal Years ended September 30, 2018 and 2017, approximately _____% and
____% of the revenues of Sole Member (on a consolidated basis) were derived from Medicare payments.
Sole Member and certain of their affiliates are 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 Sole Member. Actions by governmental agencies concerning the licensure and
certification of certain communities owned or operated by Sole Member or their affiliates or the initiation
of audits and investigations concerning billing practices could also potentially have an adverse effect on
the results of operations of Sole Member and certain of their affiliates.
Medicaid. A portion of the revenues of Sole Member are dependent on reimbursement under the
Medicaid programs administered by the various states where affiliates of Sole Member have facilities.
For Fiscal Years ended September 30, 2018 and 2017, approximately _____% and _____% of the
revenues of Sole Member (on a consolidated basis) were derived from Medicaid payments. Each state
currently funds a substantial portion of Medicaid payments and exercises considerable discretion in
determining payments allowed to care providers. Regulations promulgated by CMS provide that states
are not required to pay for long-term care services on a cost-related basis, but may do so according to
33
payment rate systems established by the state and identified in a state Medicaid plan. See “APPENDIX B
— THE SOLE MEMBER” in this Official Statement.
Privacy and Security Regulations. The confidentiality of patient medical records and other health
information is subject to considerable regulation by state and federal governments. Legislation and
regulations governing the dissemination and use of medical record information are being proposed
continually at both the state and federal levels.
HIPAA. The Health Insurance Portability and Accountability Act of 1996 (“HIPAA”) mandates
the adoption of federal privacy and security standards to protect the confidentiality of protected health
information. Regulations designed to protect health information impose very complex procedures and
operational requirements. Failure to protect the privacy and security of protected health information
could result in damages or civil or criminal penalties. In particular, HIPAA imposes civil monetary
penalties for violations and criminal penalties for knowingly obtaining or using individually identifiable
health information. Penalties for HIPAA non-compliance range from $50,000 for any violation not to
exceed $1.5 million in any calendar year for wrongful disclosure of individually identifiable health
information. Any such violations may increase operating expenses as necessary to notify affected
individuals of privacy or security breaches, correct problems, comply with federal and state regulations,
defend against potential claims and implement and maintain any additional requirements imposed by
government action.
HITECH. Certain amendments to HIPAA known as the Health Information Technology for
Economic and Clinical Health Act (the “HITECH Act”) alter HIPAA rules regarding the use and
disclosure of protected health information. The HITECH Act (i) extends the reach of HIPAA beyond
“covered entities,” (ii) imposes a breach notification requirement on HIPAA covered entities, (iii) limits
certain uses and disclosures of individually identifiable health information, (iv) increases individuals’
rights with respect to individually identifiable health information, (v) restricts marketing communications,
and (vi) increases enforcement of, and penalties for, violations of privacy and security of individually
identifiable health information. Any violation of the HITECH Act is subject to HIPAA civil and criminal
penalties. The HITECH Act broadened the applicability of the criminal penalty provisions under HIPAA
to employees of covered entities and required penalties for violations resulting from willful neglect.
The HITECH Act breach notification requirement creates a federal breach notification law that
mirrors protections that many states have passed in recent years. This requirement requires the Company
to notify its clients of any unauthorized access, acquisition, or disclosure of their unsecured protected
health information that poses significant risk of financial, reputational or other harm to a client. In
addition, the breach notification requirement requires reporting all breaches to the Secretary of the U.S.
Department of Health and Human Services (“DHHS”) and, in some cases, local media outlets, of certain
unauthorized access, acquisition, or disclosure of unsecured protected health information that poses
significant risk of financial, reputational or other harm to a patient.
Government Health Program Regulations Governing Fraud and Abuse and Certain Referrals.
Federal and state health care fraud and abuse laws generally regulate services furnished to beneficiaries of
federal and state and private health insurance plans, and they impose penalties for improper billing and
other abuses. Under these laws, health care providers may be punished for billing for services that were
not provided, not medically necessary, provided by an improper person, accompanied by an illegal
inducement to use or not use another service or product, or billed in a manner that does not comply with
applicable government requirements. Violations of these laws are punishable by a range of criminal, civil
and administrative sanctions. If the Company violates any one of the fraud and abuse laws, among other
possible sanctions, federal or state authorities could recover amounts paid, exclude the Company from
participation in the Medicaid program, and impose civil money penalties. The federal government (and
34
individuals acting on its behalf) have brought many investigations, prosecutions and civil enforcement
actions under the fraud and abuse laws in recent years. In some cases, the scope of the fraud and abuse
laws is so broad that they may result in liability for business transactions that are traditional or
commonplace in the health care industry.
Federal Anti-Kickback Law. There is an expanding and complex body of state and federal law,
regulation and policy relating to relationships between providers of health care services to patients and
potential referral sources such as, but not limited to, physicians. The federal Medicare-Medicaid Anti-
Fraud and Abuse Amendments of 1997 to the Social Security Act, as amended (the “Anti-Kickback
Law”), prohibits the offer, payment, solicitation, or receipt of any remuneration (including any kickback,
bribe or rebate), directly or indirectly, covertly or overtly, in cash or in kind in order to induce business
for which reimbursement is provided, in whole or in part, under a federal health care program, including
Medicaid, even without actual knowledge or specific intent to commit a violation. Violations may result
in civil penalties that include temporary or permanent exclusion from government health care programs,
civil money penalties up to $50,000 per kickback, and treble damages. Notably, any claims for items or
services that violate the Anti-Kickback Law are also considered false claims for purposes of the federal
civil False Claims Act (the “Civil FCA”), further broadening the scope of liability. Federal regulations
describe certain arrangements (i.e., safe harbors) that are exempt from prosecution under the Anti-
Kickback Law. Because the law is broadly applied and safe harbors are narrowly drawn, there can be no
assurance that the Company will not be found in violation of the Anti-Kickback Law in the future.
False Claims Act. The Civil FCA prohibits anyone from knowingly submitting a false, fictitious
or fraudulent claim to the federal government. Violation of the Civil FCA can result in civil money
penalties and fines, including treble damages. Private individuals may initiate actions on behalf of the
federal government in lawsuits called qui tam actions. Qui tam lawsuits typically remain under seal
(hence, unknown to the defendant) for some time while the federal government decides whether or not to
intervene on behalf of private qui tam plaintiffs and take the lead in litigation. The plaintiffs, or
“whistleblowers,” can recover significant amounts from the damages awarded to the government. In
several cases, Civil FCA violations have been alleged solely on the existence of alleged kickback
arrangements or violations of Section 1877 of the Social Security Act (commonly known as the “Stark
Law”), even in the absence of evidence that false claims had been submitted as a result of those
arrangements. The ACA creates Civil FCA liability for knowingly failing to report and return an
overpayment within a specified time. The federal criminal False Claims Act (the “Criminal FCA”)
prohibits the knowing and willful making of a false statement or misrepresentation of a material fact in
submitting a claim to the government. Sanctions for violation of the Criminal FCA include
imprisonment, fines, and exclusions. Amendments to the FCA in the Fraud Enhancement and Recovery
Act of 2009 (“FERA”) and the ACA amend and expand the reach of the FCA. FERA expanded the
FCA’s reverse false claims provision, imposing liability on any person who “knowingly conceals” or
“knowingly and improperly avoids or decreases” an “obligation to pay or transmit money or property to
the Government,” whether or not the person uses a false record or statement to do so. FERA also clarified
that an “obligation” can arise from the retention of an overpayment. ACA Section 6402 further addresses
the retention of overpayments by defining the term overpayment and the circumstances and timing under
which an overpayment need be returned to the government before it becomes an “obligation” under the
FCA. On February 12, 2016, CMS released a final rule imposing a new “reasonable diligence” standard
for identifying overpayments that must be reported and returned within 60 days. CMS clarified that the
60-day timeframe for report and return begins when either reasonable diligence is completed (including
determination of the overpayment amount) or on the day the person received credible information of a
potential overpayment (if the person failed to conduct reasonable diligence and the person in fact received
an overpayment). Failure to report and return overpayments as described herein may also result in
potential FCA liability.
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Civil Monetary Penalties Law. The Civil Monetary Penalties Law (the “CMPL”) in part
authorizes the government to impose money penalties against individuals and entities committing a
variety of acts. For example, penalties may be imposed for the knowing presentation of claims that are (i)
incorrectly coded for payment, (ii) for services that are known to be medically unnecessary, (iii) for
services furnished by an excluded party, or (iv) otherwise false. An entity that offers remuneration to an
individual that the entity knows is likely to induce the individual to receive care from a particular provider
may also be fined. The ACA amended the CMPL to authorize civil money penalties for a number of
additional activities, including (i) knowingly making or using a false record or statement material to a
false or fraudulent claim for payment; (ii) failing to grant the Office of Inspector General timely access
for audits, investigations or evaluations; and (iii) failing to report and return a known overpayment within
statutory time limits. Violations of the CMPL can result in substantial civil money penalties plus three
times the amount claimed.
Management of Sole Member does not believe that it will be involved in activities that pose a
significant risk of sanctions under these referral laws. However, there can be no assurance that such
challenge or investigation will not occur in the future.
Labor Issues. Sole Member and certain of their affiliates have suffered from an increasing
scarcity of skilled nursing and health care personnel and aides to staff their communities. The trend in
the scarcity of qualified personnel has forced owners of such communities, including Sole Member and
certain of their affiliates, to pay increased salaries to such personnel as competition for such employees
intensified. If a community cannot maintain adequate staffing levels, the community’s license may be at
risk. A shortage of qualified professional personnel, including registered nurses, could significantly
increase payroll costs of Sole Member and certain of their affiliates.
Malpractice Claims and Losses. Sole Member maintain professional liability insurance with
commercial insurance carriers. The operations of Sole Member and certain of their affiliates (including
the Company) may be affected by increases in the incidence of malpractice lawsuits against elder care
communities 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 Sole Member and certain of their affiliates (including the
Company) or the premiums at which such coverage can be obtained.
Environmental Factors Affecting the Health Care Industry. Nursing and assisted living
communities such as those operated by the Sole Member or its affiliates are subject to a wide variety of
federal, state and local environmental and occupational and safety laws and regulations. Among the types
of regulatory requirements faced by nursing and assisted living communities are: air and water quality
control requirements; waste management requirements; specific regulatory requirements applicable to
asbestos, polychlorinated biphenyls and radioactive substances; requirements for providing notice to
employees and members of the public about hazardous materials handled by or located at nursing and
assisted living communities; and requirements for training employees in the proper handling and
management of hazardous materials and wastes. Nursing and assisted living communities may be subject
to liability for failure to investigate and remedy any hazardous substances that have come to be located on
the property, including any such substances that may have migrated off of the property. Typical nursing
and assisted living community operations include, in various combinations, the handling, use, storage,
transportation, disposal and discharge of biological waste, including hazardous, infectious, toxic,
radioactive, flammable and other hazardous materials, wastes, pollutants or contaminants. For this
reason, nursing and assisted living community operations are particularly susceptible to the practical,
financial and legal risks associated with compliance with such laws and regulations. Such risks may
result in damage to individuals, property or the environment; may interrupt operations or increase their
36
cost, or both; may result in legal liability, damages, injunctions or fines; or may trigger investigations,
administrative proceedings, penalties or other government agency actions. There can be no assurance that
the Company encounter such risks in the future, and such risks may result in material adverse
consequences to the operations or financial condition of the Company.
Other Possible Risk Factors
The occurrence of any of the following events, or other unanticipated events, could adversely
affect the operations of the Company:
1. Inability to control increases in operating costs, including salaries, wages and fringe
benefits, supplies and other expenses, given an inability to obtain corresponding increases in revenues
from residents whose incomes will largely be fixed;
2. Unionization, employee strikes and other adverse labor actions which could result in a
substantial increase in expenditures without a corresponding increase in revenues;
3. Adoption of other federal, state or local legislation or regulations having an adverse effect
on the future operating or financial performance of the Company;
4. The cost and availability of energy;
5. Inflation or other adverse economic conditions;
6. Changes in tax, pension, social security or other laws and regulations affecting the
provisions of health care and other services to the elderly; or
7. The occurrence of natural disasters, including, but not limited to, hurricanes, floods or
earthquakes, or failures of storm water detention devices during such naturally occurring events, which
may damage the Project, interrupt utility service to the Project, or otherwise impair the operation and
generation of revenues from said Project.
Summary
The foregoing is intended only as a summary of certain risk factors attendant to an investment in
the Series 2019 Bonds. In order for potential investors to identify risk factors and make an informed
decision, potential investors should be thoroughly familiar with this entire Official Statement and the
appendices hereto.
TAX MATTERS
Tax Exemption
It is the opinion of Briggs and Morgan, Professional Association, Minneapolis, Minnesota, as
Bond Counsel to the Issuer, under existing laws, regulations, rulings, and decisions, and assuming
continuing compliance by the Company with covenants made to satisfy requirements of the Internal
Revenue Code of 1986, as amended (the “Code”), interest on the Series 2019A Bonds is not included in
gross income for federal income tax purposes and, to the same extent, is not included in taxable net
income of individuals, estates, and trusts for Minnesota income tax purposes. Interest on the Series
2019A Bonds is not an item of tax preference for purposes of the computation of the federal alternative
37
minimum tax for individuals or for purposes of the State alternative minimum tax imposed on individuals,
estates, and trusts. Interest on the Series 2019A Bonds is subject to the Minnesota franchise tax imposed
on corporation, including financial institutions.
In expressing its opinion, Bond Counsel will rely on an opinion of Wornson Goggins Zard Neisen
Morris & Brever, PC, New Prague, Minnesota, as counsel to the Company and Sole Member, as to those
matters with respect to which its opinion is rendered.
The Code establishes certain requirements (the “Federal Tax Requirements”) that must be
satisfied subsequent to the issuance of the Series 2019A Bonds in order that, for federal income tax
purposes, interest on the Series 2019A Bonds will continue to be excluded from gross income for federal
income tax purposes. The Federal Tax Requirements include, but are not limited to, requirements relating
to the expenditure of proceeds of the Series 2019A Bonds, requirements relating to the operation of the
facilities financed by the Series 2019A Bonds, restrictions on the investment of proceeds of the Series
2019A Bonds prior to expenditure, and the requirement that certain earnings on the “gross proceeds” of
the Series 2019A Bonds be paid to the federal government. Noncompliance with the Federal Tax
Requirements may cause interest on the Series 2019A Bonds to become subject to federal and Minnesota
income taxation retroactive to their date of issue irrespective of the date on which such noncompliance
occurs or is ascertained. In expressing its opinion, Bond Counsel will assume compliance by the Issuer,
the Company, and the Trustee with the tax covenants contained in the Loan Agreement and other
documents for the issuance of the Series 2019A Bonds.
No provision has been made for an increase in the interest rate on the Series 2019A Bonds in the
event that interest on the Series 2019A Bonds becomes subject to federal or Minnesota income taxation;
however, upon the occurrence of a Determination of Taxability with respect to the Series 2019 Bonds, the
Series 2019 Bonds are subject to mandatory redemption, at par plus accrued interest. See “THE SERIES
2019 BONDS – Redemption of Series 2019 Bonds Prior to Maturity – Mandatory Redemption-
Determination of Taxability” in this Official Statement.
Bond Premium
The Series 2019A Bonds with a stated maturity of July 1, 20__ and July 1, 20__ (the “Premium
Bonds”), are being sold at a price greater than the principal amounts payable on such Series 2019A Bonds
at maturity. To the extent that a purchaser of a Premium Bond acquires a Premium Bond at a price
greater than the principal amount payable at maturity, such excess maybe considered “amortizable bond
premium” under Section 171 of the Code. In general, any amortizable bond premium with respect to a
Premium Bond must be amortized under the Code. The amount of premium so amortized will reduce the
owner’s basis in such Premium Bond for federal income tax purposes, and such amortized premium is not
deductible for federal income tax purposes. In the case of a tax-exempt debt instrument subject to early
call, the bond premium rules include special rules that impact the period over which the premium is
amortized. The rate of the amortization of the bond premium and the corresponding basis reduction may
result in a Bondholder realizing a taxable gain when a Premium Bond owned by such Bondholder is sold
or disposed of for an amount equal to or less than such Premium Bond’s original cost. Purchasers should
consult their own tax advisors as to the computation and treatment of such amortizable bond premium,
including, but not limited to, the calculation of gain or loss upon the sale, redemption, maturity, receipt or
payment or other disposition of a Premium Bond.
Original Issue Discount
The Series 2019A Bonds with a stated maturity of July 1 in the years 20__, 20__, 20__, and 20__
(the “Discount Bonds”) are being sold at a discount from the principal amount payable on such Series
38
2019A Bonds at maturity. The difference between the price at which a substantial amount of the
Discount Bonds of a given maturity is first sold to the public (the “Issue Price”) and the principal amount
payable at maturity constitutes “original issue discount” under the Code. The amount of original issue
discount that accrues to a holder of a Discount Bond under section 1288 of the Code is excluded from
federal gross income and from Minnesota taxable net income of individuals, estates, and trusts to the
same extent that stated interest on such Discount Bond would be so excluded. The amount of the original
issue discount that accrues with respect to a Discount Bond under section 1288 is added to the owner’s
federal and Minnesota tax basis in determining gain or loss upon disposition of such Discount Bond
(whether by sale, exchange, redemption or payment at maturity). Original issue discount is taxable under
the Minnesota franchise tax on corporations and financial institutions.
Interest in the form of original issue discount accrues under section 1288 pursuant to a constant
yield method that reflects semiannual compounding on dates that are determined by reference to the
maturity date of the Discount Bond. The amount of original issue discount that accrues for any particular
semiannual accrual period generally is equal to the excess of (1) the product of (a) one-half of the yield on
such Bonds (adjusted as necessary for an initial short period) and (b) the adjusted issue price of such
Bonds, over (2) the amount of stated interest actually payable. For purposes of the preceding sentence,
the adjusted issue price is determined by adding to the Issue Price for such Bonds the original issue
discount that is treated as having accrued during all prior semiannual accrual periods. If a Discount Bond
is sold or otherwise disposed of between semiannual compounding dates, then the original issue discount
that would have accrued for that semiannual accrual period for federal income tax purposes is allocated
ratably to the days in such accrual period.
If a Discount Bond is purchased for a cost that exceeds the sum of the Issue Price plus accrued
interest and accrued original issue discount, the amount of original issue discount that is deemed to accrue
thereafter to the purchaser is reduced by an amount that reflects amortization of such excess over the
remaining term of such Bond.
Except for the Minnesota rules described above, no opinion is expressed as to state and local
income tax treatment of original issue discount. It is possible under certain state and local income tax
laws that original issue discount on a Discount Bond may be taxable in the year of accrual, and may be
deemed to accrue differently than under federal law.
Holders of Discount Bonds should consult their tax advisors with respect to computation and
accrual of original issue discount and with respect to the state and local tax consequences of owning
Discount Bonds.
The Series 2019A-T Bonds
Interest to be paid on the Series 2019A-T Bonds is included in gross income of the recipient for
federal income tax purposes and in taxable net income of individuals, estates and trusts for Minnesota
income tax purposes, and is subject to Minnesota franchise taxes imposed on corporations and financial
institutions.
Not Bank-Qualified Obligations
The Series 2019 Bonds have not been designated by the Issuer as “qualified tax-exempt
obligations” within the meaning of Section 265(b)(3) of the Code.
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Legislative Proposals
Bond Counsel’s opinion is given as of its date and Bond Counsel assumes no obligation to
update, revise, or supplement such opinion to reflect any changes in facts or circumstances or any changes
in law that may hereafter occur. Proposals are regularly introduced in both the United States House of
Representatives and the United States Senate that, if enacted, could alter or affect the tax-exempt status on
municipal bonds. For example, the recent federal tax reform legislation (formerly known as the Tax Cuts
and Jobs Act) signed by President Trump as of December 22, 2017, will significantly change the income
tax rates for individuals and corporations and will modify the alternative minimum tax for tax years
beginning after December 31, 2017, and will alter other existing tax law in a manner that may affect the
market price for, or marketability of, the Series 2019A Bonds. Prospective purchasers of the Series
2019A Bonds should consult their own tax advisors regarding the impact of any such change in law.
The above is not a comprehensive list of all federal tax consequences which may arise from the
receipt of interest on the Series 2019A Bonds. The receipt of interest on the Series 2019A Bonds may
otherwise affect the federal or state income tax liability of the recipient based on the particular taxes to
which the recipient is subject and the particular tax status of other items or deductions. Bond Counsel
expresses no opinion regarding any such consequences. All prospective purchasers of the Series 2019A
Bonds are encouraged to consult with their personal tax advisors as to the tax consequences of, or tax
considerations for, purchasing or holding the Series 2019A Bonds.
THE FINANCIAL FEASIBILITY STUDY
The Financial Feasibility Study (the “Forecast”) attached hereto in “APPENDIX C —
FINANCIAL FEASIBILITY STUDY” prepared by the Company and examined by CliftonLarsonAllen
LLP, Minneapolis, Minnesota, for the \[three (3) years ending September 30, 2022\] is based upon
assumptions made by the Company. No assurance can be given that the results described in the Forecast
will be achieved. The Forecast is based on assumptions made by management of the Company as to,
among other things, future utilization levels, future costs and future revenues. The Forecast should be
read in its entirety.
The Forecast is based on various assumptions that represent only the beliefs of the Company’s
management as to the most probable future events and are subject to material uncertainties. No
assurances can be given that the Company will, in fact, be able to generate sufficient revenue and attain
the utilization levels as stated in the Forecast, and variations from the Forecast for each of such matters
should be expected to occur. Accordingly, the operations and financial condition of the Company in the
future will inevitably vary from those set forth in the Forecast, and such variance may be material and
adverse. See “RISK FACTORS – Financial Feasibility Study” in this Official Statement.
The Company has not assumed any responsibility to update the Forecast or to provide any
financial forecast or projections in the future. The Underwriter has not made any independent inquiry as
to the assumptions on which the Forecast is based and assume no responsibility therefor.
AUDITED CONSOLIDATED FINANCIAL STATEMENTS OF THE SOLE MEMBER
The audited consolidated financial statements and supplementary information of the Sole
Member (including the Company) as of and for the Fiscal Years ended September 30, 2018 and 2017 are
included in APPENDIX D. The financial statements of Sole Member have been audited by
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CliftonLarsonAllen LLP, independent auditors (the “Independent Auditor”), as stated in its report
thereon. The Sole Member is not obligated to make any payments under the Loan Agreement.
UNAUDITED FINANCIAL STATEMENTS
The unaudited interim consolidated financial statements of the Company, as of and for the six-
month periods ended March 31, 2019 and 2018 included in this Official Statement in APPENDIX E, have
been prepared by the Company and have not been reviewed or audited by any independent third party,
including CliftonLarsonAllen LLP. The financial information contained in “APPENDIX E —
UNAUDITED FINANCIAL STATEMENTS OF THE COMPANY FOR THE SIX-MONTH PERIODS
ENDED MARCH 31, 2019 AND 2018” were internally prepared by the Company in accordance with
U.S. generally accepted accounting principles. See “APPENDIX A — THE COMPANY, THE
MANAGER AND THE PROJECT” in this Official Statement.
ENFORCEABILITY OF OBLIGATIONS
On the date of delivery of the Series 2019 Bonds, Briggs and Morgan, Professional Association,
as Bond Counsel, will issue its opinion, dated the date thereof, that the Series 2019 Bonds are valid and
legally binding special, limited obligations of the Issuer, enforceable in accordance with their terms, and
that the Loan Agreement and the Indenture are valid and legally binding agreements of the Issuer,
enforceable in accordance with their respective terms. Wornson Goggins Zard Neisen Morris & Brever,
PC, as counsel to the Company, will issue its opinion that the Loan Agreement, the Continuing
Disclosure Agreement, the Bond Purchase Agreement, and the Mortgage are valid and legally binding
agreements of the Company, enforceable in accordance with their respective terms. The foregoing
opinions will be generally qualified to the extent that the enforceability of the respective instruments may
be limited by principles of equity and by bankruptcy, insolvency, moratorium or other laws affecting the
enforcement of creditors’ rights.
While the Series 2019 Bonds are secured or payable pursuant to the Indenture, the Loan
Agreement, and the Mortgage, the practical realization of payment from any security will depend upon
the exercise of various remedies specified in the respective instruments. These and other remedies are
dependent in many respects upon judicial action, which is subject to discretion and delay. Accordingly,
the remedies specified in the above documents may not be readily available or may be limited.
APPROVAL OF LEGAL PROCEEDINGS
Legal matters incident to the issuance and sale of the Series 2019 Bonds and with regard to the
tax-exempt status of interest on the Series 2019A Bonds under existing laws are subject to the approving
legal opinion of Briggs and Morgan, Professional Association, as Bond Counsel to the Issuer . Wornson
Goggins Zard Neisen Morris & Brever, PC has acted as counsel for the Company. The Underwriter has
been represented in this transaction by Ballard Spahr LLP.
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ABSENCE OF MATERIAL LITIGATION
The Issuer
As of the date of delivery of the Series 2019 Bonds to the Underwriter, authorized officials of the
Issuer will certify that there is no pending or, to their actual knowledge, threatened litigation to which the
Issuer is party, which in any way questions or affects the validity of the Series 2019 Bonds, or any
proceedings or transactions relating to their issuance, sale and delivery.
The Company
As of the date of delivery of the Series 2019 Bonds to the Underwriter, the Company will certify
that there is no pending or, to the best of their knowledge, threatened litigation to which the Company is a
party, which in any way questions or affects the validity of the Series 2019 Bonds, or any proceedings,
documents, or transactions relating to their issuance, sale and delivery.
Sole Member
As of the date of delivery of the Series 2019 Bonds to the Underwriter, Sole Member will certify
that there is no pending or, to the best of their knowledge, threatened litigation to which Sole Member is a
party, which in any way questions or affects the validity of the Series 2019 Bonds, or any proceedings,
documents, or transactions relating to their issuance, sale and delivery. Sole Member is currently subject
to a civil investigation by the U.S. Attorney’s Office for the District of Minnesota relating to Sole
Member’s therapy managements practices, see “APPENDIX B — THE SOLE MEMBER” in this
Official Statement for more information.
RELATIONSHIPS AMONG THE PARTIES
In connection with the issuance of the Series 2019 Bonds, the Issuer, the Underwriter, and the
Company are being represented by the attorneys or law firms identified above under the heading
“APPROVAL OF LEGAL PROCEEDINGS.” In other transactions not related to the Series 2019 Bonds
each of these attorneys or law firms may have acted as Bond Counsel or represented the Issuer, the
Underwriter, the Company, or their affiliates, in capacities different from those described under
“APPROVAL OF LEGAL PROCEEDINGS,” and there will be no limitations imposed as a result of the
issuance of the Series 2019 Bonds on the ability of any of these firms or attorneys to act as Bond Counsel
or represent any of these parties in any future transactions. Furthermore, the Company, the Underwriter,
and their affiliates are not limited in engaging in future business transactions with each other. Potential
purchasers of the Series 2019 Bonds should not assume that the Issuer, the Underwriter, the Company, or
their respective counsel or Bond Counsel have not previously engaged in, or will not after the issuance of
the Series 2019 Bonds engage in, other transactions with each other or with any affiliates of any of them,
and no assurance can be given that there are or will be no past or future relationships or transactions
between or among any of these parties or these attorneys or law firms.
UNDERWRITING
The Series 2019 Bonds are being purchased from the Issuer by Dougherty & Company LLC, in
Minneapolis, Minnesota (the “Underwriter”). The Underwriter has agreed to purchase (i) the
Series 2019A Bonds, for a purchase price of $__________, which amount represents the principal amount
of the Series 2019A Bonds ($_______), less the Underwriter’s discount of $_________, \[plus\] \[less\] \[net\]
42
original issue \[premium\] \[discount\] of $________, and (ii) the Series 2019A-T, for a purchase price of
$_________, which amount represents the principal amount of the Series 2019A-T Bonds ($_________),
less the Underwriter’s discount of $_________. The Underwriter is purchasing the Series 2019 Bonds
subject to the terms of a Bond Purchase Agreement (the “Bond Purchase Agreement”) between the Issuer,
the Company, and the Underwriter. The Bond Purchase Agreement provides that the Underwriter will
purchase all the Series 2019 Bonds if any are purchased and that the obligation to make such purchase is
subject to certain terms and conditions set forth in the Bond Purchase Agreement, the approval of certain
legal matters by counsel, and certain other conditions. The initial public offering prices set forth on the
cover page hereof may be changed from time to time by the Underwriter. The Company has agreed under
the Bond Purchase Agreement to pay to the Underwriter certain expenses, and to indemnify the
Underwriter and the Issuer against certain liabilities, including certain liabilities under federal and state
securities laws.
CONTINUING DISCLOSURE
Rule 15c2-12, promulgated by the Securities and Exchange Commission under the Securities
Exchange Act of 1934, as amended (the “Rule”), imposes continuing disclosure obligations on the
obligated parties of certain state and municipal securities to permit participating underwriters (the
Underwriter) to offer and sell the securities. In order to comply with the requirements of the Rule, the
Company will enter into the Continuing Disclosure Agreement on the date of issuance of the Series 2019
Bonds. The Company has not been subject to any prior continuing disclosure undertakings that are
subject to the provisions of the Rule. See “APPENDIX H — FORM OF CONTINUING DISCLOSURE
AGREEMENT” in this Official Statement.
NO BOND RATING
The Company has not applied for a rating of the Series 2019 Bonds from any of the national
credit rating agencies, and, consequently, the Series 2019 Bonds have not been rated by any national
credit rating agency. The Company has not received a rating from any of the national credit rating
agencies. The Series 2019 Bonds are believed to bear higher rates of interest than obligations with
investment-grade ratings in order to compensate investors for a level of risk that is higher than the risk
generally associated with investment-grade obligations. In addition, unrated obligations such as the
Series 2019 Bonds typically have less liquidity in the secondary market than obligations that have
received a rating from a national credit rating agency. See “RISK FACTORS – Absence of Rating” in
this Official Statement.
THE TRUSTEE
U.S. Bank National Association, a national banking association organized under the laws of the
United States, will serve as Trustee, Bond Registrar, and Paying Agent. The Trustee will carry out those
duties assigned to it under the Indenture. Except for the contents of this section, the Trustee has not
reviewed or participated in the preparation of this Official Statement and assumes no responsibility for the
nature, contents, accuracy, fairness or completeness of the information set forth in this Official Statement
or for the recitals contained in the Indenture or the Series 2019 Bonds, or for the validity, sufficiency, or
legal effect of any of such documents.
The mailing address of the Trustee is U.S. Bank National Association, 60 Livingston Avenue,
Saint Paul, Minnesota 55107, Attention: Corporate Trust Services. Additional information about the
43
Trustee may be found at its website at http://www.usbank.com/corporatetrust. The U.S. Bank website is
not incorporated into this Official Statement by such reference and is not a part hereof.
MISCELLANEOUS
General
The references herein to the Act, the Indenture, the Loan Agreement, 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. Reference is hereby made to such instruments, documents, and other materials,
copies of which will be furnished by the Trustee upon request for further 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 I are integral parts 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 Series 2019 Bonds, but
neither the failure to print such numbers on any Series 2019 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 Series 2019 Bonds.
Limited Issuer Involvement
The Company, Sole Member and the Issuer have authorized and approved the use and
distribution of this Official Statement, although the Issuer has not reviewed or approved any matters
herein and assumes no responsibility for the accuracy or completeness of the information herein except
for the information under the caption “THE ISSUER” and “ABSENCE OF MATERIAL LITIGATION –
The Issuer” in this Official Statement.
No Registration of Series 2019 Bonds
Registration or qualification of the offer and sale of the Series 2019 Bonds (as distinguished from
registration of the ownership of the Series 2019 Bonds) is not required under the federal Securities Act
of 1933, as amended. THE COMPANY DOES NOT ASSUME ANY RESPONSIBILITY FOR
QUALIFICATION OR REGISTRATION OF THE SERIES 2019 BONDS FOR SALE UNDER THE
SECURITIES LAWS OF ANY JURISDICTION IN WHICH THE SERIES 2019 BONDS MAY BE
SOLD, ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED.
Interest of Certain Persons Named in this Official Statement
The fees to be paid to Bond Counsel, counsel to the Underwriter, the Trustee, and the
Underwriter are contingent upon the sale and delivery of the Series 2019 Bonds.
Official Statement Certification of the Company
The preparation of this Official Statement and its distribution has been authorized by the
Company. This Official Statement has been “deemed final” by the Company in compliance with the
44
provisions of the Rule. This Official Statement is not to be construed as an agreement or contract
between the Company and any purchaser, owner or holder of any Series 2019 Bond.
(The remainder of this page is intentionally left blank.)
45
APPENDIX A
THE COMPANY, THE MANAGER AND THE PROJECT
APPENDIX A
THE COMPANY, THE MANAGER AND THE PROJECT
TABLE OF CONTENTS
A-1
APPENDIX B
THE FOUNDATION FOR HEALTH CARE CONTINUUMS
APPENDIX B
THE FOUNDATION FOR HEALTH CARE CONTINUUMS
TABLE OF CONTENTS
B-1
APPENDIX C
FINANCIAL FEASIBILITY STUDY
APPENDIX C
FINANCIAL FEASIBILITY STUDY
C-1
APPENDIX D
AUDITED CONSOLIDATED FINANCIAL STATEMENTS AND
SUPPLEMENTARY INFORMATION OF THE SOLE MEMBER AND
AFFILIATES (INCLUDING THE COMPANY) FOR THE FISCAL
YEARS ENDED SEPTEMBER 30, 2018 AND 2017
APPENDIX D
AUDITED CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION
OF THE SOLE MEMBER AND AFFILIATES (INCLUDING THE COMPANY) FOR THE FISCAL
YEARS ENDED SEPTEMBER 30, 2018 AND 2017
D-1
APPENDIX E
UNAUDITED FINANCIAL STATEMENTS OF THE COMPANY
FOR THE SIX-MONTH PERIODS
ENDED MARCH 31, 2019 AND 2018
APPENDIX E
UNAUDITED FINANCIAL STATEMENTS OF THE COMPANY
FOR THE SIX-MONTH PERIODS ENDED MARCH 31, 2019 AND 2018
E-1
APPENDIX F
DEFINITIONS AND SUMMARY OF
CERTAIN PRINCIPAL DOCUMENTS
APPENDIX F
DEFINITIONS AND SUMMARY OF CERTAIN PRINCIPAL DOCUMENTS
DEFINITIONS
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APPENDIX G
FORM OF BOND COUNSEL OPINION
APPENDIX G
FORM OF BOND COUNSEL OPINION
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APPENDIX H
FORM OF CONTINUING DISCLOSURE AGREEMENT
APPENDIX H
FORM OF CONTINUING DISCLOSURE AGREEMENT
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APPENDIX I
BOOK-ENTRY ONLY SYSTEM
APPENDIX I
BOOK-ENTRY ONLY SYSTEM
The Depository Trust Company (“DTC”), New York, NY, will act as securities depository for the
Securities. The Securities 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 Security certificate will be issued for each maturity of the Securities, 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 17A of the Securities Exchange Act of
1934. DTC holds and provides asset servicing for over 3.6 million issues of U.S. and non-U.S. equity, 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. DTC is a wholly-owned subsidiary of The
Depository Trust & Clearing Corporation (“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 a Standard & Poor’s rating: AA+. 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 the Securities under the DTC system must be made by or through Direct Participants which
will receive a credit for the Securities on DTC’s records. The ownership interest of each actual purchaser of each
Security (“Beneficial Owner”) is in turn 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 Securities 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 the Securities, except in the event that use of the book-entry system for the
Securities is discontinued.
To facilitate subsequent transfers, all Securities deposited by Direct Participants with DTC are registered in
the name of DTC’s partnership nominee, Cede & Co., or such other name as may be requested by an authorized
representative of DTC. The deposit of the Securities 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 Bond; DTC’s records reflect only the identity of the Direct Participants to whose accounts
such Securities are credited, which may or may not be the Beneficial Owners. The Direct and Indirect Participants
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 Participants, and by Direct Participants and Indirect Participants 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 Securities may wish to take certain steps to augment the transmission to them of notices of
significant events with respect to the Securities, such as redemptions, tenders, defaults, and proposed amendments to
the Security documents. For example, Beneficial Owners of the Securities may wish to ascertain that the nominee
holding the Security 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 registrar and request that copies
of the notices be provided directly to them.
Redemption notices are required to be sent to DTC. If less than all of the Securities within an issue are
being redeemed, DTC’s practice is to determine by lot the amount of the interest of each Direct Participant in such
issue to be redeemed.
Neither DTC nor Cede & Co. (nor such other DTC nominee) will consent or vote with respect to Securities
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 Securities are credited on
the record date (identified in a listing attached to the Omnibus Proxy).
Redemption proceeds, distributions, and dividend payments on the Securities 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 corresponding detail information from the Issuer or
Trustee on the payable date in accordance with their respective holdings shown on DTC’s records. Payments by
Participants to Beneficial Owners will be governed by standing instructions 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, or 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 Trustee, 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.
A Beneficial Owner will give notice to elect to have its Security purchased or tendered, through its
Participant, to Trustee, and will effect delivery of such Security by causing the Direct Participant to transfer the
Participant’s interest in the Series 2019 Bonds, on DTC’s records, to Trustee. The requirement for physical delivery
of Securities in connection with an optional tender or a mandatory purchase will be deemed satisfied when the
ownership rights in the Securities are transferred by Direct Participants on DTC’s records and followed by a book-
entry credit of tendered Securities to Trustee’s DTC account.
DTC may discontinue providing its services as depository with respect to the Securities at any time by
giving reasonable notice to Issuer or the Trustee. Under such circumstances, in the event that a successor depository
is not obtained, Security 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,
Security certificates will be printed and delivered to DTC.
The information in this section concerning DTC and DTC’s book-entry system has been obtained from
sources that the Issuer believes to be reliable, but the Issuer takes no responsibility for the accuracy thereof.
THE INFORMATION ABOVE DISCUSSING THE BOOK-ENTRY SYSTEM HAS BEEN FURNISHED
BY DTC. NO REPRESENTATION IS MADE BY THE ISSUER, THE COMPANY OR THE UNDERWRITER
AS TO THE COMPLETENESS OR ACCURACY OF SUCH INFORMATION OR AS TO THE ABSENCE OF
MATERIAL ADVERSE CHANGES IN SUCH INFORMATION SUBSEQUENT TO THE DATE HEREOF. NO
ATTEMPT HAS BEEN MADE BY THE ISSUER, THE COMPANY OR THE UNDERWRITER TO
DETERMINE WHETHER DTC IS OR WILL BE FINANCIALLY OR OTHERWISE CAPABLE OF
FULFILLING ITS OBLIGATIONS. THE ISSUER HAS NO RESPONSIBILITY OR OBLIGATION TO DTC
PARTICIPANTS, INDIRECT PARTICIPANTS OR BENEFICIAL OWNERS, OR THE PERSONS FOR WHICH
THEY ACT AS NOMINEES WITH RESPECT TO THE BOND, OR FOR ANY PRINCIPAL OF, PREMIUM, IF
ANY, OR INTEREST PAYMENT THEREON.
DMNORTH #6773302 v4
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